-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DHY52uUx+pMBLavcLqVZL640boUXyelMJEVihUkM84oEARb7xcwCToM2UJSymjs0 IlB0wDB68c93nuhk0wzIkg== 0001269678-05-000182.txt : 20050926 0001269678-05-000182.hdr.sgml : 20050926 20050926154016 ACCESSION NUMBER: 0001269678-05-000182 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 20041231 FILED AS OF DATE: 20050926 DATE AS OF CHANGE: 20050926 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TIGER TELEMATICS INC CENTRAL INDEX KEY: 0001065581 STANDARD INDUSTRIAL CLASSIFICATION: COMMUNICATION SERVICES, NEC [4899] IRS NUMBER: 134051167 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-15977 FILM NUMBER: 051102866 BUSINESS ADDRESS: STREET 1: 10201 CENTURION PARKWAY NORTH STREET 2: SUITE 600 CITY: JACKSONVILLE STATE: FL ZIP: 32256 BUSINESS PHONE: 904-279-9240 FORMER COMPANY: FORMER CONFORMED NAME: MEDIA COMMUNICATIONS GROUP INC DATE OF NAME CHANGE: 20000630 10-K 1 tiger10k123104.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2004 Commission file number 001-15977 Tiger Telematics, Inc. (Exact name of registrant as specified in its charter) DELAWARE 13-4051167 (State of other jurisdiction of (I.R.S. Employee incorporation or organization) Identification No.) 550 Water Street, Suite 937, Jacksonville, FL 32202 (Address or principal executive offices) (Zip code) (904) 358-1512 (Registrant's telephone number including area code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001 par value Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ ] No [X] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Indicate by check mark whether the registrant is an accelerated filer (as defined by Exchange Act Rule 12b-2). Yes [ X ] No [ ] Aggregate market value of common stock held by non-affiliates of the registrant as of August 23, 2005 was $1,000,000,000. Number of shares of common stock outstanding as of August 23, 2005 was 61,068,312. DOCUMENTS INCORPORATED BY REFERENCE None TIGER TELEMATICS, INC. ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004 Table of Contents Page PART I........................................................................1 ITEM 1. BUSINESS.........................................................1 General.................................................................1 Growth Strategy.........................................................3 Products and Services...................................................4 Relationship with Major Customers.......................................5 Suppliers...............................................................5 Sales & Marketing.......................................................6 Competition.............................................................6 Intellectual Property...................................................6 Employees...............................................................7 ITEM 2. PROPERTIES.......................................................7 ITEM 3. LEGAL PROCEEDINGS................................................7 ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS................9 PART II.......................................................................9 ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS..............................................9 Market Price and Dividend Information...................................9 ITEM 6. SELECTED FINANCIAL DATA.........................................10 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.............................11 General Overview.......................................................12 Results of Operations..................................................12 i Liquidity and Capital Resources........................................15 Critical Accounting Policies...........................................16 Recently Issued Accounting Standards...................................17 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK............................................................18 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL DATA...........18 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.............................18 ITEM 9A. CONTROLS AND PROCEDURES.........................................18 PART III.....................................................................20 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT..............20 Code of Ethics.........................................................22 Audit Committee Financial Expert.......................................22 ITEM 11. EXECUTIVE COMPENSATION..........................................22 Summary Compensation...................................................22 Compensation of Directors..............................................23 2001 Stock Option Plan.................................................23 2005 Stock Incentive Plan..............................................26 Employment Contracts and Termination and Change-In-Control Arrangements...........................................................28 Compensation Committee Interlocks and Insider Participation............29 Shareholder Return Performance.........................................29 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT......................................................29 Equity Compensation Plan Information...................................30 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................31 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES..........................32 Audit Fees.............................................................32 Audit Related Services.................................................33 Tax Fees...............................................................33 Additional Fees........................................................33 ii PART IV......................................................................33 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES......................33 SIGNATURES.............................................................37 iii PART I ITEM 1. BUSINESS General Tiger Telematics, Inc. ("Tiger Telematics" or the "Company"), a Delaware corporation, is the parent company of several subsidiaries, including Gizmondo Europe Ltd., the developer of the multi-entertainment wireless handheld gaming device called the Gizmondo. The Company historically has been in the retail flooring business and a designer, developer and marketer of mobile telematics systems and services that combine global positioning and voice recognition technology to locate and track vehicles and people down to the street level in countries throughout the world. Telematics is an emerging industry that uses a combination of computer, wireless and satellite technology largely to provide communications between a central source and fleets of vehicles. These projects have been dropped in favor of development of the Gizmondo. In 2003, the Company began developing a new multi-entertainment wireless handheld gaming device referred to as Gizmondo. While the Company previously developed a variety of commercial telematics products, since early 2005 the Company's primary business strategy has been to develop the Gizmondo. The Company initially launched a limited production version of the Gizmondo in the UK on October 29, 2004, and launched the full-scale production of Gizmondo in the UK in March 2005, and plans a full-scale introduction to the US market in the fourth quarter of 2005. The Gizmondo is powered by a Microsoft Windows CE.net platform, has a 2.8-inch TFT color screen with a Samsung ARM9 400Mhz processor and incorporates the GoForce 3D 4500 NVIDIA graphics accelerator. Gizmondo provides cutting-edge gaming, multimedia messaging, an MP3 music player, Mpeg4 movie playing capability, a digital camera and a GPRS network link to allow wide-area network gaming. Additionally, Gizmondo contains a GPS chip for location based services, is equipped with Bluetooth for use in multi-player gaming and accepts MMC card accessories. The Gizmondo represents the Company's primary business segment. On June 6, 2002, the Company changed its name from Floor Decor, Inc. to Tiger Telematics, Inc. after deciding to exit the historical flooring business and focus exclusively on mobile telematics systems and services, with the major focus on Gizmondo. The Company is the parent company of the following subsidiaries: (i) Media Flooring, Inc., (ii) Gizmondo Europe Ltd. (formerly Tiger Telematics Europe Ltd.), (iii) Tiger Telematics USA, Inc., (iv) ISIS Models Ltd. (75% owned), (v) Indie Studios, (vi) Warthog Plc (including four wholly owned subsidiaries of Warthog Plc) and (vii) Globicom, Inc. (84% owned, which was acquired in 2005). Media Flooring, Inc. (now dormant), operated a flooring products sales and service business through a wholly owned subsidiary Floor Decor LLC. This business represented all of the business operations of the Company during early 2002. In June 2002, the Company discontinued the flooring segment operation and in August 2002 sold the assets of Floor Decor LLC, and the use of the name Floor Decor LLC to an unrelated third party. The operating results for this discontinued segment are classified as operating results of discontinued operations in 2002. On February 4, 2002, the Company acquired Eagle Eye Scandinavia Distribution, Ltd, an early stage UK company that distributed telematics products and 1 services. The Company subsequently changed the name from Eagle Eye Scandinavia Distribution, Ltd to Tiger Telematics Ltd. Tiger Telematics Ltd. was the exclusive distributor in Scandinavia and Yugoslavia of the Eagle Eye VCG2, a vehicle communications gateway that combined telecommunications and Global Positioning Systems (GPS) technologies to provide security and communications solutions for fleet vehicle management. This telematics product was manufactured by an unrelated UK based company Eagle Eye Telematics Plc. On December 17, 2002, the Company sold Tiger Telematics, Ltd. to a Swedish company, primarily to reduce debt and improve the Company's working capital position. In 2002, the Company organized a new subsidiary, Tiger Telematics Europe, Ltd. to provide a variety of telematics products and services to customers in England and Western Europe. Tiger Telematics Europe, Ltd. focused on developing new telematics products and child-tracking devices and on marketing telematics products primarily to large fleet suppliers such as rental car companies. In 2003, Tiger Telematics Europe, Ltd. began focusing primarily on developing the Gizmondo. In early 2005, the Company changed the name of Tiger Telematics Ltd. to Gizmondo Europe Ltd. to match the name of the Company's primary product, the Gizmondo. In June 2002, the Company formed a wholly owned subsidiary Tiger Telematics USA, Inc. that was created to acquire the assets of a US telematics developer of consumer automotive devices. This subsidiary was ultimately unable to successfully launch the Port-IT products associated with this acquisition and this subsidiary is now dormant. In May 2004, Gizmondo Europe, Ltd. acquired a seventy-five percent (75%) interest in ISIS Models Ltd., for 40,000 shares of the Company's restricted common stock issued in the third quarter of 2004, valued at $92,800. ISIS was acquired to provide marketing support and arrangements for Gizmondo. The Company also assumed liabilities in excess of the value of tangible assets acquired of $223,099. ISIS is the successor company to ISIS Models Management Limited, a company that has previously ceased operations. On August 2, 2004, Gizmondo Europe completed the acquisition of 100% of the stock of Indie Studios pursuant to a Stock Purchase Agreement dated May 20, 2004 for one million shares of the Company's restricted common stock. Indie was acquired to enhance the Company's game development operations. There are also 600,000 contingent shares reserved for future issuance based on the completion of two games in progress as of the acquisition date. The games were completed in January 2005 and the contingent shares were issued. The value of the contingent shares, approximately $4,560,000, was charged to Research & Development expense in the first quarter of 2005. The Company assumed the excess of liabilities over the value of tangible assets acquired of approximately $61,400, paid cash of approximately $850,000 and issued stock valued at $2,740,000. The excess of purchase price over the value of the tangible assets acquired ($3,651,713), was assigned to Goodwill. In August 2004, the Company filed IPR patent applications for Gizmondo in the USA and in all other appropriate countries where the Company plans to sell the Gizmondo. The Company purchased the assets and intellectual properties of the operating subsidiaries of Warthog Plc on November 3, 2004, in a move to further expand the Company's games development agenda and management infrastructure. The Company paid $1,114,000 in cash and issued 497,866 shares of its restricted common stock valued at $1,618,000. Within two days of closing, the Company injected an additional approximately $1.3 million into the Warthog subsidiaries for working capital purposes. 2 In September 2005, the Company acquired an eighty-four percent (84%) interest in Globicom, Inc. for 116,859 shares of the Company's restricted common stock issued in the third quarter of 2005 and the payment of $200,000. Globicom was acquired to provide wireless network support for Gizmondo. The Company had difficult years in 2004, 2003 and 2002 due to extremely challenging industry conditions and high development costs associated with developing the Gizmondo. The Company has earned limited revenues to date and has incurred net losses of approximately $99 million, $8 million and $11.1 million for the years ended December 31, 2004, 2003 and 2002, respectively. Additionally, the Company will report an operating loss in the first six months of 2005 of more than $210 million, principally due to development costs for the Gizmondo and non-cash expenses associated with shares of restricted common stock issued for services. Industry Overview Gaming industry information UK Games compared with other industries Games market size (pound)1,081m Cinema market size (pound) 755m Video Rental market size (pound) 466m Music (pound)2,016m UK hardware data 2002 UK installed base of Playstation 2 3.7m UK installed base of Playstation 6.8m Market size comparison 2002 UK Euro 1,719m Germany Euro 1,196m France Euro 990m Italy Euro 438m Spain/Portugal Euro 415m Source: ELSPA Estimated world market value for the games and entertainment/reference software is valued in excess of $28 billion annually. Growth Strategy While the Company previously developed a variety of commercial telematics products designed for fleet management, anti-theft and security applications, the Company's primary business strategy is to develop the Gizmondo. During 2005, the Company launched Gizmondo first in England and then in the European market. 3 The Company anticipates launching Gizmondo in the United States during the fourth quarter of 2005. The initial Gizmondo units were produced and manufactured by a group consisting of Plextek, an independent electrical design and consulting firm based in the UK, Intrinsyc Software International, a Microsoft Gold Level Windows Embedded Partner and Xilinx, a software programmer specializing in programmable logic. The initial Gizmondo units were displayed in January 2004 at the 2004 Consumer Electronics Show in Las Vegas. Going forward, the Company will utilize Flextronics as the new volume manufacturer of Gizmondo units. By utilizing Flextronic's high-volume manufacturing capabilities and global reach, the Company should be able to bring more units to market and assure its ability to fill the growing number of sales orders. In addition to revenue from the sale of Gizmondo units the Company anticipates revenue from related sales of hardware, software, music and video downloads, games, MNVO and Smart Ads. To accomplish the difficult challenge of converting the Gizmondo idea into an actual product, the Company, since the third quarter of 2003, has entered into a number of agreements, joint ventures and strategic partnerships with recognized design, engineering, software, manufacturing, marketing, public relations, and distribution companies, including Plextek, an independent UK electrical design and consulting firm; Microsoft, the maker of the Windows Net CE software operating system used by Gizmondo; Synergenix Interactive AB, a game developer; Intrinsyc Software International, a Microsoft Gold Level Windows Embedded Partner; Xilinx, a software programmer specializing in programmable logic; Fathammer Alliance, a supplier of advanced 3D graphics and game technologies for mobile platforms; MINICK a premium messaging network in Europe; Samsung, supplier of Gizmondo's Mobile Applications Processor; Micronas, supplier of Gizmondo's single chip MIDI synthesizer; Flextronics, an electronics manufacturer; CATIC, a State-Run Chinese conglomerate that provides sales, distribution, technical support, and numerous other joint ventures for all Chinese regions; Toys R Us, an authorized UK retailer of Gizmondo; Ogilvy Public Relations Worldwide, the Company's Agency of Record; Renaissance Corp, an electronics marketer and distributor; OD2, a European music distributor; Redline Marketing and Tartan Sales, distributors of Gizmondo units throughout the US, Canada, and Mexico; M-Systems, supplier of the mDiskOnChip G3 memory chip; Daniels & Associates, the Company's Investment Banker; Playcom Software Vertriebs GmBH, a German games wholesaler and distributor; John Lewis Department Stores, an authorized UK retailer of Gizmondo; NVIDIA Corporation, supplier of Gizmondo's GoForce 3D 4500 3D Wireless media processor; Indigo Pearl Ltd, a gaming public relations agency; SCi Entertainment Group, a games publisher; Ditan Corporation, a retail distribution provider; Mother, an advertising agency; United Electronics SL, an electronics distributor; Microsoft Game Studios, a gaming company; and Zi Corporation, supplier of the advanced test input technology featured on Gizmondo. In addition, to facilitate the launch of Gizmondo, the Company acquired game developers Indie Studios and Warthog Games, Ltd. In August 2005, Gizmondo Europe and U.S. game developer Electronic Arts entered into a Software Development Contract for the development of two games, FIFA and FXXFSX. In connection with this contract, Gizmondo Europe paid Electronic Arts $5.9 million. Products and Services Since 2003, the Company has focused on developing its primary product, Gizmondo, a new multi-entertainment wireless handheld gaming device targeted at the gaming industry. Gizmondo is a new multi-entertainment wireless handheld gaming device that will compete with similar handheld gaming products offered by Nintendo, Nokia, 4 Tapwave and Sony. Gizmondo is powered by a Microsoft Windows CE.net platform, has a 2.8-inch TFT color screen with a Samsung ARM9 400Mhz processor and incorporates the GoForce 3D 4500 NVIDIA graphics accelerator. Gizmondo provides cutting-edge gaming, multimedia messaging, an MP3 music player, Mpeg 4 movie playing capability, a digital camera and a GPRS network link to allow wide-area network gaming. Technical Specifications: 400 MHz Processor, GSM Tri-Band, GPRS Class 10, SiRF GPS, TFT Screen - 320 x 240 Pixels, WAP 2.0, MMS Send and Receive, MP3 Playback, Polyphonic MIDI, SMS / EMS, MPEG 4 Playback, JPEG Camera, SD Flash Card Reader, Mini-USB Client, Bluetooth 2 (Multiplayer Gaming), 3D Games Capability, GPS Tracking Application, GPS Mapping Application, Removable SIM Card, Removable Battery, Polyphonic Ringtones, Stereo Headset Socket for MP3 and Games, Stop game play when battery near empty, Windows Media Player 9, Flight Mode, Speaker, Vibrate Mode. Gizmondo is approximately 5.5 inches wide, 3.5 inches high, over an inch thick, and weighs 5.5 ounces (155 grams). The outer shell is made of a durable and stain-resistant slate-colored composite material with a rubbery feel. The rectangular screen, measuring 2.25 by 1.75 inches (a 2.8" TFT LCD display), sits right in the center of the console. Aside from being a gaming device, the Gizmondo also performs the following functions: movie player, allowing users to view full-feature videos in MPEG 4 format using the unit's built-in Windows Media Player 9 and SD Card slot; MP3 player permitting users to download and listen to audio files stored in either MP3, MIDI & SP-MIDI, WMA, or WAV formats; SMS & MMS messaging facility that lets users easily send text, image, and music files; and high-resolution digital camera. Gizmondo also is equipped with a unique global positioning system; it's wired for GSM tri-band networks so it can be used on five continents; it supports Bluetooth wireless technology; it has USB connection capabilities; and with its removable memory cards, it provides users with unlimited storage. In addition to having more features and functions than any competing units, Gizmondo is the only device among this new generation of completely mobile gaming consoles that uses a version of Microsoft Windows (CE.NET) as its operating system. Relationship with Major Customers The Gizmondo is a developmental stage product that has only recently been marketed and sold to the general public in a limited fashion. Consequently, the Company has no current large customers but has entered into various distribution and representation agreements as detailed in the Growth Strategy section above. Suppliers The Company developed the Gizmondo internally but the manufacture is completed by outside parties. As discussed in the Growth Strategy section above, Flextronics is the Company's volume manufacturer for Gizmondo units. Although the Company believes that multiple sources of supply exist for nearly all of the products and components purchased from outside suppliers, the Company generally maintains only one supplier for each core product purchased for the manufacture of Gizmondo units. Additionally, the Company relies on Flextronics as the sole manufacturer of Gizmondo units. Therefore interruptions in supply or manufacture or price changes in the items purchased by the Company could have a material adverse effect on the Company's operations. 5 Sales & Marketing The Company's sales and marketing approach leverages management's extensive experience in both of its major market segments of commercial and retail buyers and the use of other distributors. The Company uses a combination of the following to drive commercial sales in the Gizmondo segment: o Direct sales via internal commissioned sales force o Large representative agencies that specialize in retail sales and customer base During 2005, the Company launched the Gizmondo in different geographic markets starting in the UK initially, then plans for a launch in Continental Europe and then in the US. Competition Competition in gaming mobile handheld products includes perennial leader Nintendo with its Gameboy advance, Nokia with its N-Gage and new product offerings from Tapwave and Sony. The handheld gaming market in the last ten years has been led by one dominant player - `Nintendo Gameboy'. Since the introduction of Nokia N-Gage, the handheld gaming market is beginning to evolve with the introduction of various multi-functional devices. Within the handheld gaming market category there are two principal competitors who together control substantially all of the handheld gaming market: o Sony Playstation Portable - A handheld gaming console with a 4.5" screen that also has the ability to play video from Sony UMD discs. Functionality is limited, and `add-on' components will be required in order to extend functionality. o Nintendo DS - Nintendo DS is the next generation gaming console within the Gameboy family. Targeted at the under 16 age category, the functionality is limited to gaming functions only. The unique selling point of the Nintendo DS is its dual screen. Neither Sony nor Nintendo include GPS, SMS, email or a camera function. Intellectual Property The Company markets its products under the name Tiger Telematics and Gizmondo. The Company has devoted substantial time, effort and expense to the development of brand name recognition and goodwill and has not received any notice that its use of such marks infringes upon the rights of others, and is not aware of any activities which would appear to constitute infringement of any of its marks. The Company has filed to trademark its name and logo and has patents pending in the United States (since 2004) and abroad for the Gizmondo. The Company owns all Gizmondo intellectual property rights. 6 Employees As of August 1, 2005, the Company had approximately 131 employees and contract agents, including 43 administrative, 15 sales and marketing, 70 game developers and 3 persons responsible for warehouse and shipping activities. In many instances, the Company utilizes agencies that actually employ the persons or retain employees as consultants on an as needed basis. The Company has not experienced any work stoppages and the Company's employees are not represented by a union. The Company considers its relations with its employees to be good. ITEM 2. PROPERTIES The Company currently leases three facilities in the United States and three facilities in the United Kingdom. The Company opened a facility in Los Angeles, California in the third quarter of 2005. The following table sets forth certain information concerning the facilities of the Company. AVERAGE RENEWAL SQUARE ANNUALIZED EXPIRATION LOCATION USE FEET LEASE COST OPTION - -------- --- ---- ---------- ------ Jacksonville, Florida Executive Office 600 $24,000 August 2005 Los Angeles, Executive Office 2,500 $122,040 November 2005 California Austin, Texas Gizmondo Studios 9,000 $164,118 April 2009 Office Farnborough, UK Executive Office 5,000 $404,080 October 2005 Farnborough, UK Operations Office 15,000 $267,668 March 2007 Manchester, UK Gizmondo Studios 5,000 $318,664 March 2010 Office London, UK Retail Store 2,000 $334,250 March 2011 The Company believes that its existing facilities are adequate to meet its current needs and those additional facilities can be leased to meet future needs. ITEM 3. LEGAL PROCEEDINGS A shareholder of the Company borrowed some of the funds advanced to the Company (with funds going to Tiger Telematics, Ltd. (Tiger Ltd), a former subsidiary of the Company) from a private investment bank, London International Mercantile Bank (LIM), based in London. The shareholder failed to repay the note when due and LIM made demand on Tiger Ltd to repay the funds. The Company maintained that it was not responsible for that obligation and responded to the demand accordingly. Tiger Ltd entered into a settlement agreement the Court approved as a Tomblin Order where the demand note payable to the shareholder was forgiven in exchange for the Company entering into an installment note for approximately $475,000, to be paid over time directly to LIM. The shareholder remained contingently obligated for the sum owed plus interest in event that the payment was not made timely by Tiger Ltd. The Company issued a limited guaranty for the obligation to LIM. 7 The settlement agreement called for monthly payments at a variable interest rate. Tiger Ltd repaid approximately $80,000 prior to the sale of the business on December 17, 2002. Following the sale of Tiger Ltd, the Company was apprised that Tiger Ltd was placed in liquidation insolvency under the laws of the United Kingdom for failure to make the payments required under this arrangement. LIM made demand on the Company for approximately $450,000 under the guarantee but has made no attempt to collect on the guaranty as it pursues its direct remedies against the original borrower of the funds. LIM also holds 140,000 shares of the Company's common stock and certain real estate provided by the original borrower as collateral. The Company has reserved an amount that it believes will cover any obligation that may arise. A shareholder has advised the Company that the obligation has now been retired. On April 26, 2002, the Company entered into a Lease Agreement with Christian and Timbers UK Ltd (C&T) for office premises for its subsidiary for a term of five years. The Company paid the first year's rent by issuing 20,000 shares of common stock. The subsidiary subsequently defaulted on the lease arrangement. In the summer of 2003, C&T sued the Company pursuant to the Company's guarantee. In October 2003, the Company entered into a judgment stipulation for $300,000 to settle all obligations under the guarantee. The Company has issued shares of common stock to C&T that it believes will satisfy the amount of the outstanding judgment. In March 2004, Jordan Grand Prix Limited, filed suit against the Company in the High Court of Justice, Queen's Bench Division (Central Office), London, UK, alleging violation of a sponsorship agreement and dated letter agreement entered into in July 2003. Jordan sued the Company for $3 million and alleged that the Company defaulted on a payment of $500,000, due on January 1, 2004, under the sponsorship agreement, and a payment for $250,000, due on the same date under the letter agreement. On February 26, 2004, Jordan terminated both agreements. In order to avoid summary judgment in favor of the plaintiff, the Company escrowed 70,000 shares of its common stock with the court. Prior to trial, the Company was required to substitute $1.5 million for the escrowed shares. In June 2005, the Company placed an additional 60,000 shares of its restricted common stock in escrow. The Company settled the case in July 2005 in an out of court mediation by the payment of $1,500,000 in cash and the issuance of 30,000 shares of the Company's restricted common stock valued at $208,800. In January 2005, the Company filed a lawsuit in the Circuit Court in and for the County of Duval, Florida against D. Weckstein and Company and Donald E. Weckstein, a former investment advisor to the Company, for breach of the Company's agreement with the advisor. In a mediation process completed in April 2005, the Company issued 60,000 additional shares of restricted common stock valued at $310,800 in full settlement of the matter and was released from all past and future obligations under the Agreement. This settlement was recorded in 2004. On March 22, 2005, the Board of Regents of the University of Texas System filed an action against the Company and one of its subsidiaries, Gizmondo Europe, Ltd. in the United States District Court for the Western District of Texas, Austin Division, alleging that predictive text software used in the Company's Gizmondo gaming device infringes a patent held by the Board of Regents. The Company believes that its software does not infringe the Board of Regents' patent. The Company licenses this software from another company, which under the license agreement has indemnified the Company for infringement claims. The Company and Gizmondo Europe, Ltd. were dismissed from this action in July 2005. Early in the third quarter of 2005, HandHeld Games, Inc. filed suit against the Company for damages and costs in excess of $200,000 as a result of a dispute 8 between the Company and HandHeld Games over a game development contract for the game "Chicane". The suit is in the discovery stages, but the Company believes it has meritorious defenses and does not expect the outcome of the matter to have a material effect on the financial condition of the Company. In August 2005 the Company filed an action against Integra SP Holdings Limited and Integra SP Nominee Limited (collectively "Integra") seeking a declaratory judgment that the Company had properly terminated a stock purchase agreement between the Company and Integra. In November 2004 the Company entered into an agreement with Integra to acquire all of the outstanding share capital of Integra SP Holdings Limited for Company common stock with a market value of approximately $35 million based on $14.06 per share. The agreement, which was amended in January 2005, required the satisfaction of numerous conditions in order to close. Several of those conditions were not satisfied and on July 7, 2005, the Company notified Integra that it had elected to terminate the agreement. In connection with entering into the agreement the Company had also loaned Integra $1,541,280 in 2005 under a debenture providing for loans by the Company of up to $1,926,600 secured by Integra's intellectual property rights. Termination of the stock purchase agreement entitles the Company to demand payment on the debenture with 60 days notice, which the Company did on July 7, 2005. The action was filed in Florida State Court and has been removed by Integra to the U. S. District Court, Middle District of Florida, Jacksonville Division. On August 19, 2005, Ogilvy Group Sweden Limited ("Ogilvy") commenced an action against Gizmondo Europe Limited in the Stockholm District Court to collect approximately $4.1 million plus interest allegedly owed to Ogilvy for marketing and advertising services provided to Gizmondo Europe during 2003 and 2004. Gizmondo Europe's relationship with Ogilvy was terminated on June 30, 2005. The Company has issued 400,000 shares of its common stock to Ogilvy as collateral for Gizmondo Europe's obligations to Ogilvy. On August 29, 2005, an affiliate of Ogilvy, Ogilvy Public Relations Worldwide, Inc. ("Ogilvy PR"), commenced an arbitration proceeding in New York City against Gizmondo Europe and the Company to collect approximately $305,000 plus interest allegedly owed to Ogilvy PR for public relations services under an agreement dated June 30, 2004. The agreement was terminated in December 2004. On September 20, 2005, the Company and Ogilvy PR settled this dispute for $125,000 to be paid by the Company. ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders of the Company during the fourth quarter of the period covered by this report. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS Market Price and Dividend Information The Company's Common Stock trades on the other over the counter market under the symbol "TGTL". The other over the counter market, sometimes referred to as pink sheets, is a quotation system for equity securities not listed on the national stock exchanges or the NASDAQ Stock Market, whose quotations reflect 9
inter-dealer prices, without retail mark-up, mark-down, or commission, and may not necessarily represent actual transactions. The Company's Common Stock began trading on the OTC Bulletin Board on May 22, 2001, as a result of a reverse merger with a public shell company. It was delisted from the Bulletin Board in May 2003. As of August 23, 2005, the Company had issued and outstanding 61,068,312 shares of common stock, held by approximately 2,750 shareholders of record. Following are the high and low closing stock prices in 2005, 2004, 2003 and 2002: Fiscal Year Ended December 31, 2005 2004 2003 2002 ---- ---- ---- ---- High Low High Low High Low High Low ---- --- ---- --- ---- --- ---- --- 1st Qtr. $ 32.50 $ 18.80 $ 14.75 $ 4.00 $ 2.13 $ .75 $ 36.00 $ 12.75 2nd Qtr. $ 20.95 $ 11.50 $ 14.75 $ 9.00 $ 1.00 $ .70 $ 13.50 $ 6.00 3rd Qtr. $ 20.00* $ 14.60* $ 14.70 $ 6.63 $ 2.00 $ .53 $ 7.00 $ 1.13 4th Qtr. $ 26.30 $ 11.10 $ 2.50 $ 1.35 $ 3.63 $ 1.25
*As of August 9, 2005 All share prices have been restated to reflect a 25 to 1 reverse stock split effected in July 2004. The Company has not paid cash dividends and does not intend for the foreseeable future to declare or pay any cash dividends on its Common Stock and intends to retain earnings, if any, for the future operation and planned expansion of the Company's business. Any determination to declare or pay dividends will be at the discretion of the Company's board of directors and will depend upon the Company's future earnings, results of operations, financial condition, capital requirements, considerations imposed by applicable law, and other factors deemed relevant by the board of directors. ITEM 6. SELECTED FINANCIAL DATA The selected consolidated financial data as of and for the year ended December 31, 2004, 2003 and 2002, have been derived from the audited consolidated financial statements of the Company. The selected consolidated financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" (Item 7 of this report) and the audited consolidated financial statements and related notes thereto included elsewhere herein.
Year ended December 31, 2004, 2003 and 2002 2004 2003 2002 2001 2000 ------------ ------------ ------------ ------------ ------------ OPERATING DATA: (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) Net Sales $ 726 $ 8 $ 284 $ 0 $ 0 Cost of goods sold 410 14 385 0 0 ------------ ------------ ------------ ------------ ------------ Gross profit (loss) 316 (6) (101) 0 0 General and administrative 83,678 5,582 5,172 283 0 Selling and marketing 13,814 683 597 0 0 ------------ ------------ ------------ ------------ ------------ 10 Operating income (loss) (97,176) (6,271) (5,870) (283) 0 Other income (expenses) (2,062) (1,496) (4,826) 0 3 Interest expense, net (53) (45) (38) (145) (29) ------------ ------------ ------------ ------------ ------------ Net loss from continuing operations (99,291) (7,812) (10,734) (428) (26) Net loss from discontinued operations (0) (0) (353) (871) (639) ------------ ------------ ------------ ------------ ------------ Net Loss (99,291) (7,812) (11,087) (1,299) (665) ============ ============ ============ ============ ============ Basic and diluted net loss per common share $ (5.02) $ (1.66) $ (3.93) $ (0.60) $ (0.31) ============ ============ ============ ============ ============ Weighted average shares of outstanding 19,785,471 4,710,208 2,822,876 2,173,099 2,169,467 ============ ============ ============ ============ ============
December 31, 2004 2003 2002 -------- -------- -------- BALANCE SHEET DATA: (IN THOUSANDS) Working capital deficiency $(22,789) $ (8,788) $ (5,398) Total assets 17,248 436 647 Total liabilities 33,463 9,004 5,952 Stockholders' deficiency (16,215) (8,567) (5,305) ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 23E of the Securities Act of 1934, as amended. These statements relate to future events or future financial performance. Any statements contained in this report that are not statements of historical fact may be deemed to be forward-looking statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. In some cases, forward-looking statements can be identified by terminology such as "may," "will," "should," "expect," "plan," "anticipate," "intend", "believe," "estimate," "predict," "potential" or "continue," or the negative of such terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. Investors are cautioned that these forward-looking statements reflect numerous assumptions and involve risks and uncertainties that may affect the Company's business and prospects and cause actual results to differ materially from these forward-looking statements. Among the factors that could cause actual results to differ are the Company's operating history; competition; low barriers to entry; reliance on strategic relationships; rapid technological changes; inability to complete transactions on favorable terms; consumer demand for video game hardware and software; the timing of the introduction of new generation competitive hardware systems; pricing changes by key vendors for hardware and software and the timing of any such changes, and the adequacy of supplies of new software products. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither the Company, nor any other person or entity, assumes responsibility for the accuracy 11 and completeness of the forward-looking statements. The Company is under no obligation to update any of the forward-looking statements after the filing of this Form 10-K to conform such statements to actual results or to changes in the Company's expectations. The following discussion should be read in conjunction with the Company's financial statements, related notes and the other financial information appearing elsewhere in this Form 10-K. General Overview During the first half of 2002, the Company's principal business was the retail sale of flooring products, including carpet, area rugs, wood and laminates, at discount prices, to commercial and retail customers. The Company announced the discontinuation of the flooring business on June 6, 2002, and sold the related assets on August 9, 2002. The flooring segment is treated as a discontinued operation in the financial statements. In early 2003, the Company began developing a new multi-entertainment wireless handheld gaming device that is now referred to as Gizmondo. Since then the Company's primary business strategy has been to develop and market Gizmondo. The Company initially launched a limited production version of the Gizmondo in the UK on March 19, 2005, and expects to launch the full-scale production of Gizmondo in the fourth quarter of 2005. The Gizmondo is powered by a Microsoft Windows CE.net platform, has a 2.8-inch TFT color screen and a Samsung ARM9 400Mhz processor and incorporates the GoForce 3D 4500 NVIDIA graphics accelerator. Gizmondo provides cutting-edge gaming, multimedia messaging, an MP3 music player, Mpeg4 movie playing capability, a digital camera and a GPRS network link to allow wide-area network gaming. Additionally, Gizmondo contains a GPS chip for location based services, is equipped with Bluetooth for use in multi-player gaming and accepts MMC card accessories. Results of Operations Twelve months-ended December 31, 2003 compared to the twelve months ended December 31, 2004: Net Sales: Sales for 2004 were $726,000 as compared to sales of $8,000 for 2003. The sales increase relates to activities of acquired entities. Sales are insignificant in all periods to date as the company is still developing its handheld wireless multi-entertainment device Gizmondo and has not begun sales efforts. Gross Profit (Loss): Gross profit for 2004 was $316,000 compared to a gross loss of ($5,000) for 2003. Gross profits in 2004 were earned from operations of acquired subsidiaries while the impact of recording returns from trials created the negative gross margin in 2003. Selling Expenses: Selling expenses for 2004 were $13,814,000 for 2004, compared to $684,000 for 2003, an increase of over $13 million. The increase is directly related to increased marketing efforts for the new Gizmondo product as it nears its release in the fourth quarter of 2005. Sales promotion expense exceeded $9,500,000 in 2004 and direct advertising was more than $2,100,000. In 2003 the Company was focused on selling to rental car concerns and developing new products such as the Gizmondo. 12 General and Administrative Expenses: General and administrative expenses for 2004 were $83,678,000 as compared to $5,582,000 in 2003, an increase of over $78,000,000. This increase can be attributed to highly elevated development activities as the Gizmondo approaches its release date. Personnel costs increased to over $20,000,000 (up from approximately $1,200,000 in 2003); consulting and other professional fees increased by $33,000,000 from 2003 amounts to over $34,000,000 in 2004; and direct R&D costs increased to over $27,000,000 from $3,000,000 in 2003. Expenses paid with common stock (non-cash) in 2004, included in the above amounts, increased to approximately $34,300,000 from approximately $300,000 in 2003. All of these specifically designated development costs were expensed as incurred and were not capitalized for financial reporting purposes. Other Expenses: Other expenses for 2004 were $2,115,000 as compared to $1,542,000 in 2003 Interest expense was $53,000 for 2004 ($45,000 for 2003) as auto loan balances increased in the last two months of 2004. A loss related to settlement of lawsuits was $2,019,600 in 2004 with no comparable amount in 2003. Impairment of goodwill of $56,000 was recorded in 2004, none in 2003. Loss on debt extinguishment of $1,544,000 was recorded in 2003 while $0 was recorded in 2004. Net Loss: The Company reported an operating loss for 2004 of $99,291,000 compared to a loss in 2003 of $7,812,000. Most of the loss for both years consists of expenses incurred in developing the Gizmondo product line as explained above. The UK subsidiary will incur significant costs in the development of its new products and in marketing them. Management anticipates that future net losses per quarter will be considerable higher then recent quarters as the Company increases the expenditures in product development and marketing for Gizmondo. Twelve months-ended December 31, 2002 compared to the twelve months ended December 31, 2003: Net Sales: Sales for 2002 were $284,000 and were from the entity that was sold on December 17, 2002 as compared to sales of $8,000 for 2003. This decrease in sales is principally due to not having unit sales from the sold entity of Tiger Telematics Ltd. (sold in December 2002) that reported sales in the comparable period of 2002. With Gizmondo Europe Ltd., the Company was focused in 2003 on building its next generation of product with enhanced features and in developing accounts and doing trials in the rental car business areas. The Company was focused from the third quarter 2003 onward on primarily developing its handheld wireless multi-entertainment device named Gizmondo. Gross Loss: Similarly, gross losses were ($101,000) for 2002 and ($5,000) for 2003. The 2003 results reflect the change to a development company. The impact of recording returns from trials created the negative gross margin in 2003. The lower loss recorded was the result of not having the Tiger Telematics Ltd. numbers in the 2003 results. The Company made an initial investment in a new child tracker product that was abandoned later in 2003 when the focus switched to a gaming handheld entertainment device now named Gizmondo. Selling Expenses: Selling expenses for 2002 were $597,000. For 2003, expenses were $684,000 due to marketing of the new Gizmondo product to be released later. Much of the increase can be attributed to the transformation of the Company into a development concern with a focus in early 2003 on selling to rental car concerns and developing new products such as the Gizmondo. Most of this actual cost related to the establishment of potential orders for rental car telematics products and a UK based motorbike company that produced motorbikes in China. Both of the projects have since been dropped from the Company's plans for the future. The Company also made an initial investment in a new child tracker product that was abandoned later in 2003 when the focus switched to gaming handheld entertainment device. 13 General and Administrative Expenses: General and administrative expenses for 2003 were $5,582,000 as compared to $5,172,000 in 2002 or down over $400,000. This decrease came from the lower costs with the divestiture of Tiger Telematics Ltd. in December 2002 and the associated staff reductions from the sale. In order to further reduce expenditures the Company downsized and relocated its corporate office in late 2002 and continued to operate at a reduced cost rate in 2003 as compared to the same time period in 2002. These staff reductions reduced costs and allowed the Company to sustain operations but it delayed certain filings with regulatory bodies and made the Company's control system extremely reliant on fewer persons than would normally be the case. Expenditures were made to configure the Telematics products to obtain the coveted Thatcham Q class rating for the product. This rating may allow insurance companies to provide a discount in costs to users of the Company's telematics devices. Expenditures have been made in developing several new products including Child Tracker devices (since terminated) and the Gizmondo gaming handheld devices. All of these specifically designated development expenses in 2003 were expensed as incurred and were not capitalized for financial reporting purposes. The Company anticipates an increase in its general and administrative expenses in future periods as part of its product development strategy. Other Expenses: Other expenses for 2003 were $1,542,000 as compared to $4,864,000 when the write-off of goodwill was completed. Other expenses consisted of interest expense on loans of $45,000 and currency transaction gains of $47,000. The currency transaction gain is due to the drop in the dollar currency relative to the sterling since the beginning of the year and carrying foreign based assets on the balance sheet. Interest in 2003 of $45,000 is $8,000 higher than in 2002 as the Company had interest costs on UK notes payable. Net Loss from continuing operations: The Company reported a net loss of $(7,812,000) from continuing operations in 2003 as compared to a net loss of $(10,734,000) in 2002. The primary improvement was not having the goodwill write off in 2003. The loss was also lower due to the costs associated with the divested Tiger Telematics Ltd. no longer included in operations since it was sold, not having the write down of impaired goodwill and other intangible assets that occurred in 2002 in the numbers for 2003 and the cost reductions undertaken in late 2002. Management does anticipate that its losses in future quarters will grow materially as it expenses development costs, content costs, and marketing costs for the gaming device Gizmondo. Net Loss from discontinued operations: Discontinued operations recorded a net loss of $0 in 2003 as compared to a loss of $353,000 in 2002. The operation of flooring segment was discontinued in June 2002. On August 9, 2002, the Company sold the assets of the flooring segment effectively eliminating that segment going forward from that date. Net Loss: Although the Company reported an operating loss for 2003 of $7,812,000, a substantial portion of the loss consists of expenses incurred in developing the Gizmondo product line. The loss was 30% less in the prior year when the goodwill and other intangibles write-offs were taken. The difference is attributed the divestiture of Tiger Telematics Ltd. and not having its losses in the 2003 results, the elimination of the write down of impaired goodwill and other intangibles that occurred in 2002 and the cost reductions taken in late 2002 that helped results for the twelve months ended December 31, 2003. Management does not expect that there will be discontinued operations impacting 2003 going forward. The UK subsidiary will incur significant costs in the development of its new products and in marketing them. Management anticipates that future net losses per quarter will be considerable higher then recent quarters as the Company increases the expenditures in product development and marketing for Gizmondo. 14 Liquidity and Capital Resources The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. In 2004 the Company funded its operations principally through private placements of its common stock, principally from accredited foreign investors, aggregating over $55,000,000. During 2003 the Company funded its operating losses and start-up costs principally with loans from stockholders or other parties and through private placements of common stock aggregating $1,745,000. Without such equity funding the Company would not have been able to sustain operations. During 2004 the Company's working capital deficit increased from $8,800,000 to over $22,800,000. This was the result of continued substantial losses, funded by private placements of its common stock and in part by increases in accounts payable and accrued expenses of over $22,000,000 while current assets increased just over $10,000,000 and acquisition costs, including increases in goodwill and other intangible assets of nearly $6,000,000. During 2004 the Company also issued shares of common stock in payment for services rendered by various vendors (10,522,881 shares - $29,620,000), acquisition of subsidiaries (1,697,886 shares - $4,451,000) employee compensation (1,223,024 shares - $4,694,000) and in payment of notes and employee loans payable (80,000 shares - $108,000). A subsidiary of the Company, Warthog, has a $184,400 line of credit with a balance of $121,500 (included in accrued expenses) outstanding at December 31, 2004. The note is without collateral, due on demand and was repaid in 2005. Interest is computed at 3% over the bank's base rate. In May 2005, two entities that are shareholders of the Company provided an aggregate total of approximately $21.2 million in short term loans to Gizmondo Europe. These loans are repayable by September 30, 2005, and are guaranteed by the Company and by Carl Freer and Stefan Eriksson, personally. The Company also pledged 1,027,069 shares of its common stock as collateral for the loan. The Company obtained additional equity capital ($73,100,000 through August 23, 2005) and will seek trade or bank financing as needed to fund the development and the launch of the Gizmondo product in different regions as needed. However, there can be no assurance that any future capital or other financing will be available, or if available on terms reasonably acceptable to the Company. As of December 31, 2004, the Company had stockholders' deficiency of $16,215,000. At December 31, 2004, 36,306,607 shares of common stock were issued and outstanding. Through August 23, 2005, the Company has issued approximately 24.7 million additional shares of common stock in numerous private transactions aggregating over $200,000,000 (a) for cash, (b) upon conversion of debt, accounts payable or other liabilities, (c) for goods or services provided by vendors, strategic partners, professionals, consultants and employees and (d) in connection with the acquisition of assets. See Note C of the Consolidated Financial Statements. 15 Critical Accounting Policies The preparation of financial statements in accordance with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and various other assumptions believed to be reasonable. Although these estimates are based on management's best knowledge of current events and actions that may impact the company in the future, actual results may be different from the estimates. Our critical accounting policies are those that affect our financial statements materially and involve difficult, subjective or complex judgments by management. Those policies are stock-based compensation, income taxes, goodwill impairment and revenue recognition. Stock-Based Compensation - ------------------------ We have chosen to account for stock options granted to employees and directors under the recognition and measurement principles of Accounting Principles Board Opinion No. 25 instead of the fair value recognition provisions of SFAS No. 123, "Accounting for Stock-based Compensation," as amended by SFAS No. 148, "Accounting for Stock-based Compensation Transition and Disclosure." In addition, the Company has routinely exchanged shares of its common stock for services and in satisfaction of debt owed by the Company to shareholders. Common stock exchanged for services from unrelated parties, shareholder debt and suppliers is valued at the appraised value of the Company's restricted common stock. Any differences between the appraised value and the stated value of services or debt is charged to operations. The shares issued are restricted securities and may not be currently sold. The value of these restricted securities is determined by an independent business valuation expert on a quarterly basis. Management believes that the appraised value is a better indication of the fair value of the restricted shares issued than the price of freely traded shares in the open market due to the large number of issued restricted shares. Income Taxes - ------------ The calculation of the Company's income tax provision and related valuation allowance is complex and requires the use of estimates and judgments in its determination. As part of the Company's evaluation and implementation of business strategies, consideration is given to the regulations and tax laws that apply to the specific facts and circumstances for any transaction under evaluation. This analysis includes the amount and timing of the realization of income tax liabilities or benefits. Management closely monitors tax developments in order to evaluate the effect they may have on the Company's overall tax position. Impairment of Goodwill and Other Intangible Assets - -------------------------------------------------- Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets acquired. The Company tests goodwill and other intangible assets on an annual basis, or more frequently if events or circumstances indicate that there may have been impairment. The goodwill impairment test estimates the fair value of each reporting unit, through the use of a discounted cash flows model, and compares this fair value to the reporting unit's carrying value. The goodwill impairment test requires management to make judgments in determining the assumptions used in the calculations. Management believes goodwill is not impaired and is properly recorded in the financial statements. 16 Revenue Recognition - ------------------- The Company enters into agreements to sell products (hardware or software), services, and other arrangements that include combinations of products and services. Revenue from product sales, net of trade discounts and allowances, is recognized provided that persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed or determinable, and collectibility is reasonably assured. Delivery is considered to have occurred when title and risk of loss have transferred to the customer. Revenue is reduced for estimated product returns and distributor price protection, when appropriate. For sales that include customer-specified acceptance criteria, revenue is recognized after the acceptance criteria have been met. Revenue from services is deferred and recognized over the contractual period or as services are rendered and accepted by the customer. When arrangements include multiple elements, we use objective evidence of fair value to allocate revenue to the elements and recognize revenue when the criteria for revenue recognition have been met for each element. The amount of product revenue recognized is affected by our judgments as to whether an arrangement includes multiple elements and if so, whether vendor-specific objective evidence of fair value exists for those elements. Changes to the elements in an arrangement and the ability to establish vendor-specific objective evidence for those elements could affect the timing of the revenue recognition. Most of these conditions are subjective and actual results could vary from the estimated outcome, requiring future adjustments to revenue. Research and Development - ------------------------ The Company expenses research and development costs as incurred. Recently Issued Accounting Standards In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123R (Revised 2004), Share-Based Payment ("SFAS No. 123R"), which requires that the compensation cost relating to share-based payment transactions be recognized in financial statements based on alternative fair value models. The share-based compensation cost will be measured based on the fair value of the equity or liability instruments issued. The Company currently disclosed pro forma compensation expense quarterly and annually by calculating the stock option grants' fair value using Black-Scholes model and disclosing the impact on net income and net income per share in a Note to the Consolidated Financial statements. Upon adoption, pro forma disclosure will no longer be an alternative. The table above reflects the estimated impact that such a change in accounting treatment would have had on the Company's net loss and net loss per share if it had been in effect during the year ended December 31, 2003. SFAS No. 123R also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as financing cash flows and increase net financing cash flows in periods after adoption. The Company will begin to apply SFAS No. 123R using the most appropriate fair value model as of the interim reporting period ending September 30, 2005. In November 2004, the FASB issued SFAS No. 151, "Inventory Costs, an Amendment of ARB No. 43, Chapter 4." SFAS No. 151 retains the general principle of ARB No. 43, Chapter 4, "Inventory Pricing," that inventories are presumed to be stated at cost; however, it amends ARB No. 43 to clarify that abnormal amounts of idle facilities, freight, handling costs and spoilage should be recognized as current period expenses. Also, SFAS No. 151 requires fixed overhead costs be allocated to inventories based on normal production capacity. The guidance in SFAS No. 151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The Company believes that implementing SFAS No. 151 should not have a material impact on its financial position and results of operations. 17 In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections." SFAS No. 154 replaces APB Opinion No. 20, "Accounting Changes" and SFAS No. 3, "Reporting Accounting Changes in Interim Financial Statements." SFAS No. 154 requires that a voluntary change in accounting principle be applied retrospectively with all prior period financial statements presented on the new accounting principle unless it is impracticable to do so. SFAS No. 154 also provides that a change in method of depreciating or amortizing a long-lived non-financial asset be accounted for as a change in estimate effected by a change in accounting principle and that correction of errors in previously issued financial statements should be termed a "restatement." SFAS No. 154 is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. Early adoption of this standard is permitted for accounting changes and corrections of errors made in fiscal years beginning after June 1, 2005. The Company will apply the provisions of this statement effective January 1, 2006 and believes that implementing SFAS No. 154 should not have a material impact on its financial position and results of operations. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK No market risk sensitive instruments ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL DATA The response to this item is submitted on pages F-1 - F-31 of this Report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. Item 9A. CONTROLS AND PROCEDURES. Management's Report on Internal Control over Financial Reporting Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended). This includes the process and policies designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that: (a) Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (b) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and 18 (c) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2004. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Warthog Games Limited ("Warthog") was acquired by the Company within 2 months of the financial year end. Management has considered The Securities and Exchange Commission ("SEC") document entitled "Management's Report on Internal Control over Financial Reporting and Disclosure in Exchange Act Periodic Reports: Frequently Asked Questions" and believe that it is appropriate to apply the guidance included in the answer to Question 3 (reporting on acquired businesses during the fiscal year). Warthog results were less than one percent of the consolidated net loss before tax for the year ended December 31, 2004 and management does not consider Warthog to be material to the financial statements. Hence management has excluded Warthog from management's report on internal control over financial reporting for 2004. A material weakness in internal control over financial reporting is a significant deficiency (within the meaning of the Public Company Accounting Oversight Board's Auditing Standard No. 2), or combination of significant deficiencies, that results in there being more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. Management's assessment concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2004 as a result of the following identified material weaknesses: o The design of the Company's corporate governance framework does not currently meet the requirements of COSO's Internal Control-Integrated Framework in the following areas: - The Company does not have an independent audit committee; - The Company does not have a fraud training program for employees, or a mechanism to report fraud to the board of directors; and - The Company does not have formalized and documented HR policies and procedures. o Inadequate segregation of duties, which impacted the Company's financial reporting controls, taxation calculation and reporting controls, expenditure controls and information technology controls; o Insufficient qualified personnel in human resources and payroll functions to maintain effective controls with respect to hiring of personnel; maintenance of employee records; payroll processing, including a lack of segregation of duties; and anti-fraud measures including inadequate policies for employee expenses; o Inadequate controls and accounting policies over capitalization, disposition and evaluation of useful lives of fixed assets; 19 o Inadequate controls over purchases, including authorization, recording, ordering, confirmation of the receipt of goods or services, segregation of duties, and payment of suppliers; o Inadequate IT back up procedures as back up media was held on site and not at a remote location in line with good practice; o Ineffective or inadequate controls over the retention of records, returns to the tax authorities, review and reconciliation of accounts for UK Value Added Tax (VAT) on purchases; and o Inadequate controls over the financial statements close process due to the lack of independent and timely review; lack of procedures to ensure consistency and completeness of the process; and lack of management information to enable effective review of the Company's performance. Management continues to evaluate the impact of these deficiencies and weaknesses on the Company's financial reporting and control environment. The Company, has employed BDO Stoy Hayward LLP to assist in identifying remediation actions required to address these control deficiencies and weaknesses. Goldstein Golub Kessler LLP has issued an auditors' report on management's assessment of our internal control over financial reporting. The auditors' report is included in the Report of Goldstein Golub Kessler LLP, Independent Registered Public Accounting Firm, that appears on page F-2 of this Annual Report on Form 10-K. Changes in Internal Controls. There have been no changes in internal controls or in other factors during our most recent fiscal quarter that has significantly affected or is reasonably likely to significantly affect our internal controls over financial reporting, including any corrective actions with regard to significant deficiencies and material weaknesses. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information on the directors and executive officers of the Company as of August 1, 2005 is provided below. The term of all of the directors of the Company expires May 30, 2006. Michael Carrender Director since 2002 Mr. Carrender, age 52, has been the Chief Executive Officer and Chief Financial Officer of the Company since August 2003 and was previously Executive Vice President and Chief Financial Officer of the Company since February 2002. Mr. Carrender served as President and Chief Executive Officer of Crowe Rope, a unit of JPBE, Inc., a manufacturer of cordage products, from January 1999 until he joined the Company in February 2002. He was an independent consultant for various companies prior to joining Crowe. He was Vice President and General Manager of Mail Well Inc., a New York Stock Exchange printing Company, from 1997 to 1998. Before he became a consultant, he was with Consolidated Packaging 20 Corporation, a publicly traded multi-plant paper converting company, for seventeen years during which he held positions of Treasurer (1979-1983), Chief Financial Officer (1984-1989), Chief Operating Officer (1988-1989), and President and Chief Executive Officer (1989-1996). Mr. Carrender holds a BA and an MBA in Finance. Carl Freer Director since August 2004 Mr. Freer, age 35, has served as Chairman since August 2004 and has been Managing director of the Company's Gizmondo Europe Ltd. subsidiary based in the UK since summer of 2003. He was the founder in 1999 of Eagle Eye Scandinavian Ltd. that was acquired by the Company in February 2002. He founded and served as Sales Director of ARE Media AB, a private media sales company in Stockholm, a Director of Performance Films SA, a film production company in Malaga, Spain and a Director of Rivera Auto Forum, a specialty auto dealership in Cannes, France. Mr. Freer is a director of WEG Entertainment and a trustee of several charities, including Kings Medical Research Trust. Steve Carroll Director since August 2004 Mr. Carroll, age 48, has served as a Director since August 2004 and has been the Chief Technology Director of the Company's Gizmondo Europe Ltd. subsidiary, since its inception in December 2002. He has been with the Company or its subsidiaries, since September 2002. He was formerly Director of Maxon, a Korean-high volume telecommunications equipment manufacturer from 1996 to 2002. He was previously employed at Marconi/MOD/GEC, telecommunication equipment manufacturers, in various positions from 1981 to 1996. He has a Masters Degree MSc from Cambridge in the UK. Bo Stefan Eriksson Executive Officer since September 2005 Bo Stefan Eriksson, age 46, is an executive officer of the Company's largest subsidiary, Gizmondo Europe Ltd., and is deemed to be an executive officer of the Company as of September 2005. Mr. Eriksson previously worked with Carl Freer at Eagle Eye Scandinavian Ltd., which was acquired by the Company in February 2002. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act") requires the Company's directors and executive officers, and persons who own more than 10% of the outstanding shares of the Company's common stock, to file initial reports of beneficial ownership and reports of changes in beneficial ownership of shares of common stock with the Securities and Exchange Commission (the "Commission"). Such persons are required by regulations promulgated under the Exchange Act to furnish the Company with copies of all Section 16(a) forms filed with the Commission. Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to the Company during the year ended December 31, 2004, and upon a review of Forms 5 and amendments thereto furnished to the Company with respect to the year ended December 31, 2004, or upon written representations received by the Company from certain reporting persons that such persons were not required to file Forms 5, the Company believes that no director, executive officer or holder of more than 10% of the outstanding shares of common stock failed to file on a timely basis 21
the reports required by Section 16(a) of the Exchange Act during, or with respect to, the year ended December 31, 2004. Code of Ethics As of the date of this filing, the Company has adopted a Code of Business Conduct and Ethics that applies to the Company's and its subsidiaries' officers, directors and employees. Audit Committee and Audit Committee Financial Expert The Company's board of directors acts as the Company's audit committee, with Michael W. Carrender acting as its chairman. The Company's board of directors has determined that the Company did not have an audit committee financial expert serving on its audit committee during the time period covered by this filing. The Company did not have an audit financial expert serving on its audit committee because it was not a requirement for the time period covered by this filing. ITEM 11. EXECUTIVE COMPENSATION Summary Compensation The following table provides information on the total compensation paid or accrued during the fiscal years indicated below by the Company and/or its affiliates and allocated to the Company's operations for services rendered during each of 2004, 2003 and 2002 to all persons serving as the Company's chief executive officer during 2004, 2003 and 2002, to each of the Company's three most highly compensated executive officers other than the chief executive officer whose total salary and bonus compensation exceeded $100,000 during any such year. Summary Compensation Table Annual Compensation (1) - --------------------- ---- ---------------- ------------- -------- ---------- ------------ ------- ----------- Other Securities All Annual Stock Underlying Other Name and Principal Compen- Awards Options/ LTIP Compen- Position Year Salary Bonus sation ($) Shares Payouts sation - --------------------- ---- ---------------- ------------- -------- ---------- ------------ ------- ----------- Michael W. Carrender 2004 $ 1,266,783(2) $ 0 - --------------------- ---- ---------------- ------------- -------- ---------- ------------ ------- ----------- Chief Executive 2003 $ 200,000 $ 0 0 Officer - --------------------- ---- ---------------- ------------- -------- ---------- ------------ ------- ----------- 2002 $ 78,564 $ 0 144,000(3) - --------------------- ---- ---------------- ------------- -------- ---------- ------------ ------- ----------- - --------------------- ---- ---------------- ------------- -------- ---------- ------------ ------- ----------- Carl J. Freer 2004 $ 1,075,684 $ 1,123,850 0 975,0000 0 279,516(8) Chairman (4) - --------------------- ---- ---------------- ------------- -------- ---------- ------------ ------- ----------- $ 0 $ 0 0 - --------------------- ---- ---------------- ------------- -------- ---------- ------------ ------- ----------- A. J. Nassar 2004 $ 0 $ 0 0 - --------------------- ---- ---------------- ------------- -------- ---------- ------------ ------- ----------- Former Chief 2003 $ 50,000 $ 0 0 Executive Officer 2002 and Chairman until July 2002 (5) - --------------------- ---- ---------------- ------------- -------- ---------- ------------ ------- ----------- Steve Carroll (6) 2004 $ 1,020,580 $ 0 1,492,587 0 Chief Technology Officer - --------------------- ---- ---------------- ------------- -------- ---------- ------------ ------- ----------- Bo Stefan Eriksson 2004 $ 867,465 $ 1,365,456 884,024 0 104,095(9) Director - Gizmondo Europe (7) - --------------------- ---- ---------------- ------------- -------- ---------- ------------ ------- -----------
22
_______________________ (1) No officer received perquisites in an amount greater than $50,000. (2) Mr. Carrender joined the Company in February 2002. Mr. Carrender is owed $646,666 in accrued but unpaid salary, as of December 31, 2004. (3) Options to purchase 144,000 shares at $1.50 per share were granted in August 2002 under the 2001 Stock Option Plan. (4) Mr. Freer became Chairman in August 2004, but was Managing Director of Gizmondo in 2003. He received his compensation in Great Britain Sterling from the subsidiary Gizmondo Europe Ltd. , which amount has been converted to US dollars at a 1.9277 conversion rate. The Company included in Mr. Freer's 2004 all other Compensation $163,855 paid by the Company to Bankside Law for legal fees incurred by Mr. Freer, personally. (5) Represents salary earned by Mr. Nassar from May 22, 2001 through December 31, 2001, $35,343 of which was accrued and unpaid as of December 31, 2001. The salary level at the time of his resignation was $100,000 per annum. Mr. Nassar resigned as CEO on June 28, 2002. (6) In the first quarter of 2005, Gizmondo Europe acquired a luxury automobile for Mr. Carroll. The automobile had a value of approximately $231,324 at the time of acquisition, which amount is included in his 2005 compensation. (7) Mr. Eriksson's salary is paid in Great Britain Sterling from the subsidiary Gizmondo Europe Ltd. and converted to US dollars at a 1.9277 conversion rate. (8) Includes an automobile allowance of $115,662. (9) Automobile allowance. Option Grants No stock options were granted during 2004 pursuant to the Company's 2001 stock option plan. The following table sets forth certain information concerning the exercise of options and the value of unexercised options held under the 2001 Plan and outside of the 2001 Plan at December 31, 2004 by the individuals listed in the Summary Compensation Table. Aggregated Option Exercises In Last Fiscal Year and Fiscal Year-End Option Values Number of Securities Value of unexercised Underlying Unexercised In-the-Money Options Options/Shares Fiscal Shares at Fiscal Shares Acquired Year-End(%)Exercisable/ Year-End($) Acquired on Name on Exercise Value Realized($) Unexercisable Exercisable/Unexercisable - ---- ----------- ----------------- ------------- ------------------------- Michael W. Carrender 0 0 144,000/0 $3,787,200/0 (1)
_____________________ (1) Represents the difference between the last reported sale price of the common stock on December 31, 2004 ($26.30) and the exercise price of the shares of the options at $1.50 multiplied by the number of options exercised. Compensation of Directors The directors of the Company are not compensated for serving as members of the Company's Board of Directors. 2001 Stock Option Plan The Company adopted its 2001 stock option plan (the "2001 Plan") in July 2001. The stock incentive plan provides for the granting of incentive stock related awards to officers, employees and other individuals so that the Company will be able to attract and retain the services of highly qualified individuals. The essential features of the 2001 Plan are set forth below. Shares Authorized for Grant. Subject to the anti-dilution provisions discussed below, there are 320,000 shares of common stock reserved for issuance upon the exercise of options (following the 25 for 1 reverse split of July 30, 2004). Such shares may be authorized, but unissued shares of common stock, or 23 reacquired shares. Shares subject to options granted under the 2001 Plan, which have lapsed or terminated may again be subject to options under the 2001 Plan. No options to purchase shares of common stock have been granted under the 2001 Plan as of December 31, 2004 but 144,000 were granted in 2002 and none were granted in 2003 or 2004. Administration of the 2001 Plan. The 2001 Plan is administered by the Board of Directors or by a committee consisting of two (2) or more outside directors who are appointed by the Board (the "Committee"). Subject to the express provisions of the 2001 Plan, the Board or such Committee has the authority to interpret the 2001 Plan, to prescribe, amend and rescind rules and regulations relating to the 2001 Plan, to determine the terms and provisions of option agreements and to make all other determinations necessary or advisable for the administration of the 2001 Plan. Any controversy or claim arising out of or related to the 2001 Plan, or the options granted thereunder, is determined unilaterally by, and at the sole discretion of, the Committee. Option Grants to Eligible Individuals. All employees and other individuals who provide services to the Company are eligible to receive options under the 2001 Plan. Employees are eligible to receive either "incentive" stock options, subject to the limitations of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") or "non-statutory" stock options. The 2001 Plan confers discretion on the Committee to select employees or other individuals that the Committee determines to receive options, to determine the number of shares subject to each option, the term of each option and the exercise price of the options granted, except that the exercise price may not be less than 100% of the fair market value of the underlying common stock for an incentive stock option as of the date of grant. In addition, the exercise price may not be less than 110% of the fair market value of the common stock for an incentive stock option granted to a person who owns more than 10% of the total combined voting power or value of all classes of stock of the Company. No option may have a term in excess of ten (10) years from the date of grant. The Committee has the authority to determine the vesting requirements and the permissible methods of payment of the exercise price. The Committee may also make such other provisions in the options, consistent with the terms of the 2001 Plan, as it may deem desirable. Options granted under the 2001 Plan are not exercisable until six (6) months after grant. To the extent that such an option is an incentive stock option, upon termination of an optionee's employment with the Company for any reason, such optionee's options shall immediately terminate, except that upon termination, the Committee in its discretion may allow the optionee to exercise any vested options owned by the optionee within ninety (90) days after termination. In no event are options exercisable beyond their stated term. Change in Control. All options granted under the 2001 Plan become fully vested and immediately exercisable upon the occurrence of a "Change of Control." The 2001 Plan defines Change of Control to mean the occurrence of any of the following: (i) the acquisition (other than from the Company directly) by any "person" group or entity within the meaning of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934) of beneficial ownership of thirty-five (35%) percent or more of the outstanding common stock of the Company; (ii) if the individuals who serve on the Board as of the date of stockholder approval of the 2001 Plan, no longer constitute a majority of the members of the Board of Directors; provided, however, any person who becomes a director subsequent to 24 such date, who was elected to fill a vacancy by a majority of the directors then serving on the Board of directors shall be considered a member prior to such date; (iii) the stockholders of the Company approve a merger reorganization or consolidation of the Company whereby the stockholders of the Company immediately prior to such approval do not, immediately after consummation of such reorganization, merger or consolidation, own more than 50% of the voting stock of the surviving entity; or (iv) a liquidation or dissolution of the Company, or the sale of all or substantially all of the Company's assets. Nontransferability of Options. Options granted under the 2001 Plan are not transferable other than by will or the laws of descent and distribution, and may be exercised during the optionee's lifetime only by the optionee. Upon such optionee's death, the beneficiary of the optionee's estate shall have the lesser of (a) the remaining term of such option or (b) one year for the optionee's death within which to exercise such options. Anti-dilution Provisions. In the event of a change, such as a stock split or stock dividend, in the Company's capitalization, which results in a change in the number of outstanding shares of common stock, without receipt of consideration, an appropriate adjustment will be made in the exercise price of, and the number of shares subject to, all outstanding options. An appropriate adjustment will also be made in the total number of shares authorized for issuance under the 2001 Plan. Dissolution or Liquidation. Upon the dissolution or liquidation of the Company, or upon a reorganization, merger or consolidation of the Company with one (1) or more corporations as a result of which the Company is not the surviving corporation, or upon a sale of substantially all the property or more than fifty (50%) percent of the then outstanding shares of common stock of the Company to another corporation, the Company shall either: (a) provide for the assumption by the successor corporation of the options theretofore granted or the substitution by such corporation for such options of new options covering the stock of the successor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices; or (b) give to each optionee at the time of adoption of the plan of liquidation, dissolution, merger or sale, notice of the adoption of the plan of liquidation, merger or sale (i) a reasonable time thereafter within which to exercise all such options owned by such individuals prior to the effective date of such liquidation, dissolution, merger or sale; or (ii) the right to exercise the option as to an equivalent number of shares of common stock of the successor corporation by reason of such liquidation, dissolution, merger, consolidation or reorganization. Tax Consequences to Grantees. Under present tax law, the Federal income tax treatment of options granted under the 2001 Plan is as generally described below. Incentive Stock Options. With respect to options, which qualify as incentive stock options, an optionee will not recognize income for federal income tax purposes at the time options are granted or exercised. If the optionee disposes of shares of common stock acquired upon exercise of the options before the expiration of two years from the date the options are granted, or within one year after the issuance of shares upon exercise of the options, the optionee will recognize, in the year of disposition (a) ordinary income, to the extent that the lesser of either (i) the fair market value of the shares on the date of option exercise or (ii) the amount realized on disposition, exceeds the option price; and (b) capital gain (or loss), to the extent that the amount realized on disposition differs from the fair market value of the shares on the date of option exercise. If the shares are sold after expiration of these holding periods, the optionee will realize capital gain or loss (assuming the shares are held as capital assets) equal to the difference between the amount realized on disposition and the option price. 25 Non-Qualified Stock Options. Non-qualified stock options are all options, which do not qualify for incentive stock option treatment under Section 422 of the Code. If a non-qualified stock option has a readily ascertainable fair market value at the time of grant, the optionee realizes ordinary income either (a) when his rights in the option becomes transferable; or (b) when the right to an option is not subject to a substantial risk of forfeiture. Ordinary income will be equal to the fair market value of the option less any amount paid by the optionee. If the option does not have an ascertainable fair market value at the time of grant, income is realized at the time the option is exercised. Such income would be the positive difference between the fair market value of the common stock received at the time of exercise and the exercise price paid. Upon the sale of the common stock received upon exercise, the difference between the sale price and the fair market value on the date of exercise will be treated as capital gain or loss. Tax Consequences to the Company. The Company will be entitled to a deduction for federal income tax purposes at the same time and in the same amount as an optionee is required to recognize ordinary income as described above. To the extent an optionee realizes capital gains as described above, the Company will not be entitled to any deduction for Federal income tax purposes. Accounting Considerations. Currently, there is no charge to the Company's operations in connection with the grant or exercise of an option under the 2001 Plan, unless the fair market value of the shares at the date of grant exceeds the exercise price of the option, in which case there will be a charge to operations in the amount of such excess. Earnings per share may be affected by the 2001 Plan by the effect on the calculation, as prescribed under generally accepted accounting principles, of the number of outstanding shares of common stock of the Company. This calculation reflects the potential dilutive effect, using the treasury stock method, of outstanding stock options anticipated to be exercised even though shares have not yet been issued upon exercise of these options. When shares are actually issued as a result of the exercise of stock options, additional dilution of earnings per share may result. Reload Options. The 2001 Plan provides for the automatic grant of reload options to an optionee who would pay all, or part of, an option exercise price by the delivery of shares of common stock already owned by such optionee. Reload options would be granted for each share so tendered. The exercise price of such reload option is the fair market value of the common stock on the date the original option is exercised. All other terms of the reload options are identical to the terms of the original option. 2005 Stock Incentive Plan The Company adopted the Tiger Telematics, Inc. 2005 Incentive Plan (the "2005 Plan") on May 13, 2005. The 2005 Plan provides for the granting of stock awards to Board members, employees, professional advisors and other independent contractors to provide an incentive to such individuals who provide services to the Company or its subsidiary Companies who are in a position to contribute materially to the long-term success of the Company, to increase their proprietary interest in the success of the Company and to aid in attracting and retaining directors, employees and independent contractors of outstanding ability. The essential features of the 2005 Plan are set forth below: 26 Shares Authorized for Award. Subject to adjustment provisions discussed below, there are 1,000,000 shares of the Company's common stock, $.001 par value, reserved for issuance under the 2005 Plan. Such shares of common stock may be authorized, but unissued shares of common stock, or reacquired shares. In the event that any shares of common stock that are subject to the 2005 Plan are forfeited or redeemed by the Company, such shares may again be awarded under the 2005 Plan. Administration of the 2005 Plan. The 2005 Plan is administered by an award committee appointed by the Board (the "Committee"). Subject to the express provisions of the 2005 Plan, the Committee has the authority to construe and interpret the 2005 Plan, to prescribe, amend and rescind rules and regulations relating to the 2005 Plan and to take all actions necessary or advisable for the administration of the 2005 Plan. Furthermore, the Committee grants stock awards to eligible persons and determines the time for granting stock awards, the number of shares of the Company's common stock subject to each stock award and all other terms and conditions of each stock award. The Committee's interpretation and construction of the 2005 Plan shall be final. Under the 2005 Plan, the Company indemnifies the Board of Directors and Committee. Stock Awards to Eligible Individuals. All Board members, employees, professional advisors and other independent contractors who provide services to the Company or its Subsidiaries are eligible to receive stock awards under the 2005 Plan. Terms and Conditions of Stock Awards. The Committee shall issue stock awards pursuant to a stock award agreement, which agreement shall contain or shall be subject to the following terms and conditions: the number of shares to which it pertains; the applicable restrictions on the shares; any events that would accelerate the applicable restrictions; and such other terms, conditions, provisions and restrictions as the Committee shall deem advisable. Additionally, any shares of common stock issued under the 2005 Plan shall include a legend to the effect that the shares represented thereby may not be sold, exchanged, transferred, pledged, hypothecated or otherwise disposed of except in accordance with the terms of the 2005 Plan. Adjustments. The award shares shall be subject to adjustment as a result of a stock split or stock dividend or a combination of shares or any other change, or exchange for other securities by reclassification, reorganization, merger, consolidation, recapitalization or otherwise, as determined by the Committee. Compliance with SEC Requirements. No certificate for award shares distributed pursuant to the 2005 Plan shall be issued until the Company shall have taken such action, if any, as is required to comply with the provisions of the Securities Act of 1933, as amended, the Securities Act of 1934, as amended, any other applicable laws and the requirements of any exchange in which the award shares may, at the time, be listed. Income Tax Provisions. The Company or participating subsidiary shall to the extent required by law, and may, to the extent permitted by law, deduct from any payment of any kind otherwise due to a recipient of a stock award, the aggregate amount of any federal, state or local taxes of any kind required by law to be withheld with respect to the award shares or, such recipient shall pay to the Company, or make arrangements satisfactory to the Company regarding payment by the Company of, the aggregate amount of any such taxes. Until such amount has been paid or arrangements satisfactory to the Company have been made, no stock certificates under the 2005 Plan shall be issued to a recipient. 27 Employment Contracts and Termination and Change-In-Control Arrangements As of December 31, 2004, the Company had employment agreements with all of its executive officers, Michael W. Carrender, Carl Freer, Steve Carroll and Stefan Eriksson. The Company and Michael W. Carrender entered into an employment contract effective March 1, 2004, pursuant to which Mr. Carrender is employed as the Chief Executive Officer of the Company. This contract currently provides for an initial three year term through March 1, 2007, and his employment there under is automatically extended for successive one-year periods thereafter, unless terminated by either the Company or Mr. Carrender upon proper notice. The base salary under this contract is a minimum of $1,800,000 per annum (effective as of October 1, 2004) and Mr. Carrender is eligible to receive (1) a bonus, and (2) certain perquisites described in the contract. If Mr. Carrender's employment is terminated prior to the term of the contract by the Company (unless the termination is by the Company for "cause" or as a result of Mr. Carrender's death or permanent disability) or by Mr. Carrender for "good reason," then the Company must pay Mr. Carrender (x) his remaining base salary through the end of the then current term and (y) an amount equal to fifty percent (50%) of his annual base salary for the fiscal year immediately preceding the year in which the termination occurs. Gizmondo Europe, Ltd., the Company and Carl Freer entered into an employment contract effective March 1, 2004, pursuant to which Mr. Freer is employed as the Managing Director of Gizmondo Europe. This contract currently provides for an initial three year term through March 1, 2007, and his employment there under is automatically extended for successive one-year periods thereafter, unless terminated by either the Company or Mr. Freer upon proper notice. The base salary under this contract is a minimum of $1,922,770 per annum (effective as of October 1, 2004) and Mr. Freer is eligible to receive (1) a bonus, and (2) certain perquisites described in the contract. If Mr. Freer's employment is terminated prior to the term of the contract by the Company (unless the termination is by the Company for "cause" or as a result of Mr. Freer's death or permanent disability) or by Mr. Freer for "good reason," then the Company must pay Mr. Freer (x) his remaining base salary through the end of the then current term and (y) an amount equal to fifty percent (50%) of his annual base salary for the fiscal year immediately preceding the year in which the termination occurs. Gizmondo Europe, Ltd., the Company and Steve Carroll entered into an employment contract effective October 1, 2004, pursuant to which Mr. Carroll is employed as the Chief Technology Officer. This contract currently provides for an initial three year term through October 22, 2007, and his employment there under is automatically extended for successive one-year periods thereafter, unless terminated by either the Company or Mr. Carroll upon proper notice. The base salary under this contract is a minimum of $1,542,160 per annum (effective as of February 1, 2005) and Mr. Carroll is eligible to receive (1) a bonus, and (2) certain perquisites described in the contract. If Mr. Carroll's employment is terminated prior to the term of the contract by the Company (unless the termination is by the Company for "cause" or as a result of Mr. Carroll's death or permanent disability) or by Mr. Carroll for "good reason," then the Company must pay Mr. Carroll (x) his remaining base salary through the end of the then current term and (y) an amount equal to fifty percent (50%) of his annual base salary for the fiscal year immediately preceding the year in which the termination occurs. Gizmondo Europe, Ltd., the Company and Stefan Eriksson entered into an employment contract effective March 1, 2004, pursuant to which Mr. Eriksson is employed as a Director of Gizmondo Europe. This contract currently provides for an initial three year term through March 1, 2007, and his employment there under is automatically extended for successive one-year periods thereafter, unless terminated by either the Company or Mr. Eriksson upon proper notice. The base salary under this contract is a minimum of $1,542,160 per annum (effective as of October 1, 2004) and Mr. Eriksson is eligible to receive (1) a bonus, and (2) certain perquisites described in the contract. If Mr. Eriksson's employment is terminated prior to the term of the contract by the Company (unless the termination is by the Company for "cause" or as a result of Mr. Eriksson's death or permanent disability) or by Mr. Eriksson for "good reason," then the Company must pay Mr. Eriksson (x) his remaining base salary through the end of the then current term and (y) an amount equal to fifty percent (50%) of his annual base salary for the fiscal year immediately preceding the year in which the termination occurs. 28 Compensation Committee Interlocks and Insider Participation No executive officer of the Company serves as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of the Company's Board of Directors or Compensation Committee. The Company had no separate Compensation, Stock Option and Benefits Committee during the year ended December 31, 2004. Shareholder Return Performance This graph compares the Company total stockholder returns and the Standard and Poor's 500 Composite Stock Index, The graph assumes $100 invested at the per share closing price of the common stock of the Company on the other over the counter market from December 31, 2002 forward. Prior to the reverse shell merger in May 2001, there was no established public trading market for the Company's stock. 12/31/2001 12/31/2002 12/31/2003 12/31/2004 ---------- ---------- ---------- ---------- TGTL 100.00 63.13 43.48 413.93 S&P 500 173.12 130.53 163.51 178.23 Comparison of initial $100 investment the Standard and Poor's Composite Stock Index versus the common stock of the Company. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The following table sets forth certain information with respect to the beneficial ownership of the Company's common stock as of August 9, 2005 for (a) the chief executive officer, (b) each of the Company's directors and executive officers, (c) all of the Company's current directors and executive officers as a group and (d) each stockholder known by us to own beneficially more than 5% of the Company's common stock. Beneficial ownership is determined in accordance with the rules of the Commission and includes voting or investment power with respect to the securities. 29
Shares of common stock that may be acquired by an individual or group within 60 days of August 9, 2005, pursuant to the exercise of options or warrants are deemed to be outstanding for the purpose of computing the percentage ownership of such individual or group, but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person shown in the table. Except as indicated in footnotes to this table, the Company believes that the stockholders named in this table have sole voting and investment power with respect to all shares of common stock shown to be beneficially owned by them based on information provided to us by such stockholders. Ownership percentage is based on 59,252,323 shares of common stock outstanding on August 9, 2005, plus 144,000 options outstanding. Amount and Nature of Percent Name of Beneficial Owner Beneficial Owner of Class ------------------------ ---------------- -------- Directors and Executive Officers: Michael W. Carrender1 1,924,036 3.2% Carl Freer2 4,015,088 6.8% Steve Carroll3 565,000 1.0% Stefan Eriksson4 1,137,750 1.9% --------- ---- All directors and 7,641,874 12.9% executive officers as a group (3 persons)
_______________________ 1 Includes 144,000 shares issuable upon exercise of incentive stock options, shares held in joint account with spouse and individually. Mr. Carrender's address is 550 Water Street, Suite 937, Jacksonville, FL 32202. 2 Includes shares held by spouse and in the names of three dependent children. Mr. Freer's address is One Meadow Gate Park, Farnborough Business Park, Farnborough, Hampshire, UK GU146FG. 3 Mr. Carroll's address is One Meadow Gate Park, Farnborough Business Park, Farnborough, Hampshire, UK GU146FG. 4 Includes 22,750 shares held in the name of his dependent child. Mr. Eriksson's address is One Meadow Gate Park, Farnborough Business Park, Farnborough, Hampshire, UK GU146FG. Equity Compensation Plan Information The following table reflects the number of shares of the Company's common stock that, as of August 1, 2005, were outstanding and available for issuance under both (i) equity compensation plans that have previously been approved by our stockholders and (ii) equity compensation plans that have not approved by stockholders.
Number of Securities Remaining Available for Future Issuance Under Number of Securities to Weighted-Average Equity Compensation be Issued Upon Exercise Exercise Price of Plans (Excluding of Outstanding Options, Outstanding Options, Securities Previously Plan Category Warrants and Rights Warrants and Rights Issued) - ------------- ------------------- ------------------- ---------------------- Equity Compensation 144,000(1) $1.50 156,000 Plans Approved by Security Holders Equity Compensation 0 $0 1,000,000 Plans not Approved by Security Holders Total 144,000 $1.50 1,156,000
30 _______________ 1 Consists of options issuable under the 2001 Plan to purchase a total of 144,000 shares issued to Mr. Carrender in August 2002. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS As of December 31, 2003 the Company owed Mr. Carrender $136,570 in accrued salary. As of December 31, 2004, the Company owed Mr. Carrender $646,667 in accrued salary and reimbursable expenses. During the fourth quarter of 2003, the Company converted $1,420,000 of debt to Carl Freer, a stockholder of the Company and an officer of a subsidiary of the Company, to 2,840,000 shares of common stock at the rate of $.50 per share. Mr. Freer later became a director and Chairman of the Board of the Company in August 2004. In addition, during the fourth quarter of 2003 the Company converted $226,730 of debt owed to Joe Marten into 453,460 shares of common stock valued at $.50 per share. Also during 2003, the Company converted $84,028 of debt owed to other shareholders and issued 178,054 shares valued at $.50 per share. All of these conversions were approved by the Company's board of directors. The Company recorded a loss in 2003 of $1,543,730 on the conversion of this shareholder debt. In 2004, the Company issued 800,000 shares valued at $1,800,000 to Joe Marten for services rendered to the Company. In April 2004, Mr. Marten subsequently became an employee of Gizmondo Europe responsible for Investor Relations. Mr. Marten left the employment of Gizmondo Europe after the Company's Board of Directors learned that Mr. Martin had made an unauthorized purchase of a luxury automobile using Gizmondo Europe's funds. During 2004, Mr. Carl Freer and Mr. Stefan Eriksson caused Asiatic Bank and Finance, a company registered in Panama with its head office in Hong Kong, to pay 3P PreForm Marketing and Research AB and other non-affiliated third parties $7,622,000 for research and development expenditures incurred by and charged to Gizmondo Europe. This amount has been credited in full payment of amounts previously owed by Carl Freer and Stefan Eriksson to Gizmondo Europe. Asiatic Bank and Finance owns 400,000 shares of common stock of Tiger Telematics, Inc., which it acquired in November 2003 at a price of $.50 per share. On August 2, 2004, Gizmondo Europe completed the acquisition of Indie Studios AB for an aggregate of 1.6 million shares of the Company's common stock. At the time of this acquisition, Peter Uf, Joe Marten and Stefan Eriksson were directors of both Gizmondo Europe and Indie Studios. This transaction was approved by the Company's board of directors. For additional information regarding the acquisition of Indie Studios, see Note I to the Company's financial statements. In September 2004, Northern Lights Software Limited ("Northern Lights"), a company registered in the United Kingdom, and Gizmondo Europe entered into a License Agreement, pursuant to which Northern Lights licensed the games Chicane and Colors and provided software development services to Gizmondo Europe. During 2004, Gizmondo Europe paid Northern Lights a total of $3,513,000 under the License Agreement, which amount was invoiced during the regular course of business. Carl Freer, Chairman of the Company's Board of Directors, and Stefan Eriksson are directors of both Northern Lights and Gizmondo Europe and each is 31 the beneficial owner of 23.5% of the issued and outstanding share capital of Northern Lights. At December 31, 2004, the outstanding balance payable to Northern Lights was $906,000, which amount was subsequently paid in 2005. In 2004 and the first quarter of 2005, Gizmondo Europe paid Anneli Freer, the spouse of Mr. Carl Freer, $116,000 and $57,831, respectively, for consultancy services provided to Gizmondo Europe. Mrs. Freer provided marketing and public relations services, an introduction to the performer Sting and time spent in connection with the creation of the "Agaju" gaming concept currently in development. In 2004, the Company paid $163,855 to Bankside Law for legal fees incurred on behalf of Mr. Freer, personally. The Company included this amount as additional compensation to Mr. Freer. Tamela Sainsbury, the corporate secretary of Gizmondo Europe, is the co-habiting partner of Steve Carroll, a director of the Company. In 2004, Gizmondo Europe paid Ms. Sainsbury $149,844 in base compensation, other compensation and bonuses of $82,954 and provided her with a luxury automobile valued at $69,108 at the time of acquisition. In addition, in 2004 the Company issued Ms. Sainsbury a total of 160,681 shares of the Company's common stock valued at $467,213. Ms. Sainsbury's base compensation for 2005 is $192,777. In the UK, Gizmondo Europe maintains directors accounts whereby amounts owing to and from directors of Gizmondo Europe are netted in order to facilitate advances made and expenses incurred by directors. During 2004, Gizmondo Europe was owed as much as $5,723,860, and $3,122,210, by Messrs. Freer and Eriksson, respectively, using a conversion rate of 1.8074. All amounts owed by Mr. Freer were repaid prior to his becoming a director of the Company in August 2004. As of December 31, 2004, Mr. Eriksson owed $204,197 to Gizmondo, which loans were subsequently repaid. During 2005, Mr. Eriksson owed as much as $114,066 to Gizmondo Europe, all of which has been repaid. The Company presently has three directors, all of whom are involved in management of the Company and its subsidiaries. The Company anticipates increasing the Board to seven directors and adding four independent directors. With respect to the transactions in 2004 described above in which Mr. Carl Freer, Mrs. Carl Freer and/or Mr. Stefan Eriksson had an interest, respectively, the Company will ask the four independent directors, when appointed, to review, with the assistance of independent counsel or other experts, and approve these transactions. For additional information regarding related party transactions, see Note J to the Company's financial statements. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES Audit Fees For the fiscal years ended December 31, 2004, 2003 and 2002, the fees were $488,298, $75,000 and $75,000 respectively, for professional services rendered for the audit of the Company's financial statements. There was a change of the Company's auditors in November 2002. 32 Audit Related Services The Company was billed $42,000, $40,000 and $60,000 for the years ended December 31, 2004, 2003 and 2002, respectively, for the review of financial statements included in our periodic and other reports filed with the Securities and Exchange Commission. In addition, the UK audit firm billed $87,000 in 2003 for reviews of Gizmondo Europe Ltd. subsidiary for inclusion in the Company's quarterly filings. Tax Fees The Company was not billed for tax services for 2004, 2003 and 2002. Amounts may be required to file the 2004, 2003 and 2002 tax returns. Additional Fees The Company was not billed any fees for the years ended 2004, 2003 and 2002 for any products and fees related to accounting services, including financial information systems design and implementation. PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES The following documents are filed as part of the report: 1. and 2. The financial statements filed as part of this report are listed separately in the index to Financial Statements beginning on page F-1 of this report. 3. List of Exhibits Exhibit No. Description 2.1 Agreement and Articles of Merger, Plan of Merger, Share sale and Merger Agreement Floor Decor, Inc. and Media Communications Group Corporation1 2.2 Stock Purchase Agreement among Floor Decor, Inc., Eagle Eye Scandinavian Distribution Ltd. and the stockholders of Eagle Eye dated December 2001 as amended by an Amendment to Stock Purchase Agreement attached hereto.2 2.3 The Asset Purchase Agreement among Tiger Telematics, Inc., Comworxx, Inc. and the stockholders of Comworxx dated June 13, 2002.3 ___________________ 1 Incorporated by reference to Exhibit of the same number filed with the Company's Form 8K dated June 25, 2000. 2 Incorporated by reference to Form 8K dated February 19, 2002. 3 Incorporated by reference to Form 8K dated June 27, 2002. 33 2.4 Asset Purchase Agreement dated August 9, 2002 between the Company and MINIME Inc. and related Assignment and Assumption, Security Agreement and 2 Lease Assignment and Assumption Agreements.4 2.5 Stock Purchase Agreement dated December 20, 2002 between Norrtulls Mobileextra Akliebolag and Tiger Telematics, Inc. and Tiger Telematics, Ltd. and related Royalty Agreement.5 2.6 Asset Purchase Agreement to buy assets and subsidiaries of Warthog Plc. Dated November 3,2004.6 2.7 Stock Purchase Agreement to buy shares of Integra Sp dated October 29, 2004 subject to their shareholder approval.7 2.8 Stock Purchase Agreement dated May 20, 2004, among Golden Sands Investment Holdings, Ltd. (the sole stockholder of Indie Studios AB), the Company and Gizmondo Europe.8 2.9 Amended and Restated Stock Purchase Agreement dated January 19, 2005, by and among the Company, Integra SP Holdings Limited and Integra SP Nominee Limited.9 2.10 Stock Purchase Agreement dated September 2, 2005, between the Company and Globicom, Inc.10 3.1.1 Certificate of Incorporation of the Company.11 ___________________ 4 Incorporated by reference to Form 8K dated August 9, 2002. 5 Incorporated by reference to Form 8K dated January 20, 2003. 6 Incorporated by reference to Form 8K dated November 5, 2004. 7 Incorporated by reference to Form 8K dated November 3, 2004. 8 Filed herewith. 9 Filed herewith. 10 Filed herewith. 11 Incorporated by reference to Form 10SB12 B/A filed on October 19, 2000. 34 3.1.2 Bylaws of the Company12 3.2.3 The Certificate of Amendment amending the Certificate of Incorporation of the Company. Name change to Tiger Telematics, Inc.13 4.1 Form of specimen certificate for Common Stock of the Company14 4.1 Form of Subscription Agreement15 4.2 Form of Registration Rights Agreement16 4.3 Form of Warrant Agreement17 4.4 Risk Factors18 10.1 Building Lease Agreement for the Company's "big box superstore" located at 6001 Powerline Road, Ft. Lauderdale, FL.19 10.2 Building Lease Agreement for 700 S. Military Trail, Lake Worth, FL 3316320 10.3 2001 Stock Option Plan21 10.4 2005 Incentive Plan of Tiger Telematics, Inc.22 10.5 Employment Agreement dated March 1, 2004, between the Company and Michael W. Carrender, as amended.23 10.6 Employment Agreement dated March 1, 2004, among Gizmondo Europe, Ltd., the Company and Carl Freer, as amended.24 10.7 Employment Agreement dated October 22, 2004, among Gizmondo Europe, Ltd., the Company and Steve Carroll, as amended.25 10.8 Employment Agreement dated March 1, 2004, among Gizmondo Europe, Ltd., the Company and Stefan Eriksson, as amended.26 10.9 Game Concept License Agreement dated August 4, 2005, between Gizmondo Europe, Ltd. and Game Factory Publishing, Ltd.27 ___________________ 12 Incorporated by reference to Form 10SB12 B/A filed on October 19, 2000. 13 Incorporated by reference to Form 8K dated June 6, 2002. 14 Incorporated by reference to Company's Annual Report on Form 10-KSB for the year ended December 31, 2001. 15 Incorporated by reference to Form 8K dated February 19, 2002. 16 Incorporated by reference to Form 8K dated February 19, 2002. 17 Incorporated by reference to Form 8K dated October 6, 2004. 18 Incorporated by reference to Form 8K dated February 19, 2002. 19 Incorporated by reference to Form 10Q second quarter June 30, 2001 filed on August 14, 2001. 20 Incorporated by reference to Form 10Q second quarter June 30, 2001 filed on August 14, 2001. 21 Incorporated by reference to Proxy Statement - July 11, 2001. 22 Filed herewith. 23 Filed herewith. 24 Filed herewith. 25 Filed herewith. 26 Filed herewith. 27 Filed herewith. 35 10.10 License Agreement dated September 2004, between Gizmondo Europe, Ltd. and Northern Lights Software, Ltd.28 14 Code of Business Conduct and of Ethics29 21 Subsidiaries of the Company30 21.1 Eagle Eye exclusive distributor Agreement - Scandinavia and Yugoslavia31 21.2 Automotive Software Agreement - Tiger Telematics Subsidiary32 21.3 Purchase of Games from SCi License Agreement33 21.4 Signing of 3 year Games Agreement for Gizmondo and Disney's Buena Vista Games34 31 Rule 13a-14(a)Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 200235 32 Section 1350 Certifications36 ___________________ 28 Filed herewith. 29 Filed herewith. 30 Filed herewith. 31 Incorporated by reference to Company's Annual Report on Form 10-KSB for the year ended December 31, 2001. 32 Incorporated by reference to Company's Annual Report on Form 10-KSB for the year ended December 31, 2001. 33 Incorporated by reference to Form 8K dated October 6, 2004. 34 Incorporated by reference to Proxy Statement - July 11, 2001. 35 Filed herewith. 36 Filed herewith. 36 SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Jacksonville, State of Florida, on September 26, 2005. Tiger Telematics, Inc. By: /S/ Michael W. Carrender ----------------------------- Michael W. Carrender Chief Executive Officer KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Michael Carrender his true and lawful attorney-in-fact and agents, with full power of substitution and resubstitution for him in his name, place and stead, in any and all capacities, to sign all amendments to this report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that each of said attorneys-in-fact or his substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities indicated on September 26, 2005. Signature Title - --------- ----- /s/ Michael W. Carrender Chief Executive Officer, Chief Financial - ------------------------------- Officer and Director (Principal Executive Michael W. Carrender Officer, Principal Financial Officer and Principal Accounting Officer) /s/ Carl Freer Chairman and Director - ------------------------------- Carl Freer /s/ Steve Carroll Director - ------------------------------- Steve Carroll 37 INDEX TO FINANCIAL STATEMENTS Page ---- Financial Statements Report of Independent Registered Public Accounting Firm F-2 Consolidated Balance Sheets F-6 Consolidated Statements of Operations F-7 Consolidated Statements of Stockholders' Deficiency F-8 Consolidated Statements of Cash Flows F-9 Notes to Consolidated Financial Statements F-11 F-1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors Tiger Telematics, Inc. and Subsidiaries, Inc. We have audited the accompanying consolidated balance sheets of Tiger Telematics, Inc. and Subsidiaries, Inc. as of December 31, 2004 and 2003 and the related consolidated statements of operations, stockholder's deficiency, and cash flows for the each of the three years in the period ended December 31, 2004. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Tiger Telematics, Inc. and Subsidiaries, Inc. as of December 31, 2004 and 2003, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2004 in conformity with accounting principles generally accepted in the United States of America. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note A to the financial statements, the Company has suffered recurring losses from operations and has a net working capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management's plan in regard to these matters is also described in Note A. The financial statements do not include any adjustments that might result from the outcome of this uncertainty GOLDSTEIN GOLUB KESSLER LLP New York, New York August 24, 2005, except for the last paragraph of Note K, as to which the date is September 2, 2005, Note P, as to which the date is September 8, 2005, and the second to last paragraph of Note K, as to which the date is September 20, 2005. F-2 Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders Tiger Telematics, Inc.: We have audited management's assessment, included in the accompanying Management's Report on Internal Control over Financial Reporting, that Tiger Telematics, Inc. did not maintain effective internal control over financial reporting as of December 31, 2004, because of the effect of material weaknesses identified in management's assessment, based on criteria established in Internal Control--Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). As described in Management's Report on Internal Controls Over Financial Reporting, management excluded from their assessment the internal control over financial reporting of Warthog Games Limited ("Warthog"), which was acquired in November 2004, representing approximately .5% of consolidated net losses during 2004. Accordingly, our audit did not include the internal control over financial reporting of Warthog. Tiger Telematics, Inc.'s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management's assessment and an opinion on the effectiveness of the company's internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management's assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. F-3 A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. As of December 31, 2004, the following material weaknesses have been identified and included in management's assessment: o The design of the Company's corporate governance framework does not currently meet the requirements of COSO's Internal Control-Integrated Framework in the following areas: - The Company does not have an independent audit committee; - The Company does not have a fraud training program for employees, or a mechanism to report fraud to the board of directors; and - The Company does not have formalized and documented HR policies and procedures. o Segregation of duties are inadequate, which impacted the Company's financial reporting controls, taxation calculation and reporting controls, expenditure controls and information technology controls; o There is an insufficient number of qualified personnel in the human resources and payroll functions to maintain effective controls with respect to hiring of personnel; maintenance of employee records; payroll processing, including a lack of segregation of duties; and anti fraud measures including inadequate policies for employee expenses; o Controls and accounting policies over capitalization, disposition and evaluation of useful lives of fixed assets are inadequate; o There are inadequate controls over purchases including authorization, recording, ordering, confirmation of the receipt of goods or services, segregation of duties, and payment of suppliers; o Information Technology back-up procedures are inadequate, as back up media was held on site and not at a remote location; o There are inadequate controls over the retention of records, returns to the tax authorities, review and reconciliation of accounts for UK Value Added Tax (VAT) on purchases; and o Controls over the financial statements closing process are inadequate due to the lack of independent and timely review; lack of procedures to ensure consistency and completeness of the process; and lack of management information to enable effective review of the Company's performance. These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2004 consolidated financial statements, and this report does not affect our report dated August 24, 2005, which expressed an unqualified opinion on those consolidated financial statements. In our opinion, management's assessment that Tiger Telematics, Inc. did not maintain effective internal control over financial reporting as of December 31, 2004, is fairly stated, in all material respects, based on criteria established in Internal Control--Integrated Framework issued by COSO. Also, in our opinion, because of the effects of the material weaknesses described above on the achievement of the objectives of the internal control criteria, Tiger Telematics, Inc. has not maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control--Integrated Framework issued by COSO. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Tiger Telematics, Inc. as of December 31, 2004 and 2003, and the related consolidated statements of operations, stockholders' deficiency and F-4 comprehensive loss, and cash flows for each of the three years in the period ended December 31, 2004 of Tiger Telematics, Inc. and our report dated August 24, 2005 expressed an unqualified opinion on those consolidated financial statements. We do not express an opinion or any other form of assurance on management's statement referring to their continuing evaluation of identified material weaknesses and employment of a third party consultant to assist in identifying remediation actions. GOLDSTEIN GOLUB KESSLER LLP New York, New York August 24, 2005 F-5
TIGER TELEMATICS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, 2004 and 2003 2004 2003 ------------- ------------- ASSETS Current Assets Cash $ 4,653,559 $ 8,959 Accounts receivable 616,571 2,104 Inventories 38,532 35,570 Other receivables 3,129,235 -- Due from employees 204,081 -- Prepaid expenses 1,622,562 45,383 ------------- ------------- Total current assets 10,264,540 92,016 Property and Equipment, net 1,105,853 344,376 Other Assets Goodwill 3,975,670 -- Other intangible assets 1,901,765 -- Deferred tax asset, net of valuation allowance of $45,000,000 in 2004 and $7,640,000 in 2003 -- -- ------------- ------------- $ 17,247,828 $ 436,392 ============= ============= LIABILITIES AND STOCKHOLDERS' Deficiency Current Liabilities Accounts payable $ 13,976,402 $ 3,667,646 Amount due stockholders 248,266 9,191 Notes payable - current portion 78,937 37,140 Accrued expenses 15,710,374 1,750,005 Deposits on common stock 1,871,730 2,247,891 Contingent liabilities arising from discontinued operations 1,168,243 1,168,243 ------------- ------------- Total current liabilities 33,053,952 8,880,116 ------------- ------------- Notes payable after one year 408,638 123,743 ------------- ------------- Total Liabilities 33,462,590 9,003,859 ------------- ------------- COMMITMENTS AND CONTINGENCIES Stockholders' Deficiency Common stock - 0.001 par value authorized 500,000,000 and 250,000,000 shares in 2004 and 2003 respectively. Issued and outstanding 36,306,607 and 9,498,105 in 2004 and 2003 respectively 36,307 9,498 Additional paid-in-capital 107,017,140 13,051,547 Accumulated other comprehensive loss (3,112,766) (763,732) Deficit (120,155,443) (20,864,780) ------------- ------------- Stockholders' deficiency (16,214,762) (8,567,467) ------------- ------------- $ 17,247,828 $ 436,392 ============= =============
See Notes to Consolidated Financial Statements F-6
TIGER TELEMATICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For the years ended December 31, 2004, 2003 and 2002 2004 2003 2002 ------------ ------------ ------------ Net Sales $ 726,225 $ 8,317 $ 283,730 Cost of goods sold 409,855 13,596 384,968 ------------ ------------ ------------ Gross profit (loss) 316,370 (5,279) (101,238) ------------ ------------ ------------ Operating expenses Selling expense 13,814,076 683,708 597,188 General and administrative 83,677,812 5,581,750 5,171,731 ------------ ------------ ------------ Total operating expenses 97,491,888 6,265,458 5,768,919 ------------ ------------ ------------ Operating Loss (97,175,518) (6,270,737) (5,870,157) ------------ ------------ ------------ Other income (expense) Impairment of goodwill (55,777) -- (4,884,733) Loss on extinguishment of debt instruments -- (1,543,730) -- Gain on sale of subsidiaries -- -- 248,009 Other (2,006,271) 47,442 (189,724) Interest expense (53,097) (45,424) (37,712) ------------ ------------ ------------ (2,115,145) (1,541,712) (4,864,160) ------------ ------------ ------------ Loss from continuing operations (99,290,663) (7,812,449) (10,734,317) Loss from discontinued operations -- -- (353,430) ------------ ------------ ------------ Net loss $(99,290,663 $ (7,812,449) $(11,087,747) ============ ============ ============ Basic and diluted net loss per common share: Loss from continuing operations $ (5.02) $ (1.66) $ (3.80) ============ ============ ============ Loss from discontinued operations $ -- $ -- $ (0.13) ============ ============ ============ Net loss $ (5.02) $ (1.66) $ (3.93) ============ ============ ============ Weighted average shares outstanding (basic and diluted) $ 19,785,471 $ 4,710,208 $ 2,822,876 ============ ============ ============
See Notes to Consolidated Financial Statements F-7
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY For the years ended December 31, 2004, 2003 and 2002 Accumulated Additional other Total Common Stock Paid-in Comprehensive Accumulated Stockholders' Share Amount Capital Loss Deficiency Deficiency ------------- ------------- ------------- ------------- ------------- ------------- Balance (deficiency) December 31, 2001 2,235,467 2,235 $ 567,720 $ -- $ (1,964,584) $ (1,394,629) Issuance of common stock and warrants: Private placement 100,498 100 876,573 -- -- 876,673 Conversion of notes payable and amounts due Stockholders 335,361 335 1,987,754 -- -- 1,988,089 Acquisition of Tiger Telematics 280,000 280 2,799,720 -- -- 2,800,000 Limited Acquisition of Comworxx Inc. 170,531 171 1,065,646 -- -- 1,065,817 Services 105,600 106 446,352 -- -- 446,458 Net Loss -- -- -- -- (11,087,747) (11,087,747) ------------- ------------- ------------- ------------- ------------- Balance (deficiency) December 31, 2002 3,227,457 3,227 7,743,765 -- (13,052,331) (5,305,339) Issuance of common stock: Private placement 2,372,034 2,372 1,742,718 -- -- 1,745,090 Conversion of notes payable and amounts due stockholders 3,471,514 3,472 3,271,016 -- -- 3,274,488 Services 427,100 427 294,048 -- -- 294,475 Other comprehensive loss: Foreign currency translation adjustment -- -- -- (763,732) -- (763,732) Net Loss -- -- -- (7,812,449) (7,812,449) (7,812,449) ------------- Total Comprehensive Loss -- -- -- (8,576,181) -- -- ------------- ------------- ------------- ------------- ------------- ------------- Balance (deficiency) December 31, 2003 9,498,105 9,498 13,051,547 (763,732) (20,864,780) (8,567,467) Issuance of common stock: Private placement 13,284,731 13,285 55,106,701 -- -- 55,119,986 Conversion of notes payable 80,000 80 107,570 -- -- 107,650 Services 10,522,881 10,523 29,609,000 -- -- 29,619,523 Stock based Employee compensation 1,223,024 1,223 4,693,155 -- -- 4,694,378 Acquisition of subsidiaries 1,697,866 1,698 4,449,167 -- -- 4,450,865 Other comprehensive loss: Foreign currency translation -- -- -- (2,349,034) -- (2,349,034) adjustment Net loss -- -- -- (99,290,663) (99,290,663) (99,290,663) ------------- Total comprehensive loss -- -- -- (101,639,697) -- -- ------------- ------------- ------------- ------------- ------------- ------------- Balance (deficiency) December 31, 2004 36,306,607 $ 36,307 $ 107,017,140 $ (3,112,766) $(120,155,443) $ (16,214,762) ============= ============= ============= ============= ============= =============
See Notes to Consolidated Financial Statements F-8
TIGER TELEMATICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended December 31, 2004, 2003 and 2002 2004 2003 2002 ------------ ------------ ------------ Cash Flows from Operating Activities: Loss from continuing operations $(99,290,663) $ (7,812,449) $(10,734,317) Loss from discontinued operations -- -- (353,430) ------------ ------------ ------------ Net Loss (99,290,663) (7,812,449) (11,087,747) Other comprehensive loss (2,349,034) (763,732) -- Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 496,374 74,173 63,924 Amortization of intangible assets -- -- 115,762 Loss (gain) on currency transactions -- -- 189,724 Common stock issued for operating expenses 34,313,901 294,475 446,458 Gain of sale of subsidiary -- -- (248,009) Write down of assets of acquired company -- -- 407,000 Impairment of goodwill and other intangibles 55,777 -- 4,884,733 Loss on extinguishment of debt instruments -- 1,543,730 -- Changes in assets and liabilities: Decrease in assets of discontinued operations -- -- 1,278,443 Increase (Decrease) in liabilities of discontinued operations -- -- (735,409) (Increase) decrease in assets: Accounts receivable 338,974 114,544 (116,648) Other receivables (1,774,256) -- -- Inventories 99,265 127,919 (163,488) Prepaid expenses (1,479,812) 83,821 (129,204) Increase (decrease) in liabilities: Accounts payable 9,382,130 2,216,648 1,450,998 Accrued expenses 12,594,251 (211,639) 1,961,644 Net liabilities related to sold operations -- 15,530 1,152,713 ------------ ------------ ------------ Net cash used in operating activities (47,613,093) (4,316,980) (529,106) ------------ ------------ ------------ Cash Flows From Investing Activities: Purchase of property and equipment (1,120,795) (181,353) (237,196) Acquisition of subsidiary - net of cash received (1,926,667) -- -- ------------ ------------ ------------ Net cash used in investing activities (3,047,462) (181,353) (237,196) ------------ ------------ ------------ Cash Flows From Financing Activities: Issuance of common stock and warrants 55,119,986 1,745,090 876,673 Net change in deposits on common stock (376,161) 2,247,891 -- Loans and advances from stockholders 234,638 1,334,075 204,014 Repayment to stockholders -- (804,911) (534,281) Proceeds from notes payable 369,571 -- 184,400 Payments on debt (42,879) (14,853) (8,664) Other -- -- 23,829 Net cash provided by financing activities 55,305,155 4,507,292 745,971 ------------ ------------ ------------ Net change in cash 4,644,600 8,959 (20,331)
See Notes to Consolidated Financial Statements F-9
TIGER TELEMATICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Continued 2004 2003 2002 ----------- ----------- ----------- Cash: Beginning of year 8,959 -- 20,331 ----------- ----------- ----------- End of year $ 4,653,559 $ 8,959 $ -- =========== =========== =========== Supplemental disclosure of Cash Flow Information: Cash paid for interest $ 53,097 $ 45,424 $ 19,489 =========== =========== =========== Financing Activities: Conversion of trade notes to common stock $ 97,650 $ -- $ -- Conversion of stockholder debt to common stock $ 10,000 $ 3,274,488 $ 1,988,089 ----------- ----------- ----------- $ 107,650 $ 3,274,488 $ 1,988,089 =========== =========== =========== Investing Activities: Cash paid for subsidiary $ 1,964,485 $ -- $ -- Common stock issued for acquisition 4,450,865 -- 3,865,817 Liabilities in excess of assets acquired 284,531 -- -- ----------- ----------- ----------- $ 6,699,881 $ -- $ 3,865,817 =========== =========== =========== Acquisition of subsidiaries: Goodwill $ 4,031,447 $ -- $ 3,714,818 Other intangible assets 1,901,765 -- 3,263,050 Accounts receivable 953,441 -- 507,307 Other receivables 1,559,060 -- -- Inventories 102,227 -- 105,472 Prepaid expenses 97,367 -- 24,838 Property and equipment 137,056 -- 282,065 Accounts payable (742,616) -- (891,632) Overdraft (184,010) -- -- Due to related parties (14,437) -- (944,962) Accrued expenses (1,463,768) -- (2,195,927) Cash and stock paid for subsidiaries (6,415,350 -- (3,865,817) ----------- ----------- ----------- Cash received $ 37,818 $ -- $ 788 =========== =========== ===========
See Notes to Consolidated Financial Statements F-10 NOTE A - DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES Description of Business: Tiger Telematics, Inc. (the Company or Tiger) and its wholly owned subsidiaries are principally engaged in the business of developing and marketing the Gizmondo wireless handheld multi-entertainment gaming device. During 2002 the Company's principal business was developing and marketing telematics products principally in Western Europe. The Company (previously known as Floor Decor, Inc.) and its then wholly owned subsidiaries, Media Flooring, Inc. and Floor Decor LLC owned and operated retail stores in Florida. In 2002, the Company sold this business and changed its name from Floor Decor, Inc. to Tiger Telematics, Inc. Prior to its sale in August 2002 and its classification as a discontinued operation, the Company's primary business was retail floor covering. In February 2002, the Company acquired Eagle Eye Scandinavian Distributions, Ltd., a developer and distributor of telematics products and services to the business-to-business segment in Europe and changed its name to Tiger Telematics, Ltd. During most of 2002, the Company's principal business was developing and selling telematics products and services, conducted through Tiger Telematics, Ltd. This subsidiary was sold on December 17, 2002. The Company started Tiger Telematics Europe, Ltd. (now known as Gizmondo Europe, Ltd.) in late 2002 to focus on developing new telematics products including next generation fleet telematics products and child tracker products. In early 2003 the Company began developing a new multi-entertainment wireless handheld gaming device referred to as Gizmondo. Since then the Company's primary business strategy has been to develop and market Gizmondo. The Company initially launched a limited production version of the Gizmondo in the UK on March 19, 2005, and expects to launch the full-scale production of Gizmondo in the fourth quarter of 2005. The Gizmondo is powered by a Microsoft Windows CE.net platform, has a 2.8-inch TFT color screen and a Samsung ARM9 400Mhz processor and incorporates the GoForce 3D 4500 NVIDIA graphics accelerator. Gizmondo provides cutting-edge gaming, multimedia messaging, an MP3 music player, Mpeg 4 movie playing capability, a digital camera and a GPRS network link to allow wide-area network gaming. Additionally, Gizmondo contains a GPS chip for location based services, is equipped with Bluetooth for use in multi-player gaming and accepts MMC card accessories. Significant Accounting Policies: Going Concern: The Company has sustained net losses aggregating over $118.2 million over the past three years and at December 31, 2004 had a net working capital deficiency of $22.8 million. During that period, over $35 million of expenses were funded by issuing restricted common stock in exchange for services and did not require the use of cash. F-11 Management anticipates proceeds from sales of Gizmondo units and accessories to increase significantly after the U.S. launch of the product in the fourth quarter of 2004. Management also anticipates the issuance of equity securities to meet working capital requirements and to fund development costs incurred in connection with developing Telematics related products that the Company believes will enhance its operations. Additionally, the Company borrowed approximately $21.2 million from shareholders on a short-term basis and management believes that future borrowing are available from shareholders if needed. In July 2005, the Company instituted significant cost savings measures including: closing unneeded facilities, reducing staff by over 100 employees and instituting other cost savings measures. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary in the event the Company cannot continue as a going concern. Principles of Consolidation: The consolidated financial statements include the accounts of Tiger Telematics, Inc. (Company), and its majority owned subsidiaries and the discontinued operations of Floor Decor Inc. and its subsidiaries through the date of their divestiture in 2002. All intercompany transactions are eliminated in consolidation. Use of Estimates: In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of the contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Valuation of Common Stock: The shares of common stock issued as payment for services, employee bonuses, acquisitions and debt payments are restricted securities and may not be currently sold. The "fair value" of these restricted securities is determined by an independent business valuation expert on a quarterly basis. Management believes that the appraised value is a better indication of the fair value of the restricted shares issued than the price of freely traded shares in the open market due to the large number of issued restricted shares. Foreign Currency Translation: Results of operations and cash flows are translated at average exchange rates and assets and liabilities are translated at end-of-period exchange rates for operations outside the United States that prepare financial statements in other than the US dollar (generally in the UK). Translation adjustments are included in other comprehensive income (loss) until such time as the entity that generated the adjustments is sold. Gains and losses from foreign currency transactions are not material and are reflected in other income (loss), net. Inventories: Inventories are stated at the lower of cost (specific identification basis) or market, and consist of electronic components. Property and Equipment: Property and equipment is stated at cost. Depreciation is provided by straight-line methods over their estimated service lives. Vehicles and furniture, fixtures and equipment are depreciated over periods from 3 to 7 years. F-12 Income Taxes: Income taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and dates on the date of enactment. Stock-Based Compensation: In July 2001, the stockholders approved the adoption of the Company's 2001 Employee Stock Option Plan (the "Plan"). Stock options are granted at a price equal to the market value of the Common Stock at the date of grant, generally expire 10 years from the date of the grant and vest equally over a three-year service period. 2004 2003 2002 -------- -------- -------- Total common shares available for grant 176,000 176,000 320,000 Options to purchase common shares granted at $1.50 per share -0- -0- 144,000 Options exercised -0- -0- -0- Options forfeited/expired -0- -0- -0- Options available for grant 176,000 176,000 176,000 Shares vested during the year 36,000 36,000 36,000 Shares granted but unvested 36,000 72,000 108,000 The 144,000 stock options awarded in 2002 were all to one person at an exercise price of $1.50 per share. The Company uses the intrinsic-value method of accounting for the Plan. Under this method, compensation cost is the excess, if any, of the quoted market price over the amount an employee must pay to acquire the stock at the date of the grant. The Company generally grants options with an exercise price equal to the market value of the common stock at the date of grant. The Black-Scholes option price model was used to estimate the fair value as of the date of grant using the following assumptions for all years presented: Dividend yield 0% Risk-free interest rates 4.35% Volatility 163.00% Expected option term (years) 9.61 Weighted-average fair value of options granted during the year $ 1.50 If the Company had determined compensation expense for the Plan based on the fair value at the grant dates consistent with the method of SFAS No. 123 and SFAS No. 148, the Company's pro-forma net loss and basic loss per share would have been as follows: (In thousands except for per share amounts) F-13
2004 2003 2002 ---------- ---------- ---------- Net loss as reported $ (99,291) $ (7,812) $ (11,088) Stock based compensation expense, net of tax ($0) $ 4,694 -- -- included in the determination of net loss as reported Stock based compensation expense under the fair $ (4,748) $ (54) $ (54) value based method, net of tax ($0) Pro forma net loss $ (99,345) $ (7,866) $ (11,142) Net loss per share, as reported $ (5.02) $ (1.66) $ (3.93) Pro forma net loss per share $ (5.02) $ (1.67) $ (3.95)
2005 Stock Incentive Plan The Company adopted the Tiger Telematics, Inc. 2005 Incentive Plan (the "2005 Plan") on May 13, 2005. The 2005 Plan provides for the granting of stock awards to Board members, employees, professional advisors and other independent contractors to provide an incentive to such individuals who provide services to the Company or its subsidiary Companies who are in a position to contribute materially to the long-term success of the Company, to increase their proprietary interest in the success of the Company and to aid in attracting and retaining directors, employees and independent contractors of outstanding ability. There are 1,000,000 shares of the Company's common stock, $.001 par value, reserved for issuance under the 2005 Plan. Such shares of common stock may be authorized, but unissued shares of common stock, or reacquired shares. In the event that any shares of common stock that are subject to the 2005 Plan are forfeited or redeemed by the Company, such shares may again be awarded under the 2005 Plan. No certificate for award shares distributed pursuant to the 2005 Plan shall be issued until the Company shall have taken such action, if any, as is required to comply with the provisions of the Securities Act of 1933, as amended, the Securities Act of 1934, as amended, any other applicable laws and the requirements of any exchange in which the award shares may, at the time, be listed. No shares have been awarded under the 2005 Plan. Goodwill: Goodwill is recorded as the difference, if any, between the aggregate consideration paid for an acquisition and the fair value of the net tangible and intangible assets acquired. SFAS 142, "Goodwill and Other Intangible Assets" requires that intangible assets with definite useful lives be amortized over their respective useful lives to their residual values, and all intangible assets be reviewed for impairment. The Company tests goodwill for impairment on an annual basis or more frequently if the Company believes indicators of impairment exist. The performance of the test involves a two-step process. The first step involves comparing the fair values of the applicable reporting units with their aggregate carrying value, including goodwill. The Company generally determines the fair value of its reporting units using the income approach methodology of valuation that includes the discounted cash flow method. If the carrying amount of a reporting unit exceeds the reporting unit's fair value, the Company performs the second step. The second test involves comparing the implied fair value of the affected reporting unit's goodwill with the carrying value of that goodwill. If the carrying amount of the reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss is recorded. F-14 Circumstances that could trigger an impairment test include but are not limited to: a significant adverse change in the business climate or legal factors; an adverse action or assessment by a regulator; unanticipated competition; loss of key personnel; the likelihood that a reporting unit or significant portion of a reporting unit will be sold or otherwise disposed of; results of testing for recoverability of a significant asset group within a reporting unit and recognition of a goodwill impairment loss in the financial statements of a subsidiary that is a component of a reporting unit. Impairment: In accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," the Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds their fair value. Assets to be disposed of are separately presented on the balance sheet and reported at the lower of their carrying amount or fair value less costs to sell, and are no longer depreciated. Earnings (Loss) per Share: Basic earnings (loss) per share is computed using the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share is computed using the weighted average number of common shares and potential common shares outstanding during the period. Potential common shares, including stock options and warrants, are excluded from the computation since their effect, for all years presented, are anti-dilutive. Research and Development Costs: Research and development costs are expensed as incurred. All of the Company's efforts are focused on developing the Gizmondo. Research and development costs were $27,200,000, $3,000,000 and $0 for 2004, 2003 and 2002 respectively. Comprehensive (Loss) Income: The Company reports comprehensive (loss) income in accordance with SFAS No. 130, "Reporting Comprehensive Income." SFAS No. 130 established a standard for reporting and displaying other comprehensive (loss) income and its components within the financial statements. Loss on foreign currency exchange is the only component of the Company's other comprehensive loss. Cash: The Company maintains cash in bank deposit accounts, which at times, exceed insured limits. The Company has not experienced any losses on these accounts. F-15 Revenue Recognition: Sales are recognized when merchandise is delivered and accepted by the customer, net of estimated sales returns, discounts and allowances. Advertising Cost: Advertising costs are included in selling expense and are expensed in the period incurred. Such costs were $2,177,000, $684,000 and $18,500 for 2004, 2003 and 2002, respectively. Fair Value of Financial Instruments: Statement of Financial Accounting Standards (SFAS) No. 107, "Disclosures about Fair Value of Financial Statements" requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate that value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. SFAS No. 107 excludes certain financial instruments and all non-financial assets and liabilities from its disclosure requirements. The carrying value of current assets such as receivables, and liabilities such as payables, approximate fair value due to the short maturity of instruments. The Company has no off balance sheet financial instruments. Recently Issued Accounting Standards: In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123R (Revised 2004), Share-Based Payment ("SFAS No. 123R"), which requires that the compensation cost relating to share-based payment transactions be recognized in financial statements based on alternative fair value models. The share-based compensation cost will be measured based on the fair value of the equity or liability instruments issued. The Company currently disclosed pro forma compensation expense quarterly and annually by calculating the stock option grants' fair value using Black-Scholes model and disclosing the impact on net income and net income per share in a Note to the Consolidated Financial statements. Upon adoption, pro forma disclosure will no longer be an alternative. The table above reflects the estimated impact that such a change in accounting treatment would have had on the Company's net loss and net loss per share if it had been in effect during the year ended December 31, 2004. SFAS No. 123R also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as financing cash flows and increase net financing cash flows in periods after adoption. The Company will begin to apply SFAS No. 123R using the most appropriate fair value model as of the interim reporting period beginning January 1, 2006. In November 2004, the FASB issued SFAS No. 151, "Inventory Costs, an Amendment of ARB No. 43, Chapter 4." SFAS No. 151 retains the general principle of ARB No. 43, Chapter 4, "Inventory Pricing," that inventories are presumed to be stated at cost; however, it amends ARB No. 43 to clarify that abnormal amounts of idle facilities, freight, handling costs and spoilage should be recognized as current period expenses. Also, SFAS No. 151 requires fixed overhead costs be allocated to inventories based on normal production capacity. The guidance in SFAS No. 151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The Company believes that implementing SFAS No. 151 should not have a material impact on its financial position and results of operations. F-16 In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections." SFAS No. 154 replaces APB Opinion No. 20, "Accounting Changes" and SFAS No. 3, "Reporting Accounting Changes in Interim Financial Statements." SFAS No. 154 requires that a voluntary change in accounting principle be applied retrospectively with all prior period financial statements presented on the new accounting principle unless it is impracticable to do so. SFAS No. 154 also provides that a change in method of depreciating or amortizing a long-lived nonfinancial asset be accounted for as a change in estimate effected by a change in accounting principle and that correction of errors in previously issued financial statements should be termed a "restatement." SFAS No. 154 is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. Early adoption of this standard is permitted for accounting changes and corrections of errors made in fiscal years beginning after June 1, 2005. The Company will apply the provisions of this statement effective January 1, 2006 and believes that implementing SFAS No. 154 should not have a material impact on its financial position and results of operations. NOTE B - REVERSE STOCK SPLIT AND INCREASE IN AUTHORIZED SHARES In July 2004, the Company's shareholders approved a 1 for 25 reverse stock split. The number of authorized shares and par value were unchanged. All common stock amounts have been adjusted to reflect this change for all periods presented. In May 2003, the Company's shareholders approved an increase in the number of authorized shares from 100 million shares to 250 million shares. In January 2004, the authorized shares were increased to 500 million shares. NOTE C - EQUITY TRANSACTIONS Private placements of common stock: The Company entered into various private placement transactions with individual and institutional investors and sold 13,284,731, 2,372,034 and 100,498 shares of its common stock in 2004, 2003 and 2002, respectively, at per share prices ranging from $.25 to $15.99 in 2004, $.25 to $1.25 in 2003 and $10.00 in 2002. At December 31, 2004, 36,306,607 shares of common stock were issued and outstanding. Through August 23, 2005, the Company issued approximately 24.7 million additional shares in numerous private transactions (a) for cash, (b) to settle debt, accounts payable or other liabilities, (c) purchase goods or services provided by vendors, strategic partners, professionals, consultants and employees and (d) in connection with the acquisition of businesses. In each case the Company recorded capital surplus based upon the fair value of the Company's common stock at the time of issuance or agreement to issue. The aggregate amount recorded was approximately $200 million, including the above-described shares. F-17 Following is a recap of additional shares issued after December 31, 2004: - ----------------------------- ------------------ ----------------- ------------- Number of Shares Price Per Share Amount - ----------------------------- ------------------ ----------------- ------------- Balance, December 31, 2004 36,306,607 $107,053,447 - ----------------------------- ------------------ ----------------- ------------- January 1, 2005 to June 30, 2005: - ----------------------------- ------------------ ----------------- ------------- Sale of Securities 2,512,799 $3.50 to $20.00 $ 38,534,695 - ----------------------------- ------------------ ----------------- ------------- Employee Compensation 4,916,676 $4.31 to $7.92 $ 37,213,722 - ----------------------------- ------------------ ----------------- ------------- Services 12,008,885 $4.31 to $7.92 $ 80,021,481 - ----------------------------- ------------------ ----------------- ------------- Contingent shares issued for games completed 600,000 $6.96 $ 4,176,000 - ----------------------------- ------------------ ----------------- ------------- Totals - Six months ended June 30, 2005 20,038,360 $159,945,898 - ----------------------------- ------------------ ----------------- ------------- July 1 to August 23, 2005: - ----------------------------- ------------------ ----------------- ------------- Sale of Securities 3,576,478 $3.50 to $20.00 $ 34,549,007 - ----------------------------- ------------------ ----------------- ------------- Services 1,146,867 $5.20 $ 5,963,708 - ----------------------------- ------------------ ----------------- ------------- Totals at August 23, 2005 61,068,312 $307,512,060 - ----------------------------- ------------------ ----------------- ------------- Additional 2002 Transactions: Shareholder debt of $1,988,089 was converted to 335,361 shares of common stock as follows: In October 2002, certain stockholders converted $455,176 of debt to 182,070 shares of common stock. The conversion of these stockholders was done at the prevailing market price as of the date of the conversion. In October 2002, several former Tiger Telematics Ltd. shareholders agreed to convert $610,190 of their shareholder debt into common stock and warrants to purchase common stock at a price of $18.75 per share. The conversion rate was one share of common stock and one warrant for every $10.00 of debt. The debt of was converted in October 2002 into 61,019 shares of common stock and 61,019 warrants. The warrants expired unissued on December 31, 2003. During the first quarter of 2002, certain shareholders and others converted $922,723 of notes payable and amounts due shareholders into 92,272 shares of common stock. For each share of common stock received, they also received a warrant representing the right to purchase one additional share of common stock at $18.75 per share. The warrants expired unexercised on December 31, 2003. See Note I - Acquisitions for descriptions of stock issued for the Tiger Telematics Limited and Comworxx, Inc. acquisitions. F-18 The Company exchanged stock for services received as follows: lease expense - 20,000 shares valued at $8.61 per share, $172,318; and general consulting services - 85,600 shares valued at $1.25 to $10.00 per share, $274,140. Additional 2003 Transactions: Shareholder debt of $3,274,488 was converted into 3,471,514 shares of common stock as follows: During the fourth quarter of 2003, the Company converted $1,420,000 of debt to a stockholder of the Company and an officer of a subsidiary of the Company to 2,840,000 shares of common stock at the rate of $.50 per share. This person became a director and Chairman of the Board of the Company in August 2004. During the fourth quarter of 2003 the Company converted $226,730 of debt owed to an individual into 453,460 shares of common stock valued at $.50 per share and issued 800,000 shares valued at $1,800,000 to this person for services rendered to the Company. Also during 2003, the Company converted $84,028 of debt owed to other shareholders and issued 178,054 shares valued at $.50 per share. All of these conversions were approved by the Company's board of directors. The Company recorded a loss in 2003 of $1,543,730 on the conversion of this shareholder debt. The company purchased general consulting services valued at $294,475 in exchange for 427,100 shares of common stock valued from $.25 to $1.25 per share. Included in those totals was one transaction whereby the Company issued 96,000 shares of common stock to settle a liability, valued at $.25 per share. The excess of the amount owed the value of the shares issues ($67,200) was credited to operations in 2003. 2004 Transactions: The Company converted $107,650 of debt (including $10,000 owed to a shareholder) by issuing 80,000 shares of stock valued at $.50 to 3.51 per share, the fair value at the date of issuance. See Note I-Acquisitions for descriptions of stock issued for the ISIS Models Ltd., Indie Studios and Warthog Plc. acquisitions. The Company issued 10,522,881 shares of common stock valued from $.50 to $5.71 per share to purchase goods and services as follows: - ------------------------------------------------------------------------------- Service Shares Issued Per share Amount - ------------------------- ---------------- ----------------- ------------------ General consulting 10,024,917 $.50 to $5.71 $28,001,140 - ------------------------- ---------------- ----------------- ------------------ Marketing 497,964 $3.31 1,618,383 - ------------------------- ---------------- ----------------- ------------------ Totals 10,522,881 $29,619,523 ============ ============ - ------------------------------------------------------------------------------- The Company also issued 1,223,024 shares, valued between $3.25 and $5.71 per share, to its employees. The total value of shares issued to employees totaled $4,694,378. F-19 NOTE D - WARRANTS No warrants were issued during 2003. There were 319,789 warrants outstanding at the beginning of 2003, all of which expired unissued at December 31, 2003. During 2004, the Company issued warrants to purchase 250,000 shares of common stock at an exercise price of $5 per share. The warrants are exercisable immediately and expire on September 30, 2009. The Company also had outstanding warrants to purchase 245,525 shares of common stock at an exercise price of $11.25 per share. These warrants are exercisable immediately and expire on June 30, 2006. At December 31, 2004, 495,525 warrants were outstanding. None have been exercised. NOTE E - PROPERTY AND EQUIPMENT Property and equipment as of December 31, 2004, was as follows: 2004 2003 ---- ---- Vehicles $ 914,125 $ 226,826 Furniture, fixtures and equipment 762,275 191,723 ---------- ---------- 1,676,400 418,549 Less accumulated depreciation 570,547 74,173 ---------- ---------- $1,105,853 $ 344,376 ========== ========== Depreciation expense was $496,374, $74,173 and $63,924 for the years ended December 31, 2004, 2003 and 2002, respectively. NOTE F - INCOME TAX MATTERS The Company has net operating loss carry forwards as of December 31, 2004 for United States federal income tax purposes of approximately $120,000,000, expiring through 2024. Any future benefit to be realized from these net operating loss and contribution carry forwards is dependent upon the Company earning sufficient future income taxable in the United States during the periods that the carry forwards are available. The loss carry forwards also contain restrictions on the type of taxable income that they can be used to offset. Due to these uncertainties, the Company has fully offset any deferred tax benefits otherwise relating to the net operating loss carry forward with a valuation allowance of approximately $45,000,000. The Company also has undetermined losses that may be off set against future income in the UK, expiring in 2021. Any future benefits to be realized from the losses is dependent upon the company earnings sufficient future taxable income in the UK during the periods that the losses offsettable are available. Due to these uncertainties the Company has fully offset any deferred tax benefits relating to the losses. 2004 2003 ------------ ------------ Income Tax Benefit Tax provision at statutory rates $ 34,650,000 $ 2,600,000 State income taxes - net 3,217,500 240,000 Effect of lower tax brackets (13,000) (13,000) Other (494,500) (227,000) ------------ ------------ 37,360,000 2,600,000 Balance at beginning of year 7,640,000 5,040,000 ------------ ------------ Balance at end of year $ 45,000,000 $ 7,640,000 ============ ============ Valuation allowance $ 45,000,000 $ 7,640,000 ============ ============ F-20 NOTE G - OPERATING LEASES The Company leases office and warehouse facilities in the United States and United Kingdom under month-to-month and non-cancelable leases expiring from 2005 to 2012. Rent expense for 2004,2003 and 2002 was $543,000, $173,000 and $296,000, respectively. This was after reclassification of $241,280 of flooring rental expenses to discontinued operations in 2002. Certain of the leases provide for renewal options and the payment of real estate taxes and other occupancy costs. The Company also leases automobiles under operating leases expiring within five to forty-six months. Auto lease expense was $381,000, $4,000 and $0 for 2004, 2003 and 2002, respectively. Future minimum rental payments required under non-cancelable leases for the next five years are as follows: Autos Facilities ---------- ---------- 2005 $105,000 $951,000 2006 $100,000 $994,000 2007 $56,000 $905,000 2008 $18,000 $899,000 2009 $0 $802,000 Later Years $0 $490,000 ---------- ---------- Total $ 279,000 $5,041,000 ========== ========== NOTE H - NOTES PAYABLE 2004 2003 ---- ---- The notes are payable to a bank in equal monthly installments, with interest ranging from 10.4% to 14% and are collateralized by automobiles $ 487,575 $ 160,883 Less amount due within one year 78,937 37,140 ---------- ---------- Long term portion of notes payable $ 408,638 $ 123,743 ========== ========== Principal payments for the next four years are as follows: 2005 - $78,937; 2006 - - $97,922; 2007 - $34,433; and 2008 - $276,283. A subsidiary of the Company, Warthog, has a $184,400 line of credit with a balance of $121,500 outstanding at December 31, 2004. The note is without collateral, due on demand and was repaid in 2005. Interest is compute at 3% over the bank's base rate. The outstanding balance is included in accounts payable in the balance sheet. F-21 NOTE I - ACQUISITIONS The Company applied SFAS No. 141, "Business Combinations", to account for business acquisitions. 2002 Acquisitions - ----------------- Tiger Telematics (UK) Ltd. (Tiger Ltd) On February 4, 2002, the Company purchased Eagle Eye Scandinavian Distribution Limited, an English private limited Company, and changed its name to Tiger Telematics (UK) Ltd. The Company purchased all of the outstanding stock of Eagle Eye in exchange for 280,000 shares of the Company's common stock valued at $2,800,000. Tiger Telematics Ltd. was an early stage company engaged in the distribution of telematics products. The negative equity of Tiger Telematics Ltd. of $463,050 as of the acquisition date resulted in an excess of acquisition cost over tangible asset value of $3,263,050. The excess of the acquisition price over the tangible asset valuation was allocated to intangible assets consisting of $2,800,000 to an order backlog of pending orders for product to be shipped over future periods and $463,050 to distribution rights to be amortized quarterly over the remaining life of the distribution agreement. During the quarter ended September 30, 2002, the Company determined that the value of the order book was impaired and wrote-off $1,000,000. The impairment was based on the failure to ship orders as originally projected and the change in Tiger Telematics Ltd.'s business model to derive its income from monthly revenue generated by its wireless telecom provider's partnership arrangements as opposed to generating revenue primarily from the sale of hardware. In the fourth quarter of 2002, the Company wrote off the remainder of the intangible asset of $2,147,288 (net of $115,762 of accumulated amortization). In the fourth quarter of 2002 the Company sold the common stock of Tiger Telematics Ltd. to an unrelated third party. The agreement called for the transfer of certain assets and debt from Tiger Telematics Ltd. to Tiger Europe prior to closing. The transaction was done in exchange for a Royalty Agreement from the buyer and Tiger Telematics Ltd. to pay a percentage of sales over the next 10 years. Due to the uncertainty of the future payments, the Company placed a zero value on the agreement and did not record the future stream of payments on the balance sheet. The Company recorded a $ 248,009 gain of the sale representing the excess of liabilities over assets transferred to the buyer. Comworxx, Inc. On June 25, 2002, Tiger USA purchased all of the assets of Comworxx, Inc. in exchange for 170,531 shares of the Company's common stock valued at $1,065,817. The purchase agreement provided for the issuance of 316,700 additional shares based on the future price of Tiger's common stock and other factors. In 2004, the Company entered into a settlement agreement whereby 160,000 shares were issued in satisfaction of the full contingent share issuance. F-22 Based on a post acquisition review of assets, inventory, receivables and property plant and equipment were written down to the current estimated value as of the acquisition date. The write-downs created an additional excess of liabilities over tangible assets of $669,628 in 2002. The acquisition price over the tangible asset valuation was assigned to three intangible assets. Due to the position in the marketplace and funding issues associated with the acquisition, the Company believed that the goodwill was impaired and wrote off all of the goodwill of $1,735,445 in the quarter ended June 30, 2002. In the third quarter of 2002, based on its evaluation, the Company took a further write-down of the remaining assets purchased of $407,000, effectively writing off its entire investment in the purchase agreement. Assets (net of reserves) and liabilities acquired consisted of the following: Accounts receivable $ 27,619 Inventories 105,472 Prepaid items 9,368 Computer equipment 280,629 Security deposits 15,470 ------------ Total Assets 438,558 ------------ Note payable 8,664 Accounts payable 882,968 Other accruals 216,554 ------------ Total Liabilities 1,108,186 ------------ Excess of liabilities over assets $ 669,628 ============ Purchase price 1,065,817 ------------ Total goodwill (all written off on June 30, 2002) $ 1,735,445 ============ Net assets written off in the third quarter of 2002 $ 407,000 ============ The Company believed that the seller may have misrepresented the nature of the assets and the viability of the associated business at the time of the transaction. As a result the Company has retained legal counsel to advise it of its rights against the shareholders of the seller to recover certain sums or to rescind the entire transaction. As mentioned above, in June 2004 the Company issued 160,000 of the 316,700 contingent shares in settlement of this matter. Proforma information: The following proforma information reflects the net sales, net loss, and per share amounts for the year ended December 31, 2002 as if the Tiger Telematics, Ltd and Comworxx acquisitions had been completed on January 1, 2002: 2002 ------------- Proforma net Sales $ 319,613 Proforma net loss $ (13,453,091) Proforma basic and diluted net loss per common share $ (4.62) Weighted average shares outstanding -basic and diluted 2,911,298 F-23 2004 Acquisitions - ----------------- ISIS Models Ltd. In May 2004 Gizmondo Europe, Ltd. acquired a seventy-five percent (75%) interest in ISIS Models Ltd., for 40,000 shares of the Company's restricted common stock valued at $92,800. Because liabilities acquired exceed assets obtained and the Company is expected to absorb future losses, the minority interest is valued at zero and any allocation of future net income or losses is not expected to be material. ISIS was acquired to provide marketing support and arrangements for Gizmondo. The Company also assumed liabilities in excess of the value of tangible assets acquired of $223,099. ISIS is the successor company to ISIS Models Management Limited, a company that has previously ceased operations. The excess of purchase price over the value of the tangible assets acquired ($315,899), was assigned to Goodwill. The Company subsequently realized an impairment loss of approximately $56,000. While the Company does not believe that this acquisition was material, it intends to file within the next 60 days a Form 8-K describing this acquisition and providing audited financial statements for the acquired company. Indie Studios On August 2, 2004, Gizmondo Europe completed the acquisition of 100% of the stock of Indie Studios AB for 1,000,000 shares of the Company's restricted common stock. Indie was acquired to enhance the Company's game development operations. There are also 600,000 contingent shares reserved for future issuance based on the completion of two games in progress as of the acquisition date. The games were completed in January 2005 and the contingent shares were issued. The value of the contingent shares, approximately $4,560,000, was charged to Research & Development expense in the first quarter of 2005. The Company assumed the excess of liabilities over the value of tangible assets acquired of approximately $61,400; paid cash of approximately $850,000 and issued stock valued at $2,740,000. The excess of purchase price over the value of the tangible assets acquired ($3,651,713), was assigned to Goodwill. At the time of this acquisition, Peter Uf, Joe Marten and Stefan Eriksson were directors of both Gizmondo Europe and Indie Studios. This transaction was approved by the Company's board of directors. While the Company does not believe that this acquisition was material, it intends to file within the next 60 days a Form 8-K describing this acquisition and providing audited financial statements for the acquired company. Warthog Plc The Company acquired the subsidiaries, intellectual properties and assets of Warthog Plc in a move to further expand the Company's games development agenda and management infrastructure. Within two days of closing, the Company injected approximately $1.3 million into the Warthog subsidiaries for working capital purposes. F-24
The Company paid $1,114,000 in cash, issued 497,866 shares of its restricted common stock valued at $1,618,065 and assumed liabilities of $1,761,263, and recording goodwill of $63,835 and other intangible assets of $1,901,765. Financial disclosures for the 2004 acquisitions: Assets (net of reserves) and liabilities acquired in the 2004 acquisitions consisted of the following: Cash $ 37,818 Accounts receivable 953,441 Other receivables 1,559,060 Inventory 102,227 Prepaid items 97,367 Computer equipment 137,056 ---------- Tangible assets 2,886,969 ---------- Goodwill 4,031,447 Games in development 891,472 Tusk technology 1,010,293 ---------- Intangible assets 5,933,212 ---------- Accounts payable 742,616 Overdraft 184,010 Other 14,437 Other accruals 1,463,768 ---------- Liabilities Assumed 2,404,831 ---------- Cash and stock paid for subsidiaries $6,415,350 ========== Goodwill related to the Indie acquisition was written down by a $55,777 impairment adjustment. Management considers the games in development and Tusk technology to be unpatented technology and has allocated a part of the acquisition cost to such technologies. Amortization of these intangible assets begins when the games and technology will be placed in service over the expected life of the game or technology. No amortization was recorded for the two months ended December 31, 2004. The following proforma information reflects the net sales, net loss, and per share amounts as if the Company had made the 2004 Acquisitions on January 1, 2003. Neither ISIS nor Indie had operations prior to September 30, 2003. 2004 2003 2002 ---- ---- ---- Pro forma net sales $ 10,351,000 $ 12,829,000 $ 17,453,000 Pro forma net loss (114,164,000) (23,898,000) (12,195,000) Pro forma basic and diluted net loss per common share $ (5.35) $ (4.55) $ (3.67) Weighted average shares outstanding - - basic and diluted 21,323,337 5,248,074 3,320,742
F-25 NOTE J - RELATED PARTY TRANSACTIONS See Note C EQUITY TRANSACTIONS - for descriptions of shares of common stock issued to related parties. In 2004, the Company issued 800,000 shares valued at $1,800,000 to an individual for services rendered to the Company. In April 2004, this person subsequently became an employee of Gizmondo Europe responsible for Investor Relations. He left the employment of Gizmondo Europe after the Company's Board of Directors learned that he made an unauthorized purchase of a luxury automobile using Gizmondo Europe's funds. During 2004, an executive officer/director and an executive officer caused Asiatic Bank and Finance, a company registered in Panama with its head office in Hong Kong, to pay to 3P PreForm Marketing and Research AB and other non-affiliated third parties a total of $7,622,000 in respect of research and development expenditures incurred by and charged to Gizmondo Europe. This amount has been credited in full payment of amounts previously owed by these individuals to Gizmondo Europe. Asiatic Bank and Finance owns 400,000 shares of common stock of Tiger Telematics, Inc., which it acquired in November 2003 at a price of $.50 per share. On August 2, 2004, Gizmondo Europe completed the acquisition of Indie Studios AB by issuing 1.0 million shares of the Company's common stock. The Company subsequently issued 600,000 contingent shares in connection with this acquisition were issued in 2005. At the time of this acquisition, certain individuals were directors of both Gizmondo Europe and Indie Studios. This transaction was approved by the Company's board of directors. For additional information regarding the acquisition of Indie Studios, see Note I to the Company's financial statements. In September 2004, Northern Lights Software Limited ("Northern Lights"), a company registered in the United Kingdom, and Gizmondo Europe entered into a License Agreement, pursuant to which Northern Lights licensed the games Chicane and Colors and provided software development services to Gizmondo Europe. During 2004, Gizmondo Europe paid Northern Lights a total of $3,513,000 under the License Agreement, which amount was invoiced during the regular course of business. The Chairman of the Company's Board of Directors and an executive officer are the directors of both Northern Lights and Gizmondo Europe and are the beneficial owners of 23.5% of the issued and outstanding share capital of Northern Lights. At December 31, 2004, the outstanding balance payable to Northern Lights was $906,000, which amount was subsequently paid in 2005. In 2004, Gizmondo Europe paid the spouse of an executive officer/director, $116,000 and $57,831, respectively, for consultancy services provided to Gizmondo Europe. This individual provided marketing and public relations services, an introduction to the performer Sting and time spent in connection with the creation of the "Agaju" gaming concept currently in development. F-26 In 2004, the Company paid $163,855 to Bankside Law for legal fees incurred on behalf of an executive officer/director, personally. The Company included this amount as additional compensation to the executive officer/director. In 2004, Gizmondo Europe paid the corporate secretary, who is the co-habiting partner of an executive officer/director of the Company, $149,844 in base compensation, other compensation and bonuses of $82,954 and provided her with a luxury automobile valued at $69,108 at the time of acquisition. In addition, in 2004 the Company issued this individual a total of 160,681 shares of the Company's common stock valued at $467,213. Her base compensation for 2005 is $192,777. In the UK, Gizmondo Europe maintains directors accounts whereby amounts owing to and from directors of Gizmondo Europe are netted in order to facilitate advances made and expenses incurred by directors. During 2004, Gizmondo Europe was owed as much as $5,723,860, and $3,122,210, by Messrs. Freer and Eriksson, respectively, using a conversion rate of 1.8074. All amounts owed by Mr. Freer were repaid prior to his becoming a director of the Company in August 2004. As of December 31, 2004, Mr. Eriksson owed $204,081 to Gizmondo, which loans were subsequently repaid. During 2005, Mr. Eriksson owed as much as $114,066 to Gizmondo Europe, all of which has been repaid. The Company presently has three directors, all of whom are involved in management of the Company and its subsidiaries. The Company anticipates increasing the Board to seven directors and adding four independent directors. With respect to the transactions in 2004 described above in which executive officers, directors and/or spouses of the foregoing had an interest, respectively, the Company will ask the four independent directors, when appointed, to review and approve these transactions. NOTE K - CONTINGENCIES A shareholder of the Company borrowed some of the funds advanced to the Company (with funds going to the Tiger Ltd subsidiary) from a private investment bank, London International Mercantile Bank (LIM), based in London. The shareholder failed to repay the note when due and LIM made demand on the subsidiary, Tiger Telematics Ltd., to repay the funds since Tiger Telematics Ltd. was the beneficiary of the funds. The Company maintained that it was not responsible for that obligation and responded to the demand accordingly. Tiger Telematics Ltd. entered into a settlement agreement the Court approved as a Tomblin Order where the demand note payable to the shareholder was forgiven in exchange for the Company entering into an installment note for approximately $475,000, to be paid over time directly to LIM. The shareholder remained contingently obligated for the sum owed plus interest in event that the payment was not made timely by Tiger Telematics Ltd. The Company issued a limited guaranty for the obligation to LIM. The settlement agreement called for monthly payments at a variable interest rate. Tiger Telematics Ltd. repaid approximately $80,000 prior to the sale of the business on December 17, 2002. Following the sale of Tiger Telematics Ltd., the Company was apprised that Tiger Telematics Ltd. was placed in liquidation insolvency under the laws of the United Kingdom for failure to make the payments required under this arrangement. LIM made demand on the Company for approximately $450,000 under the guarantee but has made no attempt to collect on the guaranty as it pursues its direct remedies against the original borrower of the funds. LIM also holds 140,000 F-27 shares of the Company's common stock and certain real estate provided by the original borrower as collateral. The Company has reserved an amount that it believes will cover any obligation that may arise. On April 26, 2002, the Company entered into a Lease Agreement with Christian and Timbers UK Ltd (C&T) for office premises for its subsidiary for a term of five years. The Company paid the first year's rent by issuing 20,000 shares of common stock. The subsidiary subsequently defaulted on the lease arrangement. In the summer of 2003, C&T sued the Company pursuant to the Company's guarantee. In October 2003, the Company entered into a judgment stipulation for $300,000 to settle all obligations under the guarantee. The Company has issued shares of common stock to C&T, that it believes will satisfy the amount of the outstanding judgment. In March 2004, Jordan Grand Prix Ltd. filed suit against the Company in the UK alleging violation of the Sponsorship Agreement entered into between the Company and Jordan Racing in July 17, 2003 and a related Letter Agreement dated in July 2003. The sponsorship agreement was meant to assist in marketing the Company's new hand held gaming device and to correspond with its launch. The launch was delayed from its anticipated time frame. Jordan sued the Company for $3 million and alleged that the Company defaulted on a payment of $500,000, due on January 1, 2004, under the sponsorship agreement, and a payment for $250,000, due on the same date under a separate letter agreement. In January 2005, the Court reduced the amount of the payment and allowed the Company to deposit 70,000 shares of its stock in escrow to satisfy this requirement. Prior to commencement of the trial, the Company was to substitute $1.5 million in exchange for the escrowed shares. The Company settled the case in July 2005 in an out of court mediation by the payment of $1,500,000 in cash and the issuance of 30,000 shares of the Company's restricted common stock valued at $208,800. The settlement was recorded in the 2004 financial statements and included in other expenses. In January 2005, the Company filed a lawsuit in the Circuit Court in and for the County of Duval, Florida against D. Weckstein and Company and Donald E. Weckstein, a former investment advisor to the Company, for breach of the Company's agreement with the advisor. In a mediation process completed in April 2005, the Company issued 60,000 additional shares of restricted common stock valued at $310,800 in full settlement of the matter and was released from all past and future obligations under the Agreement. The settlement was recorded in the 2004 financial statements and included in other expenses. In October 2004, Gizmondo Europe Ltd, (Gizmondo), a subsidiary of the Company signed a contract with SCi Entertainment Group Plc (SCi), a leading games publisher, under which Gizmondo has licensed the right to develop and publish twelve SCi products for the Gizmondo platform. The agreement covers both currently released titles as well as those in the pipeline, and establishes the structure for continuing collaboration between the two companies. The agreement has Gizmondo paying a minimum guarantee of approximately $1,250,000 allocated by and among 12 products. The guarantee, which has been paid, is non-refundable but fully recoverable against earned royalties of each product. An earned royalty of 50% of net receipts is to be paid on each product. On March 22, 2005, the Board of Regents of the University of Texas System filed an action against the Company and one of its subsidiaries, Gizmondo Europe, Ltd. in the United States District Court for the Western District of Texas, Austin Division, alleging that predictive text software used in the Company's Gizmondo gaming device infringes a patent held by the Board of Regents. The Company believes that its software does not infringe the Board of Regents' patent. The F-28 Company licenses this software from another company, which under the license agreement has indemnified the Company for infringement claims. The Company and Gizmondo Europe, Ltd. were dismissed from this action in July 2005. In August 2005, the Company filed an action against Integra SP Holdings Limited and Integra SP Nominee Limited (collectively "Integra") seeking a declaratory judgment that the Company had properly terminated a stock purchase agreement between the Company and Integra. In November 2004, the Company entered into an agreement with Integra to acquire all of the outstanding share capital of Integra SP Holdings Limited for Company common stock with a market value of approximately $35 million based on $14.06 per share. The agreement, which was amended in January 2005, required the satisfaction of numerous conditions in order to close. Several of those conditions were not satisfied and on July 7, 2005, the Company notified Integra that it had elected to terminate the agreement. In connection with entering into the agreement the Company had also loaned Integra $1,541,280 under a debenture providing for loans by the Company of up to $1,926,600 secured by Integra's intellectual property rights. Termination of the stock purchase agreement entitles the Company to demand payment on the debenture with 60 days notice, which the Company did on July 7, 2005. The action was filed in Florida State Court and has been removed by Integra to the U. S. District Court, Middle District, Jacksonville Division. On August 19, 2005, Ogilvy Group Sweden Limited ("Ogilvy") commenced an action against Gizmondo Europe Limited in the Stockholm District Court to collect approximately $4.1 million plus interest allegedly owed to Ogilvy for marketing and advertising services provided to Gizmondo Europe during 2003 and 2004. Gizmondo Europe's relationship with Ogilvy was terminated on June 30, 2005. The Company has issued 400,000 shares of its common stock to Ogilvy as collateral for Gizmondo Europe's obligations to Ogilvy. On August 29, 2005, an affiliate of Ogilvy, Ogilvy Public Relations Worldwide, Inc. ("Ogilvy PR"), commenced an arbitration proceeding in New York City against Gizmondo Europe and the Company to collect approximately $305,000 plus interest allegedly owed to Ogilvy PR for public relations services under an agreement dated June 30, 2004. On September 20, 2005, the Company and Ogilvy PR settled this dispute for $125,000 to be paid by the Company. On September 2, 2005, MTV Networks Europe demanded payment of $1,527,500 Euros previously invoiced to Gizmondo Europe under an agreement dated March 31, 2005 with Gizmondo Europe guaranteed by the Company. The agreement provides for sponsorship fees of $2,600,000 Euros plus VAT and airtime advertising fees of $2,600,000 Euros plus VAT. MTV Networks Europe has terminated the agreement effective September 9, 2005, reserving its right to bring legal proceedings for payment of the outstanding invoices and damages for lost profits resulting from termination of this agreement. NOTE L - DISCONTINUED OPERATIONS In June 2002, the Company entered into a plan to dispose of its flooring business and, as of June 30, 2002, accounted for the flooring segment as a discontinued segment. The Company has estimated that the net loss on the discontinued operations from June 30, 2002 through the date of sale, August 9, 2002 to be $35,000, and the estimated gain on sale and included that amount in the liabilities of the discontinued segment. F-29 On August 9, 2002, the Company sold its flooring business to a purchasing group headed up by a former officer of the Company. The Company sold assets aggregating $1,152,698, in consideration for the assumption by the buyer of liabilities totaling $1,243,135. The Company will remain contingently liable on the liabilities until such time as the buyers pay them off. In addition, the buyer has assumed operating leases described above. In April 2003, the buyer of the flooring assets filed a Chapter 11 bankruptcy proceeding and was liquidated as of April 30, 2003. As of December 31, 2002, the Company has made a provision for loss of approximately $1,153,000. Revenue included in loss from discontinued operations was $2,163,158 for the year ended December 31, 2002. A summary of the liabilities the Company may be obligated to pay, as of December 31, as follows: 2004 2003 ------------ ------------ Liabilities - Leases and various payables and accruals related to failure of Floor Decor, and other dispositions $ 1,168,243 $ 1,168,243 NOTE M - PREPAYMENTS Prepayment consists of the following: December 31, --------------------------- 2004 2003 ------------ ------------ Prepaid expenses are as follows: Rent $ 45,659 $ 45,383 Insurance 382,493 -- Prepayments for Gizmondo production 944,105 -- General 250,305 -- ------------ ------------ TOTAL $ 1,622,562 $ 45,383 ============ ============ NOTE N - ACCRUED EXPENSES Accrued expenses consists of the following: December 31, --------------------------- 2004 2003 ------------ ------------ Payroll and related taxes $ 752,697 $ 150,054 Accrued expenses 3,782,778 -- Withholding taxes accrual 7,494,715 -- VAT accrual 265,628 -- Audit fees 150,743 -- Consulting -- 302,100 Other 723,844 -- Settlements of litigation 2,019,600 -- Amounts accrued related to acquisitions, bankruptcy of acquiring companies and rent and advisor fees related to events described in NOTE K - CONTINGENCIES 520,369 1,297,851 ------------ ------------ $ 15,710,374 $ 1,750,005 ============ ============ F-30 NOTE O - SEGMENT INFORMATION Since 2003 the Company has focused all of its business in one segment, developing its primary product, Gizmondo, a new multi-entertainment wireless handheld gaming device targeted at the gaming industry. NOTE P - SUBSEQUENT EVENTS In August 2005, Gizmondo Europe and U. S. game developer Electronic Arts entered into a Software Development Contract for the development of two games, FIFA and FXXFSX. In connection with this contract, Gizmondo Europe paid Electronic Arts $5.9 million. In May 2005, two entities that are shareholders of the Company paid an aggregate total of approximately $21.2 million in short term loans to Gizmondo Europe. These loans are repayable by September 30, 2005, and are guaranteed by the Company and by Carl Freer and Stefan Eriksson, personally. The Company also pledged 1,027,069 shares of its common stock as collateral for the loan. On September 8, 2005, the Company executed a Stock Purchase Agreement with certain stockholders of Globicom, Inc., a Texas corporation, and closed the transaction on that date, for the acquisition of approximately eighty-four percent (84%) of the issued and outstanding common stock of Globicom, Inc. The Company acquired Globicom in a move to provide wireless network support and expand the wireless infrastructure for Gizmondo. The Company paid $200,000 in cash and issued 116,859 shares of its restricted common stock on September 8, 2005. An additional contingent cash payment of $120,000 is due upon the completion of certain milestones. Payments amounting to $3,971,000 have been made to Games Factory Publishing Ltd in connection with a games development agreement entered into in August 2005 for the development of 19 games to be used on the Gizmondo handheld device. A 50% shareholder of Games Factory Publishing Ltd owns 100,000 shares of the Company's common stock. NOTE Q - EMPLOYMENT CONTRACTS AND TERMINATION AND CHANGE-IN-CONTROL ARRANGEMENTS As of December 31, 2004, the Company had employment agreements with all of its executive officers, Michael W. Carrender, Carl Freer, Steve Carroll and Stefan Eriksson. The Company and Michael W. Carrender entered into an employment contract effective March 1, 2004, pursuant to which Mr. Carrender is employed as the Chief Executive Officer of the Company. This contract currently provides for an initial three year term through March 1, 2007, and his employment there under is automatically extended for successive one-year periods thereafter, unless terminated by either the Company or Mr. Carrender upon proper notice. The base salary under this contract is a minimum of $1,800,000 per annum (effective as of October 1, 2004) and Mr. Carrender is eligible to receive (1) a bonus approved by the Company's Compensation Committee, and (2) certain perquisites described in the contract. If Mr. Carrender's employment is terminated prior to the term of the contract by the Company (unless the termination is by the Company for "cause" or as a result of Mr. Carrender's death or permanent disability) or by Mr. Carrender for "good reason," then the Company must pay Mr. Carrender (x) his remaining base salary through the end of the then current term and (y) an amount equal to fifty percent (50%) of his annual base salary for the fiscal year immediately preceding the year in which the termination occurs. F-31 Gizmondo Europe, Ltd., the Company and Carl Freer entered into an employment contract effective March 1, 2004, pursuant to which Mr. Freer is employed as the Managing Director of Gizmondo Europe. This contract currently provides for an initial three year term through March 1, 2007, and his employment there under is automatically extended for successive one-year periods thereafter, unless terminated by either the Company or Mr. Freer upon proper notice. The base salary under this contract is a minimum of $1,922,770 per annum (effective as of October 1, 2004) and Mr. Freer is eligible to receive (1) a bonus, and (2) certain perquisites described in the contract. If Mr. Freer's employment is terminated prior to the term of the contract by the Company (unless the termination is by the Company for "cause" or as a result of Mr. Freer's death or permanent disability) or by Mr. Freer for "good reason," then the Company must pay Mr. Freer (x) his remaining base salary through the end of the then current term and (y) an amount equal to fifty percent (50%) of his annual base salary for the fiscal year immediately preceding the year in which the termination occurs. Gizmondo Europe, Ltd., the Company and Steve Carroll entered into an employment contract effective October 22, 2004, pursuant to which Mr. Carroll is employed as the Chief Technology Officer. This contract currently provides for an initial three year term through October 22, 2007, and his employment there under is automatically extended for successive one-year periods thereafter, unless terminated by either the Company or Mr. Carroll upon proper notice. The base salary under this contract is a minimum of $1,542,160 per annum (effective as of February 1, 2005) and Mr. Carroll is eligible to receive (1) a bonus, and (2) certain perquisites described in the contract. If Mr. Carroll's employment is terminated prior to the term of the contract by the Company (unless the termination is by the Company for "cause" or as a result of Mr. Carroll's death or permanent disability) or by Mr. Carroll for "good reason," then the Company must pay Mr. Carroll (x) his remaining base salary through the end of the then current term and (y) an amount equal to fifty percent (50%) of his annual base salary for the fiscal year immediately preceding the year in which the termination occurs. Gizmondo Europe, Ltd., the Company and Stefan Eriksson entered into an employment contract effective March 1, 2004, pursuant to which Mr. Eriksson is employed as the Director of Gizmondo Europe. This contract currently provides for an initial three year term through March 1, 2007, and his employment there under is automatically extended for successive one-year periods thereafter, unless terminated by either the Company or Mr. Eriksson upon proper notice. The base salary under this contract is a minimum of $1,542,160 per annum (effective as of October 1, 2004) and Mr. Eriksson is eligible to receive (1) a bonus, and (2) certain perquisites described in the contract. If Mr. Eriksson's employment is terminated prior to the term of the contract by the Company (unless the termination is by the Company for "cause" or as a result of Mr. Eriksson's death or permanent disability) or by Mr. Eriksson for "good reason," then the Company must pay Mr. Eriksson (x) his remaining base salary through the end of the then current term and (y) an amount equal to fifty percent (50%) of his annual base salary for the fiscal year immediately preceding the year in which the termination occurs. F-32 Compensation Committee Interlocks and Insider Participation No executive officer of the Company serves as a member of the board of directors of any entity that has one or more executive officers serving as a member of the Company's Board of Directors. The Company had no separate Compensation, Stock Option and Benefits Committee during the year ended December 31, 2004. NOTE R - ACCOUNTS RECEIVABLE Accounts receivable consists of amounts due from customers, none of whom are considered to be major customers. Accounts receivable are reported at their unpaid principal balances reduced by an allowance for doubtful accounts. The Company estimates doubtful accounts based on historical bad debts, factors related to specific customers' ability to pay and current economic trends. The Company writes off accounts receivable against the allowance when a balance is determined not to be collectible. Management did not consider an allowance for doubtful accounts to be necessary at December 31, 2004. Other Receivables: Other receivables consist of the following: VAT refunds due $ 1,952,677 Purchase tax refunds due 306,726 Due from Integra 467,201 Amounts due from other debtors 402,631 ----------- TOTAL $ 3,129,235 =========== NOTE S - QUARTERLY DATA (UNAUDITED) (In thousands except for per share amounts) Year ended December 31, 2004 ---------------------------- Fourth Third Second First Quarter Quarter Quarter Quarter --------- --------- --------- --------- Net sales $ 274 $ 268 $ 184 $ 0 Cost of goods sold (36) 297 149 0 --------- --------- --------- --------- Gross profit (loss) 310 (29) 35 0 Selling, general and Administrative 54,167 17,865 19,730 5,730 Other income (expense) (2,076) 0 (1) (38) --------- --------- --------- --------- Net loss $ (55,933) $ (17,894) $ (19,696) $ (5,768) ========= ========= ========= ========= Net loss per share $ (1.79) $ (0.87) $ (1.21) $ (0.52) ========= ========= ========= ========= F-33 Year ended December 31, 2003 ---------------------------- Fourth Third Second First Quarter Quarter Quarter Quarter --------- --------- --------- --------- Net sales $ 17 $ 0 $ (9) $ 1 Cost of goods sold 20 (9) 1 3 --------- --------- --------- --------- Gross profit (loss) (3) (9) (10) (2) Selling, general and Administrative 4,873 1,142 407 545 Other income (expense) 242 (287) 52 (32) --------- --------- --------- --------- Net loss $ (4,634) $ (1,438) $ (365) $ (579) ========= ========= ========= ========= Net loss per share $ (1.0571) $ (0.4004) $ (0.1088) $ (0.1773) ========= ========= ========= ========= Year ended December 31, 2002 ---------------------------- Fourth Third Second First Quarter Quarter Quarter Quarter --------- --------- --------- --------- Net sales $ 130 $ 152 $ 1 $ 1 Cost of goods sold 117 223 42 3 --------- --------- --------- --------- Gross profit (loss) 13 (71) (41) (2) Selling, general and Administrative 1,256 1,410 2,149 954 Other income (expense) (521) (1,027) (3,288) (28) --------- --------- --------- --------- Loss from continuing Operations (1,764) (2,508) (5,478) (984) Loss from discontinued Operations 0 0 (164) (189) --------- --------- --------- --------- Net loss (1,764) (2,508) (5,642) (1,173) ========= ========= ========= ========= Net loss per share $ (0.6249) $ (0.8885) $ (1.9986) $ (0.4155) ========= ========= ========= ========= F-34 EX-2.8 2 tiger10k123104ex28.txt STOCK PURCHASE AGREEMENT - GOLDEN SANDS INVESTMENT HOLDINGS, LTD. 5-20-04 Exhibit 2.8 ================================================================================ STOCK PURCHASE AGREEMENT By and Among GOLDEN SANDS INVESTMENT HOLDINGS LTD. as owner of INDIE STUDIOS AB TIGER TELEMATICS, INC., And GIZMONDO EUROPE LTD. Dated May 20, 2004 ================================================================================ TABLE OF CONTENTS Page ARTICLE I PURCHASE OF ASSETS AND ASSUMPTION OF LIABILITIES.............1 1.1 Sale and Purchase of the Assets..................................1 1.2 Excluded Assets..................................................2 1.3 Assumed Liabilities..............................................2 1.4 Retained Liabilities.............................................2 ARTICLE II PURCHASE PRICE; CLOSING......................................2 2.1 Purchase Price...................................................2 2.2 Price Computation................................................3 2.3 Closing Time and Place...........................................3 2.4 Transfer of Title to Acquired Assets; Assumption of Liabilities..3 a Employees........................................................3 b Collection of Assets.............................................3 ARTICLE III REPRESENTATIONS AND WARRANTIES OF TARGET.....................3 3.1 Organization.....................................................4 3.2 Capitalization and Ownership.....................................4 3.3 Subsidiaries.....................................................4 3.4 Authorization and Enforceability.................................4 3.5 No Conflict; No Violation of Laws or Agreements..................4 3.6 Financial Statements.............................................5 3.7 No Undisclosed Liabilities.......................................5 3.8 Brokerage........................................................6 3.9 Title to Assets; Liens...........................................6 3.10 Trade Payables...................................................6 3.11 Accounts Receivable..............................................6 3.12 Contracts........................................................6 3.13 Employee Benefit Plans...........................................7 3.14 Labor Relations; Employees.......................................7 3.15 Regulatory Actions or Investigations.............................7 3.16 Copies of Documents..............................................7 3.17 Taxes............................................................7 -i- TABLE OF CONTENTS (continued) Page 3.18 Inventory........................................................8 3.19 Absence of Certain Changes.......................................8 3.20 Intellectual Property...........................................10 3.21 Trade Secrets and Customer Lists................................10 3.22 Litigation......................................................11 3.23 Compliance with Laws............................................11 3.24 Product Warranty................................................12 3.25 Product Liability...............................................12 3.26 Powers of Attorney..............................................12 3.27 Authorizations..................................................12 3.28 Transactions with Interested Persons............................12 3.29 Hazardous Materials; Environmental Compliance; Disclosure of Environmental Information........................12 3.30 Backlog.........................................................13 3.31 Customers, Distributors and Independent Sales Representatives...13 3.32 Disclosure of Material Information and Potentially Adverse Developments...........................................14 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS..............14 4.1 Organization....................................................14 4.2 Authorization and Enforceability................................14 4.3 No Conflict; No Violation of Laws or Agreements.................14 4.4 Consents........................................................15 4.5 Brokerage.......................................................15 ARTICLE V REPRESENTATION AND WARRANTIES OF BUYER 15 5.1 Organization....................................................15 5.2 Capitalization and Ownership....................................15 5.3 Subsidiaries....................................................15 5.4 Authorization and Enforceability................................16 5.5 No Conflict; No Violation of Laws or Agreements.................16 5.6 Consents........................................................16 5.7 Financial Statements............................................16 -ii- TABLE OF CONTENTS (continued) Page 5.8 No Undisclosed Liabilities......................................17 5.9 Litigation and Claims...........................................17 5.10 Brokers.........................................................17 5.11 Truth and Accuracy of Disclosures...............................17 ARTICLE VI PRE-CLOSING COVENANTS OF TARGET AND SELLER..................17 6.1 Conduct of Business.............................................17 6.2 Authorization from Others.......................................18 6.3 Breach of Representations and Warranties........................18 6.4 Consummation of Agreement.......................................19 6.5 Confidentiality.................................................19 6.6 No Solicitation of Other Offers.................................19 6.7 Access, Information, and Documents..............................19 ARTICLE VII PRE-CLOSING COVENANTS OF BUYER..............................19 7.1 Consummation of Agreement.......................................19 7.2 Confidentiality.................................................20 7.3 Authorization from Others.......................................20 7.4 Breach of Representations and Warranties........................20 ARTICLE VIII CONDITIONS TO CLOSING.......................................20 8.1 Conditions Precedent to Obligations of Buyer....................20 8.2 Conditions Precedent to the Obligations of Target...............21 ARTICLE IX TERMINATION.................................................21 9.1 Termination of Agreement.........................................21 9.2 Effect of Termination............................................22 ARTICLE X CERTAIN ADDITIONAL COVENANTS................................22 10.1 Costs, Expenses, and Transfer Taxes..............................22 10.2 .................................................................22 ARTICLE XI INDEMNIFICATION.............................................22 11.1 Materiality; Survival............................................22 11.2 Indemnification Rights of Buyer..................................22 -iii- TABLE OF CONTENTS (continued) Page 11.3 Indemnification Rights of Seller ................................24 11.4 Indemnification Payments and Dispute Resolution..................24 ARTICLE XII MISCELLANEOUS...............................................25 12.1 Notices..........................................................25 12.2 Successors and Assigns...........................................26 12.3 Construction.....................................................26 12.4 Governing Law....................................................24 12.5 Headings.........................................................27 12.6 Counterparts.....................................................27 12.7 Further Assurances...............................................27 12.8 Course of Dealing................................................27 12.9 Severability.....................................................27 12.10 Entire Agreement.................................................27 Exhibit Definitions.......................................................28 Exhibits and schedules to purchase agreement.............................. -iv- SHARE PURCHASE AGREEMENT This SHARE PURCHASE AGREEMENT (the "Agreement"), is made and entered into May 20, 2004, by and among TIGER TELEMATICS, INC., a Delaware corporation ("Buyer's parent "), GIZMONDO EUROPE, LTD. a United Kingdom corporation ("Buyer "), and Golden Sands Investment Holdings, Ltd. ("Seller") who owns the shares of Indie Studios AB("Target"). BACKGROUND: Buyer is a UK corporation engaged in the business of developing, manufacturing and marketing automotive telematics products (the "Business") in Europe and a new handheld wireless multi entertainment device that focuses on gaming. . Buyer's parent is a U.S. publicly traded company under the symbol TIGR that wants to see the transaction take place and is down streaming shares to the subsidiary to implement the transaction. Target is the wholly owned by Golden Sands Investment Holdings Ltd. and is in the business of developing games for consoles and other mediums of use. Target is engaged in gaming development arena. Buyer desires to purchase and Seller desires to sale the common stock of Target on the terms and conditions of this Agreement. Buyer specifically wants the game Colors and other games currently in development and all related intellectual properties associated with the same whether capitalized on the balance sheet or not. All capitalized (and as noted herein, uncapitalized) words or expressions used in this Agreement (including the Schedules and Exhibits annexed hereto) not otherwise defined herein have the meanings specified in Exhibit A hereto (such meanings to be equally applicable to both the singular and plural forms of the terms defined). This Agreement and the agreements and instruments to be executed and delivered at Closing are referred to collectively herein as the "Transaction Agreements" and the transactions contemplated by the Transaction Agreements are referred to collectively herein as the "Transactions". In consideration of the foregoing, the mutual representations, warranties and covenants set forth in this Agreement, and for the good and valuable consideration, the sufficiency of which is hereby acknowledged, the parties hereto agree as follows: ARTICLE I PURCHASE OF SHARES, ASSETS AND ASSUMPTION OF LIABILITIES 1.1 Sale and Purchase of the Assets. Upon the terms and subject to the conditions contained in this Agreement, at the Closing, Target shall sell, transfer, assign, convey and deliver to Buyer, and Buyer shall purchase, acquire and accept, all of Target's right, title and interest in and to, the shares of 1 common stock of Target as set forth on the balance sheet of Target at the Closing Date (the "Closing Balance Sheet") and any and all contracts (the "Assumed Contracts") to which Target is a party (collectively, the "Acquired Assets"). For sake of clarity, a true, correct and complete listing of the assets of Target as of the date of this Agreement, that would constitute all of the Acquired Assets if the Closing Date is the same date as the date hereof, is set forth on Schedule I hereto. 1.2 Excluded Assets. The Acquired Assets shall exclude only those assets that are not reflected on the Closing Balance Sheet or Schedule I or that do not consist of Assumed Contracts (collectively, the "Excluded Assets"), a true, correct and complete listing of which as of the date of this Agreement is set forth on Schedule II hereto. 1.3 Assumed Liabilities. In addition to acquiring all of the outstanding common stock of the seller, Buyer shall assume and discharge of all the liabilities of Target set forth on the Closing Balance Sheet, including without limitation, and liabilities arising in respect of the Assumed Contracts (collectively, the "Assumed Liabilities"). A true, correct and complete listing of all liabilities of Target to be assumed by Buyer, that would constitute all of the Assumed Liabilities if the Closing Date is the same date as the date hereof, and their amounts as of the date of this Agreement is set forth on Schedule III hereto. 1.4 Retained Liabilities. Except for the Assumed Liabilities, Buyer shall not assume, become liable for or obligated for any of Target's obligations, liabilities or indebtedness in respect of the Excluded Assets (all such liabilities and obligations of Target, other than the Assumed Liabilities, the "Retained Executed Liabilities"). ARTICLE II PURCHASE PRICE; CLOSING 2.1 Purchase Price. 25 million restricted commons shares of the Buyers parent to be issued within 5 days of closing. Closing is to be set by mutual agreement of the parties but prior to August 30, 2004. An additional 7.5 million restricted shares of the Buyers parent will be issued to seller upon the competitions by Target of the Colors game and delivery to the buyer. A further 7.5 million restricted shares of the buyers parent will be issued upon completion of a to be announced racing game with Jensen Button and delivery to the parent. 2.2 Price Computation. The price per share as of the date of the contract is agreed to be $.31 per share which is the closing price as of the date of this contract. All shares are pre-splits or consolidations and will be adjusted accordingly. 2.3 Closing Time and Place. The closing of the transactions contemplated by this Agreement (the "Closing") will take place at the offices of Gizmondo Europe, Ltd., as soon as practicable following the date hereof on such date as Target and Buyer shall agree. The date on which the Closing occurs is hereinafter referred to as the "Closing Date." 2 2.4 Transfer of Title to Acquired Assets; Assumption of Liabilities. The sale, assignment, conveyance, transfer, and delivery by Target of the acquired shares and associated Acquired Assets shall be made at the Closing by appropriate bills of sale, assignments, endorsements, and such other appropriate instruments of transfer sufficient to vest in Buyer as of the Closing Date title to the Acquired Assets that are owned, and a valid and assignable leasehold interest in the Acquired Assets that are leased by Target. Such instruments of assignment, conveyance, and transfer shall include without limitation a bill of sale transferring title to tangible assets and an assignment transferring title to intangible assets. Risk of loss of the Acquired Assets shall pass from Target to Buyer at Closing. Buyer will execute and deliver to Target at the Closing an Assumption Agreement with respect to the Assumed Liabilities and an Assignment and Assumption of Lease Agreement with respect to each of the real property leases to be assumed. (a) Employees. Attached hereto as Schedule 5 is a list of all employees of Target that are expected to be employed by Buyer post-closing (the "Retained Employees"). Schedule 5 sets forth the amount of all expenses, including without limitation accrued vacation, unpaid expense reimbursement and accrued salary (collectively, the "Employment Expenses") currently owed to the Retained Employees. Target shall update Schedule 55 at Closing to provide definitive lists of Retained Employees and Employment Expenses. (b) Collection of Assets. Subsequent to the Closing, Buyer shall have the right and authority to collect all receivables and other items transferred and assigned to it by Target hereunder and to endorse with the name of Target any checks received on account of such receivables or other items, and Target agrees that it will promptly transfer or deliver to Buyer from time to time, any cash or other property that Target may receive with respect to any claims, contracts, licenses, leases, commitments, sales orders, purchase orders, receivables of any character included in the Acquired Assets or any other items included in the Acquired Assets. ARTICLE III REPRESENTATIONS AND WARRANTIES OF TARGET Target hereby represents and warrants to Buyer, as of the date hereof and as of the Closing Date (except as such representations and warranties may be amended, modified or limited by any of the matters disclosed on any portion of the List of Schedule (whether specifically identified in this Article III or not) attached hereto as List of Schedules hereto (the "List of Schedule"), as follows: 3.1 Organization. Target is a corporation duly organized, validly existing, and in good standing under the laws of Sweden certified by the Company House and of Target's Bylaws, as amended to date, certified by Target's Director, are complete and correct and no amendments thereto have been filed or are pending. Target is and has been at all times in compliance with its Articles and Bylaws. Target is duly qualified or licensed to conduct business as a foreign corporation in and is in good standing in each jurisdiction in which the nature of business as conducted by Target or the character and nature of any of the Acquired Assets make such qualification necessary, all of which jurisdictions are listed on the List of Schedule. 3 3.2 Capitalization and Ownership. The authorized capital stock of Target consists of 1,000 shares of common stock, 100 crown par value, of which 1,000 shares of common stock are issued and outstanding, giving the Target a share capital of 100,000 crown. The organization number of Target is SE 01- 556655-1056 in Sweden. All of such issued and outstanding shares of capital stock of Target are owned beneficially and of record by Golden Sands Investment Holdings, Ltd. , Inc., have been duly authorized, validly issued, are fully paid and nonassessable, were not issued in violation of the terms of any agreement or other understanding binding upon Target or any other Person and were issued in compliance with all applicable federal and state securities or "blue-sky" laws and regulations. Except as set forth on the List of Schedule, there are no outstanding securities, options, warrants, rights, agreements, calls, subscription commitments, demands, or understandings of any character whatsoever, fixed or contingent, that directly or indirectly (i) call for the issuance, sale or other disposition of any capital stock of Target and there are no securities convertible into or exchangeable for the stock of Target or (ii) obligate Target to grant, offer or enter into any of the foregoing or (iii) relate to the voting or control of any capital stock of Target. No person has any right to require Target to register any securities of Target under the Securities Act of 1933. 3.3 Subsidiaries. Target has no interests, direct or indirect, in any other Person. 3.4 Authorization and Enforceability. Seller and Target has all requisite corporate power and authority to execute and deliver the Transaction Agreements and to perform its obligations thereunder. Target's execution and delivery of, and the performance of its obligations under, the Transaction Agreements have been duly and validly authorized by all necessary corporate action. This Agreement has been, and upon their execution and delivery by Target, the other Transaction Agreements will be, duly executed and delivered on behalf of Target and constitutes and will constitute the legal, valid, and binding obligations of Target, enforceable against Target in accordance with their respective terms subject to general equitable principles and except as the enforceability of the Transaction Agreements may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws of general application relating to creditors' rights. 3.5 No Conflict; No Violation of Laws or Agreements. The execution and delivery of this Agreement do not, the execution and delivery of the other Transaction Agreements will not, and the consummation of the Transactions and the compliance with the terms, conditions, and provisions of the Transaction Agreements by Target will not: (a) contravene any provision of Target's Charter or Bylaws; (b) conflict with, constitute or result in any breach, default or violation of (or an event which might, with or without the passage of time or the giving of notice or both, constitute or result in a breach, default or violation of) (i) any of the terms, conditions, or provisions of any indenture, mortgage, loan, credit agreement, or any other instrument, contract, agreement or commitment to which Target is a party, or by which any Target, any of Acquired Assets may be bound or affected, (ii) any judgment or order of any Governmental Authority, or (iii) any law, rule or regulation; 4 (c) result in the creation or imposition of any Lien upon any Acquired Assets or give to others any interests or rights therein; (d) result in the acceleration of any liability or obligation of Target (or give others the right to cause such acceleration); or (e) result in the reduction of, termination of or loss of any right (or give others the right to cause such a reduction, termination or loss) under any Assumed Contract No consent or waiver by, approval of, or designation, declaration or filing with, any Person, governmental authority or entity (or any department, agency, or political subdivision thereof) is required in connection with the execution, delivery and performance by Target of the Transaction Agreements. 3.6 Financial Statements. (a) Set forth on the List of Schedule is (i) a business plan of the target and a true and correct copy of the unaudited consolidated balance sheet of Target as of March 31, 2004 (the "Target Financial Statement Date") and the related consolidated statements of income and cash flows for the fiscal year then ended (collectively, the "Target Year-End Financial Statements"), and (ii) the unaudited consolidated balance sheet of Target and related statement of income and cash flows as of, and for the month period ended March 31 30, 2004 (the "Target Interim Statements" and, together with the Target Year-End Financial Statements, the "Target Financial Statements"). (b) The Target Business Plan and Financial Statements: (i) were prepared from and are consistent with the Books and Records of Target, which Books and Records have been maintained in accordance with all legal and accounting requirements and completely and accurately reflect all financial transactions of Target, (ii) were prepared in accordance with GAAP consistently applied; and (iii) are correct and complete and present fairly the financial condition of Target and the results of its operations for the periods covered by, and as at the dates of, each of the Target Financial Statements except that the Target Interim Statements omit footnote disclosures and do not reflect year end adjustments which will not, in the aggregate, be material. The income statements included in the Target Financial Statements do not contain any material items of special or non-recurring income or other income not earned in the ordinary course of business except as expressly specified therein. 3.7 No Undisclosed Liabilities. Except as set forth on the List of Schedule, Target does not have any material liability or obligation of any nature, whether due or to become due, absolute, contingent, or otherwise, whether direct or indirect, except (a) to the extent reflected as a liability on the Target Financial Statements, or (b) material liabilities incurred in the ordinary course of business (and not in violation of this Agreement) since the Target Financial Statement Date and fully reflected as liabilities on the appropriate books of account (and which will be fully reflected as liabilities on the Closing Balance Sheet). 5 3.8 Brokerage. Neither Target nor anyone acting on behalf of Target has engaged, retained or incurred any liability to any broker, investment banker, finder or agent, made any agreement or taken any other action which might cause anyone to become entitled to a broker's fee or commission or agreed to pay any brokerage fees, commissions, finder's fees or other fees with respect to or as a result of the Transactions. 3.9 Title to Assets; Liens. Target has good and marketable title to the Acquired Assets that are owned and a valid and assignable (unless otherwise disclosed on the List of Schedule) leasehold interest in the Acquired Assets that are leased. The Acquired Assets are free and clear of all mortgages, liens, security interests, pledges, charges and other encumbrances, except for liens for current taxes not yet due and payable or being contested in good faith by appropriate proceedings, and such imperfections of title, easements and encumbrances as do not materially detract from the value of the properties subject thereto or affected thereby or otherwise do not materially interfere with their present or future use in a manner consistent with present practices or materially impair the operation of the Business. The Acquired Assets constitute all of the material assets used to conduct the Business. 3.10 Trade Payables. All of the trade payables have been incurred in the ordinary course of the Business and is set forth on the List of Schedule, which also includes a trade payable aging report. 3.11 Accounts Receivable. A complete and accurate listing of all accounts receivable of Target included in the Acquired Assets as of the date hereof accurately reflecting the aging thereof is set forth on the List of Schedule. All such accounts receivable are valid and enforceable claims, are subject to no set off or counterclaim and are fully collectible in the ordinary course of business. 3.12 Contracts. Except for contracts, commitments or agreements that (i) are described List of Schedule in the List of Schedule hereto or (ii) relate exclusively to the Excluded Assets and are not to be assigned to or assumed by Buyer, Target is not a party to or subject to any contract, commitment or agreement that is material to the operation of the Business. Copies of all contracts, commitments, plans, agreements or licenses described in List of Schedule in the List of Schedule have been provided to Buyer or its counsel prior to the execution of this Agreement and are true, correct and complete, and have not been subject to any amendment, extension or other modification as of the date hereof. Each contract, commitment, plan agreement and license described List of Schedule in the List of Schedule is binding and enforceable in accordance with its terms and is in full force and effect without any default (other than payment defaults as noted List of Schedule in the List of Schedule) thereunder by Target or, to the knowledge of Target, by any other party thereto (a "default" being defined for purposes hereof as an actual default or any set of facts that would, upon receipt of notice or passage of time, constitute a default), and except as otherwise set forth List of Schedule in the List of Schedule such contracts, commitments and agreements are assignable by Target 6 3.13 Employee Benefit Plans. All employee benefit plans, as that term is defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended, ("ERISA"), currently maintained by Target or to which Target has an obligation to contribute (the "Employee Benefit Plans") are described List of Schedule in the List of Schedule. No event has occurred nor has there been any omission which would result in violation of any laws, rulings or regulations applicable to any Employee Benefit Plan. There are no claims pending or, to the knowledge of Target, threatened with respect to any Employee Benefit Plan, other than claims for benefits by employees, beneficiaries or dependents arising in the normal course of the operation of any such plan. All contributions (including all employer contributions and employee salary reduction contributions) that are due have been paid to each such Employee Benefit Plan. All premiums or other payments for all periods ending on or before the Closing Date have been paid with respect to each such Employee Benefit Plan. 3.14 Labor Relations; Employees. Target employs approximately 10 employees and generally enjoys a good employer-employee relationship. Except as set forth on the List of Schedule, Target is not delinquent in payments to any of its employees for any wages, salaries, commissions, bonuses or other direct compensation for any services performed for it to the date hereof or amounts required to be reimbursed to such employees. Upon termination of the employment of Target's employees, neither Target nor Buyer will by reason of anything done prior to the Closing be liable to any of such employees for so-called "severance pay" or any other payments. Target has not implemented any written or oral policy that would contravene or contradict the "employment at will" policy. Target is in compliance with all applicable laws and regulations respecting labor, employment, fair employment practices, terms and conditions of employment, and wages and hours. 3.15 Regulatory Actions or Investigations. Target is not now a party to, and has not been apprised or notified of, any regulatory investigation or proceeding contemplated, pending or initiated by any federal or state agency or governmental unit. 3.16 Copies of Documents. Target has made available for inspection and copying by Buyer and its counsel true and correct copies of all documents referred to in List of Schedule. 3.17 Taxes. (a) Definitions. As used herein, "IRC" means the Internal Revenue Code of 1986, as amended and interpreted by treasury regulations; "Tax Return" means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof; and "Taxes" means any federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental, customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not. 7 (b) Returns and Payments. Target has filed all Tax Returns that it was required to file. All such Tax Returns are correct and complete in all respects. All Taxes owed by Target (whether or not shown on any Tax Return) have been paid. Target currently is not the beneficiary of any extension of time within which to file any Tax Return. No claim has ever been made by an authority in a jurisdiction where Target does not file Tax Returns that it is or may be subject to taxation by that jurisdiction. There are no liens, encumbrances, or charges against any of the assets of Target that arose in connection with any failure (or alleged failure) to pay any Tax. (c) Withholding Taxes. Target has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, shareholder, or other third party. (d) Tax Liabilities. Neither Target, nor any of Target's officers, directors, or employees responsible for Tax matters has knowledge of any facts that would lead them to expect any authority to assess any additional Taxes for any period for which Tax Returns have been filed. There is no dispute or claim concerning any Tax liability of Target either claimed or raised by any authority in writing or as to which any of target, Stockholder or any of Target's, officers, directors, or employees responsible for Tax matters has knowledge based upon personal contact with any agent of such authority. The List of Schedule lists all Tax Returns filed for taxable periods ended on or after December 31, 2000, indicates those Tax Returns that have been audited and indicates those Tax Returns that currently are the subject of an audit. Target has delivered to the Buyer correct and complete copies of all Tax Returns, examination reports, closing agreements and statements of deficiencies assessed against or agreed to by Target since December 31, 2003. Target has disclosed on its federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of federal income Tax within the meaning of IRC Section 6662. (e) Statute of Limitations. Target has not waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency. (f) Affiliated Group. Target has not been a member of an affiliated group filing a consolidated federal income Tax Return (other than a group the common parent of which was Target) and has not incurred any liability for the Taxes of any other person or entity (other than Target) under Treasury Regulations Section 1.1502-6 (or similar provision of state, local, or foreign law), as a transferee or successor, by contract, or otherwise. Target is not a party to any Tax allocation or sharing agreement. 3.18 Inventory. A complete and accurate listing of the Inventory and the pricing thereof is set forth List of Schedule in the List of Schedule. 3.19 Absence of Certain Changes. Since the Target Financial Statement Date and except as set forth on the List of Schedule there has not been: 8 (a) any operation of the Business out of the ordinary course of business or any change in the financial condition, properties, assets, liabilities, business, prospects or operations of the Business that changes, by itself or in conjunction with all other such changes, or has been or is likely to materially adversely affect, the Business; (b) any purchase, sale, license or other disposition, or any agreement or other arrangement for the purchase, sale, license or other disposition, of any part of the Target's properties or assets (including any patents, trademarks and copyrights) included in the Acquired Assets, other than purchases for and sales from inventory in the ordinary course of business; (c) any payment or discharge of a lien or liability of Target that is not shown on the Target Financial Statements or incurred in the ordinary course of business thereafter; (d) any obligation or liability incurred by Target to any bank, to any officer, director, employee or stockholder of Target, or, other than in the ordinary course of business, to any other individual; or any loans or advances made by Target to any officer, director, employee or stockholder of Target, except for normal compensation and expense allowances payable to officers or employees; (e) any capital expenditure by Target in excess of $10,000 for any one item included in the Assets; (f) any contracts relating to the Business, other than in the ordinary course of business of the Business, entered into by Target that obligate Target for more than $10,000 with respect to any one contract or more than $25,000 with respect to the aggregate of all such contracts; (g) any change in the accounting methods or practices followed by Target or any change in depreciation or amortization policies or rates theretofore adopted; (h) any change in the manner in which inventory of Target used in the Business is marketed or any increase in inventory levels in excess of historical levels for comparable periods; (i) any acceleration, termination, modification or cancellation of any agreement, contract, lease or license relating to the Business (or series of related agreements, contracts, leases or licenses) involving more than $10,000 to which Target is a party or by which it is bound; (j) any issuance of any evidence of indebtedness or creation, incurrence, assumption or guaranty of any indebtedness for borrowed money or capital lease obligations involving in excess of $10,000 singly or $25,000 in the aggregate; (k) any delay or postponement of payment of any accounts payable or other liabilities relating to the Business outside the ordinary course of business; 9 (l) any change in the employment terms or employment-related benefits for any independent sales representative or employee employed in the Business outside the ordinary course of business; or (m) any agreement or understanding, whether in writing or otherwise, for Target to take any of the actions specified in paragraphs (a) through (l) above. 3.20 Intellectual Property. (a) All domestic and foreign patents, patent applications, copyrighted works, copyright applications and registrations, trade secrets, inventions, developments, customer lists, manufacturing and secret processes, hardware designs, programming processes, software and other information, know-how, trade names, trademarks and service marks, registered trademarks and trademark applications, and registered service marks and service mark applications (if any) that are used by, owned by or licensed to Target and that relate to the Business (collectively, the "Intellectual Property") are listed on the List of Schedule, which indicates, with respect to each, the nature of Target's interest therein and the expiration date thereof or the date on which the Target's interest therein terminates. Registered copyrights, patents, trademarks and service marks that are owned by or licensed to Target and that relate to the Business have been duly registered in, filed in or issued by, as the case may be, the United States Patent and Trademark Office, the United States Register of Copyrights or the corresponding offices of other countries identified on the List of Schedule, and have been properly maintained and renewed in accordance with all applicable provisions of law and administrative regulations in the United States and each such country. The Intellectual Property is the only intellectual property used in or otherwise necessary to operate the Business as currently conducted or proposed to be conducted. (b) Except as set forth on the List of Schedule, use of the Intellectual Property and any other intellectual property used by Target in the Business does not require the consent of any other person and the same are freely transferable (except as otherwise provided by law) and are owned exclusively by Target, free and clear of any attachments, liens, encumbrances or adverse claims, and neither its present or contemplated activities or products infringe, misappropriate, dilute, impair or constitute unfair competition with respect to any patent, trade name, trademark, copyright or other proprietary rights of others. (c) No other person has an interest in or right or license to use, or the right to license others under, the Intellectual Property, other than the rights of licensors and their licensees in the licensed intellectual property identified on the List of Schedule. There are no claims or demands of any other person pertaining thereto and no proceedings have been instituted, are pending or threatened that challenge the rights of Target in respect thereof and Target does not know of any fact that could be the basis of any such claim. There is no infringement of any of the Intellectual Property by others nor is any of the Intellectual Property subject to any outstanding order, decree, judgment, stipulation, settlement, lien, charge, encumbrance or attachment. No claim or demand has been made and no proceeding has been filed or is threatened to be filed charging Target with infringement of any patent, trade name, trademark, service mark or copyright and Target does not know of any facts which could be the basis of any such claims. Except as set forth on the List of Schedule, there are no royalties, honoraria, fees or other payments payable by Target to any person with respect to any of the Intellectual Property. 10 3.21 Trade Secrets and Customer Lists. Except as set forth on the List of Schedule, target owns or has the right to use, free and clear of any claims or rights of others, all trade secrets, inventions, developments, customer lists, manufacturing and secret processes, hardware designs, programming processes, software and other information, and know-how (if any) required for or used in the manufacture or marketing of all products formerly or presently sold, manufactured, licensed, under development or produced by Target in the Business, including products licensed from others. There are no payments that are required to be made by Target for the use of such trade secrets, inventions, developments, customer lists, copyrighted materials, manufacturing and secret processes and know-how. Target is not using or in any way making any unlawful or wrongful use of any confidential information, copyrighted materials, know-how or trade secrets of any third party, including without limitation any former employer of any present or past employee of Target or of any of Target's predecessors. Target is not a party to any non-competition or confidentiality agreement related to the Business with any party other than Buyer. 3.22 Litigation. Except as set forth on the List of Schedule, there are no suits, actions or administrative, arbitration or other proceedings or governmental investigations pending or, to the knowledge of Target, threatened against or relating to Target, the Acquired Assets or the Business. Target is not otherwise engaged as a party in any suit, action or administrative, arbitration or other proceeding. Target has not entered into or been subject to any consent decree, compliance order, or administrative order with respect to any property owned, operated, leased, or used by Target. Target has not received any request for information, notice, demand letter, administrative inquiry, or formal or informal complaint or claim with respect to any property owned, operated, leased or used by Target or any facilities or operations thereon. Target has not been named by the U.S. Environmental Protection Agency or a state environmental agency as a potentially responsible party (or similar designation under applicable state law) in connection with any site at which hazardous substances, hazardous materials, toxic substances, oil, or petroleum products have been released or are threatened to be released. There are no existing or, to the knowledge of Target, threatened product liability, warranty or other similar claims, or any facts upon which a claim of such nature could be based, against Target for services or products that are defective or fail to meet any service or product warranties. Target is not aware of any facts providing a basis for any matter addressed in this Section 3.22 or has any reason to believe that any such matters will be forthcoming. 3.23 Compliance with Laws. Target is not in violation of any laws, rules or regulations that apply to the conduct of the Business or any facilities or property owned, leased, operated or used by Target. There has never been any citation, fine or penalty imposed, asserted or to the knowledge of Target, threatened against Target under any foreign, federal, state, local or other law or regulation relating to employment, immigration, occupational safety, zoning or environmental matters and Target is not aware of any circumstances, occurrences, or conditions likely to result in the imposition or assertion of such a citation, fine or penalty, nor has Target received any notice to the effect that it is in violation of any such laws or regulations. 11 3.24 Product Warranty. Each product manufactured, sold, leased, or delivered by Target has conformed with all applicable contractual commitments and all express and implied warranties. Target has no liability (and there is no basis for any present or future action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand which may give rise to any liability) for replacement or repair thereof or other damages in connection therewith, subject only to the reserve for product warranty claims set forth in the Target Financial Statements as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of Target. No product manufactured, sold, leased, or delivered by Target is subject to any guaranty, warranty, or other indemnity beyond the applicable standard terms and conditions of sale or lease, all of which have been provided to Buyer by Target. 3.25 Product Liability. Target has no liability (and to the knowledge of Target there is no basis for any present or future action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand against it giving rise to any liability) arising out of any injury to individuals or property as a result of the ownership, possession, or use of any product manufactured, sold, leased, or delivered by Target ("Product Liability"). 3.26 Powers of Attorney. Target has not entered into any outstanding power of attorney. 3.27 Authorizations. Target has obtained and is in compliance with all Authorizations and no proceeding is pending or, to the knowledge of Target, threatened in which any Person or governmental authority is seeking to revoke or deny the renewal of any Authorization. All Authorizations relating to the Business are listed on the List of Schedule. Each Authorization is in full force and effect without any default thereunder by Target (a "default" being defined for purposes hereof as an actual default or any set of facts which would, upon receipt of notice or passage of time, constitute a default), and can be assigned by Target to Buyer hereunder such that it will remain in full force and effect after giving effect to the Transactions. Target has not received any notice of any claim or charge that Target has breached any Authorization. 3.28 Transactions with Interested Persons. Except as set forth on the List of Schedule, neither any Stockholder nor any officer, supervisory employee or director of Target nor any of their respective spouses or children, owns, directly or indirectly, on an individual or joint basis, any material interest in, or serves as an officer or director or in another similar capacity of, any customer, competitor or supplier of Target, or any organization that has a material contract or arrangement with Target, with respect to the Related Agreements. 3.29 Hazardous Materials; Environmental Compliance; Disclosure of Environmental Information. (a) Target has never generated, used, stored or handled any Hazardous Materials (as hereinafter defined) nor has it treated, stored, disposed of, spilled or released any Hazardous Materials at any site presently or formerly owned, leased, operated or used by target or shipped any Hazardous Materials for treatment, storage or disposal at any other site or facilities. To 12 the knowledge of Target, no other person has ever generated, used, handled, stored or disposed of any Hazardous Materials at any site presently or formerly owned, leased, operated or used by Target, nor has there been or is there threatened any release of any Hazardous Materials on or at any such site. Target does not presently own or lease, nor has it previously owned or leased, any site on which underground storage tanks are or were located. No lien has been imposed by any governmental agency on any property, facility, machinery, or equipment owned, operated, leased or used by Target in connection with the presence of any Hazardous Materials. For purposes of this Section 3.29, "Hazardous Materials" shall mean and include ethylene oxide, any hazardous waste, hazardous material, hazardous substance, petroleum product, oil, toxic substance or pollutant as defined in or pursuant to the Resource Conservation and Recovery Act, as amended, the Comprehensive Environmental Response, Compensation and Liability Act, as amended, the Hazardous Materials Transportation Act or any other foreign, federal, state or local law, regulation, ordinance, rule or by-law, whether existing as of the date hereof, previously enforced or subsequently enacted pertaining to environmental or health and safety matters. (b) To the knowledge of Target, Target has no liability under nor has it ever violated any Environmental Law (as hereinafter defined) with respect to any property owned, operated, leased, or used by Target and any facilities and operations thereon. In addition, Target, any property owned, operated, leased, or used by Target, and any facilities and operations thereon are presently in compliance with all applicable Environmental Laws. Target has not entered into or been subject to any consent decree, compliance order or administrative order with respect to any environmental or health and safety matter or received any request for information, notice, demand letter, administrative inquiry, or formal or informal complaint or claim with respect to any environmental or health and safety matter or any enforcement of any Environmental Law; and Target has no reason to believe that any of the above will be forthcoming. For purposes of this Section 3.29, "Environmental Law" shall mean any environmental or health and safety-related law, regulation, rule, ordinance, or by-law at the federal, foreign, state, or local level. (c) Target has provided to the Buyer copies of all documents, records, and information available to Target concerning any environmental or health and safety matter relevant to Target, whether generated by Target or others, including, without limitation, environmental audits, environmental risk assessments, site assessments, documentation regarding off-site disposal of Hazardous Materials (as defined above), spill control plans, and reports, correspondence, permits, licenses, approvals, consents, or other authorizations issued by any environmental agency. 3.30 Backlog. As of the date hereof, Target has a backlog of firm orders for the sale of services of the Business, for which revenues have not been recognized by Target, as set forth on the List of Schedule. 3.31 Customers, Distributors and Independent Sales Representatives. The List of Schedule sets forth the names and addresses of all customers to which, and independent sales representatives and distributors through which, Target has sold or distributed in excess of $25,000 of its products or services in the Business during any of the last two fiscal years of Target. The List of Schedule also indicates all customers, distributors and independent sales representatives with which Target has entered into a contract or agreement. During such period and through the date hereof, no such customer, distributor or independent sales representative has canceled or otherwise terminated its 13 relationship with Target or decreased materially its usage or purchase of the products or services of Target, except for changes in customer relationships that have occurred in the ordinary course of business the aggregate value of which has not exceeded $10,000. To the knowledge of Target, no such customer, independent sales representative or distributor has any plan or intention to terminate, cancel or otherwise modify its relationship with Target in a manner that would be adverse to Target. 3.32 Disclosure of Material Information and Potentially Adverse Developments. No disclosure made to Buyer or contained herein, including the List of Schedule, about Target's business, operations, financial condition, results of operations or prospects (other than any statements relating solely to the business, operations, financial condition, results of operations or prospects of Seller) contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements of facts contained therein not misleading or necessary to provide Buyer with adequate and complete information as to Target's business, operations, financial condition, results of operations or prospects. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLERS Each Golden Sands Investment Holdings Ltd. and Indie Studios AB., severally and not jointly, hereby represents and warrants as to itself to Buyer, as of the date hereof and as of the Closing Date, as follows: 4.1 Organization. Such Ltd. . And AB is a corporation duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation. 4.2 Authorization and Enforceability. Such Ltd.. And AB. has all requisite corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. Such Ltd. and AB. execution and delivery of, and the performance of its obligations under, this Agreement have been duly and validly authorized by all necessary corporate action. This Agreement has been duly executed and delivered on behalf of such Ltd. And AB. and constitutes the legal, valid, and binding obligations of such company, enforceable against such company in accordance with its terms subject to general equitable principles and except as the enforceability of this Agreement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws of general application relating to creditors' rights. 4.3 No Conflict; No Violation of Laws or Agreements. The execution and delivery of this Agreement does not, and the consummation of the Transactions and the compliance with the terms, conditions and provisions of this Agreement by Stockholder will not: (a) contravene any provision of Stockholder's Charter or Bylaws, or (b) conflict with, or constitute, or result in any breach, default, violation of (or an event which might, with or without 14 the passage of time or the giving of notice or both constitute or result in a breach, default or violation of) (i) any of the terms, conditions, or provisions of any indenture, mortgage, loan, credit agreement, or any other instrument, contract, agreement or commitment to which it is a party, or by which any of its assets may be bound or affected or (ii) any judgment or order of any Governmental Authority, or (iii) any law, rule, or regulation. 4.4 Consents. No consent, approval, or authorization of, or registration or filing with, any Person, including any Governmental Authority, is required in connection with company's execution and delivery of this Agreement or the consummation of the Transactions by Companies. 4.5 Brokerage. Neither Company nor anyone acting on Company's behalf has engaged, retained or incurred any liability to any broker, investment banker, finder or agent, made any agreement or taken any other action which might cause anyone to become entitled to a broker's fee or commission or agreed to pay any brokerage fees, commissions, finder's fees or other fees with respect to or as a result of the Transactions. ARTICLE V REPRESENTATION AND WARRANTIES OF BUYER Each of Buyer, jointly and severally, represents and warrants to Golden Sands Investment Holdings, Ltd. and Indie Studios AB , as of the date hereof and as of the Closing Date, as follows: 5.1 Organization. Buyer is a corporation duly incorporated, validly existing and in good standing under the laws of the UK and has all requisite corporate power and authority (a) to do business in the jurisdictions wherein the character of the properties owned or leased or the nature of the activities by it make such qualification necessary, (b) to execute and deliver this Agreement, and (c) to perform its obligations hereunder. 5.2 Capitalization and Ownership. The authorized capital stock of Buyer consists of 100 private shares of common stock, $0.000 par value per share, of which 100 shares of common stock are issued and outstanding and owned by Tiger Telematics, Inc. All of such issued and outstanding shares of capital stock of Buyer have been duly authorized, validly issued, are fully paid and nonassessable, were not issued in violation of the terms of any agreement or other understanding binding upon Buyer or any other Person and were issued in compliance with all applicable federal and state securities or "blue-sky" laws and regulations. Except as set forth in Schedule 5.1, there are no outstanding securities, options, warrants, rights, agreements, calls, subscription commitments, demands, or understandings of any character whatsoever, fixed or contingent, that directly or indirectly (i) call for the issuance, sale or other disposition of any capital stock of Buyer or any of its subsidiaries and there are no securities convertible into or exchangeable for the stock of Buyer or (ii) obligate Buyer to grant, offer or enter into any of the foregoing or (iii) relate to the voting or control of any capital stock of Buyer or any of its subsidiaries. 15 5.3 Subsidiaries. Buyers parents directly owns all of the outstanding shares of capital stock of Buyer. 5.4 Authorization and Enforceability. The execution and delivery of the Transaction Agreements, and the performance of Buyer's and obligations thereunder, have been duly authorized by all necessary corporate action on the part of Buyer. This Agreement has been, and upon their execution and delivery by Buyer and Target each of the other Transaction Agreement to which Buyer and Target is a party will be, duly executed and delivered by each of Buyer and Tiger and constitutes and will constitute the legal, valid and binding obligation of Buyer and Tiger, as the case may be, enforceable against them in accordance with their respective terms subject to general equitable principles and except as the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws of general application relating to creditors' rights. 5.5 No Conflict; No Violation of Laws or Agreements. The execution and delivery of this Agreement do not, the execution and delivery of the other Transaction Agreements will not, and the consummation of the Transactions and the compliance with the terms, conditions and provisions of the Transaction Agreement by each of Buyer will not: (a) contravene any provision of Buyer's Charter or Bylaws, or (b) conflict with, or constitute, or result in any breach, default, violation of (or an event which might, with or without the passage of time or the giving of notice or both constitute or result in a breach, default or violation of) (i) any of the terms, conditions, or provisions of any indenture, mortgage, loan, credit agreement, or any other instrument, contract, agreement or commitment to which either of them is a party, or by which any of their assets may be bound or affected or (ii) any judgment or order of any Governmental Authority, or any law, rule, or regulation applicable to Buyer or any of its Affiliates. 5.6 Consents. No consent, approval, or authorization of, or registration or filing with, any Person, including any Governmental Authority, is required in connection with Buyer's execution and delivery of this Agreement or the consummation of the transactions contemplated by this Agreement by Buyer. 5.7 Brokers. Neither Buyer nor anyone acting on their behalf has engaged, retained or incurred any liability to any broker, investment banker, finder or agent, made any agreement or taken any other action which might cause anyone to become entitled to a broker's fee or commission or agreed to pay any brokerage fees, commissions, finder's fees or other fees with respect to or as a result of the Transactions. 5.8 Truth and Accuracy of Disclosures. No disclosure made to Target about Buyer's business, operations, financial condition, results of operations or prospects (other than any statements relating solely to the business, operations, financial condition, results of operations or prospects of Target) contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements of facts contained therein not misleading or necessary to provide Target with adequate and complete information as to Buyer's business, operations, financial condition, results of operations or prospects. 16 ARTICLE VI PRE-CLOSING COVENANTS OF TARGET. 6.1 Conduct of Business. Between the date of this Agreement and the Closing Date, Target will, and Seller will cause Target to: (a) conduct the Business only in the ordinary course and refrain from changing or introducing any method of management or operations except in the ordinary course of business and consistent with prior practices; (b) refrain from (i) making any purchase, sale or disposition of any asset or property included in or to be included in the Acquiring Assets other than in the ordinary course of business, (ii) purchasing any capital asset for use in the Business costing more than $10,000, (iii) mortgaging, pledging, subjecting to a lien or otherwise encumbering any of such assets other than in the ordinary course of business, and (iv) including any liabilities other than in the ordinary course of business consistent with past practices; (c) refrain from making any change or incurring any obligation to make a change in its Charter, Bylaws or authorized or issued capital stock; (d) refrain from declaring, setting aside or paying any dividend, making any other distribution in respect of its capital stock or making any direct or indirect redemption, purchase or other acquisition of its stock; (e) refrain from making any change in the compensation payable or to become payable to any of its officers, employees, agents or independent contractors; (f) refrain from prepaying any loans from its stockholders, officers or directors (if any) or making any change in its borrowing arrangements; (g) use its best efforts to prevent any change with respect to its management and supervisory personnel who are employed in the Business; (h) use its best efforts to keep available its present officers and employees employed in the Business and to preserve the goodwill of all suppliers, customers, distributors, independent contractors and others having business relations with the Business; and 6.2 Authorization from Others. Prior to the Closing Date, Target and Seller will obtain all authorizations, consents and permits of others required to permit the consummation by Target and Seller of the Transactions. 6.3 Breach of Representations and Warranties. Neither any Tiger, Inc. shall take any action that would result in any of the representations and warranties contained in Articles 3 and 4 hereof being untrue in any material respect. Promptly upon the occurrence of, or promptly upon Target or Tiger, Inc. becoming aware of the impending or threatened occurrence of, any event that would cause or constitute a breach or default, or would have caused or 17 constituted a breach or default had such event occurred or been known to Target or Tiger, Inc. prior to the date hereof, of any of the representations and warranties of the Target or Tiger, Inc. contained in this Agreement, Target and Seller shall give detailed written notice thereof to Buyer and shall use their respective best efforts to prevent or promptly cure the same. 6.4 Consummation of Agreement. Target and Seller shall use their respective best efforts to perform and fulfill all conditions and obligations on their parts to be performed and fulfilled under this Agreement. 6.5 Confidentiality. Target and Seller agree that (a) Target and Seller and their respective officers, directors, agents and representatives will hold in strict confidence, and will not use, any data and information obtained in connection with this transaction or Agreement with respect to the business of Buyer, except for the purpose of Target's and Seller's internal evaluation of the Transactions; (b) if such Transactions are not consummated, Target and Seller will return to Buyer all copies of such data and information, including but not limited to worksheets, test reports, manuals, lists, memoranda, and other documents prepared by or made available to Target and Seller in connection with this transaction; and (c) they will treat the existence of this Agreement and the transactions contemplated hereby as strictly confidential and will not disclose them to any Person without the prior written consent of Buyer. 6.6 No Solicitation of Other Offers. Neither Target, Seller, nor any of their respective officers, directors, agents or representatives will, directly or indirectly, (i) solicit, initiate discussions or engage in negotiations with, any person, other than Buyer, relating to the possible acquisition of Target or any of the Acquired Assets (except in the ordinary course of business of Target); (ii) provide, or cause any other person to provide, any information to any person, other than Buyer, relating to the possible acquisition of Target or any of the Acquired Assets (except in the ordinary course of business of Target); or (iii) enter into a transaction with any Person, other than Buyer, concerning the possible acquisition of Target or any of the Acquired Assets (except in the ordinary course of business of Target). Target and Seller will notify Buyer immediately if any Person makes any proposal, offer, inquiry or contact with respect to any of the foregoing. 6.7 Access, Information, and Documents. Buyer and Buyer's counsel, accountant, and other representatives will have full access during normal business hours to all of Target's properties, books, tax returns, contracts, commitments, records, officers, personnel, and accountants. Target shall provide Buyer with all such documents and copies of documents (certified to be true copies if requested) and all information with respect to the affairs of the Target Companies as Buyer may reasonably request. ARTICLE VII PRE-CLOSING COVENANTS OF BUYER 7.1 Consummation of Agreement. Buyer shall use best efforts to perform and fulfill all conditions and obligations on its part to be performed and fulfilled under this Agreement. 18 7.2 Confidentiality. Buyer agree that, unless and until the Closing has been consummated, (a)Buyer and officers, directors, agents and representatives will hold in strict confidence, and will not use, any data and information obtained in connection with this transaction or Agreement with respect to the business of Target, except for the purpose of Buyer's internal evaluation of this transaction or the consummation of the Transactions; and (b) if the Transactions are not consummated, Buyer will return to Target all copies of such data and information, including but not limited to worksheets, test reports, manuals, lists, memoranda, and other documents prepared by or made available to Buyer in connection with this transaction. 7.3 Authorization from Others. Prior to the Closing Date, Buyer will obtain all authorizations, consents and set forth on Schedule 7.3. 7.4 Breach of Representations and Warranties. Buyer shall not take any action that would result in any of the representations and warranties contained in Article 5 hereof being untrue in any material respect. Promptly upon the occurrence of, or promptly upon Buyer becoming aware of the impending or threatened occurrence of, any event that would cause or constitute a breach or default, or would have caused or constituted a breach or default had such event occurred or been known to Buyer prior to the date hereof, of any of the representations and warranties of Buyer contained in or referred to in this Agreement, Buyer shall give detailed written notice thereof to Target shall use their best efforts to prevent or promptly cure the same. ARTICLE VIII CONDITIONS TO CLOSING 8.1 Conditions Precedent to Obligations of Buyer. The obligations of Buyer to proceed with the Closing under this Agreement are subject to the fulfillment prior to or at Closing of the following conditions (any one or more of which may be waived in whole or in part by Buyer in Buyer's sole discretion): (a) Representations, Warranties and Covenants. The representations and warranties of Target and seller set forth in Articles 3 and 4 that are not qualified as to materiality shall be true and correct in all material respects, and such the representations and warranties that are qualified as to materiality shall be true and correct in all respects, at and as of the Closing Date. Target and seller shall have performed and complied with all of their covenants hereunder in all material respects through the Closing. (b) Litigation. No order of any Governmental Authority shall be in effect which restrains or prohibits the Transactions shall not be threatened, nor shall there be pending, any action or proceeding (i) challenging any of the Transactions or seeking monetary relief by reason of the consummation of such transactions, or (ii) which would likely have a Material Adverse Effect. (c) Consents. Target and Buyer shall have procured all of the third party consents, approvals and authorizations set forth on Schedule 7.4. 19 (d) Closing Certificate. Target shall have delivered to Buyer a certificate to the effect that each of the conditions specified above in Subsections 7.1(a), (b) and (c) is satisfied in all respects; (e) Satisfactory Instruments. All instruments and documents required of Target to effectuate and consummate the Transactions shall be in form and substance reasonably satisfactory to Buyer and its counsel. 8.2 Conditions Precedent to the Obligations of Target. The obligation of Target and seller to proceed with the Closing is subject to the fulfillment prior to or at Closing of the following conditions (any one or more of which may be waived in whole or in part by Target in its sole discretion): (a) Material Adverse Effect. All representations and warranties of Buyer contained herein shall be true, accurate, complete and correct in all material respects as of the Closing Date. (b) Litigation. No order of any Governmental Authority shall be in effect which restrains or prohibits the Transactions. There shall not be threatened, nor shall there be pending, any action or proceeding (i) challenging any of the Transactions or seeking monetary relief by reason of the consummation of such transactions, or (ii) which would likely have a Material Adverse Effect. (c) Satisfactory Instruments. All instruments and documents required of Buyer to effectuate and consummate the Transactions contemplated hereby shall be in form and substance reasonably satisfactory to Target and the seller and their counsel. ARTICLE IX TERMINATION 9.1 Termination of Agreement. This Agreement and the transactions contemplated hereby may be terminated at any time on or prior to the Closing Date: (a) Mutual Consent. By mutual written consent of Buyer and Target and the Seller; (b) Termination by Buyer. By Buyer upon notice to Target if there has been a material misrepresentation, inaccuracy or breach by Target or Seller of any of their representations, warranties or covenants, or if any of the conditions specified in Section 8.1 hereof shall not have been substantially fulfilled by the time required and not have been waived by Buyer, or if the Closing shall not have occurred on or before August 30, 2004; or (c) Termination by Target. By Target upon notice to Buyer if there has been a material misrepresentation, inaccuracy or breach by Buyer of any of its representations, warranties or covenants, or if any of the conditions specified in Section 8.2 hereof shall not have been substantially fulfilled by 20 the time required and not have been waived by Target, or if the Closing shall not have occurred on or before August 30, 2004. 9.2 Effect of Termination. In the event of termination of this Agreement by either Target or Buyer, as provided above, this Agreement shall terminate as of the date of the written notice or consent described in Section 7.1 above, and there will be no liability on the part of Target or Buyer or their respective Affiliates, except for liabilities arising from a breach of this Agreement prior to such termination. ARTICLE X CERTAIN ADDITIONAL COVENANTS 10.1 Costs, Expenses, and Transfer Taxes. Each party hereto will pay its own costs and expenses, including legal and accounting fees, in connection with the negotiation, execution, performance of and compliance with this Agreement. 10.2 Employee Matters. Immediately prior to the consummation of the transactions contemplated hereby, Target will terminate all of its employees, and Buyer will offer employment to all former employees of Target listed on Schedule 5 at the same place of employment and on terms no less favorable than the terms of employment that existed at Target. ARTICLE XI INDEMNIFICATION 11.1 Materiality; Survival. All representations, warranties, agreements, covenants and obligations herein or in any schedule, certificate or financial statement delivered by any party incident to the Transactions are material, shall be deemed to have been relied upon by the parties and shall survive the Closing hereof for a period of two (2) years and shall not merge in the performance of any obligation by any party hereto; provided, however, that all such matters relating to Product Liability, Environmental Laws or Taxes shall survive the Closing for the period of the statute of limitations applicable to such matters. 11.2 Indemnification Rights of Buyer. (a) Seller and jointly and severally agrees to defend, indemnify and hold Buyer and their respective subsidiaries and affiliates and the persons serving as officers, directors, partners, employees or agents thereof (hereinafter collectively referred to as "Buyer Indemnified Parties" or individually as a "Buyer Indemnified Party") harmless from and against any damages, liabilities, losses, fines, penalties, clean-up costs, study costs and expenses (including, without limitation, reasonable counsel fees and expenses as the same are incurred) (collectively, "Losses") of any kind or nature whatsoever that may be sustained or suffered by any of them arising out of or based upon or in connection with any of the following matters (notwithstanding any investigation by or knowledge of any of the Buyer Indemnified Parties): 21 (i) a breach of any representation, warranty, agreement, covenant or obligation made by the Seller (but not any other Stockholder) in this Agreement or in any exhibit, schedule, certificate or financial statement delivered hereunder or in connection herewith or by reason of any claim, action or proceeding asserted or instituted or growing out of any matter or thing that constitutes or is alleged by a third party to constitute a breach of such representations, warranties or covenants; and (ii) any claims of third parties arising out of or relating the Retained Liabilities. Seller shall have no obligation to indemnify any Buyer Indemnified Party from and against any Losses as to which a claim for indemnification is not made on or before the second anniversary of the Closing Date, except with respect to Product Liability, Environmental Laws or Taxes, as to which any Buyer Indemnified Party can make a claim on or before the date on which the statute of limitations period applicable to such matters expires. No claims for Losses shall be brought hereunder by Buyer until the aggregate amount of such claims exceeds $50,000, and, if the aggregate amount of Losses claimed hereunder exceeds $50,000 and Buyer are entitled to indemnification pursuant hereto, Buyer shall be entitled to collect any Losses in excess of such $50,000. (b) The Buyer Indemnified Parties shall give prompt written notice to Target and Seller from which indemnification is sought of any claim, liability or expense to which the indemnification obligations hereunder would apply. Such notice shall state the information then available regarding the amount of such claim, liability or expense and shall specify the provision or provisions of this Agreement under which the claim, liability or expense is asserted. The failure to promptly notify the Seller as provided above shall not relieve the Seller of any liability hereunder except to the extent that the rights of the Seller have been materially and adversely prejudiced as a result of the failure to give, or the delay in giving, such notice. (c) If such indemnification claim, liability or expense is the subject of litigation, the Seller shall have the right to participate at their own expense in the defense of any such litigation. The Buyer Indemnified Parties may, in their sole discretion, authorize the Seller , if they so desire, to take over the defense of such litigation so long as such defense is expeditious and is undertaken by counsel acceptable to the Buyer Indemnified Parties; provided, however, that the Seller shall not enter into any settlement that has binding effect on the Buyer without the prior written consent of the Buyer, which consent shall not be unreasonably withheld. In addition, the Buyer Indemnified Party may not enter into any settlement in which an indemnifying party will be liable hereunder without the consent of such indemnifying party. 11.3 Indemnification Rights of Seller. (a) Buyer agree to defend, indemnify and hold Seller and their respective subsidiaries and affiliates and the persons serving as 22 officers, directors, partners, employees or agents thereof (hereinafter collectively referred to as "Seller Indemnified Parties" or individually as a "Seller Indemnified Party") harmless from and against any Losses of any kind or nature whatsoever that may be sustained or suffered by any of them arising out of or based upon or in connection with any of the following matters: (i) a breach of any representation, warranty, agreement, covenant or obligation made by Buyer in this Agreement or in any exhibit, schedule or certificate delivered hereunder or in connection herewith or by reason of any claim, action or proceeding asserted or instituted growing out of any matter or thing that constitutes or is alleged by a third party to constitute a breach of such representations, warranties or covenants; and (ii) any claims of third parties arising out of or relating to the ownership or operation of the shares of Tiger Telematics, Ltd.Acquired Assets or the Business by Buyer after the Closing Date, whether accrued, absolute, contingent or otherwise, including the Assumed Liabilities, but not including the Retained Liabilities. Buyer shall have no obligation to indemnify any Seller Indemnified Party from and against any Losses as to which a claim for indemnification is not made on or before the third anniversary of the Closing Date. In no event shall the indemnification obligations of the Buyer to all Seller Indemnified parties exceed $2,000,000. (b) The Seller Indemnified Parties shall give prompt written notice to Buyer of any claim, liability or expense to which the indemnification obligations hereunder would apply. Such notice shall state the information then available regarding the amount of such claim, liability or expense and shall specify the provision or provisions of this Agreement under which the claim, liability or expense is asserted. The failure to promptly notify Buyer as provided above shall not relieve Buyer of any liability hereunder except to the extent that the rights of Buyer have been materially and adversely prejudiced as a result of the failure to give, or the delay in giving, such notice. (c) If such indemnification claim, liability or expense is the subject of litigation, Buyer shall have the right to participate at their own expense in the defense of any such litigation. The Seller Indemnified Parties may, in their sole discretion, authorize Buyer if they so desire to take over the defense of such litigation so long as such defense is expeditious and is undertaken by counsel acceptable to the Seller Indemnified Parties; provided, however, that Buyer shall not enter into any settlement which has binding effect on Seller without the prior written consent of Seller, which shall not be unreasonably withheld. 11.4 Indemnification Payments and Dispute Resolution. Any indemnification amounts due under Section 11.2 or 11.3 shall be paid within 30 days after notice thereof is given by the party seeking indemnification unless within said 30-day period the party providing indemnification indicates in a writing delivered to the party seeking indemnification that it disputes the nature or amount of the claim for indemnification in which event the dispute, upon the election of any party hereto after said 30-day period, shall be referred to the American Arbitration Association to be settled by arbitration in Florida in accordance with the UNCITRAL rules of commercial arbitration. The fees and expenses of the arbitrator shall be borne by that party (with Seller 23 and Buyer together each being considered one party) whose last offer of settlement differed by a greater amount from the arbitrator's award than did the last offer of settlement of the other party; provided, however, that no offer of settlement shall be disclosed to the arbitrator until after the arbitrator renders an award on the merits. The determination of the arbitrator as to the amount, if any, of the indemnification claim, liability or expense that is properly allowable shall be conclusive and binding upon the parties hereto and payment shall be made as so determined within five business days of the date of such award. The judgment upon the award may be entered in any court having jurisdiction thereof. There shall be added to the amount of any arbitration award interest at the rate of 10% per annum, accrued daily, on the amount required to be paid pursuant to such award. This interest will be computed from the date payment would have been paid if not disputed to the date paid and the arbitrator shall include provisions therefore in any award rendered. ARTICLE XII MISCELLANEOUS 12.1 Notices. All notices, requests, demands, and other communications hereunder shall be in writing and shall be deemed to have been duly given if personally delivered by courier, or if mailed, when mailed by United States first-class, certified or registered mail, postage prepaid, to the other party at the following addresses or by telecopy, receipt confirmed (or at such other address as shall be given in writing by any party to the other): If to Buyer, to: Michael Carrender CEO Tiger Telematics, Inc. 10201 Centurion Parkway Suite 600 Jacksonville, FL 32256 Fax: 904-279-9242 With a copy to: Lawyer: LeClair Ryan, a Professional Corporation 707 East Main Street - 11th Floor Richmond, Virginia 23219 Fax: (804) 783-7615 Attention: Scott Richter 24 If to Seller, to: Golden Sands Investment Holdings Ltd.. Attn: Peter Uf Fax: 12.2 Successors and Assigns. This Agreement, and all rights and powers granted hereby, will bind and inure to the benefit of the parties hereto and their respective successors and assigns, but neither this Agreement nor any of the rights, interests, or obligations hereunder shall be assigned by any of the parties hereto without the prior written consent of the other parties hereto. 12.3 Construction. The parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement. Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The word "including" shall mean including without limitation. The parties intend that each representation, warranty, and covenant contained herein shall have independent significance. If any party has breached any representation, warranty, or covenant contained herein in any respect, the fact that there exists another representation, warranty, or covenant relating to the same subject matter (regardless of the relative levels of specificity) which the party has not breached shall not detract from or mitigate the fact that the party is in breach of the first representation, warranty, or covenant. All pronouns and any variations thereof refer to the masculine, feminine or neuter, singular or plural, as the identity of the Person or Persons may require. All references herein to Articles, Sections (other than Sections of the Code or any other statute) and subsections shall be deemed to be references to Articles, Sections and subsections of this Agreement unless the context shall otherwise require. 12.4 Governing Law. With respect to corporate governance matters concerning a corporation of any jurisdiction, this Agreement shall be governed by and construed in accordance with the laws of such jurisdiction. With respect to all other matters, this Agreement shall be governed by and construed in accordance with the laws of State of Florida, without regard to the conflicts of law provisions thereof. 12.5 Headings. The headings preceding the text of the sections and subsections hereof are inserted solely for convenience of reference and shall not constitute a part of this Agreement, nor shall they affect its meaning, construction, or effect. 12.6 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but which together shall constitute one and the same instrument. 12.7 Further Assurances. Both before and after closing hereunder, each party shall cooperate and take such action as may be reasonably requested by another party in order to more fully carry out the provisions and purposes of this Agreement and the transactions contemplated hereby. 25 12.8 Course of Dealing. No course of dealing and no delay on the part of any party hereto in exercising any right, power, or remedy conferred by this Agreement shall operate as a waiver thereof or otherwise prejudice such party's rights, powers and remedies. The failure of any of the parties to this Agreement to require the performance of a term or obligation under this Agreement or the waiver by any of the parties to this Agreement of any breach hereunder shall not prevent subsequent enforcement of such term or obligation or be deemed a waiver of an subsequent breach hereunder. No single or partial exercise of any rights, powers or remedies conferred by this Agreement shall preclude any other or further exercise thereof or the exercise of any other right, power or remedy. 12.9 Severability. This Agreement shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of this Agreement or of any other term or provision hereof. Furthermore, in lieu of any such invalid or unenforceable term or provision, the parties hereto intend that there shall be added as a part of this Agreement a provision as similar in terms to such invalid or unenforceable provision as may be valid and enforceable, so as to effect the original intent of the parties to the greatest extent possible. 12.10 Entire Agreement. This Agreement and the Schedules, Exhibits and Certificates hereto, each of which is hereby incorporated herein, set forth all of the promises, covenants, agreements, conditions, and undertakings between the parties hereto with respect to the subject matter hereof and supersede all prior and contemporaneous agreements and understandings, inducements, or conditions, express or implied, oral or written. This Agreement may not be amended except by an instrument in writing signed by the party sought to be charged with effect of such amendment. 26 IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and year first above written. TIGER TELEMATICS, INC. By:____________________________________ Name: Michael W. Carrender Title: CEO GIZMONDO EUROPE, LTD. By:____________________________________ Name: Carl Freer Title: Managing Director Golden Sands Investment Holdings, Ltd. By:____________________________________ Name: Peter Uf Title: Director 27 Exhibit A DEFINITIONS "Affiliate" means, when used with respect to any Person, (a) if such Person is a corporation, any officer or director thereof and any Person which is, directly or indirectly, beneficial owner (by itself or as part of any group) of more than fifty percent (50%) of any class of any voting security thereof, (b) if such Person is an LLC, any officer or manager thereof and any Person which is, directly or indirectly, beneficial owner (by itself or as part of any group) of more than fifty percent (50%) of any class of any voting interest therein, (c) if such Person is a partnership, any general partner thereof and any Person which is, directly or indirectly, beneficial owner (by itself or as part of any group) of more than fifty percent (50%) of any limited partnership interest thereof, and (d) any other Person which directly or indirectly, through one or more intermediaries controls, is controlled by, or is under common control with, such Person. For purposes of this definition: (i) any "beneficial owner" that is a partnership shall be deemed to include any general or limited partner thereof, any "beneficial owner" that is an LLC shall be deemed to include any Person controlling, controlled by or under common control with such beneficial owner, or any officer, manager or member of such beneficial owner or of any LLC occupying any such control relationship, and any "beneficial owner" that is a corporation shall be deemed to include any Person controlling, controlled by or under common control with such beneficial owner, or any officer or director of such beneficial owner or of any corporation occupying any such control relationship; and (ii) "control" (including the correlative terms "controlling," "controlled by" and "under common control with"), with respect to any Person, shall mean possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or by contract or otherwise. "Books and Records" includes the original and all copies of reports, books, manuals, financial statements, or reports, price books, confirmations, telegrams, receipts, inventory books, contracts, printed matters, computer printouts, teletypes, invoices, transcripts, analyses, Returns, minutes, accounts, estimates, projections, comparisons, press releases, reviews, opinions, studies and investigations, graphic representations of any kind (including photographs, charts, graphs, videotape and motion pictures, electronic and mechanical records, tapes, cassettes, discs, and recordings, whether preserved in writing, phone record, film, tape, videotape, or computer record). "Authorization" means all federal, foreign, state, provincial, municipal, local or other governmental consents, certifications, licenses, permits, registrations, grants and other authorizations that are necessary to permit Target to conduct the Business as present conducted or proposed to be conducted. "Bylaws" means the bylaws of any corporation organized under the laws of any State of the United States of America and any equivalent document of any corporation or entity organized under the laws of another jurisdiction, as amended or restated through the date hereof or the Closing Date, as the case may be. 28 "Charter" means the Certificate of Incorporation or Formation, Articles of Incorporation or Organization or other organizational document of a corporation or an LLC organized under the laws of any State of the United States of America and any equivalent document of a corporation, LLC or other similar entity organized under the laws of another jurisdiction, as amended or restated through the date hereof or the Closing Date, as the case may be. "Code" means the Internal Revenue Code of 1986 and valid interpretations thereof, as reflected in Treasury regulations, published IRS rulings and court decisions. "GAAP" means United States generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession, which are applicable to the circumstances as of the date of determination, consistently applied. "Governmental Authority" means all agencies, instrumentalities, departments, commissions, courts, tribunals, or boards of any government, whether foreign, federal, state, or local. "Knowledge" all references to "knowledge" herein shall mean actual knowledge after reasonable investigation. Knowledge of any entity shall be deemed to include the knowledge of its directors and officers. "Lien" means, with respect to any asset or right, any mortgage, deed of trust, pledge, hypothecation, assignment, security interest, lien, charge, restriction, adverse claim or right whatsoever, title defect or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof, any assignment or other conveyance of any right to receive income and any assignment of receivables with recourse against assignor), any filing of any financing statement as debtor under the Uniform Commercial Code or comparable law of any jurisdiction and any agreement to give or make any of the foregoing except with respect to securities, restrictions on transferability imposed by federal and state securities laws. "Material Adverse Effect" means an occurrence or event which has or is reasonably likely to have a material adverse impact or effect on the Business, or the operations, financial conditions or prospects of the applicable companies, taken as a whole. "Person" means any natural person, corporation, business trust, trust, estate, partnership, limited partnership, LLC, limited liability partnership, association, joint venture, or other entity. "Taxes" or "Tax" means all taxes, however, denominated, including any interest, penalties or other additions to tax that may become payable in respect thereof, imposed by any federal, territorial, state, local or foreign government or any agency or political subdivision of any such government, which taxes shall include, without limiting the generality of the foregoing, all income or profits taxes (including federal income taxes and state income taxes), real property gains taxes, payroll and employee withholding taxes, unemployment insurance taxes, social security taxes, sales and use taxes, ad valorem taxes, excise 29 taxes, franchise taxes, occupation taxes, real and personal property taxes, stamp taxes, environmental taxes, transfer taxes and other governmental charges, and other obligations of the same or of a similar nature to any of the foregoing, which any Target Company is required to pay, withhold or collect. 30 EX-2.9 3 tiger10k123104ex29.txt AMENDED AND RESTATED STOCK PURCHASE AGREEMENT - INTEGRA SP HOLDINGS LIMITED AND INTEGRA SP NOMINEE LIMITED Exhibit 2.9 ================================================================================ THIS AGREEMENT DOES NOT CONSTITUTE AN OFFER TO SELL SHARES OF COMMON STOCK OF TIGER TELEMATICS, INC. TO, OR THE SOLICITATION OF AN OFFER TO PURCHASE SHARES OF COMMON STOCK OF TIGER TELEMATICS, INC. BY, ANY PERSON IN ANY COUNTRY OR JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS UNLAWFUL OR ANY PERSON THAT DOES NOT QUALIFY AS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501 OF REGULATION D PROMULGATED UNDER THE SECURITIES ACT. AMENDED AND RESTATED STOCK PURCHASE AGREEMENT BY AND BETWEEN TIGER TELEMATICS, INC. INTEGRA SP HOLDINGS LIMITED AND INTEGRA SP NOMINEE LIMITED Dated as of January 19, 2005 ================================================================================ TABLE OF CONTENTS Page ---- ARTICLE I PURCHASE AND SALE OF SHARES..........................................1 1.1 TRANSFER OF SHARES...........................................1 1.2 PURCHASE PRICE...............................................1 1.3 PAYMENT AT FIRST CLOSING.....................................4 1.4 DELIVERY OF SHARES...........................................4 1.5 AFFILIATE-OWNED ASSETS.......................................4 1.6 ASSET TRANSFER AND FURTHER ASSURANCES........................4 ARTICLE II THE CLOSING.........................................................4 ARTICLE III REPRESENTATIONS AND WARRANTIES of THE STOCKHOLDER..................4 3.1 TITLE TO THE SHARES..........................................5 3.2 ORGANIZATION AND POWER.......................................5 3.3 AUTHORITY; AUTHORIZATION, EXECUTION AND DELIVERY; ENFORCEABILITY; NO CONFLICT.................................5 3.4 CONSENTS.....................................................5 3.5 BROKERS......................................................6 3.6 INVESTMENT REPRESENTATIONS...................................6 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE SELLER GROUP..................7 4.1 ORGANIZATION, POWER, AUTHORITY AND GOOD STANDING.............7 4.2 AUTHORITY; AUTHORIZATION, EXECUTION AND DELIVERY; ENFORCEABILITY; NO CONFLICT.................................7 4.3 CONSENTS.....................................................7 4.4 CAPITALIZATION...............................................8 4.5 SUBSIDIARIES; INVESTMENTS....................................8 4.6 FINANCIAL INFORMATION........................................8 4.7 ABSENCE OF UNDISCLOSED LIABILITIES...........................9 4.8 ABSENCE OF CHANGES...........................................9 4.9 TAX MATTERS.................................................10 4.10 TITLE TO ASSETS, PROPERTIES AND RIGHTS AND RELATED MATTERS..11 4.11 REAL PROPERTY - OWNED OR LEASED.............................12 4.12 INTELLECTUAL PROPERTY.......................................12 4.13 AGREEMENTS, NO DEFAULTS, ETC................................13 4.14 LITIGATION, ETC.............................................14 4.15 COMPLIANCE WITH LAWS........................................15 4.16 INSURANCE...................................................15 4.17 LABOR RELATIONS; EMPLOYEES..................................15 4.18 ERISA COMPLIANCE............................................16 4.19 ENVIRONMENTAL MATTERS.......................................16 4.20 BROKERS.....................................................17 4.21 RELATED PARTY TRANSACTIONS..................................17 4.22 ACCOUNTS AND NOTES RECEIVABLE...............................18 4.23 BANK ACCOUNTS; POWERS OF ATTORNEY...........................18 4.24 SUPPLIERS AND VENDORS.......................................18 4.25 CUSTOMERS...................................................18 4.26 CONFLICTS OF INTEREST.......................................19 4.27 DISCLOSURE..................................................19 ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.....................19 5.1 ORGANIZATION; CORPORATE AUTHORITY...........................19 5.2 AUTHORITY; AUTHORIZATION; EXECUTION AND DELIVERY; ENFORCEABILITY; NO CONFLICT................................19 5.3 CONSENTS....................................................20 5.4 BROKERS.....................................................20 5.5 LITIGATION..................................................20 5.6 TIGR SHARES.................................................20 5.7 CAPITALIZATION..............................................20 5.8 WARN ACT....................................................20 5.9 SEC DOCUMENTS...............................................20 5.10 INVESTMENT INTENT...........................................21 i ARTICLE VI COVENANTS AND AGREEMENTS...........................................21 6.1 ACCESS TO RECORDS AND PROPERTIES............................21 6.2 CONDUCT OF THE BUSINESS.....................................21 6.3 EFFORTS TO CONSUMMATE.......................................22 6.4 NEGOTIATION WITH OTHERS.....................................23 6.5 NOTICE OF PROSPECTIVE BREACH................................23 6.6 PUBLIC ANNOUNCEMENTS........................................23 6.7 EXCHANGE PROCEEDS...........................................23 6.8 NON-COMPETITION COVENANT....................................23 6.9 DISCLOSURE OF INFORMATION...................................24 6.10 USE OF PROPRIETARY NAME.....................................25 6.11 SUPPLEMENTS TO SCHEDULES....................................25 6.12 CERTAIN EMPLOYEE MATTERS....................................26 6.13 NO-HIRE OF EMPLOYEES........................................26 6.14 NASDAQ LISTING..............................................26 6.15 FINANCIAL STATEMENTS........................................26 6.16 PAYMENT TO KBC..............................................26 ARTICLE VII CLOSING OBLIGATIONS...............................................27 7.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS......................27 7.2 CONDITIONS TO OBLIGATIONS OF THE PURCHASER..................27 7.3 CONDITIONS TO OBLIGATIONS OF THE SELLER GROUP...............29 ARTICLE VIII INDEMNIFICATION..................................................29 8.1 GENERALLY...................................................29 8.2 ASSERTION OF CLAIMS.........................................30 8.3 NOTICE AND DEFENSE OF THIRD PARTY CLAIMS....................30 8.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES..................31 8.5 LIMITATIONS ON INDEMNIFICATION..............................31 8.6 EXCLUSION OF CERTAIN CLAIMS.................................32 8.7 MITIGATION..................................................32 8.8 PARTIES TO CLAIM............................................32 ARTICLE IX TERMINATION; EFFECT OF TERMINATION.................................33 9.1 TERMINATION.................................................33 9.2 EFFECT OF TERMINATION.......................................34 ARTICLE X MISCELLANEOUS PROVISIONS............................................34 10.1 AMENDMENT...................................................34 10.2 ENTIRE AGREEMENT............................................34 10.3 SEVERABILITY................................................34 10.4 BENEFITS OF AGREEMENT.......................................34 10.5 EXPENSES; SALES AND TRANSFER TAXES..........................35 10.6 REMEDIES....................................................35 10.7 NOTICES.....................................................35 10.8 COUNTERPARTS AND FACSIMILE EXECUTION........................36 10.9 GOVERNING LAW..............................................36 10.10 JURISDICTION AND VENUE......................................36 10.11 MUTUAL CONTRIBUTION.........................................37 10.12 NO THIRD PARTY BENEFICIARIES................................37 10.13 INDEPENDENCE OF COVENANTS AND REPRESENTATIONS AND WARRANTIES.................................................37 10.14 INTERPRETATION; CONSTRUCTION................................37 ii ANNEXES, SCHEDULES AND EXHIBITS Annexes - ------- Annex I Stockholder Annex II Certain Definitions Schedules Schedule 3.4 - Stockholder Consents Schedule 4.1 - Foreign Qualifications for the Company and Its Subsidiaries Schedule 4.3 - Company Consents Schedule 4.4(a) - Capitalization of the Company and Its Subsidiaries Schedule 4.4(b) - Options, Warrants, Voting Agreements, etc. Schedule 4.5 - Subsidiaries and Investments Schedule 4.6(a) - Financial Statements Schedule 4.6(c) - Accounts Payable and Accounts Receivable Schedule 4.7 - Undisclosed Liabilities Schedule 4.8 - Absence of Changes Schedule 4.9(a) - Tax Matters Schedule 4.9(c) - Taxing Authority Notifications Schedule 4.10(a) - Encumbrances Schedule 4.10(b) - Tangible Personal Property Schedule 4.11(a) - Real Property Schedule 4.11(b) - Real Property Proceedings, Notices and Exceptions Schedule 4.12(a) - Intellectual Property Rights Schedule 4.12(b) - Actions to Protect Intellectual Property Rights Schedule 4.13(a) - Material Contracts Schedule 4.13(d) - Funded Indebtedness Schedule 4.14(a) - Litigation, Etc. Schedule 4.14(b) - Resolved Litigation Schedule 4.15 - Compliance with Laws Schedule 4.16(a) - Insurance Policies Schedule 4.16(b) - Insurance Claims, Etc. Schedule 4.17(a) - Directors, Officers and Key Employees Schedule 4.17(b) - Number of Employees, Independent Contractors, etc. Schedule 4.17(c) - Labor Relations Schedule 4.17(e) - Labor Proceedings Schedule 4.17(f) - Joint Employer Matters Schedule 4.17(g) - Independent Contractor Agreements Schedule 4.19(a) - Environmental Laws - Violations Schedule 4.19(b) - Environmental Compliance - Previously Owned Properties Schedule 4.21(a) - Related Party Transactions Schedule 4.21(b) - Distributions Schedule 4.22 - Accounts and Notes Receivable Schedule 4.23 - Bank Accounts; Powers of Attorney Schedule 4.24 - Suppliers and Vendors Schedule 4.25 - Customers Schedule 5.1 - Foreign Qualifications for the Purchaser Schedule 5.3 - Purchaser Consents Exhibits - -------- Exhibit A - Form of Escrow Agreement iii INDEX OF DEFINED TERMS The following capitalized terms, which may be used in more than one Section or other location of this Agreement, are defined in the following Sections or other locations: Section or Term other Location ---- -------------- Acquisition Proposal Annex II Affiliate Annex II Affiliate-Owned Asset 1.5 Agreement 10.14 Annual Balance Sheet 4.6(a)(i) Annual Balance Sheet Date 4.6(a)(i) Annual Financial Statements 4.6(a)(i) Arbitrating Accountants Annex II Knowledge 10.14 Business Preamble Business Day Annex II Capital Lease Annex II Charter Documents Annex II Code 4.9(a) Commission Annex II Company Caption Competing Business 6.8(b) Confidential Information 6.9(a) Contract Annex II Control Annex II Covered Properties 4.19(b) Employee Benefit Plan Annex II Encumbrances Annex II Environmental, Health and Safety Laws Annex II Escrow Account 1.2 Exchange Proceeds 6.7 Exchange Rate Annex II Exclusivity Period 6.4(a) ERISA Annex II Excluded Seller Representations 8.5(a) Financial Statements 4.6(a)(iii) First Closing Article II First Closing Date Article II Funded Indebtedness Annex II GAAP Annex II Governmental Entity Annex II Guaranty Annex II Hired Employees 6.12 HSR Act 6.3 Income Taxes Annex II Indemnified Persons Annex II Indemnifying Persons Annex II Initial TIGR Shares Portion 1.2 Intellectual Property Rights Annex II Interim Balance Sheets 4.6(a)(i) Interim Financial Statements 4.6(a)(i) Latest Balance Sheet 4.6(a)(iii) Latest Balance Sheet Date 4.6(a)(iii) Latest Financial Statements 4.6(a)(iii) Law Annex II Leased Property 4.11(a) Letter of Intent 10.2 iv Section or Term other Location ---- -------------- Liability Annex II Licensed Requisite Rights 4.12(a)(i) Litigation Expense Annex II Losses Annex II Management Stockholder Annex II Market Price Annex II Material Adverse Change 4.8(i) Material Contracts 4.13(b) Options Preamble Orders Annex II Owned Requisite Rights 4.12(a)(i) Permits Annex II Permitted Encumbrances Annex II Person Annex II Possible Transaction 6.4 Proceeding Annex II Purchase Price 1.2 Purchaser Caption Purchaser Indemnified Persons Annex II Purchaser Indemnifying Persons Annex II Purchaser Losses Annex II Purchaser's Accountants Annex II Purchaser SEC Documents 5.9 Representatives 6.9(a) Requisite Rights 4.12(a)(i) Restrictive Period 6.8(a) Second Closing Article II Second Closing Date Article II Securities Annex II Securities Act Annex II Seller Group Caption Seller Indemnified Persons Annex II Seller Indemnifying Persons Annex II Seller Losses Annex II Shares Preamble Stock Preamble Stockholder Caption Subsidiary Annex II Survival Date 8.4(a) Tax Return Annex II Taxes Annex II TIGR Shares Annex II Third Party 4.17(f) Third Party Claim 8.3 Twelve Month Target Net Profit 1.2(c) Twelve Month Target Net Sales 1.2(c) Twenty-Four Month Target Net Profit 1.2(e) Twenty-Four Month Target Net Sales 1.2(e) v AMENDED AND RESTATED STOCK PURCHASE AGREEMENT This AMENDED AND RESTATED STOCK PURCHASE AGREEMENT dated as of January 19, 2005, is by and among TIGER TELEMATICS, INC., a Delaware corporation (the "Purchaser"), INTEGRA SP HOLDINGS LTD., an English limited company incorporated under the laws of England (the "Company"), and INTEGRA SP NOMINEE LTD., an English limited company incorporated under the laws of England and stockholder of the Company (the "Stockholder"; and the Stockholder and the Company are collectively referred to as the "Seller Group"). Certain capitalized terms used in this Agreement are defined on Annex II attached to this Agreement. PREAMBLE The Company, together with its Subsidiaries, is engaged in the business (collectively, the "Business") of (i) providing software for the visualization, interaction and integration of real-time enterprise systems in a browser through its award winning AltioLive(TM) product, (ii) developing software products, and (iii) providing software support services to customers, partners and end users within the finance, public and commercial sectors. The Company presently has approximately seventy-four (74) Persons that own all of the issued and outstanding shares of the common stock, .01 Pence par value per share, of the Company (collectively, the "Stock") and/or options or other rights to acquire shares of Stock (collectively, the "Options"). In order to comply with applicable exemptions from the registration requirements of the Securities Act, qualification under applicable U.S. state securities laws and compliance under other applicable Laws, on the First Closing Date, the Purchaser has agreed to purchase only those issued and outstanding shares of Stock that immediately prior to the First Closing were owned by an "accredited investor" as defined in Rule 501 of Regulation D promulgated under the Securities Act, up to a minimum number of 80 % of the issued and outstanding shares of Stock. Upon the completion and filing of all reports required to be filed by the Purchaser pursuant to the Securities Exchange Act and the availability of an exemption from the registration requirements of the Securities Act, qualification under applicable U.S. state securities laws and compliance under other applicable Laws, on the Second Closing Date, the Purchaser shall offer to acquire, on the same terms and conditions as provided for herein, and the Stockholder shall deliver, the remaining issued and outstanding shares of Stock that are owned by any Person, including any shares of Stock that are owned by an "accredited investor" as defined in Rule 501 of Regulation D promulgated under the Securities Act. On or before the Second Closing Date, the Company shall release or allow to lapse all outstanding Options, warrants, convertible loans or other rights for the purchase of shares of capital stock or convertible securities of the Company so that such Options, warrants, convertible loans or other rights may no longer be exercised. The Stockholder will be on the First Closing the legal owner of at least 80 % of the issued and outstanding shares of Stock. The shares of Stock owned by the Stockholder as of the First Closing are collectively referred to as the "Shares." The Stockholder desires to sell to the Purchaser, and the Purchaser desires to purchase from the Stockholder, all of the Shares, on the terms and subject to the conditions contained in this Agreement. ACCORDINGLY, in consideration of the mutual representations, warranties, covenants and agreements contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: ARTICLE I PURCHASE AND SALE OF SHARES 1.1 Transfer of Shares. On the terms and subject to the conditions contained in this Agreement, at the First Closing, the Stockholder shall sell, transfer, convey and assign to the Purchaser, and the Purchaser shall purchase and acquire from the Stockholder, all of the Shares, free and clear of all Encumbrances. 1.2 Purchase Price. In connection with both the First Closing and Second Closing, the aggregate consideration to be paid by the Purchaser to the Stockholder for one hundred percent (100%) of the issued and outstanding shares of Stock, on a fully 1 diluted basis, as if all outstanding Options, warrants, convertible loans or other rights for the purchase of shares of capital stock or convertible securities of the Company had been fully (a) exercised immediately prior to such issuance (and the resulting securities fully converted into shares of Stock, if so convertible) as of such date or (b) released or lapsed as of such date so that such Options, warrants, convertible loans or other rights may no longer be exercised, shall consist of the sum of the following (such sum being called the "Purchase Price"); provided, however, notwithstanding anything to the contrary herein or in any disclosure made in connection with this Agreement, in the event the Purchaser has not acquired one hundred percent (100%) of the issued and outstanding shares of Stock, on a fully diluted basis, as if all outstanding Options, warrants, convertible loans or other rights for the purchase of shares of capital stock or convertible securities of the Company had been fully (a) exercised immediately prior to such issuance (and the resulting securities fully converted into shares of Stock, if so convertible) as of such date or (b) released or lapsed as of such date so that such Options, warrants, convertible loans or other rights may no longer be exercised, on or before August 31, 2005, then the actual consideration payable to the Stockholder pursuant to Sections 1.2(a)-(e) of this Agreement or otherwise shall be ratably reduced (and to the extent the consideration payable pursuant to Section 1.2(a) has previously been paid by the Purchaser prior to making this ratable reduction, the amount of such ratable reduction from Section 1.2(a) may be applied to any or all of Sections 1.2(b)-(e)) by multiplying any such consideration by a fraction, (x) the numerator of which is the number of shares of Stock actually sold and transferred to the Purchaser and (y) the denominator of which is the aggregate number of issued and outstanding shares of Stock, on a fully diluted basis, as if all outstanding Options, warrants, convertible loans or other rights for the purchase of shares of capital stock or convertible securities of the Company had been fully (a) exercised immediately prior to such issuance (and the resulting securities fully converted into shares of Stock, if so convertible) as of such date or (b) released or lapsed as of such date so that such Options, warrants, convertible loans or other rights may no longer be exercised: (a) At the First Closing, 625,250 (the "Initial TIGR Shares Portion") newly issued TIGR Shares; (b) Twelve (12) months following the First Closing, Purchaser shall release from the Escrow Account that number of TIGR Shares determined as follows: (i) if the Market Price of TIGR Shares immediately before the first anniversary of the First Closing is less than $8.75 then 1,253,349 TIGR Shares; or (ii) if the Market Price of TIGR Shares immediately before the first anniversary of First Closing is greater than or equal to $8.75 and less than or equal to $13.75, the number of TIGR Shares found by dividing the sum of Sterling GBP 6 million converted to United States dollars at the Exchange Rate by the Market Price immediately before the first anniversary of the First Closing; or (iii) if the Market Price of TIGR Shares immediately before the first anniversary of the First Closing is greater than $13.75, the number of TIGR Shares found by dividing the sum of Sterling GBP 6 million converted to United States dollars at the Exchange Rate by the Market Price immediately before the first anniversary of First Closing together with twenty-five percent (25%) of the amount by which the number of TIGR Shares calculated under this clause 1.2(b) (iii) is less than 797,586 TIGR Shares. (c) Fifteen (15) months following the First Closing, Purchaser shall release from the Escrow Account that number of TIGR Shares with a maximum aggregate value of up to Sterling GBP 2,000,000, based on the Market Price of TIGR Shares immediately before the fifteen (15) month anniversary of the First Closing; provided, however, the payment described in this Section 1.2(c) shall be subject to an earn-out adjustment described below based on the achievement of targeted net sales of the Business of GBP 3,560,000 ("Twelve Month Target Net Sales") and targeted net profit of the Business of GBP 330,314 ("Twelve Month Target Net Profit"), in each case for the twelve (12) month period beginning with the first full month following the First Closing: (i) Sterling GBP 1,000,000 of the payment described in this Section 1.2(c) will be multiplied by that percentage that is equal to the ratio (expressed as a percentage) (A) the numerator of which is the actual net sales of the Business for the twelve (12) month period beginning with the first full month following the First Closing, determined by the Purchaser on a basis consistent with the preparation of the Company's Latest Financial Statements provided to Purchaser prior to First Closing, and (B) the denominator of which is the Twelve Month Target Net Sales (provided that the amount of such adjustment shall not be less than zero or more than Sterling GBP 1,000,000); and (ii) Sterling GBP 1,000,000 of the payment described in this Section 1.2(c) will be multiplied by that percentage that is equal to the ratio (expressed as a percentage) (A) the numerator of which is the actual net profit of the Business 2 for the twelve (12) month period beginning with the first full month following the First Closing, determined by the Purchaser on a basis consistent with the preparation of the Company's Latest Financial Statements provided to Purchaser prior to the First Closing and (B) the denominator of which is the Twelve Month Target Net Profit (provided that the amount of such adjustment shall not be less than zero or more than Sterling GBP 1,000,000); (d) Twenty-Four (24) months following the First Closing, Purchaser shall release from the Escrow Account that number of TIGR Shares determined as follows: (i) if the Market Price of TIGR Shares immediately before the second anniversary of First Closing is less than $8.75 then 731,120 TIGR Shares; or (ii) if the Market Price of TIGR Shares immediately before the second anniversary of First Closing is greater than or equal to $8.75 and less than or equal to $13.75, the number of TIGR Shares found by dividing the sum of Sterling GBP 3.5 million converted to United States dollars at the Exchange Rate by the Market Price immediately before the second anniversary of First Closing; or (iii) if the Market Price of TIGR Shares immediately before the second anniversary of First Closing is greater than $13.75, the number of TIGR Shares found by dividing the sum of Sterling GBP 3.5 million converted to United States dollars at the Exchange Rate by the Market Price immediately before the second anniversary of First Closing together with twenty-five percent (25%) of the amount by which the number of TIGR Shares calculated under this clause 1.2(d) (iii) is less than 465,258 TIGR Shares; and (e) Twenty-Seven (27) months following the First Closing, Purchaser shall release from the Escrow Account that number of newly issued TIGR Shares with a maximum aggregate value of up to Sterling GBP 2,000,000, based on the Market Price of TIGR Shares immediately before the twenty-seven (27) month anniversary of the First Closing; provided, however, the payment described in this Section 1.2(e) shall be subject to an earn-out adjustment described below based on the achievement of targeted net sales of the Business of GBP 7,336,000 ("Twenty-Four Month Target Net Sales") and targeted net profit of the Business of GBP 2,253,890 ("Twenty-Four Month Target Net Profit"), in each case for the twenty-four (24) month period beginning with the first full month following the First Closing: (i) Sterling GBP 1,000,000 of the payment described in this Section 1.2(e) will be multiplied by that percentage that is equal to the ratio (expressed as a percentage) (A) the numerator of which is the actual net sales of the Business for the twenty-four (24) month period beginning with the first full month following the First Closing, determined by the Purchaser on a basis consistent with the preparation of the Company's Latest Financial Statements provided to Purchaser prior to the First Closing, and (B) the denominator of which is the Twenty-Four Month Target Net Sales (provided that the amount of such adjustment shall not be less than zero or more than Sterling GBP 1,000,000); and (ii) Sterling GBP 1,000,000 of the payment described in this Section 1.2(e) will be multiplied by that percentage that is equal to the ratio (expressed as a percentage) (A) the numerator of which is the actual net profit of the Business for the twenty-four (24) month period beginning with the first full month following the First Closing, determined by the Purchaser on a basis consistent with the preparation of the Company's Latest Financial Statements provided to Purchaser prior to the First Closing, and (B) the denominator of which is the Twenty-Four Month Target Net Profit (provided that the amount of such adjustment shall not be less than zero or more than Sterling GBP 1,000,000); At the First Closing, Purchaser shall place in escrow pursuant to the terms of an Escrow Agreement substantially in the form of Exhibit A (the "Escrow Account"), and provide Stockholder evidence of such deposit, a total of 2,794,785 TIGR Shares (as adjusted pursuant to Section 1.2), which shall be used to satisfy Purchaser's obligation to issue TIGR Shares to the Stockholder pursuant to Sections 1.2(b), 1.2(c), 1.2(d) and 1.2(e) of this Agreement. Following the payment to the Stockholder pursuant to Sections 1.2(b), 1.2(c), 1.2(d) and 1.2(e) of this Agreement, the remaining TIGR Shares, if any, shall be released and returned to Purchaser. Notwithstanding anything herein to the contrary, the maximum aggregate consideration to be paid by the Purchaser to the Stockholder (i) pursuant to Sections 1.2(b) and 1.2(d) shall be limited to a maximum aggregate amount of 1,984,469 TIGR Shares (as adjusted pursuant to Section 1.2) and (ii) for the Shares pursuant to this Section 1.2 or otherwise shall be limited to an aggregate amount of 3,420,035 TIGR Shares (as adjusted pursuant to Section 1.2). 3 1.3 Payment at First Closing. At the First Closing, the Purchaser shall deliver the Initial TIGR Shares Portion of the Purchase Price to the Stockholder, in the form of stock certificates, duly executed and issued by the Purchaser, representing the Initial TIGR Shares Portion. 1.4 Delivery of Shares. At the First Closing, in consideration of the Purchaser's delivery of the Initial TIGR Shares Portion of the Purchase Price pursuant to Section 1.3 and the establishment of the Escrow Account, (a) the Stockholder shall deliver to the Company the certificate or certificates representing the Shares, accompanied by duly executed stock transfer forms transferring the Shares to the Purchaser, in each case sufficient in form and substance to convey to the Purchaser good title to all of the Shares, free and clear of all Encumbrances, and (b) the Company shall deliver to the Purchaser a certificate registered in the name of the Purchaser representing the Shares. 1.5 Affiliate-Owned Assets. To the extent that any asset, property, interest in property or right relating to, or used or held for use by the Company or any of its Subsidiaries in the conduct of the Business is owned by the Company or a Stockholder or any of his, her or its Affiliates or by any other Affiliate of the Company or its Subsidiaries, such asset, property, interest in property or right shall be deemed to be an "Affiliate-Owned Asset" for purposes of this Agreement. 1.6 Asset Transfer and Further Assurances. The Stockholder shall, at the First Closing and at any time after the First Closing, upon the request of the Purchaser, do, execute, acknowledge and deliver, and cause to be done, executed, acknowledged and delivered, all such further acts, deeds, assignments, transfers, conveyances, powers of attorney and other assurances as may be required to transfer, convey, grant and confirm to and vest in the Purchaser good title to (i) the Shares, and (ii) the Affiliate-Owned Assets, in each case free and clear of all Encumbrances. Any conversion of currency required in connection with this Agreement shall be based on the Exchange Rate at the time of such required conversion. ARTICLE II THE CLOSING On the terms and subject to the conditions contained in this Agreement, the closing (the "First Closing") of the transactions contemplated by this Agreement shall take place at the offices of Smith Hulsey & Busey, counsel for the Purchaser, at the address set forth in Section 10.7, as soon as possible, but in no event later than seven (7) business days after all of the conditions set forth in Article VII have been satisfied or waived (other than those conditions which by their terms are intended to be satisfied at the First Closing, or such other place or later date as shall be mutually agreed upon by the parties, provided that all of the conditions set forth in Article VII have been satisfied or waived (other than those conditions which by their terms are intended to be satisfied at the First Closing). The date on which the First Closing occurs shall be referred to as the "First Closing Date." The closing of the transactions contemplated by Section 6.3 of this Agreement (the "Second Closing") shall take place at the offices of Smith Hulsey & Busey, counsel for the Purchaser, as soon as possible, upon the completion and filing of all reports required to be filed by the Purchaser pursuant to the Securities Exchange Act and the availability of an exemption from the registration requirements of the Securities Act, qualification under applicable U.S. state securities laws and compliance under other applicable Laws. The date on which the Second Closing occurs shall be referred to as the "Second Closing Date." ARTICLE III REPRESENTATIONS AND WARRANTIES of THE STOCKHOLDER The Stockholder hereby represents and warrants to the Purchaser as of October 29, 2004 as follows: 4 3.1 Title to the Shares. The Stockholder (i) is the lawful owner, of record and beneficially, of all of the Shares, and (ii) has good and marketable title to such Shares, free and clear of any and all Encumbrances whatsoever and with no restriction on the voting rights and other incidents of record and beneficial ownership pertaining to the Shares. The Stockholder is not the subject of any bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar Proceeding affecting creditors' rights and remedies generally. Except for this Agreement, there are no Contracts or other understandings or arrangements between the Stockholder and any other Person (including any of the Company, or any of the Company's Subsidiaries) with respect to the acquisition, disposition, transfer, registration or voting of, or any other matters in any way pertaining or relating to, any of the capital stock or other securities of the Company (including the Shares owned by the Stockholder). The Stockholder do not have any right whatsoever to receive or acquire any additional shares of capital stock or other securities of the Company or any of its Subsidiaries. 3.2 Organization and Power. The Stockholder is an English limited company duly organized or formed, validly existing, and in good standing under the Laws of the jurisdiction of its incorporation or formation and has all requisite power and authority (corporate, partnership or otherwise) to own, lease and operate its assets and properties and to carry on its business as presently conducted. The Purchaser has been furnished with true, correct and complete copies of the Stockholder's Charter Documents, in each case as amended and in effect on and as of the date this representation is being made and is deemed made hereunder. 3.3 Authority; Authorization, Execution and Delivery; Enforceability; No Conflict. (a) The Stockholder has the full and absolute legal right, capacity, power and authority (if applicable, corporate, partnership or otherwise) to execute, deliver and perform its obligations under this Agreement to which it is or will be a party, and to consummate the transactions contemplated hereby and thereby. The Stockholder's execution and delivery of this Agreement to which it is or will be a party, and the performance by the Stockholder of its obligations hereunder and thereunder, have been duly and validly authorized by all requisite action on the part of such Stockholder (including its board of directors and all committees thereof and its stockholders). This Agreement to which the Stockholder is or will be a party has been, or upon the execution hereof and thereof will be, duly and validly executed and delivered by the Stockholder, and this Agreement is, or upon the execution hereof and thereof will be, duly and validly executed and delivered by the Stockholder and constitutes, or upon the Stockholder's execution and delivery hereof and thereof, will constitute, a valid and binding obligation of the Stockholder, enforceable against it in accordance with their respective terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar Laws affecting creditors' rights and remedies generally, and, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity). (b) Neither the execution and delivery by the Stockholder of, nor the performance of its obligations under, this Agreement, nor the consummation by the Stockholder of the transactions contemplated hereby, nor the compliance by the Stockholder with any of the provisions hereof, will (i) conflict with, or result in any violation of, or cause a default (with or without notice or lapse of time or both) under, any provision of the Company's or any of its Subsidiaries' Charter Documents, or, such Stockholder's Charter Documents, (ii) conflict with, or result in any violation of, or cause a default (with or without notice or lapse of time or both) under, or give rise to any right of termination, amendment, cancellation or acceleration of any obligations contained in, or the loss of any benefit under, any term, condition or provision of any provision of any Contract to which the Stockholder, the Company or any of the Company's Subsidiaries is a party or by which the Stockholder, the Company, any of the Company's Subsidiaries, or any of its, or their assets or properties are or may be bound, (iii) violate any Law applicable to the Stockholder, the Company, or any of the Company's Subsidiaries, or (iv) result in an Encumbrance on or against any assets, rights or properties of the Stockholder, the Company, or any of the Company's Subsidiaries, or on or against any capital stock or other securities of the Company or any of its Subsidiaries, or give rise to any claim against the Company, any of the Company's Subsidiaries or the Purchaser. 3.4 Consents. Except as set forth on Schedule 3.4, no Permit, authorization, consent or approval of or by, or any notification of or filing with, any Person 5 (governmental or private) is required for, as a result of, or in connection with the execution, delivery and performance by the Stockholder of this Agreement or the consummation of the transactions contemplated hereby. 3.5 Brokers. The Stockholder has not employed any broker or finder or incurred any Liability for any brokerage fees, commissions or finders' fees or similar compensation or transaction based payments in connection with the transactions contemplated by this Agreement. 3.6 Investment Representations. (a) The Stockholder acknowledges and agrees that (i) the TIGR Shares issued to the Stockholder are to be held by the Stockholder solely for its own account for investment purposes only and not for resale, subdivision, transfer, assignment, pledge or other disposition. The Stockholder does not have any present plan or intention to sell, subdivide, transfer, assign, pledge or otherwise dispose of any part of the TIGR Shares issued to the Stockholder or to enter into any Contract or other undertaking or arrangement with respect thereto. (b) The Stockholder has such knowledge and experience in financial and business matters that the Stockholder is capable of evaluating the merits and risks of an investment in the TIGR Shares and the Stockholder can bear the economic risk of such investment. The Stockholder acknowledges and agrees that the Purchaser has made available to the Stockholder and its attorneys and other representatives all agreements, documents, records and books that the Stockholder has requested relating to its investment in the TIGR Shares. The Stockholder further acknowledges and agrees that it has had an opportunity to ask questions of, and to receive answers from, individuals acting on behalf of the Purchaser concerning the Purchaser and the terms and conditions of the Stockholder's investment in the TIGR Shares hereunder, and answers have been provided to all of such questions to the full satisfaction of the Stockholder. (c) The Stockholder has relied only upon such advice as may have been received from tax, accounting, legal and financial advisors. The Stockholder has not received any assurances or representations from any Person associated with the Purchaser or its Affiliates as to the benefits, economic, tax or otherwise, likely to result from its investment in the TIGR Shares. (d) The Stockholder understands that there are substantial restrictions on the transferability of the TIGR Shares, that there will be no public market for the TIGR Shares, and, accordingly, the Stockholder will need to bear the economic risk of its investment for an indefinite period of time and will not be readily able to liquidate its investment in case of emergency. (e) The Stockholder understands that the TIGR Shares are restricted securities under the Securities Act and that they may not be resold, subdivided, transferred, assigned, pledged or otherwise disposed of unless they are first registered under the federal securities Laws or unless an exemption from such registration is available. The TIGR Shares are subject to registration rights pursuant to which the Purchaser agrees to register the TIGR Shares issued to the Stockholder upon the Purchaser's filing with the Commission of a registration statement pursuant to which such TIGR Shares may be registered with the Commission in a secondary offering at anytime following the date of the execution of this Agreement. The Purchaser also agrees and covenants to treat all TIGR Shares used as payment for this Agreement, in the same manner as all other TIGR Shares with respect to share splits, reverse splits, pre-emption, rights issues and any other share event which may effect the TIGR Shares generally. (f) Except as set forth in Section 3.6(e) above, the Stockholder understands that the Purchaser has no obligation or intention to register the TIGR Shares. (g) The Stockholder is not a Person that is, or would cause the Purchaser to be, disqualified pursuant to Rule 262 promulgated under the Securities Act. (h) The Stockholder understands that the Purchaser is relying on the representations and warranties set forth in this Section 3.6 in issuing the TIGR Shares to the Stockholder. (i) As of the First Closing Date, the Stockholder is an "accredited investor" as defined in Rule 501 of Regulation D promulgated under the Securities Act due to the fact that the Stockholder was formed for the 6 purpose of acquiring the TIGR Shares and all of the holders of the issued and outstanding share capital of the Stockholder are "accredited investors" as defined in Rule 501 of Regulation D promulgated under the Securities Act, as at First Closing Date. ARTICLE IV REPRESENTATIONS AND WARRANTIES of the seller group Each member of the Seller Group hereby jointly and severally represents and warrants to the Purchaser as of October 29, 2004 as follows: 4.1 Organization, Power, Authority and Good Standing. The Company and each of its Subsidiaries are corporations duly organized, validly existing and in good standing under the respective Laws of the jurisdiction of their incorporation and have all requisite power and authority (corporate or otherwise) to own, lease and operate their respective assets and properties and to carry on their respective businesses (all of which collectively comprise the Business) as presently conducted. The Company and each of its Subsidiaries are duly qualified and in good standing to transact business as a foreign Person in those jurisdictions set forth on Schedule 4.1, which jurisdictions constitute all of the jurisdictions in which the character of the property owned, leased or operated by the Company or such Subsidiaries or the nature of the business or activities conducted by the Company or such Subsidiaries makes such qualification necessary. The Purchaser has been furnished with true, correct and complete copies of the Charter Documents of the Company and each of its Subsidiaries, in each case as amended and in effect on and as of the date this representation is being made and is deemed made hereunder. Except as set forth on Schedule 4.1, neither the Company nor any of its Subsidiaries has (i) engaged in any business or activity other than the Business, or (ii) used any trade name or assumed name or other corporate name at any time. 4.2 Authority; Authorization, Execution and Delivery; Enforceability; No Conflict. (a) The Company has all requisite power and authority (corporate or otherwise) to execute, deliver and perform its obligations under this Agreement, and to consummate the transactions contemplated hereby and thereby. The Company's execution and delivery of this Agreement, and the performance by the Company of its obligations hereunder and thereunder, have been duly and validly authorized by all requisite action on the part of the Company (including its board of directors and all committees thereof and its stockholders). This Agreement is or will be a party has been, or upon the Company's execution hereof and thereof will be, duly and validly executed and delivered by the Company and constitutes, or upon the Company's execution and delivery hereof and thereof will constitute, a valid and binding obligation of the Company, enforceable against the Company in accordance with their respective terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar Laws affecting creditors' rights and remedies generally, and, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity). (b) Neither the execution and delivery by the Company and the Stockholder of, nor the performance of their respective obligations under, this Agreement, nor the consummation by the Company and the Stockholder of the transactions contemplated hereby, nor the compliance by the Company and the Stockholder with any of the provisions hereof, will (i) conflict with, or result in any violation of, or cause a default (with or without notice or lapse of time or both) under, any provision of the Company's or any of its Subsidiaries' Charter Documents, (ii) conflict with, or result in any violation of, or cause a default (with or without notice or lapse of time or both) under, or give rise to any right of termination, amendment, cancellation or acceleration of any obligations contained in, or the loss of any benefit under, any term, condition or provision of any provision of any Contract to which the Company or any of its Subsidiaries is a party, or by which the Company or any of its Subsidiaries or any of their respective assets or properties are or may be bound, (iii) violate any Law applicable to the Company or any of its Subsidiaries, or (iv) result in an Encumbrance on or against any assets, rights or properties of the Company or any of its Subsidiaries, or on or against any capital stock or other securities of the Company or any of its Subsidiaries, or give rise to any claim against the Company, any of the Company's Subsidiaries or the Purchaser. 4.3 Consents. Except as set forth on Schedule 4.3, no Permit, authorization, consent or approval of or by, or notification of or filing with, any Person (governmental or otherwise) is required for, as a result of, or in connection with the execution, delivery and performance by the Company of this Agreement or the consummation of the transactions contemplated hereby. 7 4.4 Capitalization. (a) The authorized capital stock of the Company and each of its Subsidiaries is set forth on Schedule 4.4(a), which schedule also sets forth the total number of outstanding shares of capital stock of the Company and each of its Subsidiaries and options to acquire shares of capital stock of the Company. All such outstanding shares and options to acquire shares of capital stock of the Company disclosed on Schedule 4.4(a) are duly and validly issued and outstanding, fully paid and non-assessable, with no personal Liability attached to the ownership thereof, and are held of record and beneficially by the Persons, and in the respective amounts, set forth on Schedule 4.4(a), without Encumbrance except as noted in Section 4.4(b). On the First Closing Date, the Stockholder will be the legal owner of at least 80% of the issued and outstanding shares of Stock. On the Second Closing Date, the Stockholder will be the legal owner of all 100% of the issued and outstanding shares of Stock, on a fully diluted basis, as if all outstanding Options, warrants, convertible loans or other rights for the purchase of shares of capital stock or convertible securities of the Company had been fully (a) exercised immediately prior to such issuance (and the resulting securities fully converted into shares of Stock, if so convertible) as of such date or (b) released or lapsed as of such date so that such Options, warrants, convertible loans or other rights may no longer be exercised. (b) Except as set forth on Schedule 4.4(a), there are no outstanding securities that are convertible into, exchangeable for, or carrying the right to acquire, any equity securities of the Company or any of its Subsidiaries, or subscriptions, warrants, options, calls, puts, convertible securities, registration or other rights, arrangements or commitments obligating the Company or any of its Subsidiaries to issue, sell, register, purchase or redeem any of its respective securities or any ownership interest or rights therein. Except as set forth on Schedule 4.4(b), there are no Contracts, commitments, arrangements, understandings or restrictions to which the Stockholder, or any other Person is bound relating in any way to any shares of capital stock or other securities of the Company or any of its Subsidiaries, including voting trusts or other similar agreements or understandings with respect to the voting of the Company's or any of its Subsidiaries' capital stock or other securities. There are no stock appreciation rights, phantom stock rights, or similar rights or arrangements outstanding with respect to the Company or any of its Subsidiaries. (c) All securities issued by the Company or any of its Subsidiaries have been issued in transactions exempt from registration under all applicable federal and state securities Laws, and neither the Company nor any of its Subsidiaries has violated any applicable federal or state securities Laws in connection with the issuance of any such securities. 4.5 Subsidiaries; Investments. Except as set forth on Schedule 4.5, neither the Company nor any of its Subsidiaries owns or holds, directly or indirectly, any equity interest in or debt obligation of (excluding accounts receivable arising in the ordinary course of business, consistent with past practice) any other Person. 4.6 Financial Information. (a) Schedule 4.6(a) contains true, correct and complete copies of the following: (i) the audited consolidated balance sheets of the Company and its Subsidiaries as of June 30, 2004 (the "Annual Balance Sheet"; and such date being referred to as the "Annual Balance Sheet Date"), June 30, 2003, and June 30, 2002, and the related audited consolidated statements of income, stockholders' equity and cash flows of the Company and its Subsidiaries for the fiscal years then ended, including any footnotes and schedules thereto (all of the foregoing, including the Annual Balance Sheet being collectively referred to as the "Annual Financial Statements"); (ii) the unaudited consolidated balance sheets of the Company and its Subsidiaries as of August 31, 2004, and each subsequent month then ended through the First Closing Date (collectively, the "Interim Balance Sheets"), and the unaudited consolidated statements of income, stockholders' equity and cash flows of the Company and its Subsidiaries for the period then ended, and each subsequent monthly period then ended through the First Closing Date, including any and all footnotes and schedules thereto (all of the foregoing, including the Interim Balance Sheets, being collectively referred to as the "Interim Financial Statements"); and (iii) the unaudited consolidated balance sheet of the Company and its Subsidiaries as of August 31, 2004 (the "Latest Balance 8 Sheet"; and such date being referred to as the "Latest Balance Sheet Date"), and the unaudited consolidated statements of income, stockholders' equity and cash flows of the Company and its Subsidiaries for the period then ended, including any and all footnotes and schedules thereto (all of the foregoing, including the Latest Balance Sheet, being collectively referred to as the "Latest Financial Statements"; and the Annual Financial Statements, the Interim Financial Statements and the Latest Financial Statements being collectively referred to as the "Financial Statements"). (b) The Financial Statements (i) are true, correct and complete, (ii) fairly present in all material respects the consolidated financial position of the Company and each of its Subsidiaries as of the dates indicated and the consolidated results of operations of the Company and each of its Subsidiaries for the periods indicated, (iii) have been prepared in accordance with GAAP (to the extent GAAP has been correctly applied) consistently applied throughout the periods covered thereby (subject to the absence of footnotes and schedules that may be required by GAAP and, in the case of the Latest Financial Statements, normal year-end adjustments that are not material individually or in the aggregate), and (iv) are in accordance with the books and records of the Company and each of its Subsidiaries, which books and records are true, correct and complete and have been maintained in a manner consistent with historical practice. (c) Schedule 4.6(c) contains a true, correct and complete summary of all accounts payable, accrued expenses and accounts receivable of the Company and each of its Subsidiaries as of the most recent practicable date prior to the date hereof, which schedule sets forth the name of the account debtor (in the case of accounts receivable) or account creditor (in the case of accounts payable) and the amount owed by such account debtor or owing to such account creditor (identifying the portion of such amount that is current, thirty (30) days past due, sixty (60) days past due, ninety (90) days past due, and more than ninety (90) days past due). 4.7 Absence of Undisclosed Liabilities. Except as set forth on Schedule 4.7, neither the Company nor any of its Subsidiaries has any Liability except (i) to the extent expressly reflected or reserved against on the Latest Balance Sheet, (ii) Liabilities under Contracts (other than any Liability arising from any breach or violation thereof or default thereunder), and (iii) Liabilities incurred in the ordinary course of business, consistent with past practice, since the Latest Balance Sheet Date (other than any such Liability arising from any breach or violation of, or default under, any Contract, or arising from any breach of warranty, tort, infringement, or violation of any Law or any Proceeding). There are no loss contingencies (as such term is used in Statement of Financial Accounting Standards No. 5 issued by the Financial Accounting Standards Board in March 1975) of or affecting the Company or any of its Subsidiaries that are not adequately provided for or disclosed on the Latest Balance Sheet or in the footnotes or schedules thereto. Neither the Company nor any of its Subsidiaries has, either expressly or by operation of Law, assumed or undertaken any Liability of any other Person, including any obligation for corrective or remedial action relating to Environmental, Health and Safety Laws. 4.8 Absence of Changes. Since the Latest Balance Sheet Date, except as set forth on Schedule 4.8, the Company and each of its Subsidiaries have been operated in the ordinary course of business, consistent with past practice, and there has not been: (i) any event or condition that has resulted in or could reasonably be expected to result in an adverse change in the business, operations, assets, condition (financial or otherwise), operating results, liabilities, relations with employees, customers, suppliers or prospects of the Company or any of its Subsidiaries, or any casualty loss or damage to the assets or properties of the Company or any of its Subsidiaries, whether or not covered by insurance (a "Material Adverse Change"); (ii) any declaration, setting aside or payment of any dividend or other distribution with respect to any shares of capital stock or other securities of the Company or any of its Subsidiaries, or any direct or indirect redemption, purchase or other acquisition of any capital stock or other securities of the Company or any of its Subsidiaries, or any other payments of any nature directly or indirectly to or for the benefit of the Stockholder or any Affiliate of the Company (whether or not on or with respect to any shares of capital stock or other securities of the Company or any of its Subsidiaries owned by the Stockholder or Affiliate), other than salaries and benefits paid in the ordinary course of business, consistent with past practice; 9 (iii) any general uniform increase in the compensation of employees (including any increase pursuant to any bonus, pension, profit-sharing or other plan or commitment) of the Company or any of its Subsidiaries, or any increase in or prepayment of any such compensation payable to or to become payable to any director, officer or key employee; (iv) any acquisition or disposition of assets or properties owned by the Company or any of its Subsidiaries, other than in the ordinary course of business, consistent with past practice; (v) any agreement or commitment on the part of the Company or any of its Subsidiaries to merge, amalgamate or consolidate with or into, or otherwise acquire, any other Person or division thereof; (vi) any change in depreciation or amortization policies or rates previously adopted, any change in income or expense recognition or bad debt reserve, write-down or write-off policies previously adopted, any material write-up or write-down of inventory or other assets or any other change in other accounting or in Tax reporting or methods or practices followed by the Company or any of its Subsidiaries; (vii) any change in the manner in which products or services of the Company or any of its Subsidiaries are marketed (including any change in prices), any change in the manner in which the Company or any of its Subsidiaries extends discounts or credit to customers, or any change in the manner or terms by which the Company or any of its Subsidiaries collects accounts receivable, except in the ordinary course of business and which would not have a Material Adverse Effect; (viii) any failure by the Company or any of its Subsidiaries to make scheduled capital expenditures or investments, or any failure to pay trade accounts payable or any other Liability of the Company or any of its Subsidiaries when due; or (ix) any Contract or other understanding or arrangement (other than this Agreement), whether in writing or otherwise, to take any of the actions specified in the foregoing clauses (i) through (viii). 4.9 Tax Matters. (a) Except as set forth on Schedule 4.9(a), the Company, each of its Subsidiaries, and each other Person included in any consolidated or combined Tax Return and part of an affiliated group, within the meaning of Section 1504 of the Internal Revenue Code of 1986, as amended (the "Code"), of which the Company or any of its Subsidiaries is or has been a member: (i) has timely paid or caused to be paid all Taxes required to be paid by it through the date hereof and as of the First Closing Date (including any Taxes shown due on any Tax Return); (ii) has filed or caused to be filed in a timely and proper manner (within any applicable extension periods) all Tax Returns required to be filed by it with the appropriate Governmental Entities in all jurisdictions in which such Tax Returns are required to be filed; and (iii) has not requested or caused to be requested any extension of time within which to file any Tax Return, which Tax Return has not since been filed. (b) The Company has previously delivered to the Purchaser true, correct and complete copies of all Tax Returns filed by or on behalf of the Company and each of its Subsidiaries for all completed Tax years of the Company or such Subsidiary that remain open for audit or review by the relevant Taxing authority. All such Tax Returns were true, correct and complete. (c) Except as set forth in Schedule 4.9(c): (i) neither the Company nor any of its Subsidiaries has been notified by the Internal Revenue Service or any other Taxing authority that any issues have been raised (and no such issues are currently pending) by the Internal Revenue Service or any other Taxing 10 authority in connection with any Tax Return of the Company or any of its Subsidiaries, there are no pending Tax audits with respect to the Company or any of its Subsidiaries, and no waivers of statutes of limitations related to Taxes have been given or requested with respect to the Company or any of its Subsidiaries; (ii) full and adequate provision has been made (A) on the Latest Balance Sheet for all Taxes payable by the Company and each of its Subsidiaries for all periods ending on or prior to the Latest Balance Sheet Date, and (B) on the books and records of the Company and each of its Subsidiaries for all Taxes payable by the Company and such Subsidiaries for all periods beginning on or after the Latest Balance Sheet Date; (iii) neither the Company nor any of its Subsidiaries has incurred any Tax Liability from and after the Latest Balance Sheet Date other than Taxes incurred in the ordinary course of business, consistent with past practice; (iv) neither the Company nor any of its Subsidiaries (A) is, or has made an election to be treated as, a "consenting corporation" under Section 341(f) of the Code, or (B) is, or has been, a "personal holding company" within the meaning of Section 542 of the Code; (v) the Company and each of its Subsidiaries have complied in all respects with all applicable Laws relating to the collection or withholding of Taxes (including sales Taxes and the withholding of Taxes from the wages of employees); (vi) neither the Company nor any of its Subsidiaries is, or has ever been, a party to any Tax sharing, indemnity of similar agreement with any Person; (vii) neither the Company nor any of its Subsidiaries has incurred any Liability to make or possibly make any payments, either alone or in conjunction with any other payments, that: (A) are not deductible under, or would otherwise constitute a "parachute payment" within the meaning of, Section 280G of the Code (or any corresponding provision of domestic or foreign income Tax Law); or (B) are or may be subject to the imposition of an excise Tax under Section 4999 of the Code; (viii) neither the Company nor any of its Subsidiaries has agreed to, or is required to, make any adjustments or changes either on, before or after the First Closing Date, to its accounting methods pursuant to Section 481 of the Code, and the Internal Revenue Service has not proposed any such adjustments or changes in the accounting methods of the Company or any such Subsidiary; (ix) to the knowledge of the Seller Group, no claim has ever been made by any Taxing authority in a jurisdiction in which the Company or any of it Subsidiaries does not file Tax Returns that the Company or any such Subsidiary is, or may be subject to, taxation by that jurisdiction; and (x) neither the Company, nor any of its Subsidiaries nor any Stockholder is a foreign Person within the meaning of Section 1.1445-2(b) of the rules and regulations promulgated under Section 1445 of the Code. 4.10 Title to Assets, Properties and Rights and Related Matters. (a) The Company and each of its Subsidiaries, as applicable, have good and marketable title (or a valid leasehold interest) to all of the assets, properties and interests in properties, real, personal or mixed, reflected on the Latest Balance Sheet or acquired after the Latest Balance Sheet Date (except for assets or properties sold or otherwise disposed of since the Latest Balance Sheet Date in the ordinary course of business, consistent with past practice, and accounts receivable and notes receivable paid in full subsequent to the Latest Balance Sheet Date in the ordinary course of business, consistent with past practice), free and clear of all Encumbrances, of any kind or character, except for those Encumbrances set forth on Schedule 4.10(a) and Permitted Encumbrances. Such assets are in good operating condition and repair (normal wear and tear excepted), are sufficient to operate the Business as presently conducted and as presently proposed to be conducted, are suitable for the uses for which they are used in the Business, and are not subject to any condition that materially interferes with the economic value or use thereof. With respect to any leased assets, such assets are in such condition as to permit the surrender thereof to the lessors thereunder on the date hereof without any cost 11 or expense for repair or restoration as if the related leases were terminated or expired on the date hereof in the ordinary course of business, consistent with past practice. (b) Schedule 4.10(b) contains a materially true, correct and complete list of all tangible personal property owned by the Company and each of its Subsidiaries as of the First Closing Date. Except for any inventory, supplies, equipment, tractors, trailers and automobiles in transit in the ordinary course of business, consistent with past practice, all tangible personal property listed on Schedule 4.10(b) is located on the Company's or its Subsidiaries' premises listed on Schedule 4.11(a). 4.11 Real Property - Owned or Leased. (a) Schedule 4.11(a) contains a list and brief description of all of the real property owned, leased, subleased or otherwise occupied by the Company or any of its Subsidiaries. The description of each parcel of real property subject to one or more leases (the "Leased Property") includes the names of the lessor and the lessee and the basic terms thereof. The real property listed on Schedule 4.11(a) constitutes all real property used or occupied by the Company or any of its Subsidiaries in connection with the Business. (b) With respect to the real property listed on Schedule 4.11(a), except as set forth on Schedule 4.11(b): (i) no portion of the real property is subject to any pending condemnation or other Proceeding, and, to the knowledge of the Seller Group, there is no threatened condemnation or other Proceeding with respect thereto; (ii) the physical condition of the real property is sufficient to permit the continued conduct of the Business as presently conducted and as presently proposed to be conducted, subject to the provision of usual and customary maintenance and repairs performed in the ordinary course of business, consistent with past practice, with respect to similar properties of like age and construction; (iii) the Company and its Subsidiaries, as applicable, indicated on Schedule 4.11(b) are the fee owners of the real property or the owners and holders of all the leasehold estates purported to be granted by the leases associated with the Leased Property, as applicable; (iv) there are no Contracts to which the Company, any of its Subsidiaries, or any of their respective Affiliates is a party, granting to any party or parties the right of use or occupancy of any portion of the real property; (v) there are no parties (other than the Company and its Subsidiaries) in possession of any portion of the real property; and (vi) no notice of any increase in the assessed valuation of any portion of the real property and no notice of any contemplated special assessment with respect to any portion of the real property has been received by the Company or any of its Subsidiaries, and, to the knowledge of the Seller Group, there is no threatened increase in assessed valuation or threatened special assessment pertaining to any portion of the real property. 4.12 Intellectual Property. (a) Except as set forth on Schedule 4.12(a): (i) the Company and each of its Subsidiaries, as applicable, own, have the right to use, sell, license and dispose of, and have the right to bring actions for the infringement of, all Intellectual Property Rights used in, necessary for, or required for the conduct of the Business as presently conducted and as presently proposed to be conducted (collectively, the "Owned Requisite Rights"), other than those Intellectual Property Rights for which the Company or any such Subsidiary has a valid license, all of which are listed on Schedule 4.12(a) (collectively, the "Licensed Requisite Rights"; and together with the Owned Requisite Rights, the "Requisite Rights"), and such rights to use, sell, license, dispose of and bring actions are exclusive with respect to the Owned Requisite Rights; 12 (ii) neither the Company nor any of its Subsidiaries has granted any Person the right to use any of the Owned Requisite Rights; (iii) there exists no material default, or any event which upon the giving of notice or the passage of time, or both, would give rise to a material claim of a default by the Company or any of its Subsidiaries under the licenses granting the Company and/or any of its Subsidiaries the Licensed Requisite Rights; (iv) the Company and each of its Subsidiaries have taken all commercially reasonable and practicable steps designed to safeguard and maintain (A) the secrecy and confidentiality of the Company's and its Subsidiaries' Confidential Information, and (B) the proprietary rights of the Company and each of its Subsidiaries in all of the Requisite Rights; (v) to the knowledge of the Seller Group, neither the Company nor any of its Subsidiaries has interfered with, infringed upon, misappropriated or otherwise come into conflict with any Intellectual Property Rights of any Person or committed any acts of unfair competition or received from any Person in the past five years any notice, charge, complaint, claim or assertion thereof, and no such charge, complaint, claim or assertion is impliedly threatened by an offer to license from another Person; and (vi) neither the Company nor any of its Subsidiaries has sent to any Person in the past five years, or otherwise communicated to any Person, any notice, charge, complaint, claim or other assertion of any present, impending or threatened interference with, infringement upon, misappropriation of, or other conflict with any Intellectual Property Rights of the Company or any of its Subsidiaries by such other Person or any acts of unfair competition by such other Person, nor, to the knowledge of the Seller Group, is any such interference, infringement, misappropriation, conflict or act of unfair competition occurring or threatened. (b) Schedule 4.12(b) contains a true, correct and complete list of all applications, filings and other formal actions made or taken pursuant to any Laws by the Company and/or any of its Subsidiaries to perfect or protect their respective interests in their respective Intellectual Property Rights. 4.13 Agreements, No Defaults, Etc. (a) Schedule 4.13(a) contains a true, correct and complete list and a brief description of all material Contracts to which the Company or any of its Subsidiaries is a party and (x) that were entered into or made outside the ordinary course of business, consistent with past practice, or (y) that were entered into or made in the ordinary course of business, consistent with past practice, and are described in clauses (i) through (xiii) of the next sentence of this Section 4.13. Except as set forth on Schedule 4.13(a), neither the Company nor any of its Subsidiaries is a party to any of the following material Contracts: (i) distributorship, dealer, sales, advertising, agency, manufacturer's representative, or any other Contract relating to the payment of a commission; (ii) any Contract relating to the employment of any officer, employee or consultant or any other type of Contract or other understanding or arrangement with any officer, employee or consultant, including any Contract or other understanding or arrangement relating to severance payments; (iii) any indenture, mortgage, promissory note, loan agreement, pledge agreement, guaranty or conditional sale or other Contract relating to the borrowing of money, a line of credit or a Capital Lease; (iv) any Contract for charitable contributions in excess of $5,000 individually or $10,000 in the aggregate; (v) any Contract for capital expenditures in excess of $10,000 individually or $50,000 in the aggregate; (vi) any Contract for the sale of any assets, properties or rights other than the sale of services or products in the ordinary course of business, consistent with past practice; 13 (vii) any Contract pursuant to which the Company or any of its Subsidiaries is a lessee of or holds or operates any machinery, equipment, motor vehicles, office furniture, fixtures, products, merchandise or other personal property owned by any other Person in excess of $10,000 individually or $50,000 in the aggregate; (viii) any Contract relating to the lending or investing of funds; (ix) any Contract relating to any form of intangible property, including any Intellectual Property Rights; (x) any Contract that restricts the Company or any of its Subsidiaries from engaging in any aspect of the Business or any other business anywhere in the world; (xi) any Contract or group of related Contracts with the same Person or group of Affiliated Persons (excluding purchase orders entered into in the ordinary course of business, consistent with past practice, that are to be completed within three months of entering into such purchase orders) for the purchase or sale of products or services under which the undelivered or unperformed balance or portion thereof (including the aggregate undelivered or unperformed balance or portion under any such Contracts between the same Person and the Company or any of its Subsidiaries) has a selling price in excess of $50,000; (xii) any Contract for the acquisition or disposition of a Person or a division of a Person made within the preceding five years (whether or not such acquisition or disposition was consummated); or (xiii) any other material Contract material to the Business. (b) The Contracts disclosed on Schedule 4.4(b), the leases (and any other Contracts) disclosed on Schedule 4.11(a), the licenses (and any other Contracts) disclosed on Schedule 4.12(a), the insurance policies (and any other Contracts) disclosed on Schedule 4.16(a), and the Contracts disclosed on Schedule 4.21 are incorporated by reference onto Schedule 4.13. The Contracts disclosed on Schedule 4.13, together with the Contracts incorporated by reference onto Schedule 4.13, are collectively referred to as the "Material Contracts." (c) All Material Contracts (i) are in full force and effect, (ii) constitute legal, valid and binding obligations of the Company and/or its Subsidiaries that are parties thereto and, to the knowledge of the Seller Group, the other parties thereto, and (iii) are enforceable in accordance with their terms against the Company and/or its Subsidiaries that are parties thereto and, the other parties thereto, in each case subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar Laws affecting creditors' rights and remedies generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity). The Company and each of its Subsidiaries have performed all of the respective obligations required to be performed by them to date pursuant to the terms of the Material Contracts, and there exists no default, or any event which upon the giving of notice or the passage of time, or both, would give rise to a claim of a default in the performance by the Company or any of its Subsidiaries or, to the knowledge of the Seller Group, any other party to any of the Material Contracts of their respective obligations thereunder. The Purchaser has been furnished with true, correct and complete copies of all written Material Contracts and Schedule 4.13(a) (including Contracts incorporated by reference thereon) contains true, correct and complete descriptions of all oral Contracts listed on Schedule 4.13(a) (including Contracts incorporated by reference thereon). (d) Schedule 4.13(d) contains a true, correct and complete list of all Funded Indebtedness of the Company and each of its Subsidiaries, in each case showing the aggregate principal amount thereof (and the aggregate amount of any undrawn commitments with respect thereto), the name of the lender, and the name of the respective borrower and any other Person that directly or indirectly guaranteed such Funded Indebtedness. 4.14 Litigation, Etc. (a) Except as disclosed on Schedule 4.14(a), there are no (i) Proceedings pending or, to the knowledge of the Seller Group, threatened against the Company or any of its Subsidiaries, whether at law or in equity, civil or criminal in nature, or before or by any Governmental Entity or arbitrator, nor, to the knowledge of the Seller Group, does there exist any basis therefor, or (ii) Orders of any Governmental Entity or arbitrator with respect to, involving or against the Company or any of its Subsidiaries. The Company and each of its 14 Subsidiaries have delivered to the Purchaser all material documents and correspondence relating to the matters disclosed on Schedule 4.14(a). (b) Schedule 4.14(b) lists each matter described in Section 4.14(a) that (i) resulted in any criminal sanctions against the Company or any of its Subsidiaries, or (ii) was in existence within the last five years and resulted in payments in excess of $10,000 by the Company or any of its Subsidiaries (whether as a result of a judgment, civil fine, settlement or otherwise). 4.15 Compliance with Laws. The Company and each of its Subsidiaries (a) have complied in all material respects with, and are in compliance with, all Laws, Orders and Permits applicable to them and the Business, and (b) have all Permits used or necessary in the conduct of the Business. All of the material Permits referred to in the preceding sentence are listed on Schedule 4.15 and are in full force and effect. No violations with respect to any of the material Permits listed on Schedule 4.15 have occurred or are or have been recorded, and no Proceeding is pending or, to the knowledge of the Seller Group, threatened to revoke or limit any such Permits. No investigation or review by any Governmental Entity with respect to the Company or any of its Subsidiaries is pending or, to the knowledge of the Seller Group, threatened, nor has any Governmental Entity notified the Company or any of its Subsidiaries of its intention to conduct the same. Neither the Company nor any of its Subsidiaries has received any opinion or memorandum or legal advice from legal counsel to the effect that it is exposed, from a legal standpoint, to any Liability or disadvantage that may be material to its business, financial condition, operations, property or affairs. No member of the Seller Group is aware of any proposed Law that would materially and adversely affect the Company or any of its Subsidiaries in, conducting the Business in any jurisdiction in which the Company or any such Subsidiary is presently conducting business. 4.16 Insurance. (a) Schedule 4.16(a) contains a true, correct and complete list of all policies of liability, theft, fidelity, life, fire, product liability, cargo, workers' compensation, health and other forms of insurance held by or on behalf of the Company or any of its Subsidiaries (specifying the insurer, amount of coverage, basis of coverage (i.e., "occurrence" or "claims made"), type of insurance, policy number and any pending claims thereunder). All such coverages have been maintained at all times during the course of the operation of the Business. The Company and each of its Subsidiaries is insured against all risks usually insured against by Persons conducting similar businesses and operating similar properties in the localities where the Business is conducted and the properties of the Company and its Subsidiaries are located, under policies of such types and in such amounts as are customarily carried by such Persons. (b) Except as set forth on Schedule 4.16(b), with respect to each policy of insurance listed on Schedule 4.16(a): (i) all premiums with respect thereto are currently paid and to the knowledge of the Company are not subject to adjustment, (ii) neither the Company nor any of its Subsidiaries is in default in any respect with respect to its respective obligations under such policy, (iii) to the knowledge of the Seller Group, no basis exists that would give any insurer under any such policy the right to cancel or unilaterally reduce or limit the stated coverages contained in such policy, (iv) there are no outstanding claims currently pending under such policy that could be expected to cause an increase in the insurance rates of the Company or any of its Subsidiaries, and no facts or circumstances exist that might be expected to relieve the insurer under such policy of its obligations to satisfy in full any claim thereunder, and (v) neither the Company nor any of its Subsidiaries has received any notice that any such policy has been or shall be canceled or terminated or will not be renewed on substantially the same terms as are now in effect or that the premium on such policy shall be increased on the renewal thereof. 4.17 Labor Relations; Employees. (a) Schedule 4.17(a) sets forth a list of all directors, officers and key employees of the Company and each of its Subsidiaries as of the date hereof, together with their respective titles (if any) and positions held, their current compensation (including salary, wages, bonuses and commissions), and the respective dates on which they commenced employment. To the extent any such employee is on a leave of absence, Schedule 4.17(a) indicates the nature of such leave of absence and such employee's anticipated date of return to active employment. No officer or key employee listed on Schedule 4.17(a) has given the Company or any of its Subsidiaries notice, and, to the knowledge of the Seller Group, no officer or key employee listed on Schedule 4.17(a) has any plans or intends to terminate his or her employment with the Company or such Subsidiary. No former officer or key employee has left the service of the Company or any of its Subsidiaries within the last six months. 15 (b) Schedule 4.17(b) sets forth the aggregate number of employees, other non-supervisory personnel, independent contractors and owner/operators that work for the Company or any of its Subsidiaries, specifying in the case of the Company and each such Subsidiary the number that belong to a union or are otherwise covered by an employment agreement or a collective bargaining agreement, identified by terminal location or facility. (c) Except as set forth on Schedule 4.17(c), (i) there is no labor strike, dispute or grievance, or work slowdown or stoppage actually pending or, to the knowledge of the Seller Group, threatened against or involving the Company or any of its Subsidiaries, and (ii) neither the Company nor any of its Subsidiaries is a party to or bound by any collective bargaining agreement, union Contract or similar agreement, no such Contract or agreement is currently being negotiated by the Company or any of its Subsidiaries, no labor union has taken any action with respect to organizing the employees of the Company or any of its Subsidiaries, and no representation question exists with respect to any such employees. (d) The Company, and each of its Subsidiaries, have complied in all material respects with all Laws relating to the hiring and retention of all employees, leased employees and independent contractors relating to wages, hours, Company Employee Plans, workers' compensation, unemployment, equal opportunity, collective bargaining, and the payment of social security and other Taxes. (e) Schedule 4.17(e) sets forth a true, correct and complete list of any and all unfair labor practice charges or other Proceedings, charges, employment discrimination lawsuits, wrongful discharge lawsuits, citations and litigation, wage and hour charges and litigation, and employment related litigation that are presently pending, or to the knowledge of the Seller Group, threatened at law or in equity, involving the Company or any of its Subsidiaries. Schedule 4.17(e) also sets forth a true, correct and complete list of those charges, lawsuits, citations, litigation and Proceedings falling within the above categories that have been settled or otherwise disposed of within the previous two years. (f) Except as set forth in Schedule 4.17(f), neither the Company nor any of its Subsidiaries is a joint employer or alter ego, with or of any of its suppliers, distributors, customers or other Persons with which it has any Contract or other understanding or arrangement, including any owner/operator with whom the Company or any of its Subsidiaries has a Contract or other understanding or arrangement, or any other Person with which the Company or any of its Subsidiaries has a leasing arrangement (collectively referred to for the purposes of this Section 4.17(f) as "Third Parties"), and no Third Parties are alter egos of the Company or any of its Subsidiaries. Neither the Company nor any of its Subsidiaries (i) exercises management power or authority over the operations or personnel of any Third Party, (ii) supervises the employees of any Third Party, or (iii) is responsible for, or has the authority to establish, implement or effectively recommend the labor relations or employment policies or actions, including wages, hours, working conditions or any terms of employment, for any employee of any Third Party. There is no interchange of personnel, no common boards of directors and no common officers, managers or employees between the Company or any of its Subsidiaries and any Third Party. Neither the Company or any of its Subsidiaries provides any administrative services for any Third Party that are not required by Law or that are not provided in a bona fide, arms-length transaction at fair market value. Any administrative services provided by the Company or any of its Subsidiaries for any Third Party have been detailed on Schedule 4.17(f). (g) Except as set forth on Schedule 4.17(g), the Company's and each of its Subsidiaries' Contracts and other understandings with owner/operators and independent contractors establish a bona fide arrangement where such individuals are independent contractors to, and are not employees of, the Company or any of its Subsidiaries, and there are not any disputes, claims, charges or allegations pending or, to the knowledge of the Seller Group, threatened at law or in equity before any Governmental Entity that challenges the independent contractor nature of such Contract or other understanding or arrangement. 4.18 ERISA Compliance. The Company does not have any Employee Benefit Plans as defined in ERISA or any similar plan or benefit governed by applicable Law. 4.19 Environmental Matters. (a) Except as set forth on Schedule 4.19(a), neither the Company, any of its Subsidiaries, or any of their respective Affiliates has received any written or oral notice, report or other information (i) regarding any actual or alleged violation of any Environmental, Health and Safety Laws, or any 16 Liabilities, including any investigatory, remedial or corrective obligations, relating to (A) the Company, any of its Subsidiaries, any of their respective Affiliates, or any of their respective predecessors, (B) the Business, or (C) any of the Company's or any of its Subsidiaries' currently or formerly owned or leased properties or operations, or (ii) that the Company or any of its Subsidiaries is potentially responsible under any Environmental, Health and Safety Laws for response costs, corrective action or natural resource damages, as those terms are defined under the Environmental, Health and Safety Laws, at any location. (b) Schedule 4.19(b) sets forth a true, correct and complete list of all properties and facilities previously owned, leased or operated by the Company, any of its Subsidiaries, or any of their respective predecessors at any time (together with the Leased Properties, the "Covered Properties"). There has been no release, discharge, spill or disposal of any substance at any of the Covered Properties so as to give rise to any Liability of the Company or any of its Subsidiaries under any Environmental, Health and Safety Laws. Except as set forth on Schedule 4.19(b), there is not now, nor has there ever been, any asbestos-containing material in any form or condition, underground storage tank, above-ground storage tank, landfill, waste pile, surface impoundment, disposal area, or article or equipment containing polychlorinated biphenyls on or at any of the Covered Properties. (c) Neither the Company, any of its Subsidiaries, any of their respective Affiliates, nor any of their respective predecessors has treated, stored, disposed of, arranged for or permitted the disposal of, transported, handled or released any substance, or owned or operated any property or facility (and no such property or facility is contaminated by any such substance) in a manner that has given or would give rise to Liability pursuant to any Environmental, Health and Safety Laws, including any Liability for response costs, corrective action costs, personal injury, property damage, natural resources damage or attorney fees, or any investigative, corrective or remedial obligations pursuant to any Environmental, Health and Safety Laws. (d) To the knowledge of the Seller Group, no facts, events or conditions relating to the past or present operations of the Company, any of its Subsidiaries, any of their respective Affiliates, any of their respective predecessors, or any of the Covered Properties will prevent, hinder or limit continued compliance by the Company or any of its Subsidiaries with any Environmental, Health and Safety Laws, or give rise to any investigative, corrective or remedial obligations pursuant to any Environmental, Health and Safety Laws, or give rise to any other Liability pursuant to any Environmental, Health and Safety Laws, including any relating to on-site or off-site releases or threatened releases of materials, substances or wastes, personal injury, property damage or natural resources damage. (e) Neither this Agreement nor the consummation of the transactions contemplated by this Agreement will result in any obligations for site investigation or cleanup, or notification to or consent of any Governmental Entity or other third party, pursuant to any of the so-called "transaction-triggered" or "responsible property transfer" Environmental, Health and Safety Laws. (f) The Company and each of its Subsidiaries have provided the Purchaser with true, correct and complete copies of all reports and studies within the possession or control of the Company and its Subsidiaries with respect to past and present environmental conditions or events at any of the Covered Properties (all of which are listed on Schedule 4.19(b)), and, to the knowledge of the Seller Group, there are no other environmental reports or studies with respect thereto. 4.20 Brokers. Neither the Company nor any of its Subsidiaries has employed any broker or finder or incurred any Liability for any brokerage fees, commissions or finders' fees or similar compensation or transaction based payments in connection with the transactions contemplated by this Agreement. 4.21 Related Party Transactions. (a) Except as set forth on Schedule 4.21(a), and except for compensation to bona fide employees of the Company or any of its Subsidiaries for services rendered in the ordinary course of business, consistent with past practice, no current or former Affiliate of the Company or any of its Subsidiaries or any "Associate" (as defined in the rules promulgated under the Securities Exchange Act) of any thereof, is now, or has been during the last five fiscal years, (i) party to any transaction or Contract with the Company or 17 any of its Subsidiaries (including any Contract or other understanding or arrangement providing for the furnishing of services by, or the rental of real or personal property from, or otherwise requiring payments to, any such Affiliate or Associate), or (ii) the direct or indirect owner of an interest in any Person that is a present or potential competitor, supplier or customer of the Company or any of its Subsidiaries (other than non-affiliated holdings in publicly held companies). Except as set forth on Schedule 4.21(a), neither the Company nor any of its Subsidiaries is a guarantor or otherwise liable for any actual or potential Liability of its Affiliates or their Associates. Except as set forth on Schedule 4.21(a), neither the Company nor any of its Subsidiaries (x) owns or operates any vehicles, boats, aircraft, apartments or other residential or recreational properties or facilities for executive, administrative or sales purposes, or (y) owns or pays for any social club memberships, whether or not for the benefit of the Company, any of its Subsidiaries, and/or any of their respective executives. (b) Schedule 4.21(b), sets forth a true, correct and complete list of all distributions, dividends, redemptions or repurchases, of or with respect to the capital stock of the Company (as set forth on Schedule 4.21(b)), made by the Company during the Company's current fiscal year. 4.22 Accounts and Notes Receivable. Except as set forth on Schedule 4.22, and except for allowances for doubtful accounts reflected on the Latest Balance Sheet, all accounts receivable and notes receivable owing to the Company or any of its Subsidiaries as of the date hereof constitute, and as of the First Closing shall constitute, valid and enforceable claims arising from bona fide transactions in the ordinary course of business, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar Laws affecting creditors' rights and remedies generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity), and, to the knowledge of the Seller Group, there are no asserted claims, refusals to pay or other rights of set-off against any thereof. Except as set forth on Schedule 4.22 (including those items categorized as "legal" on such Schedule), there is (i) no account debtor or note debtor that is delinquent by more than thirty (30) days for payments due from such account debtor or note debtor in excess of $10,000 in the aggregate, (ii) no account debtor or note debtor that has refused, or, to the knowledge of the Seller Group, threatened to refuse, to pay its obligations to the Company or its Subsidiaries, as the case may be, for any reason, or has otherwise made a claim of set-off or similar claim (other than in amounts not in excess of $5,000 per account debtor or note debtor, or $10,000 in the aggregate), and (iii) to the knowledge of the Seller Group, no account debtor or note debtor that owes the Company or any of its Subsidiaries amounts in excess of $10,000 in the aggregate is insolvent or bankrupt. 4.23 Bank Accounts; Powers of Attorney. Schedule 4.23 sets forth a true and complete list of (i) all bank accounts and safe deposit boxes of the Company and each of its Subsidiaries and all Persons who are signatories thereunder or who have access thereto, and (ii) the names of all Persons holding general or special powers of attorney from the Company or any of its Subsidiaries and a summary of the terms thereof (excluding ministerial powers of attorney granted to representatives of the Company or any of its Subsidiaries that are terminable at will). 4.24 Suppliers and Vendors. Except as set forth on Schedule 4.24, no material supplier or vendor to the Company or any of its Subsidiaries has canceled or otherwise terminated, or, to the knowledge of the Seller Group, threatened to cancel or otherwise terminate, its relationship with the Company or any of its Subsidiaries or has decreased, limited or otherwise modified, or, to the knowledge of the Seller Group, threatened to decrease, limit or otherwise modify, the services, supplies or materials it provides to the Company or any of its Subsidiaries. 4.25 Customers. Except as set forth on Schedule 4.25, no customer of the Company or any of its Subsidiaries to which more than $50,000 of annual sales were attributable during any of the preceding three fiscal years has notified the Company or any of its Subsidiaries that it intends, or, to the knowledge of the Seller Group, has threatened, to terminate or materially curtail its relationship and dealings with the Company or any of its Subsidiaries. 18 4.26 Conflicts of Interest. To the knowledge of the Seller Group, neither the Company, any of its Subsidiaries, any Stockholder, nor any officer, employee, agent or other Person acting on their behalf has, directly or indirectly, given or agreed to give, any money, gift or similar benefit (other than legal price concessions to customers in the ordinary course of business, consistent with past practice) to any customer, supplier, employee or agent of a customer or supplier, or official or employee of any Governmental Entity or other Person who was, is, or may be in a position to help or hinder the Business (or assist in connection with any actual or proposed transaction) that (i) might subject the Company or any of its Subsidiaries to any damage or penalty in any Proceeding, (ii) if not given in the past, would have resulted in a Material Adverse Change, or (iii) if not continued in the future, reasonably could be expected to result in a Material Adverse Change. There is not now, and there has never been, any employment by the Company or any of its Subsidiaries of, or beneficial ownership in the Company or any of its Subsidiaries by, any governmental or political official in any jurisdiction in which the Company or any of its Subsidiaries has conducted, presently is conducting, or presently is proposing to conduct business. 4.27 Disclosure. Neither this Agreement, including the Schedules, Annexes, attachments and Exhibits hereto, contains any untrue statement of a material fact or omits a material fact necessary to make the statements contained herein or therein, taken as a whole, in light of the circumstances in which they were made, not misleading. ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE PURCHASER The Purchaser represents and warrants to the Stockholder as of October 29, 2004 as follows: 5.1 Organization; Corporate Authority. The Purchaser is a corporation duly organized, validly existing and in good standing under the Laws of the jurisdiction of its incorporation and has all requisite power and authority (corporate or otherwise) to own, lease and operate its assets and properties and to carry on its business as presently conducted and as presently proposed to be conducted. The Purchaser is duly qualified and in good standing to transact business as a foreign Person in those jurisdictions set forth on Schedule 5.1, which constitute all of the jurisdictions in which the character of the property owned, leased or operated by the Purchaser or the nature of the business or activities conducted by the Purchaser makes such qualification necessary. The Seller Group has been furnished with true, correct and complete copies of the Purchaser's Charter Documents, in each case as amended and in effect on the date this representation is being made and is deemed made hereunder. 5.2 Authority; Authorization; Execution and Delivery; Enforceability; No Conflict. (a) The Purchaser has all requisite power and authority (corporate and otherwise) to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby and thereby. The Purchaser's execution and delivery of this Agreement, and the performance by the Purchaser of its obligations hereunder and thereunder, have been duly and validly authorized by all requisite action on the part of the Purchaser (including its board of directors and all committees thereof and its stockholders). This Agreement has been, or upon the Purchaser's execution hereof and thereof will be, duly and validly executed and delivered by the Purchaser and constitutes, or upon the Purchaser's execution and delivery hereof and thereof will constitute, a valid and binding obligation of the Purchaser, enforceable against the Purchaser in accordance with their respective terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar Laws affecting creditors' rights and remedies generally, and, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity). (b) Neither the execution and delivery by the Purchaser of, and performance of its obligations under, this Agreement, nor the consummation by the Purchaser of the transactions contemplated hereby, nor the compliance by the Purchaser with any of the provisions hereof, will (i) conflict with, or result in any violation of, or cause a default (with or without notice or lapse of time 19 or both) under, any provision of the Purchaser's Charter Documents, (ii) conflict with, or result in any violation of, or cause a default (with or without notice or lapse of time or both) under, or give rise to any right of termination, amendment, cancellation or acceleration of any obligations contained in, or the loss of any benefit under, any term, condition or provision of any provision of any Contract to which the Purchaser is a party, or by which the Purchaser or any of its assets or properties is or may be bound, (iii) violate any Law applicable to the Purchaser, or (iv) result in an Encumbrance on or against any assets, rights or properties of the Purchaser, or on or against any capital stock or other securities of the Purchaser, or give rise to any claim against the Company, any of the Company's Subsidiaries, or the Purchaser. 5.3 Consents. Except as set forth on Schedule 5.3, no Permit, authorization, consent or approval of or by, or notification of or filing with, any Person (governmental or otherwise) is required for, as a result of, or in connection with the execution, delivery and performance by the Purchaser of this Agreement or the consummation of the transactions contemplated hereby. 5.4 Brokers. The Purchaser has not employed any broker or finder or incurred any Liability for any brokerage fees, commissions or finders' fees or similar compensation or transaction based payments in connection with the transactions contemplated by this Agreement. 5.5 Litigation. Except as disclosed on Schedule 5.5 or the Purchaser's reports filed pursuant to the Securities Exchange Act, there are no (i) Proceedings pending or, to the knowledge of the Purchaser, threatened against the Purchaser or any of its Subsidiaries, whether at law or in equity, civil or criminal in nature, or before or by any Governmental Entity or arbitrator, or (ii) Orders of any Governmental Entity or arbitrator with respect to, involving or against the Purchaser or any of its Subsidiaries. 5.6 TIGR Shares. The TIGR Shares that will be issued to the Stockholder pursuant to this Agreement when issued in accordance with this Agreement will be duly authorized, validly issued, fully paid and non-assessable. Except as described in this Agreement, there are no outstanding reservations of shares, subscriptions, warrants, puts, calls, unsatisfied preemptive rights or options of any kind or any nature with respect to the TIGR Shares that will be issued to the Stockholder pursuant to this Agreement. 5.7 Capitalization. The aggregate number of shares and type of all authorized, issued and outstanding classes of capital stock of the Company is set forth in Schedule 5.7. 5.8 WARN Act. Purchaser does not intend to implement a "plant closing" or "mass layoff" as those terms are defined in the WARN Act with respect to the Company's business within ninety (90) days after the First Closing. The Purchaser hereby assumes responsibility for giving any and all notices required by the WARN Act or any similar state law or regulation and assumes liability for any and all claims asserted under the WARN Act or any similar state law or regulation because of any action taken by Purchaser with respect to the Company's business occurring on or after the First Closing Date. The parties hereby designate the First Closing Date as the "effective date" for purposes of the WARN Act. 5.9 SEC DOCUMENTS As of their respective filing dates, each statement, report, effective registration statement, definitive proxy statement and other filings filed with the Commission by Purchaser since and including the date of the Form 10-K most recently filed by Purchaser prior to the date hereof (collectively, the "Purchaser SEC Documents") complied in all material respects with the applicable requirements of the Securities Exchange Act and the Securities Act and none of 20 the Purchaser SEC Documents contained any untrue statement of material fact or omitted to state a material fact required to be stated therein or necessary to make the statements made therein in light of the circumstances in which they were made not misleading in any material respect, except to the extent corrected by a subsequently filed Purchaser SEC Document. 5.10 INVESTMENT INTENT. Purchaser has the ability to evaluate the merits and risks associated with the transactions contemplated by this Agreement on the basis of its knowledge and experience in financial and business matters. ARTICLE VI COVENANTS AND AGREEMENTS 6.1 Access to Records and Properties. From and after the date hereof until the earlier of the First Closing or termination of this Agreement pursuant to Article IX and subject to the confidentiality provisions of Section 6.9 of this Agreement, the Company and the Stockholder will, and the Company will cause its management employees to, afford the Purchaser and its attorneys, consultants, accountants and authorized representatives full access, upon reasonable notice during normal business hours and at other reasonable times, to all properties, books, contracts, commitments, records, personnel, lenders and advisors of the Company in order to permit the Purchaser to conduct a due diligence investigation of the Company, provided that, notwithstanding any other provision of this paragraph, in no event will the foregoing be undertaken in such a manner as would reasonably be expected to interfere with, impair or impede in any material respect the business or operations of the Company. Such investigation will include, among other things, reviewing relevant financial information, reviewing relevant contractual obligations of the Company, conducting discussions with the Company's management and, with the Company's prior written consent, other employees and customers of the Company, conducting an environmental review of the Company's facilities and operational practices, reviewing and evaluating all pension, health, retiree and other ERISA-related plans and liabilities of the Company, and such other investigations and evaluations as may be deemed reasonably necessary by the Purchaser. 6.2 Conduct of the Business. Except as set forth on Schedule 6.2, from and after the date hereof until the earlier of the First Closing or the termination of this Agreement pursuant to Article IX, the Company and each of its Subsidiaries shall, and the Stockholder shall cause the Company and each of its Subsidiaries to: (i) conduct its business substantially as presently conducted and only in the ordinary course of business, consistent with past practice; (ii) not undertake (or enter into any Contract or other understanding or arrangement to undertake) any action, and use its commercially reasonable efforts to avoid and prevent the occurrence of any event, described in Section 4.8; (iii) not enter into any transaction other than in the ordinary course of business, consistent with past practice, that is not at arms-length with Persons that are not Affiliates, or any transaction with any Person that is an Affiliate; (iv) not acquire or dispose of any assets other than in the ordinary course of business, consistent with past practice; (v) use commercially reasonable efforts to (A) maintain its business, assets, relations with present employees, relations with customers and suppliers, licenses and operations as an ongoing business and preserve its goodwill, in accordance with past custom, and (B) satisfy each of the closing conditions set forth in Article VII; (vi) not issue or sell any shares of its capital stock, not issue or sell any securities convertible into, exercisable or exchangeable for, or options or warrants to purchase or rights to subscribe for, any shares of its capital stock, and not enter into any Contract or other understanding or arrangement to do any of the foregoing, other than those issues relating to disclosed options, 21 convertible loans, and pre-allotted share issues, all of which are incorporated in the full consideration paid by the Purchaser and which do not add to the consideration for the whole purchase of the Stockholder equity; (vii) not declare or pay any dividend or distribution on or with respect to its capital stock, not change the number of authorized shares of its capital stock or reclassify, combine, split, subdivide, or redeem or otherwise repurchase any of shares of its capital stock, not issue, deliver, pledge or encumber any additional shares of its capital stock or other securities equivalent to or exchangeable for shares of its capital stock, and not enter into any Contract or other understanding or arrangement to do any of the foregoing; (viii) not take or omit to take any action that would result in the representations and warranties contained in this Agreement being untrue on the First Closing Date; and (ix) not delay or postpone the payment of accounts payable and other obligations and liabilities or accelerate the collection of accounts receivable. 6.3 Efforts to Consummate. Subject to the terms and conditions of this Agreement, each party shall use commercially reasonable efforts to take or cause to be taken all actions and do or cause to be done all things required under all applicable Laws, Orders and Contracts in order to consummate the transactions contemplated hereby, including (i) all commercially reasonable efforts to obtain or make from or with all Persons all such consents, approvals, authorizations, waivers, notifications and filings as are required to be obtained or made by such party under such Laws, Orders and Contracts for the consummation of the transactions contemplated hereby (including the filing of all notification and reports forms and other information required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act")), and (ii) in the case of the Seller Group, all commercially reasonable efforts to assist the Purchaser in replacing the Company's performance bonds and guarantees; provided, however, that nothing contained herein shall require the Purchaser to undertake any action, including the divestiture of any assets or properties, that may be required to obtain the consent or approval of the United States Federal Trade Commission or the Department of Justice for the consummation of the transactions contemplated hereby. The Company and each of its Subsidiaries shall take all commercially reasonably actions and do all things, and the Stockholder shall cause the Company and each of its Subsidiaries to take all actions and do all things, required to extinguish at or prior to the First Closing all Funded Indebtedness and to release any and all Encumbrances on or affecting any of the Company's or any of the its Subsidiaries' assets or properties, other than the Permitted Encumbrances. The Company and the Stockholder shall use commercially reasonable efforts to procure that legal title to all the Shares is transferred to the Stockholder to hold them as nominee for the Shareholders until the First Closing, including, without limitation, complying with all requirements of the Financial Services and Markets Act 2000 and all regulations made thereunder. Purchaser shall use commercially reasonably efforts to assist the Company and Stockholder in complying with all requirements of the Financial Services and Markets Act 2000 and all regulations made thereunder. Upon the completion and filing of all reports required to be filed by the Purchaser pursuant to the Securities Exchange Act and the Purchaser's determination that an exemption is available from the registration requirements of the Securities Act and applicable U.S. state securities laws, the Purchaser shall offer to acquire, on the same terms and conditions as provided for herein, and the Stockholder shall cause to be delivered to Purchaser, on the same terms and conditions provided for herein, all remaining issued and outstanding shares of Stock (other than Stock owned by the Purchaser) and the Company shall release or allow to lapse all outstanding Options, warrants, convertible loans or other rights for the purchase of shares of capital stock or convertible securities of the Company so that on such date, all such Options, warrants, convertible loans or other rights may no longer be exercised and the Purchaser is the owner and has good title, free and clear of all Encumbrances, to one hundred percent (100%) of the issued and outstanding shares of Stock, on a fully diluted basis, as if all outstanding Options, warrants, convertible loans or other rights for the purchase of shares of capital stock or convertible securities of the Company had been fully (a) exercised immediately prior to such issuance (and the resulting securities fully converted into shares of Stock, if so convertible) as of such date or (b) released or lapsed as of such date so that such Options, warrants, convertible loans or other rights may no longer be exercised. As of the Second Closing Date, the Stockholder shall permit the Persons that participated in the Second Closing (whether by transferring shares of Stock to the Stockholder or by consenting to the release or lapse of Options, warrants, convertible loans or other rights for the purchase of shares of capital stock or convertible securities of the Company that are owned by such Person) to receive a portion of the consideration paid or payable pursuant to Section 1.2 of this Agreement. 22 6.4 Negotiation with Others. (a) During the period (the "Exclusivity Period") commencing on January 1, 2005, and ending on the first to occur of (a) the 180th day following January 1, 2005, and (b) the termination of this Agreement pursuant to Section 9.1(i), the Company and the Stockholder will not, either directly or indirectly through their respective representatives, submit, solicit, initiate, or discuss any proposal or offer from or to any person other than the Purchaser, or engage in any discussions that could lead to any proposal or offer from or to any person other than the Purchaser, regarding any possible sale, acquisition, reorganization, recapitalization, or other similar transaction involving the Company or any of its subsidiaries (whether by way of stock sale, sale of all or any material portion of assets, merger, consolidation or otherwise), or any stock sale or issuance or debt and/or equity financing involving the Company or any of its subsidiaries (each, a "Possible Transaction"), unless consented to in writing by the Purchaser. If, during the Exclusivity Period, any of the Stockholder or the Company is contacted by any other person or receives from any other person any written offer or proposal in connection with a Possible Transaction, the Company will promptly notify the Purchaser thereof, including any details and the identity of the person making any such offer or proposal and a copy thereof. During the Exclusivity Period, the Company will, and the Stockholder will cause the Company to, continue to operate its business in the ordinary course, unless otherwise consented to by the Purchaser. (b) The parties recognize and acknowledge that a breach of this Section 6.4 will cause irreparable and material loss and damage to the non-breaching party as to which it will not have an adequate remedy at law or in equity. Accordingly, each party acknowledges and agrees that the issuance of an injunction or other equitable remedy is an appropriate remedy for any such breach. 6.5 Notice of Prospective Breach. Each party shall promptly notify the other parties in writing upon the occurrence, or the failure to occur, of any event, which occurrence or failure to occur would be reasonably likely to cause (i) any representation or warranty of such party that is contained in this Agreement to be untrue or inaccurate in any respect at any time from the date of this Agreement to the First Closing as if such representation and warranty were made at such time, or (ii) any failure of any party hereto to comply with or satisfy any covenant or agreement to be complied with or satisfied by it under this Agreement. 6.6 Public Announcements. From and after the date hereof until the earlier of the First Closing or the termination of this Agreement pursuant to Article IX, each member of the Seller Group, each of the Company's Subsidiaries, and the Purchaser agree that, except (i) as otherwise required by Law, (ii) for disclosure to his, her or its respective directors, officers, employees, financial advisors, financing sources, legal counsel, independent certified public accountants or other agents, advisors or representatives on a need-to-know basis and with whom such party has a confidential relationship, and (iii) in the case of the Purchaser, in connection with its compliance with the disclosure requirements under federal and state securities Laws, he, she or it will not issue any reports, statements or releases, in each case pertaining to this Agreement to which he, she or it is a party or the transactions contemplated hereby or thereby, without the prior written consent of the Company and the Purchaser, which consent shall not unreasonably be withheld or delayed. 6.7 Exchange Proceeds. If, between the date hereof and the First Closing, the Company or any of its Subsidiaries receives any proceeds in consideration for the exchange of any of its assets, whether from the sale of any such assets, from insurance proceeds payable on account of any loss or casualty to such assets, any proceeds from the taking of such assets pursuant to the power of eminent domain, or any other proceeds from whatever source relating to the disposition of such assets (the "Exchange Proceeds"), the Company and/or its Subsidiaries shall, and the Stockholder shall cause the Company and/or such Subsidiary to, promptly notify the Purchaser of such receipt of such Exchange Proceeds and shall consult with the Purchaser with respect to the application of any such Exchange Proceeds. 6.8 Non-Competition Covenant. (a) Each Management Stockholder acknowledges and agrees that as a condition to the respective obligations of the Purchaser and Seller Group at the 23 First Closing, and as a material inducement to the Purchaser to enter into and perform its obligations hereunder and in consideration of the payments and other consideration to be received by the Stockholder under this Agreement, such Management Stockholder shall not, without the prior written consent of the Purchaser, at any time during the period beginning on the First Closing Date and ending on the third anniversary thereof (the "Restrictive Period"), (i) directly or indirectly engage in, represent in any way, or be connected with, any Competing Business (as defined below), whether such engagement shall be as a director, an officer, an owner, an employee, a partner, an Affiliate or other participant in such Competing Business, (ii) assist others in engaging in any Competing Business in the manner described in clause (i) above, (iii) induce any employees of the Purchaser or any of its Subsidiaries or other Affiliates, or any employees of the Company or any of its Subsidiaries, at any time during the Restrictive Period to terminate their employment with the Purchaser or any of its Subsidiaries or other Affiliates, or to terminate their employment with the Company or any of its Subsidiaries, or to engage in any Competing Business, or (iv) induce any customer, vendor or agent or any other Person with which the Purchaser or any or its Subsidiaries or other Affiliates, or with which the Company or any of its Subsidiaries, has a business relationship, contractual or otherwise, at any time during the Restrictive Period to terminate or alter such business relationship. This covenant is considered an integral part of this Agreement. The foregoing restriction shall not apply to the ownership of publicly traded Securities that represent less than five percent (5%) of the ownership interests of the issuer. (b) As used herein, the term "Competing Business" means any business conducted in (A) any county in the State of Florida, and (B) every other state, province, or other political subdivision of the United States, Canada, Mexico, Japan, China, South America or Europe that is engaged in the business of (x) providing software for the visualization, interaction, and integration of real-time enterprise systems in a browser, (y) developing software products and (z) providing software support services, and, in each case, such business or the services or products provided or sold by it are competitive, directly or indirectly, with the Business. Anything contained in the immediately preceding sentence to the contrary notwithstanding, any entity that has separate divisions or business units, one or more of which are engaged in a business described above, will not be deemed a Competing Business with respect to those portions of such entity that are not engaged in a business described above so long as such Stockholder's association with any such separate divisions or business units (fully taking into account his, her or its functions and the nature of his, her or its work at such division or business unit) does not involve existing customers of the Company or any of its Subsidiaries or relate in any material respect to that portion of such business which would be a Competing Business hereunder. (c) If, at the time of enforcement of this Section 6.8, a court holds that the restrictions stated herein are unreasonable under the circumstances then existing, the parties agree that the maximum period, scope or geographical area reasonable under such circumstances shall be substituted for the stated period, scope or geographical area. If any one of such covenants is declared invalid for any reason, such determination shall not affect the validity of the remainder of the covenants or any covenant covering territory other than the State of Florida. The other covenants set forth in Section 6.8(a) shall remain in effect as if the provision had been executed without the invalid covenants. The parties hereto hereby declare that they intend that the remaining covenants of the provision continue to be effective without any covenants that have been declared invalid. The parties hereto acknowledge that money damages would be an inadequate remedy for any breach of this Section 6.8. Therefore, in the event of a breach or threatened breach of this Section 6.8, the Purchaser and/or its successors or assigns may, in addition to other rights and remedies existing in its or their favor, apply to any court of competent jurisdiction for specific performance and/or injunctive relief in order to enforce or prevent any violations of the provisions of this Section 6.8 (without posting a bond or other security). 6.9 Disclosure of Information. (a) As used in this Agreement, the term "Confidential Information" means, with respect to any Person, all information (whether written or oral) furnished (whether before or after the date hereof) by such Person or its owners, members, partners, directors, officers, employees, Affiliates, representatives (including its financial advisors, attorneys and accountants) or agents (collectively, "Representatives") to any other Person or its Representatives, and all analyses, compilations, forecasts, studies or other documents prepared by such other Person or its Representatives in connection with the transactions contemplated by this Agreement that contain or reflect any such information; provided, however, that the term "Confidential Information" shall not include information that (i) is or becomes publicly available other than as a result of a disclosure by any Person or its Representatives in violation of this Agreement, or (ii) is or becomes available to such other Person on a non-confidential basis from a source that is not prohibited from disclosing such information by any legal, contractual or fiduciary obligation; provided further, however, that for purposes of this Section 6.9, from and after the First Closing, Confidential Information of the Company or any of its Subsidiaries shall be deemed Confidential Information of the Purchaser and 24 shall, as of such time, no longer be deemed Confidential Information of the Company or such Subsidiaries, as applicable. (b) The Purchaser will keep all Confidential Information of the Company and each of its Subsidiaries confidential and will not (except as required by applicable Law, regulation or legal process, and then only after compliance with the last sentence of this Section 6.9(b)) without the prior written consent of the Company or such Subsidiary, as applicable, disclose any of such Confidential Information in any manner whatsoever, directly or indirectly, and will not use any Confidential Information of the Company or any of its Subsidiaries except for the purposes contemplated by this Agreement; provided, however, that the Purchaser may reveal Confidential Information of the Company or any of its Subsidiaries to its Representatives (i) who need to know such Confidential Information for the purposes contemplated by this Agreement, (ii) who are informed by the Purchaser of the confidential nature of the Confidential Information, and (iii) who agree to act in accordance with the terms of this Section 6.9(b). The Purchaser will cause its Representatives to observe the terms of this Section 6.9(b), and will be responsible for any breach hereof by any of its Representatives. In the event that the Purchaser or any of its Representatives is requested pursuant to, or required by, applicable Law, regulation or legal process to disclose any Confidential Information of the Company or any of its Subsidiaries, the Purchaser will notify the Company or such Subsidiary, as applicable, promptly so that it may seek a protective order or other appropriate remedy or, in its sole and absolute discretion, waive compliance with the terms of this Section 6.9(b). In any event, the Purchaser will furnish only that portion of the Confidential Information of the Company any its Subsidiaries that it is advised by counsel is legally required and will exercise all commercially reasonable efforts to obtain reliable assurance, to the extent it is possible to obtain the same, that confidential treatment will be afforded to such Confidential Information. (c) The Company and the Stockholder will keep all Confidential Information of the Purchaser confidential and will not (except as required by applicable Law, regulation or legal process, and then only after compliance with the last sentence of this Section 6.9(c)), without the prior written consent of the Purchaser, disclose any of such Confidential Information in any manner whatsoever, directly or indirectly, and will not use any Confidential Information of the Purchaser except for the purposes contemplated by this Agreement; provided, however, that the Company and the Stockholder may reveal Confidential Information of the Purchaser to his, her or its Representatives (i) who need to know such Confidential Information for the purposes contemplated by this Agreement, (ii) who are informed by the Company or such Stockholder of the confidential nature of the Confidential Information, and (iii) who agree to act in accordance with the terms of this Section 6.9(c). The Company and each Stockholder will cause his, her or its Representatives to observe the terms of this Section 6.9(c), and will be responsible for any breach hereof by any of his, her or its Representatives. In the event that the Company, any Stockholder or any of their respective Representatives is requested pursuant to, or required by, applicable Law, regulation or legal process to disclose any Confidential Information of the Purchaser, the Company or such Stockholder will notify the Purchaser promptly so that it may seek a protective order or other appropriate remedy or, in its sole and absolute discretion, waive compliance with the terms of this Section 6.9(c). In any event, the Company or such Stockholder will furnish only that portion of the Confidential Information of the Purchaser that he, she or it is advised by counsel is legally required and will exercise all commercially reasonable efforts to obtain reliable assurance, to the extent it is possible to obtain the same, that confidential treatment will be afforded to such Confidential Information. (d) Each of the parties hereto recognizes and acknowledges that a breach of his, her or its covenants in Section 6.9(b) or Section 6.9(c), as the case may be, will cause irreparable and material loss and damage to the other parties, the amount of which cannot be determined readily and as to which such other parties will not have an adequate remedy at law or in damages. Accordingly, in addition to any remedy such other parties may have in damages by an action at law, such other parties shall be entitled to the issuance of an injunction restraining any such breach or threatened breach or any other remedy at law or in equity for any such breach. 6.10 Use of Proprietary Name. From and after the First Closing, the Stockholder shall not use the name "Integra" or "AltioLive" or any derivation thereof for any purpose. 6.11 Supplements to Schedules. Prior to the First Closing, the Company and the Stockholder shall promptly supplement or amend any Schedule with respect to any matter arising after the date of this Agreement that, if existing or occurring on the date of this Agreement, would have been required to be set forth or described in such Schedule. No supplement or amendment of a Schedule made pursuant to this Section 6.11 shall be deemed to constitute a cure of any breach of any representation or 25 warranty made by the Company or such Stockholder pursuant to this Agreement unless consented to in writing by the Purchaser, which consent may be withheld by the Purchaser in its sole and absolute discretion for any reason. For purposes of the rights and obligations of the parties hereunder, upon the occurrence of the First Closing, any such supplemental or amended disclosure consented to in writing by the Purchaser as aforesaid shall be deemed to have been disclosed as of the date of this Agreement. 6.12 Certain Employee Matters. On the First Closing Date the employees of the Company and each of its Subsidiaries that are actively employed by the Company or such Subsidiaries in the Business on the First Closing Date shall continue their employment on terms and conditions similar to those provided by the Company or such Subsidiaries prior to the First Closing Date (any such employees who continue their employment being referred to herein as the "Hired Employees"), and the Purchaser shall initially provide benefits to the Hired Employees, effective as to group health insurance benefits on the First Closing Date and effective as to other employee benefits as soon as practicable after the First Closing Date, in each case that are reasonably comparable on an overall basis to the benefits provided by the Company or such Subsidiaries prior to the First Closing Date to such employees. Nothing contained in this Agreement shall confer upon any Hired Employee any rights or remedies of any nature or kind whatsoever under or by reason of this Agreement, including any right to employment or continued employment or to any benefits that may be provided, directly or indirectly, under any employee benefit plan, policy or arrangement of the Purchaser, nor shall anything contained in this Agreement constitute a limitation on or restriction against the right of the Purchaser to amend, modify or terminate any such plan, policy or arrangement at any time and from time to time. 6.13 No-Hire of Employees. From and after the date hereof until the earlier of the First Closing or October 29, 2007: (a) the Purchaser shall not, and shall cause its subsidiaries and affiliates not to, hire any employee of the Company or any of its subsidiaries or affiliates without first obtaining the written consent of the Company (provided, however, that this clause shall not be deemed to be breached by an affiliate that is not controlled by the Purchaser and that hires an employee of the Company, or any of its subsidiaries or affiliates, if such affiliate of the Purchaser did not learn of the identity of such employee or acquire access to such employee or to any confidential information of the Company related to such employee from or through the Purchaser or any of its attorneys, consultants, accounts or authorized representatives, whether directly or indirectly); and (b) the Company shall not, and shall cause its subsidiaries and affiliates not to, hire any employee of the Purchaser or any of its subsidiaries or affiliates without first obtaining the written consent of the Purchaser. 6.14 NASDAQ Listing. After the First Closing, Purchaser shall use commercially reasonable efforts to cause the shares of common stock of Purchaser to be listed on NASDAQ. 6.15 Financial Statements. Prior to the First Closing Date, the Company shall deliver to the Purchaser a true, correct and complete copy of all of the Financial Statements required to be delivered pursuant to Section 4.6 of this Agreement. 6.16 Payment to KBC. In satisfaction of all amounts owed from the Company and/or its Subsidiaries to KBC Peel Hunt, on the First Closing Date, Purchaser shall pay to KBC Peel Hunt, an amount equal to (x) GBP 100,000 and (y) restricted TIGR Shares with an aggregate Market Price equal to GBP 100,000. Prior to Purchaser making such payment, KBC Peel Hunt shall acknowledge and agree that this payment satisfies all amounts owed or claimed to be owed by the Company and its Subsidiaries to KBC Peel Hunt and shall furnish to the Purchaser such investment representations and undertakings as Purchaser may reasonably request. 26 ARTICLE VII CLOSING OBLIGATIONS 7.1 Conditions to Each Party's Obligations. The respective obligations of the parties to consummate the transactions contemplated hereby are subject to the satisfaction prior to the First Closing Date of the following conditions, unless waived (to the extent such conditions can be waived) by the Company or the Purchaser, as applicable: (a) Approvals. All authorizations, consents, Orders or approvals of, or declarations or filings with, or expiration of waiting periods imposed by, any Governmental Entity (including those under the HSR Act) necessary for the consummation of the transactions contemplated hereby shall have been obtained or made. (b) No Injunctions or Restraints. No temporary restraining order, preliminary or permanent injunction, or other Order issued by any court or Governmental Entity of competent jurisdiction, nor other legal restraint or prohibition preventing the consummation of the transactions contemplated hereby, shall be in effect. (c) Actions and Statutes. No action, suit or proceeding shall have been taken or threatened, and no statute, rule, regulation or Order shall have been enacted, promulgated, issued or deemed applicable to the transactions contemplated by this Agreement by any Governmental Entity that would (i) make the consummation of the transactions contemplated hereby or thereby illegal or substantially delay the consummation of any material aspect of the transactions contemplated hereby or thereby, or (ii) render any party unable to consummate the transactions contemplated hereby or thereby. (d) U.S. Securities Laws. Purchaser shall be current with respect to all reports required to be filed by the Purchaser pursuant to the Securities Exchange Act and such reports shall not reflect a material adverse change in the Purchaser from information previously furnished to Stockholder. (e) Shareholder Loans. All amounts outstanding in connection with any loan or other obligation for Funded Indebtedness owed by the Company and/or its Subsidiaries to any Affiliate shall be paid or satisfied in full. 7.2 Conditions to Obligations of the Purchaser. The obligations of the Purchaser to consummate the transactions contemplated by this Agreement are subject to the satisfaction of the following conditions, unless waived (to the extent such conditions can be waived) by the Purchaser: (a) Accuracy of Representations and Warranties. All representations and warranties made by the Company and the Stockholder and the Company in this Agreement shall be true and correct in all material respects at and as of the First Closing Date with the same effect as if such representations and warranties had been made at and as of the First Closing Date (provided, however, that to the extent a representation is already limited to matters characterized as "material," it shall be correct in all respects), and the Purchaser shall have received a certificate to that effect signed by a principal executive officer of the Company and the Stockholder. (b) Performance of Obligations of the Company and the Stockholder. The Company and the Stockholder shall have performed in all material respects all obligations and covenants required to be performed by each of them under this Agreement prior to or as of the First Closing Date, and the Purchaser shall have received a certificate to that effect signed by a principal executive officer of the Company and Stockholder. (c) Authorization. All action necessary to authorize the execution, delivery and performance of this Agreement by the Company and the Stockholder and the consummation of the transactions contemplated hereby and thereby, including the requisite shareholder approvals, shall have been duly and validly taken by the Company and the Stockholder, and the Company and the Stockholder shall have the full power and right to consummate the transactions contemplated hereby and thereby on the terms provided herein and therein. 27 (d) Financial Statements. The Purchaser shall have received a true, correct and complete copy of all of the Financial Statements required to be delivered pursuant to Section 4.6 of this Agreement, up to the First Closing Date, and such Financial Statements shall not be materially different from drafts of such Financial Statements previously furnished to Purchaser. (e) Consents and Approvals. The Seller Group shall deliver to the Purchaser duly executed copies of all consents and approvals required for or in connection with (i) the execution and delivery by the Company and Stockholder of this Agreement to which each of them is a party, and the consummation of the transactions contemplated hereby and thereby, in form and substance reasonably satisfactory to the Purchaser and its counsel, and (ii) the continued conduct of the Business as previously conducted (including any consent identified on Schedule 4.3), in form and substance reasonably satisfactory to the Purchaser and its counsel. (f) Absence of Material Adverse Change. Since the Latest Balance Sheet Date, there shall have been no Material Adverse Change in the Business. (g) Delivery of the Shares. The Purchaser shall have received all of the Shares in accordance with Section 1.4. (h) Seller Certificates. The Seller Group shall cause each of the following certificates to be executed and/or delivered, as the case may be, by the Person who or which is the subject thereof: (i) a certificate of the secretary of the Company, dated as of the First Closing Date, certifying (A) that true, correct and complete copies of the Company's Charter Documents as in effect on the First Closing Date are attached thereto, (B) as to the incumbency and genuineness of the signatures of each officer of the Company executing this Agreement on behalf of the Company; and (C) the genuineness of the resolutions (attached thereto) of the board of directors or similar governing body of the Company and the Stockholder authorizing the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby and thereby; (ii) a certificate of the secretary of each of the Company's Subsidiaries, dated as of the First Closing Date, certifying that true and complete copies of such Subsidiary's Charter Documents as in effect on the First Closing Date are attached thereto; and (iii) certificates dated within ten (10) days of the First Closing Date of the secretaries of state of the states in which the Company and each of its Subsidiaries is organized and qualified to do business, certifying as to the good standing and non-delinquent Tax status of such Person. (i) Seller Group Approvals. The Seller Group shall have provided assurances reasonable satisfactory to the Purchaser and its counsel that all requisite corporate, shareholder and other consents have been obtained to approve and authorize the consummation of the transactions contemplated by this Agreement. The Purchaser shall have approved in its reasonable discretion all information provided to the Company's shareholders in connection with this Agreement, including information concerning the Purchaser. (j) U.S. Securities Laws. The Purchaser shall have received assurances reasonably satisfactory to it and its counsel that the issuances of all TIGR Shares pursuant to this Agreement and the distribution of any such TIGR Shares to the holders of shares, options or other equity or debt interests in Stockholder shall be exempt from the registration requirements of the Securities Act, qualification under any applicable U.S. state securities laws and registration, approval or consent under any other applicable Laws. (k) Non-Competition Covenant. Each Management Stockholder shall have acknowledged and agreed to be bound by the terms and conditions of Section 6.8 of this Agreement. (l) Debenture. There exists no default, or any event which upon the giving of notice or the passage of time, or both, would give rise to a claim of a default in the payment or performance by the Company or any of its Subsidiaries under that certain Convertible Debenture in the principal face amount of up to GBP 1,000,000, between Purchaser and Integra SP IPR Ltd., which is guaranteed by the Company; provided, however, that the maturity date of the Convertible Debenture shall be extended until the earlier of the First Closing Date or termination of this Agreement. 28 (m) As of the First Closing Date, the Purchaser shall have received from all of the "accredited investors" as defined in Rule 501 of Regulation D promulgated under the Securities Act that are participating in the First Closing, an agreement and undertaking satisfactory to the Purchaser pursuant to which such Person covenants and agrees not to exercise, assign or transfer any outstanding Options, warrants, convertible loans or other rights for the purchase of shares of capital stock or convertible securities of the Company, except in connection with the release or lapse of such Options, warrants, convertible loans or other rights as contemplated herein. 7.3 Conditions to Obligations of the Seller Group. The obligations of the Seller Group to consummate the transactions contemplated by this Agreement are subject to the satisfaction of the following conditions, unless waived (to the extent such conditions can be waived) by the Seller Group: (a) Accuracy of Representations and Warranties. All representations and warranties made by the Purchaser in this Agreement shall be true and correct in all material respects at and as of the First Closing Date with the same effect as if such representations and warranties had been made at and as of the First Closing Date (provided, however, that to the extent a representation is already limited to matters characterized as "material," it shall be correct in all respects), and the Seller Group shall have received a certificate to that effect signed by a principal executive officer of the Purchaser. (b) Performance of Obligations of the Purchaser. The Purchaser shall have performed in all material respects all obligations and covenants required to be performed by it under this Agreement prior to or as of the First Closing Date, and the Seller Group shall have received a certificate to that effect signed by a principal executive officer of the Purchaser. (c) Authorization. All action necessary to authorize the execution, delivery and performance of this Agreement by the Purchaser and the consummation of the transactions contemplated hereby and thereby, including the requisite shareholder approvals, shall have been duly and validly taken by the Purchaser, and the Purchaser shall have the full power and right to consummate the transactions contemplated hereby and thereby on the terms provided herein and therein. (d) Consents and Approvals. The Purchaser shall deliver to the Seller Group duly executed copies of all consents and approvals required for or in connection with the execution and delivery by the Purchaser of this Agreement to which it is a party, and the consummation of the transactions contemplated hereby and thereby, in form and substance reasonably satisfactory to the Seller Group. (e) Purchaser Certificates. The Purchaser shall cause each of the following certificates to be executed and/or delivered, as the case may be, by the Person who or which is the subject thereof: (i) a certificate of the secretary of the Purchaser, dated as of the First Closing Date, certifying (A) that true, correct and complete copies of the Purchaser's Charter Documents as in effect on the First Closing Date are attached thereto, (B) as to the incumbency and genuineness of the signatures of each officer of the Purchaser executing this Agreement on behalf of the Purchaser; and (C) the genuineness of the resolutions (attached thereto) of the board of directors or similar governing body of the Purchaser authorizing the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby and thereby; and (ii) certificates dated within ten (10) days of the First Closing Date of the secretaries of state of the states in which the Purchaser is organized, certifying as to the good standing and non-delinquent Tax status of the Purchaser. ARTICLE VIII INDEMNIFICATION 8.1 Generally. (a) Subject to the further provisions of this Article VIII, the Seller Indemnifying Persons, jointly and severally, shall indemnify the Purchaser Indemnified Persons for, and hold each of them harmless from and against, any and all Purchaser Losses arising from or in connection with any of the following: 29 (i) the untruth, inaccuracy or breach of any representation or warranty of the Company or the Stockholder contained in this Agreement or in any certificate delivered by the Company, the Stockholder or any of the Company's Subsidiaries in connection herewith or therewith at or before the First Closing (or any facts or circumstances constituting any such untruth, inaccuracy or breach); and (ii) the breach of any covenant or agreement of the Company or the Stockholder contained in this Agreement. (b) Subject to the further terms of this Article VIII, the Purchaser shall indemnify the Seller Indemnified Persons for, and hold each of them harmless from and against, any and all Seller Losses arising from or in connection with any of the following: (i) the untruth, inaccuracy or breach of any representation or warranty of Purchaser contained in this Agreement or in any certificate delivered by the Purchaser in connection herewith or therewith at or before the First Closing (or any facts or circumstances constituting any such untruth, inaccuracy or breach); and (ii) the breach of any covenant or agreement of the Purchaser contained in this Agreement. 8.2 Assertion of Claims. No claim for indemnification shall be brought under Section 8.1 for a breach of a representation or warranty unless the Indemnified Persons, or any of them, at any time prior to the applicable Survival Date, give the Indemnifying Persons (a) written notice of the existence of any such claim, specifying the nature and basis of such claim and the amount thereof, to the extent known, or (b) written notice pursuant to Section 8.3 of any Third Party Claim, the existence of which might give rise to such a claim for indemnification. Upon the giving of such written notice as aforesaid, the Indemnified Persons, or any of them, shall have the right to commence legal proceedings subsequent to the Survival Date for the enforcement of their rights under Section 8.1. 8.3 Notice and Defense of Third Party Claims. The obligations and liabilities of an Indemnifying Person with respect to Losses resulting from the assertion of liability by third parties (each, a "Third Party Claim") shall be subject to the following terms and conditions: (a) The Indemnified Persons shall give prompt written notice to the Indemnifying Persons of any Third Party Claim that might give rise to any Loss by the Indemnified Persons, stating the nature and basis of such Third Party Claim, and the amount thereof to the extent known; provided, however, that no delay on the part of the Indemnified Persons in notifying any Indemnifying Persons shall relieve the Indemnifying Persons from any liability or obligation hereunder unless (and then solely to the extent that) the Indemnifying Person thereby is prejudiced by the delay. Such notice shall be accompanied by copies of all relevant documentation with respect to such Third Party Claim, including any summons, complaint or other pleading that may have been served, any written demand or any other document or instrument. (b) If the Indemnifying Persons acknowledge in a writing delivered to the Indemnified Persons that such Third Party Claim is properly subject to their indemnification obligations hereunder, and the Indemnifying Persons demonstrate to the Indemnified Persons' reasonable satisfaction that the Indemnifying Persons have the financial resources to meet such indemnification obligations, then the Indemnifying Persons shall have the right to assume the defense of any Third Party Claim at their own expense and by their own counsel, which counsel shall be reasonably satisfactory to the Indemnified Persons; provided, however, that the Indemnifying Persons shall not have the right to assume the defense of any Third Party Claim, notwithstanding the giving of such written acknowledgment, if (i) the Indemnified Persons have been advised by counsel that there are one or more legal or equitable defenses available to them that are different from or in addition to those available to the Indemnifying Persons, and, in the reasonable opinion of the Indemnified Persons, counsel for the Indemnifying Persons could not adequately represent the interests of the Indemnified Persons because such interests could be in conflict with those of the Indemnifying Persons, (ii) such action or proceeding involves, or could have a material effect on, any matter beyond the scope of the indemnification obligation of the Indemnifying Persons, or (iii) the Indemnifying Persons have not assumed the defense of the Third Party Claim in a timely fashion. 30 (c) If the Indemnifying Persons assume the defense of a Third Party Claim (under circumstances in which the proviso to Section 8.3(b) is not applicable), the Indemnifying Persons shall not be responsible for any legal or other defense costs subsequently incurred by the Indemnified Persons in connection with the defense thereof. If the Indemnifying Persons do not exercise their right to assume the defense of a Third Party Claim by giving the written acknowledgment referred to in Section 8.3(b), or are otherwise restricted from so assuming by the proviso to Section 8.3(b), the Indemnifying Persons nevertheless shall be entitled to participate in such defense with their own counsel and at their own expense. If the defense of a Third Party Claim is assumed by the Indemnified Persons pursuant to clause (i) or clause (ii) of the proviso to Section 8.3(b), the Indemnified Persons shall not be entitled to settle such Third Party Claim without the prior written consent of the Indemnifying Persons, which consent shall not be unreasonably withheld or delayed. (d) If the Indemnifying Persons exercise their right to assume the defense of a Third Party Claim, (i) the Indemnified Persons shall be entitled to participate in such defense with their own counsel at their own expense, and (ii) the Indemnifying Persons shall not make any settlement of any claims without the prior written consent of the Indemnified Persons, which consent shall not be unreasonably withheld or delayed. 8.4 Survival of Representations and Warranties. (a) Subject to the further provisions of this Section 8.4, the representations and warranties of the Seller Group contained in Article IV or in any certificate or other writing delivered in connection with this Agreement shall survive the First Closing, and shall expire and be of no further force or effect on the third anniversary of the First Closing; provided, however, that the representations and warranties contained in Article III, Section 4.1, Section 4.2, Section 4.3, Section 4.4, Section 4.5, Section 4.10 and Section 4.20 shall survive the First Closing indefinitely and the representations and warranties contained in Section 4.9 and Section 4.18 shall survive the First Closing until ninety (90) days after the expiration of the applicable statutes of limitations for claims applicable to the matters covered thereby. Subject to the further provisions of this Section 8.4, the representations and warranties of the Stockholder contained in Article III or in any certificate or other writing delivered in connection with this Agreement and the representations and warranties of the Purchaser contained in Article V or in any certificate or other writing delivered in connection with this Agreement shall survive the First Closing indefinitely. The covenants and other agreements of the Seller Group and the Purchaser contained in this Agreement shall survive the First Closing until they are performed in full or otherwise expire or are terminated by their terms. For convenience of reference, the date upon which any representation or warranty contained herein shall terminate, if any, is referred to as the "Survival Date." (b) From and after the First Closing, the Stockholder shall not have any recourse against the Company for any breach of any representation, warranty, covenant or agreement of the Company set forth in this Agreement or in any certificate or other writing delivered by the Company in connection with this Agreement. 8.5 Limitations on Indemnification. (a) Indemnity Basket for the Stockholder. From and after the First Closing, the Purchaser Indemnified Persons (or any member thereof) shall not have the right to be indemnified pursuant to Section 8.1(a)(i) unless and until the Purchaser Indemnified Persons (or any member thereof) shall have incurred on a cumulative basis aggregate Losses in an amount exceeding GBP 37,500, whereupon the Purchaser Indemnified Persons (or any member thereof) shall be entitled to indemnification for all Losses incurred by the Purchaser Indemnified Persons (or any member thereof); provided, however, that in no event shall the limitations set forth in this Section 8.5(a) apply with respect to (i) any breaches of those representations and warranties set forth in Article III, Section 4.1, Section 4.2, Section 4.3, Section 4.4, Section 4.5, Section 4.10, or Section 4.20 (collectively, the "Excluded Seller Representations"), or (ii) any willful or knowing breach or any fraudulent or intentional acts or intentional misrepresentations of any member of the Seller Group. (b) Indemnity Limitations for the Stockholder. From and after the First Closing, the sum of all Losses incurred by the Purchaser Indemnified Persons (or any member thereof) pursuant to which indemnification is payable by the Stockholder pursuant to Section 8.1(a)(i) shall not exceed GBP 10,000,000; provided, however, that in no event shall the limitations set forth in this Section 8.5(b) apply with respect to (i) the Excluded Seller Representations, or (ii) any willful or knowing breach of such representations or warranties or any fraudulent or intentional acts or intentional misrepresentations of any member of the Seller Group. 31 (c) Indemnity Baskets for the Purchaser. From and after the First Closing, the Seller Indemnified Persons shall not have the right to be indemnified pursuant to Section 8.1(b)(i) unless and until the Seller Indemnified Persons (or any member thereof) shall have incurred on a cumulative basis aggregate Losses in an amount exceeding GBP 37,500, whereupon the Seller Indemnified Persons (or any member thereof) shall be entitled to indemnification for all Losses incurred by the Seller Indemnified Persons (or any member thereof); provided, however, that in no event shall the limitations set forth in this Section 8.5(c) apply with respect to any willful or knowing breach of such representations or warranties or any fraudulent or intentional acts or intentional misrepresentations of the Purchaser. (d) Indemnity Limitations for the Purchaser. From and after the First Closing, the sum of all Losses pursuant to which indemnification is payable by the Purchaser pursuant to Section 8.1(b)(i) shall not exceed GBP 10,000,000; provided, however, that in no event shall the limitations set forth in this Section 8.5(d) apply with respect to any willful or knowing breach of such representations or warranties or any fraudulent or intentional acts or intentional misrepresentations of the Purchaser. (e) Indemnity Limitation on Shares. From and after First Closing the sum of all Losses incurred by the Purchaser Indemnified Persons (or any member thereof) pursuant to which indemnification is payable by the Stockholder pursuant to Section 8.1(a)(i) shall be satisfied and any recovery may be made only against any shares in the Escrow Account and not against any of the other assets or property of the Stockholder; provided, however, that in no event shall the limitations set forth in this Section 8.5(e) apply with respect to (i) the Excluded Seller Representations, or (ii) any willful or knowing breach of such representations or warranties or any fraudulent or intentional acts or intentional misrepresentations of any member of the Seller Group. From and after First Closing the Purchaser and/or the Purchaser Indemnified Persons shall have no claim or right of action against the shareholders of the Company absent any fraudulent or intentional acts or intentional misrepresentations of any such shareholder of the Company. 8.6 Exclusion of certain claims. (a) No claim shall be made by the Purchaser against the Stockholder and the Stockholder shall have no liability to the Purchaser under this agreement, including the Warranties, in respect of any matter or liability, which is fairly and accurately disclosed in this Agreement as of the date of execution of this Agreement; (b) To the extent that it arises or is increased as a result of or is otherwise attributable to: (i) any change in or introduction of new law; (ii) any change in the rates of tax; or (iii) any change or withdrawal by any authority of any published administrative practice; in each case announced after First Closing; (c) To the extent that loss or liability is recoverable under a policy of insurance or otherwise at no cost to the Purchaser or the Company or its subsidiaries. 8.7 Mitigation. Nothing contained in this Agreement shall have the effect of relieving the Purchaser from any duty to mitigate any loss or damage suffered by it. 8.8 Parties to claim. The Warranties and the undertakings, covenants and indemnities given by the Stockholder and the Purchaser under this Agreement shall be actionable only by the original Purchaser and original Stockholder and no person other than the Purchaser or Stockholder may make any Claim or take any action against the other party under this Agreement. 32 ARTICLE IX TERMINATION; EFFECT OF TERMINATION 9.1 Termination. This Agreement may be terminated at any time prior to the First Closing by: (i) the mutual consent of the Purchaser and the Company; (ii) the Purchaser, if there has been a breach by any member of the Seller Group of any representation, warranty, covenant or agreement set forth in this Agreement that such breaching party fails to cure within ten (10) Business Days after notice thereof is given by the Purchaser (except no cure period shall be provided for any such breach that by its nature cannot be cured); (iii) the Company, if there has been a breach by the Purchaser of any representation, warranty, covenant or agreement set forth in this Agreement that the Purchaser fails to cure within ten (10) Business Days after notice thereof is given by the Company (except no cure period shall be provided for any such breach that by its nature cannot be cured); (iv) the Purchaser, if the conditions set forth in Section 7.1 or Section 7.2 have not been satisfied or waived by the Purchaser by January 31, 2005; (v) the Company, if the conditions set forth in Section 7.1 or Section 7.3 have not been satisfied or waived by the Company by January 31, 2005; or (vi) the Purchaser or the Company if any permanent injunction or other Order of a court or other competent Governmental Entity preventing the First Closing shall have become final, binding and non-appealable; provided, however, that neither the Purchaser nor the Company shall be entitled to terminate this Agreement pursuant to clause (iv) or clause (v) of this Section 9.1, respectively, if such party's breach (or, with respect to such termination by the Company, the Stockholder's breach) of this Agreement has prevented the satisfaction of any such condition. Any termination pursuant to clause (i) of this Section 9.1 shall be effected by a written instrument signed by the Purchaser and the Company, and any termination pursuant to this Section 9.1 (other than a termination pursuant to clause (i) of this Section 9.1) shall be effected by written notice from the party or parties so terminating to the other parties hereto, which notice shall specify the Section of this Agreement pursuant to which this Agreement is being terminated. If (i) this Agreement is terminated by the Purchaser pursuant to Section 9.1(ii) or (ii) the Seller Group fails to consummate the transaction contemplated by this Agreement before January 31, 2005, even though all conditions to Seller Group's obligations specified in Article VII hereof, and all conditions to Purchaser's obligations specified in Article VII hereof, shall have been satisfied or waived, in each case on or before January 31, 2005, the Company will promptly pay Purchaser a fee equal to US $75,000 in immediately available funds. Payment of the fees described in this Section 9.1 will be Purchaser's sole and exclusive remedy against the Seller Group in the event of (i) a termination of this Agreement by the Purchaser pursuant to Section 9.1(ii) or (ii) Seller Group's failure to consummate the transaction contemplated by this Agreement before January 31, 2005, if all conditions to Seller Group's obligations specified in Article VII hereof, and all conditions to Purchaser's obligations specified in Article VII hereof, shall have been satisfied or waived, in each case on or before January 31, 2005. If (i) this Agreement is terminated by the Company pursuant to Section 9.1(iii) or (ii) Purchaser fails to consummate the transaction contemplated by this Agreement before January 31, 2005, even though all conditions to Purchaser's obligations specified in Article VII hereof, and all conditions to Seller Group's obligations specified in Article VII hereof, shall have been satisfied or waived, in each case on or before January 31, 2005, Purchaser will promptly pay Company a fee equal to US $75,000 in immediately available funds. Payment of the fees described in this Section 9.1 will be Seller Group's sole and exclusive remedy against the Purchaser in the event of (i) a termination of this Agreement by the Company pursuant to Section 9.1(iii) or (ii) Purchaser's failure to consummate the transaction contemplated by this Agreement before January 31, 2005, if all conditions to Purchaser's obligations specified in Article VII hereof, and all conditions to Seller Group's obligations specified in Article VII hereof, shall have been satisfied or waived, in each case on or before January 31, 2005. 33 9.2 Effect of Termination. In the event of the termination of this Agreement pursuant to Section 9.1, this Agreement shall be of no further force or effect, except for Section 6.4, Section 6.9, Section 6.13, this Section 9.2 and Article X, each of which shall survive the termination of this Agreement; provided, however, that the Liability of any party for any breach by such party of the representations, warranties, covenants or agreements of such party set forth in this Agreement occurring prior to the termination of this Agreement shall survive the termination of this Agreement, and, in the event of any action for breach of contract in the event of a termination of this Agreement, the prevailing party shall be reimbursed by the other party to such action for all fees, costs and expenses relating to such action incurred by the prevailing party, including the fees, costs and expenses of attorneys, accountants and other professional advisers, and including those incurred in the investigation of any such breach and in enforcing the terms of this Section 9.2. ARTICLE X MISCELLANEOUS PROVISIONS 10.1 Amendment. This Agreement may not be altered or otherwise amended except pursuant to an instrument in writing signed by each party, except that any party may waive any obligation owed to it by another party under this Agreement. No waiver by any party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence. 10.2 Entire Agreement. This Agreement and the other agreements and documents referenced herein (including the Schedules, Annexes and Exhibits (in their executed form) attached hereto) and any other document or agreement contemporaneously entered into with this Agreement contain all of the agreements among the parties hereto with respect to the transactions contemplated hereby and supersede all prior agreements or understandings among the parties with respect thereto (including the Letter of Intent (the "Letter of Intent") dated July 30, 2004, by and between the Stockholder and the Purchaser). 10.3 Severability. It is the desire and intent of the parties that the provisions of this Agreement be enforced to the fullest extent permissible under the Laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, in the event that any provision of this Agreement would be held in any jurisdiction to be invalid, prohibited or unenforceable for any reason, such provision, as to such jurisdiction, shall be ineffective, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. Notwithstanding the foregoing, if such provision could be more narrowly drawn so as not to be invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. 10.4 Benefits of Agreement. All of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns. Except as expressly provided herein, this Agreement shall not confer any rights or remedies upon any Person other than the foregoing. Anything contained herein to the contrary notwithstanding, (a) this Agreement shall not be assignable by any member of the Seller Group without the express written consent of the Purchaser and (b) the Purchaser may, without the consent of any other party hereto, (i) assign any or all of its rights and interests hereunder to one or more of its Affiliates and designate one or more of its Affiliates to perform its obligations hereunder, and (ii) assign any or all of its rights and interests hereunder as security for any obligations arising in connection with the financing of the transactions contemplated hereby, in any or all of which cases the Purchaser nonetheless shall remain responsible for the performance of its obligations hereunder. 34 10.5 Expenses; Sales and Transfer Taxes. Except as otherwise provided in this Agreement, the Purchaser on the one hand and the Seller Group on the other hand shall each bear their own expenses incurred in connection with this Agreement (including the legal, accounting and due diligence fees, costs and expenses incurred by such party) and shall each pay their own sales, use, gains and excise Taxes and all registration or transfer taxes that may be payable in connection with or arising as a result of the consummation of the transaction contemplated by this Agreement. 10.6 Remedies. The parties each shall have and retain all rights and remedies existing in their favor under this Agreement, at law or in equity, including rights to bring actions for specific performance, injunctive and other equitable relief (including the remedy of rescission) to enforce or prevent a breach or violation of any provision of this Agreement, and all such rights and remedies shall, to the extent permitted by applicable Law, be cumulative and a party's pursuit of any such right or remedy shall not preclude such party from exercising or pursuing any other available right or remedy. 10.7 Notices. All notices or other communications pursuant to this Agreement shall be in writing and shall be deemed to be sufficient if delivered personally, telecopied, sent by nationally-recognized, overnight courier or mailed by registered or certified mail (return receipt requested), postage prepaid, to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (i) if to the Company or the Stockholder, to: Integra SP Holdings LTD. 45 Tabernacle Street London EC2A 4AA Attention: Sven Thiele Telephone No.: 44 (0) 20 7608 7220 Facsimile No.: 44 (0) 20 7608 7221 with a copy to: Bircham Dyson Bell 50 Broadway Westminster London SW1H 0BL Attention: Guy Vincent Telephone No.: +44 (0)20 7227 7000 Facsimile No.: +44 (0)20 7222 3480 (ii) if to the Purchaser, to: Tiger Telematics, Inc. 10201 Centurion Parkway North Suite 600 Jacksonville, Florida 32256 Attention: Michael W. Carrender Telephone No.:(904) 279-9240 Facsimile No.:(904) 279-9242 with a copy to: Smith Hulsey & Busey 225 Water Street, Suite 1800 Jacksonville, Florida 32202 Attention: John R. Smith, Jr. Telephone No.:(904) 359-7700 Facsimile No.:(904) 359-7712 All such notices and other communications shall be deemed to have been given and received (i) in the case of personal delivery, on the date of such delivery, 35 (ii) in the case of delivery by telecopy, on the date of such delivery, (iii) in the case of delivery by nationally-recognized, overnight courier, on the Business Day following dispatch, and (iv) in the case of mailing, on the third Business Day following such mailing. 10.8 Counterparts and Facsimile Execution. This Agreement may be executed in two or more counterparts, and each such counterpart shall be deemed to be an original instrument. All such counterparts shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered (by facsimile or otherwise) to the other parties, it being understood that all parties need not sign the same counterpart. Any counterpart or other signature hereupon delivered by facsimile shall be deemed for all purposes as constituting good and valid execution and delivery of this Agreement by such party. 10.9 Governing Law. (a) THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICTING PROVISION OR RULE (WHETHER OF THE STATE OF DELAWARE, OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF DELAWARE TO BE APPLIED. (b) BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH THAT APPLICABLE LAWS, EVIDENTIARY RULES AND JUDICIAL PROCEDURES APPLY OR THAT APPLICABLE LAWS AND ARBITRATION RULES IN CASES IN WHICH THE PARTIES HAVE EXPRESSLY AGREED TO SUBMIT ANY SUCH DISPUTES TO BINDING ARBITRATION APPLY, THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS, EVIDENTIARY RULES AND JUDICIAL PROCEDURES, OR BY AN ARBITRATOR APPLYING APPLICABLE LAWS AND ARBITRATION RULES IN SUCH CASES WHERE THEY HAVE EXPRESSLY AGREED TO BINDING ARBITRATION. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT OR ANY DOCUMENTS RELATED HERETO. THE PARTIES HERETO AGREE THAT ALL DISPUTES AMONG THEM ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT SHALL BE RESOLVED EXCLUSIVELY BY STATE OR FEDERAL COURTS LOCATED IN THE CITY OF JACKSONVILLE, FLORIDA, AND ANY APPELLATE COURT FROM ANY THEREOF. 10.10 Jurisdiction and Venue. (a) Each of the parties hereto hereby irrevocably and unconditionally submits, for himself, herself or itself and his, her or its property, to the exclusive jurisdiction of any Florida state court or federal court of the United States of America sitting in Jacksonville, Florida, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereunder or for recognition or enforcement of any judgment relating thereto, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in any such Florida state court or, to the extent permitted by law, in any such federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. (b) Each of the parties hereto hereby irrevocably and unconditionally waives, to the fullest extent he, she or it may legally and effectively do so, any objection that he, she or it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereunder in any Florida state or federal court of the United States of America sitting in Jacksonville, Florida. Each of the parties hereto hereby irrevocably waives, to the fullest extent he, she or it may legally and effectively do so, the defense of an inconvenient forum to the maintenance of such suit, action or proceeding in any such court. (c) Each of the parties hereto hereby agree that the mailing by certified or registered mail, return receipt requested, of any process required by any such court shall constitute valid and lawful service of process against them, without the necessity for service by any other means provided by law. 36 10.11 Mutual Contribution. The parties to this Agreement and their respective counsel have contributed mutually to the drafting of this Agreement. Consequently, no provision of this Agreement shall be construed against any party on the ground that a party drafted the provision or caused it to be drafted. 10.12 No Third Party Beneficiaries. Except as expressly provided in this Agreement, this Agreement shall not confer any rights or remedies upon any Person other than the parties hereto and their respective successors and permitted assigns. 10.13 Independence of Covenants and Representations and Warranties. All covenants hereunder shall be given independent effect so that if a certain action or condition constitutes a default under a certain covenant, the fact that such action or condition is permitted by another covenant shall not affect the occurrence of such default, unless expressly permitted under an exception to such initial covenant. In addition, all representations and warranties hereunder shall be given independent effect so that if a particular representation or warranty proves to be incorrect or is breached, the fact that another representation or warranty concerning the same or similar subject matter is correct or is not breached shall not affect the incorrectness of or a breach of a representation and warranty hereunder. 10.14 Interpretation; Construction. The term "Agreement" means this Purchase Agreement together with all Schedules, Annexes and Exhibits hereto, as the same may from time to time be amended, modified, supplemented or restated in accordance with the terms hereof. Certain capitalized terms used and not otherwise defined elsewhere in this Agreement have the meanings given to them in Annex II attached hereto. In this Agreement, the term "knowledge" of any Person means (i) the actual knowledge of such Person, and (ii) that knowledge that should have been acquired by such Person after making such reasonable inquiry and exercising such reasonable due diligence as a prudent businessperson would have made or exercised in the management of his or her business affairs, including reasonable inquiry of those directors, officers, key employees and professional advisors (including attorneys, accountants and consultants) of such Person who could reasonably be expected to have actual knowledge of the matters in question. For purposes of the preceding sentence, the knowledge, both actual and constructive, of the Stockholder and each other director, officer and key employee of the Company and its Subsidiaries shall be imputed to each member of the Seller Group. The use in this Agreement of the word "including" means "including, without limitation." The words "herein," "hereof," "hereunder," "hereby," "hereto," "hereinafter," and other words of similar import refer to this Agreement as a whole, including the Schedules, Annexes and Exhibits, as the same may from time to time be amended, modified, supplemented or restated, and not to any particular article, section, subsection, paragraph, subparagraph or clause contained in this Agreement. All references to articles, sections, subsections, paragraphs, subparagraphs, clauses, Schedules, Annexes and Exhibits mean such provisions of this Agreement and the Schedules, Annexes and Exhibits attached to this Agreement, except where otherwise stated. The title of and the article, section and paragraph headings in this Agreement are for convenience of reference only and shall not govern or affect the interpretation of any of the terms or provisions of this Agreement. The use herein of the masculine, feminine or neuter forms also shall denote the other forms, as in each case the context may require. Where specific language is used to clarify by example a general statement contained herein, such specific language shall not be deemed to modify, limit or restrict in any manner the construction of the general statement to which it relates. The language used in this Agreement has been chosen by the parties to express their mutual intent, and no rule of strict construction shall be applied against any party. Accounting terms used but not otherwise defined herein shall have the meanings given to them under GAAP. Unless expressly provided otherwise, the measure of a period of one month or year for purposes of this Agreement shall be that date of the following month or year corresponding to the starting date, provided that if no corresponding date exists, the measure shall be that date of the following month or year corresponding to the next day following the starting date. For example, one month following February 18 is March 18, and one month following March 31 is May 1. * * * * * 37 IN WITNESS WHEREOF, the parties hereto have executed this Purchase Agreement as of the date first written above. Company: ------- INTEGRA SP HOLDINGS LTD. By: ----------------------------------- Sven Thiele, CEO Stockholder: ----------- INTEGRA SP NOMINEE LTD. By: ----------------------------------- Sven Thiele, CEO Purchaser: --------- TIGER TELEMATICS, INC. By: ----------------------------------- Michael W. Carrender, CEO 38 Management Stockholders: ------------------------- The following individuals are signing this Agreement solely for the purpose of agreeing to be bound by the provisions of Section 6.8 of this Agreement. ____________________________________________ Sven Thiele, Individually ____________________________________________ Alan Palmer, Individually ____________________________________________ David Ventris, Individually 39 ANNEX I Stockholder ----------- Name and Address - ---------------- INTEGRA SP NOMINEE LTD. 40 ANNEX II Certain Definitions ------------------- "Acquisition Proposal" means any offer, proposal or indication of interest in (i) the direct or indirect acquisition or sale of all or any material part of the Company or any of its Subsidiaries (whether by stock sale or asset sale), (ii) a merger, consolidation or other similar business combination, or a reorganization, recapitalization or other similar transaction, directly or indirectly involving the Company or any of its Subsidiaries, (iii) the direct or indirect acquisition of any capital stock or other securities of the Company or any of its Subsidiaries, or (iv) any stock sale or issuance or debt and/or equity financing directly or indirectly involving the Company or any of its Subsidiaries. "Affiliate" means, with respect to any Person, (i) a partner, member, owner, shareholder, trustee, director or officer of such Person or of any Person identified in clause (iii) below, (ii) a spouse, parent, sibling or descendant of such Person (or spouse, parent, sibling or descendant of any partner, member, owner, shareholder, trustee, director or officer of such Person or of any Person identified in clause (iii) below), and (iii) any other Person that, directly or indirectly through one or more intermediaries, Controls, is Controlled by or is under common Control with such Person. "Arbitrating Accountants" means such independent "Big 5" public accounting firm as shall be agreed upon by the Purchaser and the Stockholder in writing or, if the Purchaser and the Stockholder cannot so agree, by lot from among the independent "Big 5" public accounting firms (other than the Purchaser's Accountants and PriceWaterhouseCoopers). "Business Day" means any day that is not a Saturday, Sunday or a day on which banking institutions in New York, New York are authorized or required to be closed. "Capital Lease" means any obligation to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) assets or properties, whether real, personal or mixed, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person as of such date computed in accordance with GAAP. "Charter Documents" means, (i) as to any corporation, the articles, certificate or memorandum of incorporation or association of such corporation, the by-laws of such corporation, and each other instrument or other document governing such corporation's existence and internal affairs, (ii) as to any limited partnership, the certificate of limited partnership of such partnership, the agreement of limited partnership of such partnership, and each other instrument or other document governing such partnership's existence and internal affairs, (iii) as to any limited liability company, the articles, certificate or memorandum of organization of such limited liability company, the operating agreement of such limited liability company, and each other instrument or other document governing such limited liability company's existence and internal affairs, and (iv) as to any trust, the agreement or other instrument creating such trust and any and all other documents, instruments and certificates granting (and limiting) the powers and authorities of such trust and the trustee(s) thereof and governing the activities and operations of such trust and the trustee(s) thereof, in each case in clauses (i) through (iv) above, as amended and restated and in effect at the time in question. "Commission" means the United States Securities and Exchange Commission, or any Governmental Entity succeeding to the functions thereof. "Contract" means any loan or credit agreement, note, bond, mortgage, indenture, license, lease, sublease, grant of easement, right of way, purchase order, sale order, service order, or other contract, agreement, commitment, instrument, permit, concession, franchise or license, whether written or oral. "Control" means, with respect to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by Contract or otherwise. "Employee Benefit Plan" means any employee benefit, fringe benefit, compensation, severance, incentive, bonus, profit-sharing, stock option, stock purchase or other plan, program or arrangement, whether or not funded. "Encumbrances" means and includes security interests, mortgages, liens, pledges, charges, easements, reservations, restrictions, rights of way, servitudes, options, rights of first refusal, community property interests, equitable interests, restrictions of any kind and all other 1 encumbrances, whether or not relating to the extension of credit or the borrowing of money; provided, however, Encumbrances shall not include any restrictions imposed by United States federal and state securities laws. "Environmental, Health and Safety Laws" means all Laws, Permits, Orders, Contracts and common law relating to or addressing pollution or protection of the environment, public health and safety, or employee health and safety, including all those relating to the presence, use, production, generation, handling, transportation, treatment, storage, disposal, distribution, labeling, testing, processing, discharge, release, threatened release, control or cleanup of any hazardous materials, substances or wastes, chemical substances or mixtures, pesticides, pollutants, contaminants, toxic chemicals, petroleum products or byproducts, asbestos, polychlorinated biphenyls, noise or radiation, in each case as amended and in effect from time to time. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and any successor legislation thereto, and the rules and regulations promulgated thereunder, all as the same shall be in effect from time to time. "ERISA Affiliate" means, with respect to any Person, any other Person that is a member of a "controlled group of corporations" with, or is under "common control" with, or is a member of the same "affiliated service group" with such Person as defined in Section 414(b), 414(c), 414(m) or 414(o) of the Code. "Exchange Rate" means the average closing currency conversion rate published on www.msn.com, or if such website is not available, on another currency conversion website mutually agreeable to the Purchaser and the Stockholder, averaged over a period of 11 days consisting of the day as of which the "Exchange Rate" is being determined and the 10 consecutive business days prior to such day. "Funded Indebtedness" means, without duplication, the aggregate amount (including the current portions thereof) of all (i) indebtedness for money borrowed by the Company or any of its Subsidiaries from other Persons (including any prepayment and similar penalties) and purchase money indebtedness (other than accounts payable in the ordinary course of business, consistent with past practice); (ii) indebtedness of the type described in clause (i) above guaranteed, directly or indirectly, in any manner by the Company or any of its Subsidiaries or in effect guaranteed, directly or indirectly, in any manner by the Company or any of its Subsidiaries through a Contract or other understanding or arrangement, contingent or otherwise, to supply funds to, or in any other manner invest in, the debtor, or to purchase indebtedness, or to purchase and pay for property if not delivered or pay for services if not performed, primarily for the purpose of enabling the debtor to make payment of the indebtedness or to assure the owners of the indebtedness against loss (any such Contract or other understanding or arrangement being referred to as a "Guaranty") (but the term "Guaranty" shall exclude endorsements of checks and other instruments in the ordinary course or business, consistent with past practice); (iii) all indebtedness of the type described in clause (i) above secured by any Encumbrance upon assets or properties owned by the Company or any of its Subsidiaries even though the Company or any such Subsidiary has not in any manner become liable for the payment of such indebtedness; (iv) Capital Leases, and (v) all interest expense and other charges accrued but unpaid, and all prepayment penalties and premiums, on or relating to any of such indebtedness. Funded Indebtedness of the Company and each of its Subsidiaries as of the date hereof is set forth on Schedule 4.13(d). "GAAP" means generally accepted accounting principles in the United Kingdom, as promulgated by the English Institute of Certified Public Accountants, consistently applied. "Governmental Entity" means any domestic or foreign government or political subdivision thereof, whether on a federal, state, provincial or local level and whether legislative, executive, judicial in nature, including any agency, authority, board, bureau, commission, court, department or other instrumentality thereof. "Guaranty" has the meaning given to it in the definition of Funded Indebtedness. "Income Taxes" means all income Taxes (including any Tax on or based upon net income, gross income, income as specially defined, earnings, profits or selected items of income, earnings or profits (including state Taxes imposed on subchapter S corporations)). "Indemnified Persons" means and includes the Seller Indemnified Persons and/or the Purchaser Indemnified Persons, as the case may be. "Indemnifying Persons" means and includes the Seller Indemnifying Persons and/or the Purchaser Indemnifying Persons, as the case may be. 2 "Intellectual Property Rights" means all intellectual property rights, including patents, patent applications, trademarks, trademark applications, trade names, service marks, service mark applications, trade dress, logos and designs, and the goodwill connected with the foregoing, copyrights and copyright applications, know-how, trade secrets, proprietary processes and formulae, confidential information, franchises, licenses, inventions, instructions, marketing materials and all documentation and media constituting, describing or relating to the foregoing, including manuals, memoranda and records. "Law" means any applicable domestic or foreign law, statute, treaty, rule, directive, regulation, ordinance or similar provision having the force or effect of law, whether on a federal, state, provincial or local level (including all Environmental, Health and Safety Laws), or any applicable Order of any Governmental Entity. "Liability" means any actual or potential liability or obligation, whether known or unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued, or liquidated or unliquidated, and whether due or to become due, regardless of when asserted. "Litigation Expense" means any out-of-pocket expenses incurred in connection with investigating, defending or asserting any claim, legal or administrative action, suit or Proceeding incident to any matter indemnified against hereunder, including court filing fees, court costs, arbitration fees or costs, witness fees, and fees and disbursements of outside legal counsel, investigators, expert witnesses, accountants and other professionals. "Losses" means any and all losses (including a diminution in the value of the Company's capital stock), claims, shortages, damages, expenses (including reasonable attorneys' and accountants' and other professionals' fees and Litigation Expenses), assessments and Taxes (including interest and penalties thereon), as reduced by (i) the amount actually recovered under insurance policies (net of deductibles and incidental expenses resulting therefrom), and (ii) Tax benefits actually realized under Tax Laws in respect of such Losses, net of all reasonable costs and expenses of recovering any such Tax benefits. For purposes of determining Tax benefits actually realized, there shall be included only those Tax benefits resulting from such Loss that are actually realized before the taxable year in which a payment for a Loss is received and Tax benefits resulting from such Loss that are actually realized in the taxable year in which a payment for a Loss is received, as increased by (x) the amount of any Taxes payable on such indemnification payment and (y) the amount of any Taxes payable on the payment referred to in clause (x) hereof. The Purchaser and each member of the Seller Group hereby agree that the Purchase Price shall be deemed to be decreased by the amount of any payment made by the Seller Indemnifying Persons to the Purchaser with respect to Losses incurred by the Purchaser Indemnified Persons for which the Seller Indemnifying Persons was obligated to indemnify the Purchaser Indemnified Persons. "Management Stockholder" means those individuals set forth on the signature pages of this Agreement and identified as signing this Agreement solely for purposes of agreeing to be bound by Section 6.8 of this Agreement. "Market Price" of any security means the average of the closing prices of such security's sales on all securities exchanges on which such security may at the time be listed, or, if there has been no sales on any such exchange on any day, the average of the highest bid and lowest asked prices on all such exchanges at the end of such day, or, if on any day such security is not so listed, the average of the representative bid and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time, or, if on any day such security is not quoted in the NASDAQ System, the average of the highest bid and lowest asked prices on such day in the domestic over-the-counter market as reported by the National Quotation Bureau, Incorporated, or any similar successor organization, in each such case averaged over a period of 11 days consisting of the day as of which "Market Price" is being determined and the 10 consecutive business days prior to such day. "NASDAQ" means the National Association of Securities Dealers, Inc. Automated Quotation System. "Orders" means judgments, writs, decrees, compliance agreements, injunctions or judicial or administrative orders and determinations of any Governmental Entity or arbitrator. "Permits" means all permits, licenses, authorizations, registrations, franchises, approvals, consents, certificates, variances and similar rights obtained, or required to be obtained, from a Governmental Entity. "Permitted Encumbrances" means (i) Encumbrances for Taxes not yet due and payable or being contested in good faith by appropriate Proceedings 3 and for which there are adequate reserves on the books, (ii) workers' or unemployment compensation liens arising in the ordinary course of business, and (iii) mechanic's, materialman's, supplier's, vendor's or similar liens arising in the ordinary course of business, consistent with past practice, securing amounts that are not delinquent. "Person" shall be construed as broadly as possible and shall include an individual or natural person, a partnership (including a limited liability partnership), a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, a business, a Governmental Entity, and any other entity. "Proceeding" means any action, suit, investigation or proceeding before any Governmental Entity or arbitrator. "Purchaser Indemnified Persons" means and includes the Purchaser and its Affiliates (including, following the First Closing, the Company), their respective successors and assigns, and the respective officers, directors, successors and permitted assigns and controlling parties of each of the foregoing; provided, however, that any such Person who was, prior to the First Closing Date, an officer, director, employee, Affiliate, successor or assign of the Company or any of its Subsidiaries, or a Stockholder, shall not in such capacity, be a Purchaser Indemnified Person with respect to a breach of this Agreement based on facts or circumstances occurring, or actions taken by such Person, at or prior to the First Closing. "Purchaser Indemnifying Persons" means the Purchaser and its successors. "Purchaser Losses" means any and all Losses sustained, suffered or incurred by any Purchaser Indemnified Person arising from or in connection with any matter that is the subject of indemnification under Article VIII. "Purchaser's Accountants" means GGK/Smith & Williamson (Nexia Audit Group). "Securities" means "securities" as defined in Section 2(1) of the Securities Act. "Securities Act" means the United States Securities Act of 1933, as amended, or any successor federal statute, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect from time to time. "Securities Exchange Act" means the United States Securities Exchange Act of 1934, as amended, or any successor federal statute, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect from time to time. "Seller Indemnified Persons" means and includes either (i) if the First Closing does not occur, the Company, each of the Company's Subsidiaries, each Stockholder, and their respective Affiliates, directors, officers, successors and permitted assigns or (ii) if the First Closing occurs, each Stockholder and his personal representatives, estate, heirs, successors and permitted assigns. "Seller Indemnifying Persons" means and includes either (i) if the First Closing does not occur, the Company, each of the Company's Subsidiaries, the Stockholder, and their respective successors and permitted assigns, or (ii) if the First Closing occurs, the Stockholder and its successors and permitted assigns. "Seller Losses" means any and all Losses sustained, suffered or incurred by any Seller Indemnified Person arising from or in connection with any matter that is the subject of indemnification under Article VIII. "Subsidiary" means, with respect to any Person, any other Person (i) whose Securities having a majority of the general voting power in electing the board of directors or equivalent governing body of such Person (excluding Securities entitled to vote only upon the failure to pay dividends thereon or the occurrence of other contingencies) are, at the time as of which any determination is being made, owned by such Person either directly or indirectly through one or more other entities constituting Subsidiaries, or (ii) a fifty percent (50%) interest in the profits or capital of whom is, at the time as of which any determination is being made, owned by such Person either directly or indirectly through one or more other entities constituting Subsidiaries. "Tax Return" means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof. 4 "Taxes" means, with respect to any Person, (i) all Income Taxes and all gross receipts, sales, use, ad valorem, transfer, franchise, license, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property or windfall profits taxes, alternative or add-on minimum taxes, customs duties and other taxes, fees, assessments or charges of any kind whatsoever, together with all interest and penalties, additions to tax, and other additional amounts imposed by any taxing authority (domestic or foreign) on such Person, and (ii) any liability for the payment of any amount of the type described in the foregoing clause (i) as a result of (A) being a "transferee" (within the meaning of Section 6901 of the Code or any other applicable Law) of another Person, (B) being a member of an affiliated, combined or consolidated group, or (C) a Contract or other understanding or arrangement. "TIGR Shares" means, restricted shares of common stock, .001 Dollar par value per share, of Purchaser, issued as "restricted securities" within the meaning of the Securities Act and represented by stock certificates bearing the following legend: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. WITHOUT SUCH REGISTRATIONS, SUCH SECURITIES MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED, EXCEPT UPON DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATIONS ARE NOT REQUIRED FOR SUCH TRANSFER OR THE SUBMISSION TO THE COMPANY TO THE EFFECT THAT ANY SUCH TRANSFER WILL NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED, APPLICABLE STATE SECURITIES LAWS OR ANY RULE OR REGULATION PROMULGATED THEREUNDER." 5 SELLER GROUP SCHEDULES Disclosure Unless the context otherwise requires words and expressions defined in the Agreement shall have the same meaning in these Schedules. The representations, warranties and indemnities contained in this Agreement are made and given subject to the disclosures referred to or contained in these Schedules. The Stockholder shall not be or be deemed to be in breach of any of those representations, warranties or indemnities (and no claim shall lie or liability attach) in respect of any matter which is fairly and accurately disclosed in these Schedules. The following are disclosed or are deemed to have been disclosed by these Schedules: (a) any matter specifically described in written correspondence between the Stockholder, the Stockholder's agents, the Company, any subsidiary or the Stockholder's Solicitors and the Purchaser's Solicitors and accountants on or before the date of these Schedules in relation to the Agreement or any transactions under or associated with it; (b) all the contents of the documents described in the attached disclosure schedules (true, correct and complete copies of which have been provided to Purchaser and initialed on behalf of the Stockholder and the Purchaser for purposes of identification); and (c) any matter specifically referred to in the Agreement or in any document referred to in it. SCHEDULE 3.1 The Stockholder is a nominee company formed for the purpose of this transaction and will hold the Shares on behalf of the Shareholders, for the purpose of transferring them to the Purchaser. The Stockholder will acquire these Shares prior to Closing. The Company has granted a number of options over its shares. The Company will be inviting those option holders to exercise their options prior to Closing and upon exercise of those options and grant of Shares to those option holders those new shareholders will be asked to transfer their Shares to the Stockholder. The Company is taking advice on the nominee structure whereby the option holder may set off the price for exercising their options (in total some (pound)6m) against an equivalent value of Integra shares. This will have a neutral effect on the balance sheet of the Company. Neither the Company nor the Stockholder is aware of any Encumbrance over the Shares. The rules of the Integra SP Holdings Limited 2001 Employees Share Option Scheme (governed by English law) and ISO option scheme (governed by US law) are disclosed in the Disclosure Document at Tab 3 of Volume 1. The Shareholders Agreement entered into between shareholders of the Company is disclosed at Tab 3 of Volume 1 of the Disclosure Document. The Shareholders Agreement contains certain restrictions on the ability of the Shareholders to transfer their shares without the agreement of the other shareholders. The Articles of Association of the Company (which is disclosed at Tab 2 of Volume 1 of the Disclosure Document) also contains restrictions on the ability of the Shareholders to sell their Shares. The Shareholders will be required to waive their pre-emption rights. Details of subsidiaries of the Company, namely Integra SP Limited, Integra SP Inc, Integra France SAS and Integra SP IPR Limited appear at Tab 1 of Volume 1 of the Disclosure Document. 6 SCHEDULE 3.3 The Shareholders will be required to waive their pre-emption rights and their rights under the Shareholders Agreement. The Board of Directors of the Company will be required to comply with their obligations under the Financial Services and Markets Act 2000 by delivering to the Shareholders a letter of offer approved by an approved body to be appointed and enclosing a letter of offer from the Purchaser. SCHEDULE 3.5 The Company has employed brokers KBC Peel Hunt and the terms of their retainer appear in a letter dated 8 June 2004, which appears at Tab 5 of Volume 1 of the Disclosure Document together with an email confirming their agreement with the Company regarding their revised fees and payment terms. SCHEDULE 4.1 See the disclosures under Article 3 above. Integra SP Limited trades in the United States and the European Community. Integra SP Inc trades in the United States. Integra SP France SAS trades in Spain, France and Portugal. Integra SP IPR Limited trades in the UK. SCHEDULE 4.2 See the disclosures under Article 3 above. Board minutes authorizing the execution of this agreement appear at Tab 7 of Volume 1 of the Disclosure Document. SCHEDULE 4.3 See the disclosures in Schedule 3 above. Application has been made for approval by the Inland Revenue in the United Kingdom of the status of the Stockholder as a nominee company. SCHEDULE 4.4 A schedule showing the capital structures of the Company and its subsidiaries, including options granted and outstanding appear at Tab 9 of Volume 1 of the Disclosure Document. A shareholder in the Company, James Hale, agreed to transfer his shares in the Company. These shares have been transferred over a period of time to various other shareholders in the Company. It is arguable under the terms of the Shareholders Agreement that these transfers need the consent of the Shareholders 7 and an extraordinary general meeting of the Company was called for 28 October 2004, under which a Shareholders resolution was passed authorizing these transfers subject to the approval of the Remuneration Committee. A copy of the resolution passed at this meeting appears at Tab 9 of Volume 1 of the Disclosure Documents. Prior to Closing the Company will undertake the following transactions: a) the following options will be issued: Issue of option certificates set out in Capitalization Table at Tab 9 of Volume 1 of the Disclosure Document. b) the following shares will be issued: Allot 93,750 shares to Ken Yeadon. Approximately 85,000 A Ordinary Shares in issue transferred from James Hale to other shareholders. c) the following loans will be converted to shares: As per Shareholder Interest Loan Table at Tab 11 of Volume 1 of the Disclosure Document SCHEDULE 4.5 There are a number of inter-company loans between the Company and its subsidiaries, details of which appears at Tab 11 of Volume 1 of the Disclosure Document. Integra SP Limited has a bank facility with the Bank of Scotland with an overdraft facility. A copy of the facility letter appears at Tab 11 of Volume 1 of the Disclosure Document. The Company has entered into loan agreements with a number Shareholders on the basis that the Shareholders may convert their loans into shares. Details of the current outstanding Shareholder loans appear at Tab 11 of Volume 1 of the Disclosure Document. Prior to the Closing Date, the Company will subject to the terms of the Agreement pay all amounts outstanding under any Shareholder loans in full. SCHEDULE 4.6 The audited accounts of the Company and Integra SP Limited and its group for the year to 30 June 2002 appear at Tab 12 of Volume 1 of the Disclosure Document. The consolidated audited accounts of the Company and its group for the years to 30 June 2003 and 30 June 2004 are in draft and will be completed and signed off by the Company's auditors and by the Company and disclosed prior to Closing. The Company and its subsidiaries are in breach of their obligations to deliver these accounts to Companies House and have incurred penalty fines of (pound)1500 in total relating to 2003 account for Integra SP Limited, Integra SP Holdings Limited and Integra SP IPR Limited. The unaudited management accounts of the Company and its group containing a profit and loss account for the period from the 1 July 2004 to 30 September 2004 and a balance sheet as at 30 September 2004 appear at Tab 12 of Volume 1 of the Disclosure Document. 8 SCHEDULE 4.6(c) A computer printout of the debtors and creditors of the Company and its subsidiaries appear at Tab 13 of Volume 1 of the Disclosure Document and show the balances as at 30 September 2004. There is a provision in the accounts for deferred salaries and fees including tax and NIC. Details appear at Tab 13 of Volume 1 of the Disclosure Document. SCHEDULE 4.8(ii) Prior to closing, all the option holders who hold options granted by the Company will be invited to exercise their options in exchange for shares. See disclosures under Article III above. As of the Closing Date, the Company will subject to the terms of the Agreement have no outstanding securities that are convertible into, exchangeable for, or carrying the right to acquire, any equity securities of the Company or any of its Subsidiaries. SCHEDULE 4.9 Neither the Company nor any member of its group have made nor are they required to make any tax filings in the United States. Integra SP Limited is approximately one month in arrears in payment of PAYE to the Inland Revenue, which is some (pound)60,000 outstanding to pay. Integra SP Limited is to pay VAT over a period and there is currently (pound)22,000 outstanding which will be paid in the first half of November. As of the Closing Date, Integra SP Limited expect to be current in all amounts payable by it to Inland Revenue, including, without limitation amounts due for PAYE and VAT. The company has received notice from the Inland Revenue that it will be carrying out a routine PAYE inspection of the Company and its subsidiaries in early November. Neither the Company nor Integra SP France SAS has filed any tax returns with respect to Integra SP France SAS and no such tax returns are required to be filed. The tax returns made by the Company and its UK subsidiaries for the tax year to 5 April 2003 are returns based on pre-audit numbers. The tax affairs for the years to 30 June 2002 and 2003 are open with the Inland Revenue and there is a claim against the reduction of the research and development tax credit claim, which could result in a tax rebate of up to (pound)100,000 (this has not been provided for in the book of Integra SP Limited). SCHEDULE 4.9 - vi, vii, viii, x These warranties refer to American tax legislation, which is not relevant to the Company or its subsidiaries. The Company does not believe that it has any obligations under provisions referred to therein. SCHEDULE 4.10 Integra SP Limited has granted debenture over all its assets to the Bank of Scotland as security for the lending made by the Bank of Scotland. A copy of the 9 debenture appears at Tab 19 of Volume 1 of the Disclosure Document. The Company has notified the Bank of Scotland of this transaction, but the Bank's consent is not required. Some of the assets of Integra SP Limited are subject to equipment leases. Details of those leases appear at Tab 20 of Volume 1 of the Disclosure Document. SCHEDULE 4.10(b) The list at Tab 20 of Volume 1 of the Disclosure Document contains all material assets and does not include intellectual property rights, which appear in later schedules. SCHEDULE 4.11 This Schedule 4.11 lists all real property owned, leased or occupied by the Company and its subsidiaries A copy of a lease granted to Integra SP Limited by Calathea Trust on the 3 February 2002 appears at Tab 1 of Volume 2 of the Disclosure Document. Integra SP Limited is one month in arrears of payment of the rent under the terms of the lease. As of the Closing Date, Integra SP Limited expects to be current on all amounts due under the terms of the lease. A service office is rented in Paris. See contract with Fast Connect SAS at Tab 1 of Volume 3 of the Disclosure Document. Integra SP Limited has to pay rates and other overheads in respect of the property in addition to rent. These sums appear in the accounts and management accounts. See bill at Tab 1 of Volume 11 of the Disclosure Document. SCHEDULE 4.12 The Company and its subsidiaries own or have applied for a number of patents, details of which are set out at Tab 4 of Volume 2 of the Disclosure Document. As a matter of policy any significant software of the Company and its subsidiaries is patented. In addition, intellectual property rights in the form of copyrights will be owned in any significant software. It is a term of some agreements for the creation of software that software belongs to the customer in respect of service business where customers pay time and materials (T&M). Altio IPR is not affected by this. All source codes for software belonging to the Company and its subsidiaries are available. Details of escrow agreements under which source codes are held appear at Tab 1 of Volume 3 of the Disclosure Document. The Company and its subsidiaries hold a number of standard licenses for the use of standard software such as Microsoft Office Software. A List appear at Tab 3 of Volume 2 of the Disclosure Document. 10 A number of licenses for software from Tipco, Librados and other suppliers appear at Tab1 of Volume 3 of the Disclosure Document. The standard form of terms and conditions for licenses granted by the Company and its subsidiaries and a list of licensees appear at Tab 3 of Volume 2 of the Disclosure Document. SCHEDULE 4.13 Schedule 4.13 Tab 1 of Volume 3 of the Disclosure Document contains all material Contracts of the Company and its subsidiaries Please note that some of these contracts include change of control clauses. Integra SP Limited has a contract with Casanove and an employee was dismissed for breach of confidentiality but the Company does not believe that it will result in any claim by Casanove. Additional details appear at Tab 1 of Volume 3 of the Disclosure Document. As set out above Integra SP Limited has borrowings from Bank of Scotland and there are shareholder loans outstanding. At Tab 1 of Volume 3 there are four contracts with HSBC, one is signed and the other three are awaiting signature. SCHEDULE 4.14 The Company has been pursuing a claim against a company in Luxembourg called Alfa Consult but it is unlikely that there will be any recovery. There are no sums outstanding to the lawyers in Luxembourg. SCHEDULE 4.15 Schedule 4.15 at Tab 9 of Volume 3 of the Disclosure Document are all material Permits of the Company and its subsidiaries SCHEDULE 4.16 Schedule 4.16 at Tab 10 of Volume 3 of the Disclosure Document contains details of all insurance policies of the Company and its subsidiaries. The Company insurances are due for renewal during October 2004 when new policy documents will be issued. SCHEDULE 4.17 Lloyd Dean was dismissed as a result of a breach of confidence involving the Casanove but it is not expected that there will be any claim. Susie Iny is expected to go on maternity leave in December 2004. 11 George Cao has already indicated that he intends to resign and his written resignation is expected shortly. A number of employees hold options granted by the Company. The Capitalization Table at Tab 9 of Volume 1 of the Disclosure Document provides details. SCHEDULE 4.17(g) The Company and its subsidiaries have a number of relationships with individuals who trade through their own limited company as service companies including: Michael Ward who trades through Maxsam Limited and who is on a long term assignment at Casanove. Usman Siddiqui trades through Hasbang Computing Limited and charges through his company for off side data hacker work and in addition is an employee. Adam Gourpinar trades through M Toros Limited and is on long-term contract at Royal Bank of Scotland. Loan Hill Finance Limited provides the service of Sven Thiele and Alan Palmer to Integra SP Inc on the terms of the contract at Tab 17 of Volume 3 of the Disclosure Document. SCHEDULE 4.18 SCHEDULE 4.20 The Company has retained KBC Peel Hunt on terms disclosed above. SCHEDULE 4.22 None. SCHEDULE 4.23 Schedule 4.23 at Tab 4 of Volume 4 of the Disclosure Document list all bank accounts of the Company and its subsidiaries 12 PURCHASER SCHEDULES Disclosure Unless the context otherwise requires words and expressions defined in the Agreement shall have the same meaning in these Schedules. The representations, warranties and indemnities contained in this Agreement are made and given subject to the disclosures referred to or contained in these Schedules. Purchaser shall not be or be deemed to be in breach of any of those representations, warranties or indemnities (and no claim shall lie or liability attach) in respect of any matter which is fairly and accurately disclosed in these Schedules. The following are disclosed or are deemed to have been disclosed by these Schedules: (a) any matter specifically described in written correspondence between the Purchaser, the Purchaser's agents, any subsidiary or the Purchaser's Solicitors and the Company's Solicitors and accountants on or before the date of these Schedules in relation to the Agreement or any transactions under or associated with it; (b) all the contents of the documents described in the attached disclosure schedules (true, correct and complete copies of which have been provided to Stockholder and initialed on behalf of the Stockholder and the Purchaser for purposes of identification); and (c) any matter specifically referred to in the Agreement or in any document referred to in it. SCHEDULE 5.1 Tiger Telematics, Inc. is a USA Delaware corporation with a corporate office in Florida and is qualified to do business as a foreign corporation in the State of Florida. SCHEDULE 5.3 None. SCHEDULE 5.5 Jordan Lawsuit litigation- see Form 10 Q for 3rd Quarter ended September 30, 2003. SCHEDULE 5.7 Common stock, par value $0.001 per share Authorized - 500,000,000 shares Issued and Outstanding as of September 29, 2004 - 22,975,621 shares Reserved for issuance upon exercise of options and warrants as follows: Incentive stock option plan with 320,000 shares authorized; outstanding options to purchase 144,000 shares at an average exercise price of approximately $1.50, of which options to purchase 108,000 are fully vested. See 10K and 10Q Filings. Warrants expiring on June 30, 2006 to purchase 245,525 shares at an exercise price of $11.25. From time to time the Company issues shares to various companies and persons that provide products and services to the Company including suppliers, distributors, and professional advisors including public relations, advertising and legal. The Company has offered Smith Hulsey & Busey, legal counsel to the Company, warrants to purchase 250,000 shares of common stock at $5.00 per share, expiring September 30, 2009. The Company issued shares to Golden Sands for the Indie Studios acquisition (see press release). The Company is in discussions to issue shares as a part of a potential acquisition of Warthog plc. 13 EX-2.10 4 tiger10k123104ex210.txt STOCK PURCHASE AGREEMENT - INTEGRA SP HOLDINGS LIMITED AND INTEGRA SP NOMINEE LIMITED Exhibit 2.10 [EXECUTION COPY] THIS AGREEMENT DOES NOT CONSTITUTE AN OFFER TO SELL SHARES OF COMMON STOCK OF TIGER TELEMATICS, INC. TO, OR THE SOLICITATION OF AN OFFER TO PURCHASE SHARES OF COMMON STOCK OF TIGER TELEMATICS, INC. BY, ANY PERSON IN ANY COUNTRY OR JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS UNLAWFUL OR ANY PERSON THAT DOES NOT QUALIFY AS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501 OF REGULATION D PROMULGATED UNDER THE SECURITIES ACT. STOCK PURCHASE AGREEMENT BY AND AMONG TIGER TELEMATICS, INC., GLOBICOM, INC. AND CERTAIN LISTED STOCKHOLDERS OF GLOBICOM, INC. Dated as of September 2, 2005 ================================================================================ TABLE OF CONTENTS Page ---- ARTICLE I PURCHASE AND SALE OF SHARES..........................................2 1.1 TRANSFER OF SHARES...........................................2 1.2 PURCHASE PRICE...............................................2 1.3 PAYMENT AT CLOSING...........................................2 1.4 DELIVERY OF SHARES...........................................3 1.5 AFFILIATE-OWNED ASSETS.......................................3 1.6 FURTHER ASSURANCES...........................................3 ARTICLE II THE CLOSING.........................................................3 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS.................4 3.1 TITLE TO THE SHARES..........................................4 3.2 ORGANIZATION AND POWER.......................................4 3.3 AUTHORITY; AUTHORIZATION, EXECUTION AND DELIVERY; ENFORCEABILITY; NO CONFLICT.................................4 3.4 CONSENTS.....................................................5 3.5 BROKERS......................................................5 3.6 INVESTMENT REPRESENTATIONS...................................5 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE SELLER GROUP..................6 4.1 ORGANIZATION, POWER, AUTHORITY AND GOOD STANDING.............6 4.2 AUTHORITY; AUTHORIZATION, EXECUTION AND DELIVERY; ENFORCEABILITY; NO CONFLICT.................................7 4.3 CONSENTS.....................................................8 4.4 CAPITALIZATION...............................................8 4.5 SUBSIDIARIES; INVESTMENTS....................................8 4.6 FINANCIAL INFORMATION........................................9 4.7 ABSENCE OF UNDISCLOSED LIABILITIES..........................10 4.8 ABSENCE OF CHANGES..........................................10 4.9 TAX MATTERS.................................................11 4.10 TITLE TO ASSETS, PROPERTIES AND RIGHTS AND RELATED MATTERS..13 4.11 REAL PROPERTY - OWNED OR LEASED.............................13 4.12 INTELLECTUAL PROPERTY.......................................14 4.13 AGREEMENTS, NO DEFAULTS, ETC................................15 4.14 LITIGATION, ETC.............................................17 4.15 COMPLIANCE WITH LAWS........................................17 4.16 INSURANCE...................................................18 4.17 LABOR RELATIONS; EMPLOYEES..................................18 4.18 ERISA COMPLIANCE............................................20 4.19 ENVIRONMENTAL MATTERS.......................................22 4.20 BROKERS.....................................................23 4.21 RELATED PARTY TRANSACTIONS..................................23 4.22 ACCOUNTS AND NOTES RECEIVABLE...............................24 i 4.23 BANK ACCOUNTS; POWERS OF ATTORNEY...........................24 4.24 SUPPLIERS AND VENDORS.......................................24 4.25 CUSTOMERS...................................................25 4.26 CONFLICTS OF INTEREST.......................................25 4.27 DISCLOSURE..................................................25 ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.....................25 5.1 ORGANIZATION; CORPORATE AUTHORITY...........................25 5.2 AUTHORITY; AUTHORIZATION; EXECUTION AND DELIVERY; ENFORCEABILITY; NO CONFLICT................................26 5.3 CONSENTS....................................................26 5.4 BROKERS.....................................................27 ARTICLE VI COVENANTS AND AGREEMENTS...........................................27 6.1 ACCESS TO RECORDS AND PROPERTIES............................27 6.2 CONDUCT OF THE BUSINESS.....................................27 6.3 EFFORTS TO CONSUMMATE.......................................28 6.4 NEGOTIATION WITH OTHERS.....................................28 6.5 NOTICE OF PROSPECTIVE BREACH................................29 6.6 PUBLIC ANNOUNCEMENTS........................................29 6.7 EXCHANGE PROCEEDS...........................................29 6.8 NON-COMPETITION COVENANT....................................29 6.9 DISCLOSURE OF INFORMATION...................................30 6.10 USE OF PROPRIETARY NAME.....................................32 6.11 SUPPLEMENTS TO SCHEDULES....................................32 ARTICLE VII CLOSING OBLIGATIONS...............................................32 7.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS......................32 7.2 CONDITIONS TO OBLIGATIONS OF THE PURCHASER..................33 7.3 CONDITIONS TO OBLIGATIONS OF THE SELLER GROUP...............35 ARTICLE VIII INDEMNIFICATION..................................................36 8.1 GENERALLY...................................................36 8.2 ASSERTION OF CLAIMS.........................................37 8.3 NOTICE AND DEFENSE OF THIRD PARTY CLAIMS....................37 8.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES..................38 8.5 LIMITATIONS ON INDEMNIFICATION..............................39 8.6 SATISFACTION OF INDEMNIFICATION OBLIGATIONS.................39 ARTICLE IX TERMINATION; EFFECT OF TERMINATION.................................39 9.1 TERMINATION.................................................39 9.2 EFFECT OF TERMINATION.......................................40 ARTICLE X MISCELLANEOUS PROVISIONS............................................41 10.1 AMENDMENT...................................................41 10.2 ENTIRE AGREEMENT............................................41 10.3 SEVERABILITY................................................41 10.4 BENEFITS OF AGREEMENT.......................................41 10.5 EXPENSES; SALES AND TRANSFER TAXES..........................41 ii 10.6 REMEDIES....................................................42 10.7 NOTICES.....................................................42 10.8 COUNTERPARTS AND FACSIMILE EXECUTION........................43 10.9 GOVERNING LAW..............................................43 10.10 JURISDICTION AND VENUE......................................43 10.11 MUTUAL CONTRIBUTION.........................................44 10.12 NO THIRD PARTY BENEFICIARIES................................44 10.13 INDEPENDENCE OF COVENANTS AND REPRESENTATIONS AND WARRANTIES.................................................44 10.14 INTERPRETATION; CONSTRUCTION................................44 iii ANNEXES, SCHEDULES AND EXHIBITS Annexes - ------- Annex I Stockholders Annex II Certain Definitions Schedules - --------- Schedule 1.3 - Stockholder Percentages for Allocation of Purchase Price Schedule 3.4 - Stockholder Consents Schedule 4.1 - Foreign Qualifications for the Company and Its Subsidiaries Schedule 4.3 - Company Consents Schedule 4.4(a) - Capitalization of the Company and Its Subsidiaries Schedule 4.4(b) - Options, Warrants, Voting Agreements, etc. Schedule 4.5 - Subsidiaries and Investments Schedule 4.6(a) - Financial Statements Schedule 4.6(c) - Accounts Payable and Accounts Receivable Schedule 4.7 - Undisclosed Liabilities Schedule 4.8 - Absence of Changes Schedule 4.9(a) - Tax Matters Schedule 4.9(c) - Taxing Authority Notifications Schedule 4.10(a) - Encumbrances Schedule 4.10(b) - Tangible Personal Property Schedule 4.11(a) - Real Property Schedule 4.11(b) - Real Property Proceedings, Notices and Exceptions Schedule 4.12(a) - Intellectual Property Rights Schedule 4.12(b) - Actions to Protect Intellectual Property Rights Schedule 4.13(a) - Material Contracts Schedule 4.13(d) - Funded Indebtedness Schedule 4.14(a) - Litigation, Etc. Schedule 4.14(b) - Resolved Litigation Schedule 4.15 - Compliance with Laws Schedule 4.16(a) - Insurance Policies Schedule 4.16(b) - Insurance Claims, Etc. Schedule 4.17(a) - Directors, Officers and Key Employees Schedule 4.17(b) - Number of Employees, Independent Contractors, etc. Schedule 4.17(c) - Labor Relations Schedule 4.17(e) - Labor Proceedings Schedule 4.17(f) - Joint Employer Matters Schedule 4.17(g) - Independent Contractor Agreements Schedule 4.18(a) - Employee Benefit Plans Schedule 4.18(b) - ERISA Compliance Schedule 4.19(a) - Environmental Laws - Violations Schedule 4.19(b) - Environmental Compliance - Previously Owned Properties Schedule 4.21(a) - Related Party Transactions Schedule 4.21(b) - Distributions Schedule 4.22 - Accounts and Notes Receivable iv Schedule 4.23 - Bank Accounts; Powers of Attorney Schedule 4.24 - Suppliers and Vendors Schedule 4.25 - Customers Schedule 5.1 - Foreign Qualifications for the Purchaser Schedule 5.3 - Purchaser Consents Exhibits - -------- Exhibit A - Form of Escrow Agreement Exhibit B - Form of General Release Exhibit C - Form of Employment Agreement with Greg Gifford Exhibit D - Form of Employment Agreement with Tony Rodriguez Exhibit E - Form of Employment Agreement with Ron Stapp v INDEX OF DEFINED TERMS The following capitalized terms, which may be used in more than one Section or other location of this Agreement, are defined in the following Sections or other locations: Section or Term other Location ---- -------------- Acquisition Proposal Annex II Affiliate Annex II Affiliate-Owned Asset 1.5 Agreement 10.14 Annual Balance Sheet 4.6(a)(i) Annual Balance Sheet Date 4.6(a)(i) Annual Financial Statements 4.6(a)(i) Best Knowledge 10.14 Business Preamble Business Day Annex II Capital Lease Annex II Cash Portion 1.2 Charter Documents Annex II Closing Article II Closing Date Article II COBRA 4.18(b)(viii) Code 4.9(a) Commission Annex II Company Caption Company Employee Plans 4.18(a) Competing Business 6.8(b) Confidential Information 6.9(a) Contract Annex II Control Annex II Covered Properties 4.19(b) Employee Benefit Plan Annex II Encumbrances Annex II Environmental, Health and Safety Laws Annex II Escrow Agreement 1.3 Exchange Proceeds 6.7 Exclusivity Period 6.4(a) ERISA Annex II ERISA Affiliate Annex II Excluded Seller Representations 8.4 Financial Statements 4.6(a)(iii) Funded Indebtedness Annex II GAAP Annex II General Release 7.2(h)(i) Gifford Employment Agreement 7.2(h)(ii) Governmental Entity Annex II vi Section or Term other Location ---- -------------- Guaranty Annex II HIPAA 4.18(b)(viii) Income Taxes Annex II Indemnified Persons Annex II Indemnifying Persons Annex II Intellectual Property Rights Annex II Interim Balance Sheets 4.6(a)(ii) Interim Financial Statements 4.6(a)(ii) Latest Balance Sheet 4.6(a)(iii) Latest Balance Sheet Date 4.6(a)(iii) Latest Financial Statements 4.6(a)(iii) Law Annex II Leased Property 4.11(a) Letter of Intent 10.2 Liability Annex II Licensed Requisite Rights 4.12(a)(i) Litigation Expense Annex II Losses Annex II Market Price Annex II Material Adverse Change 4.8(i) Material Contracts 4.13(b) NASDAQ Annex II Options Preamble Orders Annex II Owned Requisite Rights 4.12(a)(i) Permits Annex II Permitted Encumbrances Annex II Person Annex II Possible Transaction 6.4 Proceeding Annex II Purchase Price 1.2 Purchaser Caption Purchaser Indemnified Persons Annex II Purchaser Indemnifying Persons Annex II Purchaser Losses Annex II Related Documents 7.2(h) Representatives 6.9(a) Requisite Rights 4.12(a)(i) Restrictive Period 6.8(a) Rodriguez Employment Agreement 7.2(h)(iii) Second Cash Payment 1.2 Securities Annex II Securities Act Annex II vii Section or Term other Location ---- -------------- Securities Exchange Act Annex II Seller Group Caption Seller Indemnified Persons Annex II Seller Indemnifying Persons Annex II Seller Losses Annex II Shares Preamble Stapp Employment Agreement 7.2(h)(iv) Stock Preamble Stockholders Caption Subsidiary Annex II Survival Date 8.4(a) Tax Return Annex II Taxes Annex II TGTL Shares Annex II TGTL Shares Portion 1.2 Third Party 4.17(f) Third Party Claim 8.3 viii STOCK PURCHASE AGREEMENT This STOCK PURCHASE AGREEMENT dated as of September 2, 2005, is by and among TIGER TELEMATICS, INC., a Delaware corporation (the "Purchaser"), GLOBICOM, INC., a Texas corporation (the "Company"), and those stockholders of the Company listed on Annex I attached to this Agreement (collectively, the "Stockholders"; and the Stockholders and the Company are collectively referred to as the "Seller Group"). Certain capitalized terms used in this Agreement are defined on Annex II attached to this Agreement. PREAMBLE The Company, together with its Subsidiaries, is engaged in the business (collectively, the "Business") of providing wireless data communication services to a broad range of end users across multiple wireless networks. The Company presently has approximately twenty-nine (29) Persons that own all of the issued and outstanding shares of the common stock, no par value per share, of the Company (collectively, the "Stock") and/or options, warrants, convertible loans or other rights for the purchase of shares of capital stock or convertible securities of the Company (collectively, the "Options")1. In order to comply with applicable exemptions from the registration requirements of the Securities Act, qualification under applicable state securities laws and compliance under other applicable Laws, the Purchaser has agreed to initially purchase only those issued and outstanding shares of Stock that, immediately prior to the Closing Date, were owned by an "accredited investor" as defined in Rule 501 of Regulation D promulgated under the Securities Act. Upon the completion and filing of all reports required to be filed by the Purchaser pursuant to the Securities Exchange Act and the availability of an exemption from the registration requirements of the Securities Act, qualification under applicable state securities laws and compliance under other applicable Laws, the Purchaser shall offer to acquire, on the same terms and conditions as provided for herein, the remaining issued and outstanding shares of Stock that are owned by any Person. The Stockholders represent all of the Company's stockholders that are "accredited investors" as defined in Rule 501 of Regulation D promulgated under the Securities Act. The Stockholders are the legal owners of 6,861,476 issued and outstanding shares of Stock, which amount represents 84.41% of the issued and outstanding shares of Stock, on a fully diluted basis, as if all outstanding options, warrants, convertible loans or other rights for the purchase of shares of capital stock or convertible securities of the Company had been fully exercised immediately prior to such issuance (and the resulting securities fully converted into shares of Stock, if so convertible) as of such date. The shares of Stock owned by the Stockholders are collectively referred to as the "Shares." The Stockholders desire to sell to the Purchaser, and the Purchaser desires to purchase from the Stockholders, all of the Shares, on the terms and subject to the conditions contained in this Agreement. ACCORDINGLY, in consideration of the mutual representations, warranties, covenants and agreements contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: ___________________ 1 All Options must be canceled or exercised prior to the Closing. 1 ARTICLE I PURCHASE AND SALE OF SHARES 1.1 Transfer of Shares. On the terms and subject to the conditions contained in this Agreement, at the Closing, the Stockholders shall sell, transfer, convey and assign to the Purchaser, and the Purchaser shall purchase and acquire from the Stockholders, all of the Shares, free and clear of all Encumbrances. 1.2 Purchase Price. The aggregate consideration to be paid by the Purchaser for all of the Stock shall consist of the sum of the following (such sum being called the "Purchase Price"): (i) $200,000 (the "Cash Portion") payable to the Company in cash; plus (ii) $120,000 (the "Second Cash Payment") payable to the Company in cash within forty-five (45) days after the Company and Cingular Wireless enter into a Master Cingular GSM/GPRS Wireless Data Reseller Agreement, on terms and conditions acceptable to Purchaser; plus (iii) an aggregate total of 138,462 newly issued TGTL Shares (the "TGTL Shares Portion"), which TGTL Shares shall be prorated and issued to the Stockholders in accordance with the percentages set forth on Schedule 1.3. Notwithstanding anything in this Agreement to the contrary, the Purchase Price is based on the acquisition of 100% of the issued and outstanding capital stock of the Company, on a fully diluted basis, as if all outstanding options, warrants, convertible loans or other rights for the purchase of shares of capital stock or convertible securities of the Company had been fully exercised immediately prior to such issuance (and the resulting securities fully converted into shares of Stock, if so convertible) as of such date. In the event the Purchaser acquires less than 100% of the issued and outstanding capital stock of the Company, on a fully diluted basis, the Purchase Price shall be prorated based on the actual percentage of shares of Stock, on a fully diluted basis, that are actually sold and transferred to Purchaser. 1.3 Payment of the Purchase Price. (a) At the Closing, the Purchaser shall pay or deliver the Purchase Price as follows: (i) the Cash Portion shall be paid to the Company, by wire transfer of immediately available funds to the account designated to the Company, and used to satisfy and pay all Funded Indebtedness of the Company; and (ii) the TGTL Shares Portion shall be delivered and placed in escrow for a period of twelve (12) months following the Closing pursuant to the terms of an Escrow Agreement substantially in the form of Exhibit A (the "Escrow Agreement"), which shall satisfy Purchaser's obligation to issue TGTL Shares to the Stockholders pursuant to Section 2 1.2(ii) of this Agreement. Upon releasing the TGTL Shares Portion from escrow, the remaining balance of the TGTL Shares Portion shall be delivered to each Stockholder in accordance with the percentages set forth on Schedule 1.3, in the form of a stock certificate, duly executed and issued by the Purchaser, representing such Stockholder's pro rata portion of the remaining balance of the TGTL Shares Portion. (b) Within forty-five (45) days after the Company and Cingular Wireless enter into a Master Cingular GSM/GPRS Wireless Data Reseller Agreement, on terms and conditions acceptable to Purchaser, Purchaser shall pay the Second Cash Payment to the Company, by wire transfer of immediately available funds to the account designated to the Company, which Second Cash Payment shall be used by the Company to satisfy and pay all Funded Indebtedness of the Company. 1.4 Delivery of Shares. At the Closing, in consideration of the Purchaser's delivery of the Purchase Price pursuant to Section 1.3(a), (a) the Stockholders shall deliver to the Company the certificate or certificates representing the Shares, duly endorsed for transfer to the Purchaser or accompanied by duly executed stock powers transferring the Shares to the Purchaser, in each case sufficient in form and substance to convey to the Purchaser good title to all of the Shares, free and clear of all Encumbrances, and (b) the Company shall deliver to the Purchaser a certificate registered in the name of the Purchaser representing the Shares. 1.5 Affiliate-Owned Assets. To the extent that any asset, property, interest in property or right relating to, or used or held for use by the Company or any of its Subsidiaries in the conduct of the Business is owned by a Stockholder or any of his, her or its Affiliates or by any other Affiliate of the Company or its Subsidiaries, such asset, property, interest in property or right shall be deemed to be an "Affiliate-Owned Asset" for purposes of this Agreement. 1.6 Further Assurances. The Stockholders shall, at any time after the Closing, upon the request of the Purchaser, do, execute, acknowledge and deliver, and cause to be done, executed, acknowledged and delivered, all such further acts, deeds, assignments, transfers, conveyances, powers of attorney and other assurances as may be required to transfer, convey, grant and confirm to and vest in the Purchaser good title to (i) the Shares and (ii) the Affiliate-Owned Assets, in each case free and clear of all Encumbrances. ARTICLE II THE CLOSING On the terms and subject to the conditions contained in this Agreement, the closing (the "Closing") of the transactions contemplated by this Agreement shall take place at the offices of Smith Hulsey & Busey, counsel for the Company, at the address set forth in Section 10.7, on September 2, 2005, or such other place or later date as shall be mutually agreed upon by the parties, provided that all of the conditions set forth in Article VII have been satisfied or waived (other than those conditions which by their terms are intended to be satisfied at the Closing). The date on which the Closing occurs shall be referred to as the "Closing Date." 3 ARTICLE III REPRESENTATIONS AND WARRANTIES of THE STOCKHOLDERS Each Stockholder hereby, severally as to himself, herself or itself only and not jointly with or as to any of the other Stockholders, represents and warrants to the Purchaser as of the date hereof as follows: 3.1 Title to the Shares. Such Stockholder (i) is the lawful owner, of record and beneficially, of the number of Shares set forth opposite his, her or its name on Annex I, and (ii) has good and marketable title to such Shares, free and clear of any and all Encumbrances whatsoever and with no restriction on the voting rights and other incidents of record and beneficial ownership pertaining thereto. Such Stockholder is not the subject of any bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar Proceeding affecting creditors' rights and remedies generally. Except for this Agreement, there are no Contracts or other understandings or arrangements between such Stockholder and any other Person (including any of the other Stockholders, the Company, or any of the Company's Subsidiaries) with respect to the acquisition, disposition, transfer, registration or voting of, or any other matters in any way pertaining or relating to, any of the capital stock or other securities of the Company (including the Shares owned by such Stockholder). Such Stockholder does not have any right whatsoever to receive or acquire any additional shares of capital stock or other securities of the Company or any of its Subsidiaries. 3.2 Organization and Power. If applicable, such Stockholder is a corporation, limited liability company, partnership or trust duly organized or formed, validly existing, and in good standing under the Laws of the jurisdiction of its incorporation or formation and has all requisite power and authority (corporate, partnership or otherwise) to own, lease and operate its assets and properties and to carry on its business as presently conducted. If applicable, the Purchaser has been furnished with true, correct and complete copies of the such Stockholder's Charter Documents, in each case as amended and in effect on and as of the date this representation is being made and is deemed made hereunder. 3.3 Authority; Authorization, Execution and Delivery; Enforceability; No Conflict. (a) Such Stockholder has the full and absolute legal right, capacity, power and authority (if applicable, corporate or partnership or otherwise) to execute, deliver and perform his, her or its obligations under this Agreement and each Related Document to which he, she or it is or will be a party, and to consummate the transactions contemplated hereby and thereby. If applicable, such Stockholder's execution and delivery of this Agreement and each Related Document to which he, she or it is or will be a party, and the performance by such Stockholder of his, her or its obligations hereunder and thereunder, have been duly and validly authorized by all requisite action on the part of such Stockholder (including its board of directors and all committees thereof and its stockholders). This Agreement and each Related Document to which such Stockholder is or will be a party has been, or upon the execution hereof and thereof will be, duly and validly executed and delivered by such Stockholder, and this Agreement and each such Related Document is, or upon the execution hereof and thereof will be, duly and validly executed and delivered by 4 such Stockholder and constitutes, or upon such Stockholder's execution and delivery hereof and thereof, will constitute, a valid and binding obligation of such Stockholder, enforceable against him, her or it in accordance with their respective terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar Laws affecting creditors' rights and remedies generally, and, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity). (b) Neither the execution and delivery by such Stockholder of, nor the performance of his, her or its obligations under, this Agreement or any of the Related Documents to which he, she or it is or will be a party, nor the consummation by such Stockholder of the transactions contemplated hereby or thereby, nor the compliance by such Stockholder with any of the provisions hereof or thereof, will (i) conflict with, or result in any violation of, or cause a default (with or without notice or lapse of time or both) under, any provision of the Company's or any of its Subsidiaries' Charter Documents, or, if applicable, such Stockholder's Charter Documents, (ii) conflict with, or result in any violation of, or cause a default (with or without notice or lapse of time or both) under, or give rise to any right of termination, amendment, cancellation or acceleration of any obligations contained in, or the loss of any benefit under, any term, condition or provision of any provision of any Contract to which such Stockholder, the Company or any of the Company's Subsidiaries is a party or by which such Stockholder, the Company, any of the Company's Subsidiaries, or any of his, her, its, or their assets or properties are or may be bound, (iii) violate any Law applicable to such Stockholder, the Company, or any of the Company's Subsidiaries, or (iv) result in an Encumbrance on or against any assets, rights or properties of such Stockholder, the Company, or any of the Company's Subsidiaries, or on or against any capital stock or other securities of the Company or any of its Subsidiaries, or give rise to any claim against the Company, any of the Company's Subsidiaries or the Purchaser. 3.4 Consents. Except as set forth on Schedule 3.4, no Permit, authorization, consent or approval of or by, or any notification of or filing with, any Person (governmental or private) is required for, as a result of, or in connection with the execution, delivery and performance by such Stockholder of this Agreement or any of the Related Documents to which such Stockholder is or will be a party or the consummation of the transactions contemplated hereby or thereby. 3.5 Brokers. Such Stockholder has not employed any broker or finder or incurred any Liability for any brokerage fees, commissions or finders' fees or similar compensation or transaction based payments in connection with the transactions contemplated by this Agreement or any of the Related Documents. 3.6 Investment Representations. (a) The Stockholder is an "accredited investor" as defined in Rule 501 of Regulation D promulgated under the Securities Act. (b) The Stockholder acknowledges and agrees that the TGTL Shares issued to the Stockholder are to be held by the Stockholder solely for his, her or its own account for investment purposes only and not for resale, subdivision, transfer, assignment, pledge or other disposition. The Stockholder does not have any present plan or intention to sell, subdivide, transfer, assign, pledge or otherwise dispose of any part of the TGTL Shares issued to the Stockholder or to enter into any Contract or other undertaking or arrangement with respect thereto. 5 (c) The Stockholder has such knowledge and experience in financial and business matters that the Stockholder is capable of evaluating the merits and risks of an investment in the TGTL Shares and the Stockholder can bear the economic risk of such investment. The Stockholder acknowledges and agrees that the Purchaser has made available to the Stockholder and its attorneys and other representatives all agreements, documents, records and books that the Stockholder has requested relating to its investment in the TGTL Shares. The Stockholder further acknowledges and agrees that it has had an opportunity to ask questions of, and to receive answers from, individuals acting on behalf of the Purchaser concerning the Purchaser and the terms and conditions of the Stockholder's investment in the TGTL Shares hereunder, and answers have been provided to all of such questions to the full satisfaction of the Stockholder. (d) The Stockholder has relied only upon such advice as may have been received from tax, accounting, legal and financial advisors. The Stockholder has not received any assurances or representations from any Person associated with the Purchaser or its Affiliates as to the benefits, economic, tax or otherwise, likely to result from its investment in the TGTL Shares. (e) The Stockholder understands that there are substantial restrictions on the transferability of the TGTL Shares, that there will be no public market for the TGTL Shares, and, accordingly, the Stockholder will need to bear the economic risk of its investment for an indefinite period of time and will not be readily able to liquidate its investment in case of emergency. (f) The Stockholder understands that the TGTL Shares are restricted securities under the Securities Act and that they may not be resold, subdivided, transferred, assigned, pledged or otherwise disposed of unless they are first registered under the federal securities Laws or unless an exemption from such registration is available. (g) The Stockholder understands that the Purchaser has no obligation or intention to register the TGTL Shares. (h) The Stockholder is not a Person that is, or would cause the Purchaser to be, disqualified pursuant to Rule 262 promulgated under the Securities Act. (i) The Stockholder understands that the Purchaser is relying on the representations and warranties set forth in this Section 3.6 in issuing the TGTL Shares to the Stockholder. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE SELLER GROUP Each member of the Seller Group hereby jointly and severally represents and warrants to the Purchaser as of the date hereof as follows: 4.1 Organization, Power, Authority and Good Standing. The Company and each of its Subsidiaries are corporations duly organized, validly existing and in good standing under the respective Laws of the jurisdiction of their incorporation and have all requisite power and authority (corporate or otherwise) to own, lease and operate their respective assets and properties and to carry on their respective businesses (all of which collectively comprise the Business) as presently conducted and as presently proposed to be conducted. The Company and each of its Subsidiaries are duly 6 qualified and in good standing to transact business as a foreign Person in those jurisdictions set forth on Schedule 4.1, which jurisdictions constitute all of the jurisdictions in which the character of the property owned, leased or operated by the Company or such Subsidiaries or the nature of the business or activities conducted by the Company or such Subsidiaries makes such qualification necessary. The Purchaser has been furnished with true, correct and complete copies of the Charter Documents of the Company and each of its Subsidiaries, in each case as amended and in effect on and as of the date this representation is being made and is deemed made hereunder. Except as set forth on Schedule 4.1, neither the Company nor any of its Subsidiaries has (i) engaged in any business or activity other than the Business, or (ii) used any trade name or assumed name or other corporate name at any time. 4.2 Authority; Authorization, Execution and Delivery; Enforceability; No Conflict. (a) The Company has all requisite power and authority (corporate or otherwise) to execute, deliver and perform its obligations under this Agreement and each Related Document to which it is or will be a party, and to consummate the transactions contemplated hereby and thereby. The Company's execution and delivery of this Agreement and each Related Document to which it is or will be a party, and the performance by the Company of its obligations hereunder and thereunder, have been duly and validly authorized by all requisite action on the part of the Company (including its board of directors and all committees thereof and its stockholders). This Agreement and each Related Document to which the Company is or will be a party has been, or upon the Company's execution hereof and thereof will be, duly and validly executed and delivered by the Company and constitutes, or upon the Company's execution and delivery hereof and thereof will constitute, a valid and binding obligation of the Company, enforceable against the Company in accordance with their respective terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar Laws affecting creditors' rights and remedies generally, and, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity). (b) Neither the execution and delivery by the Company and the Stockholders of, nor the performance of their respective obligations under, this Agreement or any of the Related Documents, as applicable, nor the consummation by the Company and the Stockholders of the transactions contemplated hereby or thereby, nor the compliance by the Company and the Stockholders with any of the provisions hereof and thereof, will (i) conflict with, or result in any violation of, or cause a default (with or without notice or lapse of time or both) under, any provision of the Company's or any of its Subsidiaries' Charter Documents, (ii) conflict with, or result in any violation of, or cause a default (with or without notice or lapse of time or both) under, or give rise to any right of termination, amendment, cancellation or acceleration of any obligations contained in, or the loss of any benefit under, any term, condition or provision of any provision of any Contract to which the Company or any of its Subsidiaries is a party, or by which the Company or any of its Subsidiaries or any of their respective assets or properties are or may be bound, (iii) violate any Law applicable to the Company or any of its Subsidiaries, or (iv) result in an Encumbrance on or against any assets, rights or properties of the Company or any of its Subsidiaries, or on or against any capital stock or other securities of the Company or any of its Subsidiaries, or give rise to any claim against the Company, any of the Company's Subsidiaries or the Purchaser. 7 4.3 Consents. Except as set forth on Schedule 4.3, no Permit, authorization, consent or approval of or by, or notification of or filing with, any Person (governmental or otherwise) is required for, as a result of, or in connection with the execution, delivery and performance by the Company of this Agreement or any of the Related Documents to which it is or will be a party or the consummation of the transactions contemplated hereby or thereby. 4.4 Capitalization. (a) The authorized capital stock of the Company and each of its Subsidiaries is set forth on Schedule 4.4(a), which schedule also sets forth the total number of outstanding shares of the Company and each of its Subsidiaries. All such outstanding shares disclosed on Schedule 4.4(a) are duly and validly issued and outstanding, fully paid and non-assessable, with no personal Liability attached to the ownership thereof, and are held of record and beneficially by the Persons, and in the respective amounts, set forth on Schedule 4.4(a), without Encumbrance. (b) There are no outstanding securities that are convertible into, exchangeable for, or carrying the right to acquire, any equity securities of the Company or any of its Subsidiaries, or subscriptions, warrants, options, calls, puts, convertible securities, registration or other rights, arrangements or commitments obligating the Company or any of its Subsidiaries to issue, sell, register, purchase or redeem any of its respective securities or any ownership interest or rights therein. Except as set forth on Schedule 4.4(b), there are no Contracts, commitments, arrangements, understandings or restrictions to which any Stockholder, or any other Person is bound relating in any way to any shares of capital stock or other securities of the Company or any of its Subsidiaries, including voting trusts or other similar agreements or understandings with respect to the voting of the Company's or any of its Subsidiaries' capital stock or other securities. There are no stock appreciation rights, phantom stock rights, or similar rights or arrangements outstanding with respect to the Company or any of its Subsidiaries. (c) All securities issued by the Company or any of its Subsidiaries have been issued in transactions exempt from registration under the Securities Act and all applicable state securities or "blue sky" Laws, and neither the Company nor any of its Subsidiaries has violated the Securities Act or any applicable state securities or "blue sky" Laws in connection with the issuance of any such securities. (d) The Stockholders represent all of the Company's stockholders that are "accredited investors" as defined in Rule 501 of Regulation D promulgated under the Securities Act. The Stockholders are the legal owners of 6,861,476 issued and outstanding shares of Stock, which amount represents 84.40% of the issued and outstanding shares of Stock, on a fully diluted basis, as if all outstanding options, warrants, convertible loans or other rights for the purchase of shares of capital stock or convertible securities of the Company had been fully exercised immediately prior to such issuance (and the resulting securities fully converted into shares of Stock, if so convertible) as of such date. 4.5 Subsidiaries; Investments. Except as set forth on Schedule 4.5, neither the Company nor any of its Subsidiaries owns or holds, directly or indirectly, any equity interest in or debt obligation of (excluding accounts receivable arising in the ordinary course of business, consistent with past practice) any other Person. 8 4.6 Financial Information. (a) Schedule 4.6(a) contains true, correct and complete copies of the following: (i) the unaudited consolidated balance sheets of the Company and its Subsidiaries as of December 31, 2004 (the "Annual Balance Sheet"; and such date being referred to as the "Annual Balance Sheet Date"), December 31, 2003, and December 31, 2002, and the related unaudited consolidated statements of income, stockholders' equity and cash flows of the Company and its Subsidiaries for the fiscal years then ended, including any footnotes and schedules thereto (all of the foregoing, including the Annual Balance Sheet being collectively referred to as the "Annual Financial Statements"); (ii) the unaudited consolidated balance sheets of the Company and its Subsidiaries as of January 31, 2005, and each subsequent month then ended through the Closing Date (collectively, the "Interim Balance Sheets"), and the unaudited consolidated statements of income, stockholders' equity and cash flows of the Company and its Subsidiaries for the one-month period then ended, and each subsequent monthly period then ended through the Closing Date, including any and all footnotes and schedules thereto (all of the foregoing, including the Interim Balance Sheets, being collectively referred to as the "Interim Financial Statements"); and (iii) the unaudited consolidated balance sheet of the Company and its Subsidiaries as of December 31, 2004 (the "Latest Balance Sheet"; and such date being referred to as the "Latest Balance Sheet Date"), and the unaudited consolidated statements of income, stockholders' equity and cash flows of the Company and its Subsidiaries for the twelve-month period then ended, including any and all footnotes and schedules thereto (all of the foregoing, including the Latest Balance Sheet, being collectively referred to as the "Latest Financial Statements"; and the Annual Financial Statements, the Interim Financial Statements and the Latest Financial Statements being collectively referred to as the "Financial Statements"). (b) The Financial Statements (i) are true, correct and complete, (ii) fairly present the consolidated financial position of the Company and each of its Subsidiaries as of the dates indicated and the consolidated results of operations of the Company and each of its Subsidiaries for the periods indicated, (iii) have been prepared in accordance with GAAP (to the extent GAAP has been correctly applied) consistently applied throughout the periods covered thereby (subject to the absence of footnotes and schedules that may be required by GAAP and, in the case of the Interim Financial Statements, normal year-end adjustments that are not material individually or in the aggregate), and (iv) are in accordance with the books and records of the Company and each of its Subsidiaries, which books and records are true, correct and complete and have been maintained in a manner consistent with historical practice. (c) Schedule 4.6(c) contains a true, correct and complete summary of all accounts payable, accrued expenses and accounts receivable of the Company and each of its Subsidiaries as of the most recent practicable date prior to the date hereof, which schedule sets forth the name of the account debtor (in the case of accounts receivable) or account creditor (in the case of accounts payable) and the amount owed by such account debtor or owing to such account creditor (identifying the portion of such amount that is current, thirty (30) days past due, sixty (60) days past due, ninety (90) days past due, and more than ninety (90) days past due). 9 4.7 Absence of Undisclosed Liabilities. Except as set forth on Schedule 4.7, neither the Company nor any of its Subsidiaries has any Liability except (i) to the extent expressly reflected or reserved against on the Latest Balance Sheet, (ii) Liabilities under Contracts (other than any Liability arising from any breach or violation thereof or default thereunder), and (iii) Liabilities incurred in the ordinary course of business, consistent with past practice, since the Latest Balance Sheet Date (other than any such Liability arising from any breach or violation of, or default under, any Contract, or arising from any breach of warranty, tort, infringement, or violation of any Law or any Proceeding). There are no loss contingencies (as such term is used in Statement of Financial Accounting Standards No. 5 issued by the Financial Accounting Standards Board in March 1975) of or affecting the Company or any of its Subsidiaries that are not adequately provided for or disclosed on the Latest Balance Sheet or in the footnotes or schedules thereto. Neither the Company nor any of its Subsidiaries has, either expressly or by operation of Law, assumed or undertaken any Liability of any other Person, including any obligation for corrective or remedial action relating to Environmental, Health and Safety Laws. 4.8 Absence of Changes. Since the Latest Balance Sheet Date, except as set forth on Schedule 4.8, the Company and each of its Subsidiaries have been operated in the ordinary course of business, consistent with past practice, and there has not been: (i) any event or condition that has resulted in or could reasonably be expected to result in an adverse change in the business, operations, assets, condition (financial or otherwise), operating results, liabilities, relations with employees, customers, suppliers or prospects of the Company or any of its Subsidiaries, or any casualty loss or damage to the assets or properties of the Company or any of its Subsidiaries, whether or not covered by insurance (a "Material Adverse Change"); (ii) any declaration, setting aside or payment of any dividend or other distribution with respect to any shares of capital stock or other securities of the Company or any of its Subsidiaries, or any direct or indirect redemption, purchase or other acquisition of any capital stock or other securities of the Company or any of its Subsidiaries, or any other payments of any nature directly or indirectly to or for the benefit of any Stockholder or any Affiliate of the Company (whether or not on or with respect to any shares of capital stock or other securities of the Company or any of its Subsidiaries owned by such Stockholder or Affiliate), other than salaries and benefits paid in the ordinary course of business, consistent with past practice; (iii) any general uniform increase in the compensation of employees (including any increase pursuant to any bonus, pension, profit-sharing or other plan or commitment) of the Company or any of its Subsidiaries, or any increase in or prepayment of any such compensation payable to or to become payable to any director, officer or key employee; (iv) any acquisition or disposition of assets or properties owned by the Company or any of its Subsidiaries, other than the sale or other disposition of inventories for fair value in the ordinary course of business, consistent with past practice; 10 (v) any agreement or commitment on the part of the Company or any of its Subsidiaries to merge, amalgamate or consolidate with or into, or otherwise acquire, any other Person or division thereof; (vi) any change in depreciation or amortization policies or rates previously adopted, any change in income or expense recognition or bad debt reserve, write-down or write-off policies previously adopted, any write-up or write-down of inventory or other assets or any other change in other accounting or in Tax reporting or methods or practices followed by the Company or any of its Subsidiaries; (vii) any change in the manner in which products or services of the Company or any of its Subsidiaries are marketed (including any change in prices), any change in the manner in which the Company or any of its Subsidiaries extends discounts or credit to customers, or any change in the manner or terms by which the Company or any of its Subsidiaries collects accounts receivable; (viii) any failure by the Company or any of its Subsidiaries to make scheduled capital expenditures or investments, or any failure to pay trade accounts payable or any other Liability of the Company or any of its Subsidiaries when due; or (ix) any Contract or other understanding or arrangement (other than this Agreement and the Related Documents), whether in writing or otherwise, to take any of the actions specified in the foregoing clauses (i) through (viii). 4.9 Tax Matters. (a) Except as set forth on Schedule 4.9(a), the Company, each of its Subsidiaries, and each other Person included in any consolidated or combined Tax Return and part of an affiliated group, within the meaning of Section 1504 of the Internal Revenue Code of 1986, as amended (the "Code"), of which the Company or any of its Subsidiaries is or has been a member: (i) has timely paid or caused to be paid all Taxes required to be paid by it through the date hereof and as of the Closing Date (including any Taxes shown due on any Tax Return); (ii) has filed or caused to be filed in a timely and proper manner (within any applicable extension periods) all Tax Returns required to be filed by it with the appropriate Governmental Entities in all jurisdictions in which such Tax Returns are required to be filed; and (iii) has not requested or caused to be requested any extension of time within which to file any Tax Return, which Tax Return has not since been filed. (b) The Company has previously delivered to the Purchaser true, correct and complete copies of all Tax Returns filed by or on behalf of the Company and each of its Subsidiaries for all completed Tax years of the Company or such Subsidiary that remain open for audit or review by the relevant Taxing authority. All such Tax Returns were true, correct and complete. (c) Except as set forth in Schedule 4.9(c): 11 (i) neither the Company nor any of its Subsidiaries has been notified by the Internal Revenue Service or any other Taxing authority that any issues have been raised (and no such issues are currently pending) by the Internal Revenue Service or any other Taxing authority in connection with any Tax Return of the Company or any of its Subsidiaries, there are no pending Tax audits with respect to the Company or any of its Subsidiaries, and no waivers of statutes of limitations related to Taxes have been given or requested with respect to the Company or any of its Subsidiaries; (ii) full and adequate provision has been made (A) on the Latest Balance Sheet for all Taxes payable by the Company and each of its Subsidiaries for all periods ending on or prior to the Latest Balance Sheet Date, and (B) on the books and records of the Company and each of its Subsidiaries for all Taxes payable by the Company and such Subsidiaries for all periods beginning on or after the Latest Balance Sheet Date; (iii) neither the Company nor any of its Subsidiaries has incurred any Tax Liability from and after the Latest Balance Sheet Date other than Taxes incurred in the ordinary course of business, consistent with past practice; (iv) neither the Company nor any of its Subsidiaries (A) is, or has made an election to be treated as, a "consenting corporation" under Section 341(f) of the Code, or (B) is, or has been, a "personal holding company" within the meaning of Section 542 of the Code; (v) the Company and each of its Subsidiaries have complied in all respects with all applicable Laws relating to the collection or withholding of Taxes (including sales Taxes and the withholding of Taxes from the wages of employees); (vi) neither the Company nor any of its Subsidiaries is, or has ever been, a party to any Tax sharing, indemnity of similar agreement with any Person; (vii) neither the Company nor any of its Subsidiaries has incurred any Liability to make or possibly make any payments, either alone or in conjunction with any other payments, that: (A) are not deductible under, or would otherwise constitute a "parachute payment" within the meaning of, Section 280G of the Code (or any corresponding provision of domestic or foreign income Tax Law); or (B) are or may be subject to the imposition of an excise Tax under Section 4999 of the Code; (viii) neither the Company nor any of its Subsidiaries has agreed to, or is required to, make any adjustments or changes either on, before or after the Closing Date, to its accounting methods pursuant to Section 481 of the Code, and the Internal Revenue Service has not proposed any such adjustments or changes in the accounting methods of the Company or any such Subsidiary; (ix) no claim has ever been made by any Taxing authority in a jurisdiction in which the Company or any of it Subsidiaries does not file Tax Returns that the Company or any such Subsidiary is, or may be subject to, taxation by that jurisdiction; and 12 (x) neither the Company, nor any of its Subsidiaries nor any Stockholder is a foreign Person within the meaning of Section 1.1445-2(b) of the rules and regulations promulgated under Section 1445 of the Code. 4.10 Title to Assets, Properties and Rights and Related Matters. (a) The Company and each of its Subsidiaries, as applicable, have good and marketable title (or a valid leasehold interest) to all of the assets, properties and interests in properties, real, personal or mixed, reflected on the Latest Balance Sheet or acquired after the Latest Balance Sheet Date (except for assets or properties sold or otherwise disposed of since the Latest Balance Sheet Date in the ordinary course of business, consistent with past practice, and accounts receivable and notes receivable paid in full subsequent to the Latest Balance Sheet Date in the ordinary course of business, consistent with past practice), free and clear of all Encumbrances, of any kind or character, except for those Encumbrances set forth on Schedule 4.10(a) and Permitted Encumbrances. Such assets are in good operating condition and repair (normal wear and tear excepted), are sufficient to operate the Business as presently conducted and as presently proposed to be conducted, are suitable for the uses for which they are used in the Business, and are not subject to any condition that materially interferes with the economic value or use thereof. With respect to any leased assets, such assets are in such condition as to permit the surrender thereof to the lessors thereunder on the date hereof without any cost or expense for repair or restoration as if the related leases were terminated or expired on the date hereof in the ordinary course of business, consistent with past practice. (b) Schedule 4.10(b) contains a true, correct and complete list of all tangible personal property owned by the Company and each of its Subsidiaries as of the Closing Date. Except for any inventory, supplies, equipment, tractors, trailers and automobiles in transit in the ordinary course of business, consistent with past practice, all tangible personal property listed on Schedule 4.10(b) is located on the Company's or its Subsidiaries' premises listed on Schedule 4.11(a). 4.11 Real Property - Owned or Leased. (a) Schedule 4.11(a) contains a list and brief description of all of the real property owned, leased, subleased or otherwise occupied by the Company or any of its Subsidiaries. The description of each parcel of real property subject to one or more leases (the "Leased Property") includes the names of the lessor and the lessee and the basic terms thereof. The lease rate charged to the Company or any of its Subsidiaries, as applicable, for each parcel of Leased Property that is leased by the Company or any of its Subsidiaries, as applicable, from a Stockholder or from an Affiliate of the Company or any of its Subsidiaries is not greater than the fair market value rental that would be obtained by the Company or any such Subsidiary in an arms' length transaction with a Person that is not an Affiliate. The real property listed on Schedule 4.11(a) constitutes all real property used or occupied by the Company or any of its Subsidiaries in connection with the Business. (b) With respect to the real property listed on Schedule 4.11(a), except as set forth on Schedule 4.11(b): (i) no portion of the real property is subject to any pending condemnation or other Proceeding, and, to the best knowledge of the Seller Group, there is no threatened condemnation or other Proceeding with respect thereto; 13 (ii) the physical condition of the real property is sufficient to permit the continued conduct of the Business as presently conducted and as presently proposed to be conducted, subject to the provision of usual and customary maintenance and repairs performed in the ordinary course of business, consistent with past practice, with respect to similar properties of like age and construction; (iii) the Company and its Subsidiaries, as applicable, indicated on Schedule 4.11(b) are the fee owners of the real property or the owners and holders of all the leasehold estates purported to be granted by the leases associated with the Leased Property, as applicable; (iv) there are no Contracts to which the Company, any of its Subsidiaries, or any of their respective Affiliates is a party, granting to any party or parties the right of use or occupancy of any portion of the real property; (v) there are no parties (other than the Company and its Subsidiaries) in possession of any portion of the real property; and (vi) no notice of any increase in the assessed valuation of any portion of the real property and no notice of any contemplated special assessment with respect to any portion of the real property has been received by the Company or any of its Subsidiaries, and, to the best knowledge of the Seller Group, there is no threatened increase in assessed valuation or threatened special assessment pertaining to any portion of the real property. 4.12 Intellectual Property. (a) Except as set forth on Schedule 4.12(a): (i) the Company and each of its Subsidiaries, as applicable, own, have the right to use, sell, license and dispose of, and have the right to bring actions for the infringement of, all Intellectual Property Rights used in, necessary for, or required for the conduct of the Business as presently conducted and as presently proposed to be conducted (collectively, the "Owned Requisite Rights"), other than those Intellectual Property Rights for which the Company or any such Subsidiary has a valid license, all of which are listed on Schedule 4.12(a) (collectively, the "Licensed Requisite Rights"; and together with the Owned Requisite Rights, the "Requisite Rights"), and such rights to use, sell, license, dispose of and bring actions are exclusive with respect to the Owned Requisite Rights; (ii) neither the Company nor any of its Subsidiaries has granted any Person the right to use any of the Owned Requisite Rights; (iii) there exists no default, or any event which upon the giving of notice or the passage of time, or both, would give rise to a claim of a default by the Company or any of its Subsidiaries under the licenses granting the Company and/or any of its Subsidiaries the Licensed Requisite Rights; (iv) the Company and each of its Subsidiaries have taken all commercially reasonable and practicable steps designed to safeguard and maintain (A) the secrecy and confidentiality of the Company's and its Subsidiaries' Confidential Information, and (B) the proprietary 14 rights of the Company and each of its Subsidiaries in all of the Requisite Rights; (v) neither the Company nor any of its Subsidiaries has interfered with, infringed upon, misappropriated or otherwise come into conflict with any Intellectual Property Rights of any Person or committed any acts of unfair competition or received from any Person in the past five years any notice, charge, complaint, claim or assertion thereof, and no such charge, complaint, claim or assertion is impliedly threatened by an offer to license from another Person; and (vi) neither the Company nor any of its Subsidiaries has sent to any Person in the past five years, or otherwise communicated to any Person, any notice, charge, complaint, claim or other assertion of any present, impending or threatened interference with, infringement upon, misappropriation of, or other conflict with any Intellectual Property Rights of the Company or any of its Subsidiaries by such other Person or any acts of unfair competition by such other Person, nor, to the best knowledge of the Seller Group, is any such interference, infringement, misappropriation, conflict or act of unfair competition occurring or threatened. (b) Schedule 4.12(b) contains a true, correct and complete list of all applications, filings and other formal actions made or taken pursuant to any Laws by the Company and/or any of its Subsidiaries to perfect or protect their respective interests in their respective Intellectual Property Rights. 4.13 Agreements, No Defaults, Etc. (a) Schedule 4.13(a) contains a true, correct and complete list and a brief description of all Contracts to which the Company or any of its Subsidiaries is a party and (x) that were entered into or made outside the ordinary course of business, consistent with past practice, or (y) that were entered into or made in the ordinary course of business, consistent with past practice, and are described in clauses (i) through (xiii) of the next sentence of this Section 4.13. Except as set forth on Schedule 4.13(a), neither the Company nor any of its Subsidiaries is a party to any of the following Contracts: (i) distributorship, dealer, sales, advertising, agency, manufacturer's representative, or any other Contract relating to the payment of a commission; (ii) any Contract relating to the employment of any officer, employee or consultant or any other type of Contract or other understanding or arrangement with any officer, employee or consultant, including any Contract or other understanding or arrangement relating to severance payments; (iii) any indenture, mortgage, promissory note, loan agreement, pledge agreement, guaranty or conditional sale or other Contract relating to the borrowing of money, a line of credit or a Capital Lease; (iv) any Contract for charitable contributions in excess of $5,000 individually or $10,000 in the aggregate; (v) any Contract for capital expenditures in excess of $10,000 individually or $50,000 in the aggregate; 15 (vi) any Contract for the sale of any assets, properties or rights other than the sale of services or products in the ordinary course of business, consistent with past practice; (vii) any Contract pursuant to which the Company or any of its Subsidiaries is a lessee of or holds or operates any machinery, equipment, motor vehicles, office furniture, fixtures, products, merchandise or other personal property owned by any other Person in excess of $10,000 individually or $50,000 in the aggregate; (viii) any Contract relating to the lending or investing of funds; (ix) any Contract relating to any form of intangible property, including any Intellectual Property Rights; (x) any Contract that restricts the Company or any of its Subsidiaries from engaging in any aspect of the Business or any other business anywhere in the world; (xi) any Contract or group of related Contracts with the same Person or group of Affiliated Persons (excluding purchase orders entered into in the ordinary course of business, consistent with past practice, that are to be completed within three months of entering into such purchase orders) for the purchase or sale of products or services under which the undelivered or unperformed balance or portion thereof (including the aggregate undelivered or unperformed balance or portion under any such Contracts between the same Person and the Company or any of its Subsidiaries) has a selling price in excess of $50,000; (xii) any Contract for the acquisition or disposition of a Person or a division of a Person made within the preceding five years (whether or not such acquisition or disposition was consummated); or (xiii) any other Contract material to the Business. (b) The Contracts disclosed on Schedule 4.4(b), the leases (and any other Contracts) disclosed on Schedule 4.11(a), the licenses (and any other Contracts) disclosed on Schedule 4.12(a), the insurance policies (and any other Contracts) disclosed on Schedule 4.16(a), the Company Employee Plans (and any other Contracts) disclosed on Schedule 4.18(a), and the Contracts disclosed on Schedule 4.21 are incorporated by reference onto Schedule 4.13. The Contracts disclosed on Schedule 4.13, together with the Contracts incorporated by reference onto Schedule 4.13, are collectively referred to as the "Material Contracts." (c) All Material Contracts (i) are in full force and effect, (ii) constitute legal, valid and binding obligations of the Company and/or its Subsidiaries that are parties thereto and, to the best knowledge of the Seller Group, the other parties thereto, and (iii) are enforceable in accordance with their terms against the Company and/or its Subsidiaries that are parties thereto and, to the best knowledge of the Seller Group, the other parties thereto, in each case subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar Laws affecting creditors' rights and remedies generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity). The Company and each of its Subsidiaries have performed all of the respective obligations required to be performed by them to date pursuant to the terms of the Material Contracts, and there exists no default, or any event which upon the giving of notice or the passage of time, or both, would give rise to a 16 claim of a default in the performance by the Company or any of its Subsidiaries or, to the best knowledge of the Seller Group, any other party to any of the Material Contracts of their respective obligations thereunder. The Purchaser has been furnished with true, correct and complete copies of all written Material Contracts and Schedule 4.13(a) (including Contracts incorporated by reference thereon) contains true, correct and complete descriptions of all oral Contracts listed on Schedule 4.13(a) (including Contracts incorporated by reference thereon). (d) Schedule 4.13(d) contains a true, correct and complete list of all Funded Indebtedness of the Company and each of its Subsidiaries, in each case showing the aggregate principal amount thereof (and the aggregate amount of any undrawn commitments with respect thereto), the name of the lender, and the name of the respective borrower and any other Person that directly or indirectly guaranteed such Funded Indebtedness. 4.14 Litigation, Etc. (a) Except as disclosed on Schedule 4.14(a), there are no (i) Proceedings pending or, to the best knowledge of the Seller Group, threatened against the Company or any of its Subsidiaries, whether at law or in equity, civil or criminal in nature, or before or by any Governmental Entity or arbitrator, nor, to the best knowledge of the Seller Group, does there exist any basis therefor, or (ii) Orders of any Governmental Entity or arbitrator with respect to, involving or against the Company or any of its Subsidiaries. The Company and each of its Subsidiaries have delivered to the Purchaser all material documents and correspondence relating to the matters disclosed on Schedule 4.14(a). (b) Schedule 4.14(b) lists each matter described in Section 4.14(a) that (i) resulted in any criminal sanctions against the Company or any of its Subsidiaries, or (ii) was in existence within the last five years and resulted in payments in excess of $10,000 by the Company or any of its Subsidiaries (whether as a result of a judgment, civil fine, settlement or otherwise). 4.15 Compliance with Laws. The Company and each of its Subsidiaries (a) have complied with, and are in compliance with, all Laws, Orders and Permits applicable to them and the Business, and (b) have all Permits used or necessary in the conduct of the Business. All of the Permits referred to in the preceding sentence are listed on Schedule 4.15 and are in full force and effect. No violations with respect to any of the Permits listed on Schedule 4.15 have occurred or are or have been recorded, and no Proceeding is pending or, to the best knowledge of the Seller Group, threatened to revoke or limit any such Permits. No investigation or review by any Governmental Entity with respect to the Company or any of its Subsidiaries is pending or, to the best knowledge of the Seller Group, threatened, nor has any Governmental Entity notified the Company or any of its Subsidiaries of its intention to conduct the same. To the best knowledge of the Seller Group, there is no proposed change in any applicable Law that would require the Company or any of its Subsidiaries to obtain any Permit not listed on Schedule 4.15 in order to conduct the Business as presently conducted and as presently proposed to be conducted. Neither the Company nor any of its Subsidiaries has received any opinion or memorandum or legal advice from legal counsel to the effect that it is exposed, from a legal standpoint, to any Liability or disadvantage that may be material to its business, financial condition, operations, property or affairs. No member of the Seller Group is 17 aware of any proposed Law that would prohibit or restrict the Company or any of its Subsidiaries from, or otherwise materially and adversely affect the Company or any of its Subsidiaries in, conducting the Business in any jurisdiction in which the Company or any such Subsidiary is presently conducting business or is presently proposing to conduct business. 4.16 Insurance. (a) Schedule 4.16(a) contains a true, correct and complete list of all policies of liability (including "tail"), theft, fidelity, life, fire, product liability, cargo, workers' compensation, health and other forms of insurance held by or on behalf of the Company or any of its Subsidiaries (specifying the insurer, amount of coverage, basis of coverage (i.e., "occurrence" or "claims made"), type of insurance, policy number and any pending claims thereunder). All such coverages have been maintained at all times during the course of the operation of the Business. The Company and each of its Subsidiaries is insured against all risks usually insured against by Persons conducting similar businesses and operating similar properties in the localities where the Business is conducted and the properties of the Company and its Subsidiaries are located, under policies of such types and in such amounts as are customarily carried by such Persons. (b) Except as set forth on Schedule 4.16(b), with respect to each policy of insurance listed on Schedule 4.16(a): (i) all premiums with respect thereto are currently paid and are not subject to adjustment, (ii) neither the Company nor any of its Subsidiaries is in default in any respect with respect to its respective obligations under such policy, (iii) to the best knowledge of the Seller Group, no basis exists that would give any insurer under any such policy the right to cancel or unilaterally reduce or limit the stated coverages contained in such policy, (iv) there are no outstanding claims currently pending under such policy that could be expected to cause an increase in the insurance rates of the Company or any of its Subsidiaries, and no facts or circumstances exist that might be expected to relieve the insurer under such policy of its obligations to satisfy in full any claim thereunder, and (v) neither the Company nor any of its Subsidiaries has received any notice that any such policy has been or shall be canceled or terminated or will not be renewed on substantially the same terms as are now in effect or that the premium on such policy shall be increased on the renewal thereof. 4.17 Labor Relations; Employees. (a) Schedule 4.17(a) sets forth a list of all directors, officers and key employees of the Company and each of its Subsidiaries as of the date hereof, together with their respective titles (if any) and positions held, their current compensation (including salary, wages, bonuses and commissions), and the respective dates on which they commenced employment. To the extent any such employee is on a leave of absence, Schedule 4.17(a) indicates the nature of such leave of absence and such employee's anticipated date of return to active employment. No officer or key employee listed on Schedule 4.17(a) has given the Company or any of its Subsidiaries notice, and, to the best knowledge of the Seller Group, no officer or key employee listed on Schedule 4.17(a) has any plans or intends to terminate his or her employment with the Company or such Subsidiary. No former officer or key employee has left the service of the Company or any of its Subsidiaries within the last six months. (b) Schedule 4.17(b) sets forth the aggregate number of employees, other non-supervisory personnel, independent contractors and owner/operators that work for the Company or any of its Subsidiaries, specifying in the case of the Company and each such Subsidiary the number that belong to a union or are otherwise covered by an employment agreement or a collective bargaining agreement, identified by terminal location or facility. 18 (c) Except as set forth on Schedule 4.17(c), (i) the Company and each of its Subsidiaries generally enjoy good relations with all of their respective employees, and there is no labor strike, dispute or grievance, or work slowdown or stoppage actually pending or, to the best knowledge of the Seller Group, threatened against or involving the Company or any of its Subsidiaries, and (ii) neither the Company nor any of its Subsidiaries is a party to or bound by any collective bargaining agreement, union Contract or similar agreement, no such Contract or agreement is currently being negotiated by the Company or any of its Subsidiaries, no labor union has taken any action with respect to organizing the employees of the Company or any of its Subsidiaries, and no representation question exists with respect to any such employees. (d) The Company, each of its Subsidiaries, and each of their respective ERISA Affiliates have complied in all respects with all Laws relating to the hiring and retention of all employees, leased employees and independent contractors relating to wages, hours, Company Employee Plans, workers' compensation, unemployment, equal opportunity, collective bargaining, and the payment of social security and other Taxes. (e) Schedule 4.17(e) sets forth a true, correct and complete list of any and all unfair labor practice charges or other Proceedings before the National Labor Relations Board, Equal Opportunity Employment Commission charges, employment discrimination lawsuits, wrongful discharge lawsuits, Occupational Safety and Health Administration citations and litigation, wage and hour charges and litigation, and employment related litigation that are presently pending, or to the best knowledge of the Seller Group, threatened at law or in equity, involving the Company or any of its Subsidiaries. Schedule 4.17(e) also sets forth a true, correct and complete list of those charges, lawsuits, citations, litigation and Proceedings falling within the above categories that have been settled or otherwise disposed of within the previous two years. (f) Except as set forth in Schedule 4.17(f), neither the Company nor any of its Subsidiaries is a joint employer or alter ego, as construed under the National Labor Relations Act, as amended, with or of any of its suppliers, distributors, customers or other Persons with which it has any Contract or other understanding or arrangement, including any owner/operator with whom the Company or any of its Subsidiaries has a Contract or other understanding or arrangement, or any other Person with which the Company or any of its Subsidiaries has a leasing arrangement (collectively referred to for the purposes of this Section 4.17(f) as "Third Parties"), and no Third Parties are alter egos of the Company or any of its Subsidiaries. Neither the Company nor any of its Subsidiaries (i) exercises management power or authority over the operations or personnel of any Third Party, (ii) supervises the employees of any Third Party, or (iii) is responsible for, or has the authority to establish, implement or effectively recommend the labor relations or employment policies or actions, including wages, hours, working conditions or any terms of employment, for any employee of any Third Party. There is no interchange of personnel, no common boards of directors and no common officers, managers or employees between the Company or any of its Subsidiaries and any Third Party. Neither the Company or any of its Subsidiaries provides any administrative services for any Third Party that are not required by Law or that are not provided in a bona fide, arms-length transaction at fair market value. Any administrative services provided by the Company or any of its Subsidiaries for any Third Party have been detailed on Schedule 4.17(f). (g) Except as set forth on Schedule 4.17(g), the Company's and each of its Subsidiaries' Contracts and other understandings with owner/operators and independent contractors establish a bona fide arrangement where such individuals are independent contractors to, and are not employees of, the Company or any of its Subsidiaries, and there are not any disputes, claims, 19 charges or allegations pending or, to the best knowledge of the Seller Group, threatened at law or in equity before any Governmental Entity that challenges the independent contractor nature of such Contract or other understanding or arrangement. 4.18 ERISA Compliance. (a) Schedule 4.18(a) contains a true, correct and complete list of all Employee Benefit Plans of the Company and each of its Subsidiaries (collectively, the "Company Employee Plans"), (i) that cover any current or former employees, contract employees, independent contractors or consultants of or to the Company or any of its Subsidiaries or any spouses, family members or beneficiaries thereof (A) that are maintained, sponsored or contributed to by the Company or any of its Subsidiaries or (B) with respect to which the Company or any of its Subsidiaries is obligated to contribute or has any Liability, or (ii) with respect to which the Company or any of its Subsidiaries has any Liability on account of the maintenance or sponsorship thereof or contribution thereto by any present or former ERISA Affiliate of the Company or any of its Subsidiaries. (b) Except as set forth on Schedule 4.18(b), with respect to each Company Employee Plan: (i) such Company Employee Plan has been established, maintained, operated and administered in accordance with its terms and in compliance with ERISA, the Code, and all other applicable Laws (including with respect to reporting and disclosure); (ii) all required, declared or discretionary (consistent with past practice) payments, premiums, contributions, reimbursements or accruals for all periods ending prior to or as of the date hereof have been made or properly accrued on the Latest Balance Sheet, or with respect to accruals properly made after the Latest Balance Sheet Date, on the books and records of the Company or its Subsidiaries and all amounts withheld from employees have been timely deposited into the appropriate trust or account; (iii) there is no unfunded Liability relating to such Company Employee Plan that is not reflected on the Latest Balance Sheet, or with respect to accruals properly made after the Latest Balance Sheet Date, on the books and records of the Company or its Subsidiaries; (iv) neither the Company, any of its Subsidiaries, any of their respective ERISA Affiliates, nor any other "disqualified person" or "party in interest" (as such terms are defined in Section 4975 of the Code and Section 3(14) of ERISA, respectively) with respect to such Company Employee Plan, has breached the fiduciary rules of ERISA or engaged in a prohibited transaction that could subject any of the foregoing Persons to any Tax or penalty imposed under Section 4975 of the Code or Section 502(i), Section 502(j) or Section 502(l) of ERISA; (v) no Proceeding (other than routine claims for benefits) is pending or, to the best knowledge of the Seller Group, threatened against or relating to such Company Employee Plan or any fiduciary thereof, and there is, to the best knowledge of the Seller Group, no basis for any such Proceeding against any such Company Employee Plan; 20 (vi) each Company Employee Plan, if intended to be "qualified" within the meaning of Section 401(a) of the Code, has been determined by the Internal Revenue Service to be so qualified and the related trusts are exempt from Tax under Section 501(a) of the Code, and nothing has occurred that has or reasonably could be expected to adversely affect such qualification or exemption; (vii) except as may be required under Laws of general application, no Company Employee Plan obligates the Company or any of its Subsidiaries to provide any employee or former employee, or their spouses, family members or beneficiaries, any post-employment or post-retirement health or life insurance, accident or other "welfare-type" benefits; (viii) each such Company Employee Plan that is subject to the requirements of the Consolidated Omnibus Budget Reconciliation of 1985, as amended ("COBRA"), and the Health Insurance Portability and Accountability Act, as amended ("HIPAA"), has been maintained in compliance with COBRA and HIPAA, including all notice requirements, and no Tax payable on account of Section 4980B or any other section of the Code has been or is expected to be incurred; (ix) neither the Company, any of its Subsidiaries, nor any of their respective ERISA Affiliates is or has ever maintained or been obligated to contribute to a Multi-employer Plan (as defined in Section 3(37) of ERISA), a Multiple Employer Plan (as defined in Section 413 of the Code), or a Defined Benefit Pension Plan (as defined in Section 3(35) of ERISA); (x) no benefit payable or that may become payable by the Company, any of its Subsidiaries or any or their respective ERISA Affiliates pursuant to such Company Employee Plan will constitute an "excess parachute payment" within the meaning of Section 280G of the Code, which is or may be subject to the imposition of a Tax under Section 4999 of the Code or that would not be deductible by reason of Section 280G of the Code; (xi) each such Company Employee Plan that is intended to meet the requirements of Section 125 of the Code meets such requirements and each program of benefits for which employee contributions are provided pursuant to elections made under such Company Employee Plan meets the requirements of the Code applicable thereto; (xii) there has not been any act or omission by the Company, any of its Subsidiaries, or any of their respective ERISA Affiliates that has given rise to or could give rise to any fines, penalties or related charges under ERISA or the Code for which the Company, any of its Subsidiaries or any of their respective ERISA Affiliates could be liable; (xiii) all reporting and disclosure obligations imposed under ERISA and the Code have been satisfied with respect to each Company Employee Plan; (xiv) neither the Company nor any of its Subsidiaries has made or agreed to make, nor are they required to make (in order to bring any Company Employee Plan into compliance with ERISA or the Code) any changes in benefits that would materially increase the costs of maintaining any Company Employee Plan; 21 (xv) there has not been any act or omission by the Company or any of its Subsidiaries, or any of their respective ERISA Affiliates, that has given rise to or could give rise to any fines, penalties or related charges under ERISA or the Code for which the Company or any of its Subsidiaries, or any of their respective ERISA Affiliates, could be liable; (xvi) the Company and each of its Subsidiaries, as applicable, have timely deposited and transmitted all amounts withheld from employees for contributions or premium payments for each Company Employee Plan into the appropriate trusts or accounts; and (xvii) each Company Employee Plan that allows loans to plan participants has been operated in accordance with its terms, the plan's written loan policy and all applicable laws. In addition, all outstanding loans from such Company Employee Plans are current as of the Closing Date, and there are no loans in default. (c) The Purchaser has been provided with true, correct and complete copies, to the extent applicable, of all documents pursuant to which each Company Employee Plan is maintained and administered, the two most recent annual reports (Form 5500 and attachments) and financial statements therefor, all governmental rulings, determinations and opinions (and pending requests therefor), and, if any Company Employee Plan provides post-employment or post-retirement health and life insurance, accident or other "welfare-type" benefits, the most recent valuation of the present and future obligations under such Company Employee Plan. The foregoing documents accurately reflect all of the terms of such Company Employee Plan (including any agreement or provision that would limit the ability of the Company or any of its Subsidiaries to make any prospective amendments or to terminate such Company Employee Plan). 4.19 Environmental Matters. (a) Except as set forth on Schedule 4.19(a), neither the Company, any of its Subsidiaries, or any of their respective Affiliates has received any written or oral notice, report or other information (i) regarding any actual or alleged violation of any Environmental, Health and Safety Laws, or any Liabilities, including any investigatory, remedial or corrective obligations, relating to (A) the Company, any of its Subsidiaries, any of their respective Affiliates, or any of their respective predecessors, (B) the Business, or (C) any of the Company's or any of its Subsidiaries' currently or formerly owned or leased properties or operations, or (ii) that the Company or any of its Subsidiaries is potentially responsible under any Environmental, Health and Safety Laws for response costs, corrective action or natural resource damages, as those terms are defined under the Environmental, Health and Safety Laws, at any location. (b) Schedule 4.19(b) sets forth a true, correct and complete list of all properties and facilities previously owned, leased or operated by the Company, any of its Subsidiaries, or any of their respective predecessors at any time (together with the Leased Properties, the "Covered Properties"). There has been no release, discharge, spill or disposal of any substance at any of the Covered Properties so as to give rise to any Liability of the Company or any of its Subsidiaries under any Environmental, Health and Safety Laws. Except as set forth on Schedule 4.19(b), there is not now, nor has there ever been, any asbestos-containing material in any form or condition, underground storage tank, above-ground storage tank, landfill, waste pile, surface impoundment, disposal area, or article or equipment containing polychlorinated biphenyls on or at any of the Covered Properties. 22 (c) Neither the Company, any of its Subsidiaries, any of their respective Affiliates, nor any of their respective predecessors has treated, stored, disposed of, arranged for or permitted the disposal of, transported, handled or released any substance, or owned or operated any property or facility (and no such property or facility is contaminated by any such substance) in a manner that has given or would give rise to Liability pursuant to any Environmental, Health and Safety Laws, including any Liability for response costs, corrective action costs, personal injury, property damage, natural resources damage or attorney fees, or any investigative, corrective or remedial obligations pursuant to any Environmental, Health and Safety Laws. (d) No facts, events or conditions relating to the past or present operations of the Company, any of its Subsidiaries, any of their respective Affiliates, any of their respective predecessors, or any of the Covered Properties will prevent, hinder or limit continued compliance by the Company or any of its Subsidiaries with any Environmental, Health and Safety Laws, or give rise to any investigative, corrective or remedial obligations pursuant to any Environmental, Health and Safety Laws, or give rise to any other Liability pursuant to any Environmental, Health and Safety Laws, including any relating to on-site or off-site releases or threatened releases of materials, substances or wastes, personal injury, property damage or natural resources damage. (e) Neither this Agreement nor the consummation of the transactions contemplated by this Agreement or any of the Related Documents will result in any obligations for site investigation or cleanup, or notification to or consent of any Governmental Entity or other third party, pursuant to any of the so-called "transaction-triggered" or "responsible property transfer" Environmental, Health and Safety Laws. (f) The Company and each of its Subsidiaries have provided the Purchaser with true, correct and complete copies of all reports and studies within the possession or control of the Company and its Subsidiaries with respect to past and present environmental conditions or events at any of the Covered Properties (all of which are listed on Schedule 4.19(b)), and, to the best knowledge of the Seller Group, there are no other environmental reports or studies with respect thereto. 4.20 Brokers. Neither the Company nor any of its Subsidiaries has employed any broker or finder or incurred any Liability for any brokerage fees, commissions or finders' fees or similar compensation or transaction based payments in connection with the transactions contemplated by this Agreement or any of the Related Documents, other than Daniels and Associates. 4.21 Related Party Transactions. (a) Except as set forth on Schedule 4.21(a), and except for compensation to bona fide employees of the Company or any of its Subsidiaries for services rendered in the ordinary course of business, consistent with past practice, no current or former Affiliate of the Company or any of its Subsidiaries or any "Associate" (as defined in the rules promulgated under the Securities Exchange Act) of any thereof, is now, or has been during the last five fiscal years, (i) party to any transaction or Contract with the Company or any of its Subsidiaries (including any Contract or other understanding or arrangement providing for the furnishing of services by, or the rental of real or personal property from, or otherwise requiring payments to, any such 23 Affiliate or Associate), or (ii) the direct or indirect owner of an interest in any Person that is a present or potential competitor, supplier or customer of the Company or any of its Subsidiaries (other than non-affiliated holdings in publicly held companies). Except as set forth on Schedule 4.21(a), neither the Company nor any of its Subsidiaries is a guarantor or otherwise liable for any actual or potential Liability of its Affiliates or their Associates. Except as set forth on Schedule 4.21(a), neither the Company nor any of its Subsidiaries (x) owns or operates any vehicles, boats, aircraft, apartments or other residential or recreational properties or facilities for executive, administrative or sales purposes, or (y) owns or pays for any social club memberships, whether or not for the benefit of the Company, any of its Subsidiaries, and/or any of their respective executives. (b) Schedule 4.21(b), sets forth a true, correct and complete list of all distributions, dividends, redemptions or repurchases, of or with respect to the capital stock of the Company (as set forth on Schedule 4.21(b)), made by the Company during the Company's current fiscal year. 4.22 Accounts and Notes Receivable. Except as set forth on Schedule 4.22, and except for allowances for doubtful accounts reflected on the Latest Balance Sheet, all accounts receivable and notes receivable owing to the Company or any of its Subsidiaries as of the date hereof constitute, and as of the Closing shall constitute, valid and enforceable claims arising from bona fide transactions in the ordinary course of business, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar Laws affecting creditors' rights and remedies generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity), and, to the best knowledge of the Seller Group, there are no asserted claims, refusals to pay or other rights of set-off against any thereof. Except as set forth on Schedule 4.22 (including those items categorized as "legal" on such Schedule), there is (i) no account debtor or note debtor that is delinquent by more than thirty (30) days for payments due from such account debtor or note debtor in excess of $10,000 in the aggregate, (ii) no account debtor or note debtor that has refused, or, to the best knowledge of the Seller Group, threatened to refuse, to pay its obligations to the Company or its Subsidiaries, as the case may be, for any reason, or has otherwise made a claim of set-off or similar claim (other than in amounts not in excess of $5,000 per account debtor or note debtor, or $10,000 in the aggregate), and (iii) to the best knowledge of the Seller Group, no account debtor or note debtor that owes the Company or any of its Subsidiaries amounts in excess of $10,000 in the aggregate is insolvent or bankrupt. 4.23 Bank Accounts; Powers of Attorney. Schedule 4.23 sets forth a true and complete list of (i) all bank accounts and safe deposit boxes of the Company and each of its Subsidiaries and all Persons who are signatories thereunder or who have access thereto, and (ii) the names of all Persons holding general or special powers of attorney from the Company or any of its Subsidiaries and a summary of the terms thereof (excluding ministerial powers of attorney granted to representatives of the Company or any of its Subsidiaries that are terminable at will). 4.24 Suppliers and Vendors. Except as set forth on Schedule 4.24, no material supplier or vendor to the Company or any of its Subsidiaries has canceled or otherwise terminated, or, to the best knowledge of the Seller Group, threatened to cancel or otherwise terminate, its relationship with the Company or any of its Subsidiaries or has 24 decreased, limited or otherwise modified, or, to the best knowledge of the Seller Group, threatened to decrease, limit or otherwise modify, the services, supplies or materials it provides to the Company or any of its Subsidiaries. 4.25 Customers. Except as set forth on Schedule 4.25, no customer of the Company or any of its Subsidiaries to which more than $50,000 of annual sales were attributable during any of the preceding three fiscal years has notified the Company or any of its Subsidiaries that it intends, or, to the best knowledge of the Seller Group, has threatened, to terminate or materially curtail its relationship and dealings with the Company or any of its Subsidiaries. 4.26 Conflicts of Interest. Neither the Company, any of its Subsidiaries, any Stockholder, nor any officer, employee, agent or other Person acting on their behalf has, directly or indirectly, given or agreed to give, any money, gift or similar benefit (other than legal price concessions to customers in the ordinary course of business, consistent with past practice) to any customer, supplier, employee or agent of a customer or supplier, or official or employee of any Governmental Entity or other Person who was, is, or may be in a position to help or hinder the Business (or assist in connection with any actual or proposed transaction) that (i) might subject the Company or any of its Subsidiaries to any damage or penalty in any Proceeding, (ii) if not given in the past, would have resulted in a Material Adverse Change, or (iii) if not continued in the future, reasonably could be expected to result in a Material Adverse Change. There is not now, and there has never been, any employment by the Company or any of its Subsidiaries of, or beneficial ownership in the Company or any of its Subsidiaries by, any governmental or political official in any jurisdiction in which the Company or any of its Subsidiaries has conducted, presently is conducting, or presently is proposing to conduct business. 4.27 Disclosure. Neither this Agreement, including the Schedules, Annexes, attachments and Exhibits hereto, nor any other written material delivered by or on behalf of the Company, any of its Subsidiaries, or any Stockholder to the Purchaser or any of its representatives, contains any untrue statement of a material fact or omits a material fact necessary to make the statements contained herein or therein, taken as a whole, in light of the circumstances in which they were made, not misleading. ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE PURCHASER The Purchaser represents and warrants to each member of the Seller Group as of the date hereof as follows: 5.1 Organization; Corporate Authority. The Purchaser is a corporation duly organized, validly existing and in good standing under the Laws of the jurisdiction of its incorporation and has all requisite power and authority (corporate or otherwise) to own, lease and operate its assets and properties and to carry on its business as presently conducted and as presently proposed to be conducted. The Purchaser is duly qualified and in good standing to transact business as a foreign Person in those jurisdictions set forth on Schedule 5.1, which constitute all of the 25 jurisdictions in which the character of the property owned, leased or operated by the Purchaser or the nature of the business or activities conducted by the Purchaser makes such qualification necessary. The Seller Group has been furnished with true, correct and complete copies of the Purchaser's Charter Documents, in each case as amended and in effect on the date this representation is being made and is deemed made hereunder. 5.2 Authority; Authorization; Execution and Delivery; Enforceability; No Conflict. (a) The Purchaser has all requisite power and authority (corporate and otherwise) to execute, deliver and perform its obligations under this Agreement and each Related Document to which it is or will be a party and to consummate the transactions contemplated hereby and thereby. The Purchaser's execution and delivery of this Agreement and each Related Document to which it is or will be a party, and the performance by the Purchaser of its obligations hereunder and thereunder, have been duly and validly authorized by all requisite action on the part of the Purchaser (including its board of directors and all committees thereof and its stockholders). This Agreement and each Related Document to which the Purchaser is or will be a party has been, or upon the Purchaser's execution hereof and thereof will be, duly and validly executed and delivered by the Purchaser and constitutes, or upon the Purchaser's execution and delivery hereof and thereof will constitute, a valid and binding obligation of the Purchaser, enforceable against the Purchaser in accordance with their respective terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar Laws affecting creditors' rights and remedies generally, and, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity). (b) Neither the execution and delivery by the Purchaser of, and performance of its obligations under, this Agreement or any of the Related Documents to which it is or will be a party, nor the consummation by the Purchaser of the transactions contemplated hereby or thereby, nor the compliance by the Purchaser with any of the provisions hereof or thereof, will (i) conflict with, or result in any violation of, or cause a default (with or without notice or lapse of time or both) under, any provision of the Purchaser's Charter Documents, (ii) conflict with, or result in any violation of, or cause a default (with or without notice or lapse of time or both) under, or give rise to any right of termination, amendment, cancellation or acceleration of any obligations contained in, or the loss of any benefit under, any term, condition or provision of any provision of any Contract to which the Purchaser is a party, or by which the Purchaser or any of its assets or properties is or may be bound, (iii) violate any Law applicable to the Purchaser, or (iv) result in an Encumbrance on or against any assets, rights or properties of the Purchaser, or on or against any capital stock or other securities of the Purchaser, or give rise to any claim against the Company, any of the Company's Subsidiaries, or the Purchaser. 5.3 Consents. Except as set forth on Schedule 5.3, no Permit, authorization, consent or approval of or by, or notification of or filing with, any Person (governmental or otherwise) is required for, as a result of, or in connection with the execution, delivery and performance by the Purchaser of this Agreement or any of the Related Documents to which it is or will be a party or the consummation of the transactions contemplated hereby or thereby. 26 5.4 Brokers. The Purchaser has not employed any broker or finder or incurred any Liability for any brokerage fees, commissions or finders' fees or similar compensation or transaction based payments in connection with the transactions contemplated by this Agreement or any of the Related Documents, other than Daniels & Associates. ARTICLE VI COVENANTS AND AGREEMENTS 6.1 Access to Records and Properties. From and after the date hereof until the earlier of the Closing or termination of this Agreement pursuant to Article IX, the Company and the Shareholders will, and the Company will cause its management employees to, afford the Purchaser and its attorneys, consultants, accountants and authorized representatives full access, upon reasonable notice during normal business hours and at other reasonable times, to all properties, books, contracts, commitments, records, personnel, lenders and advisors of the Company in order to permit the Purchaser to conduct a due diligence investigation of the Company, provided that, notwithstanding any other provision of this paragraph, in no event will the foregoing be undertaken in such a manner as would reasonably be expected to interfere with, impair or impede in any material respect the business or operations of the Company. 6.2 Conduct of the Business. Except as set forth on Schedule 6.2, from and after the date hereof until the earlier of the Closing or the termination of this Agreement pursuant to Article IX, the Company and each of its Subsidiaries shall, and the Stockholders shall cause the Company and each of its Subsidiaries to: (i) conduct its business substantially as presently conducted and only in the ordinary course of business, consistent with past practice; (ii) not undertake (or enter into any Contract or other understanding or arrangement to undertake) any action, and use its commercially reasonable efforts to avoid and prevent the occurrence of any event, described in Section 4.8; (iii) not enter into any transaction other than in the ordinary course of business, consistent with past practice, any transaction that is not at arms-length with Persons that are not Affiliates, or any transaction with any Person that is an Affiliate; (iv) not acquire or dispose of any assets other than in the ordinary course of business, consistent with past practice; (v) use commercially reasonable efforts to (A) maintain its business, assets, relations with present employees, relations with customers and suppliers, licenses and operations as an ongoing business and preserve its goodwill, in accordance with past custom, and (B) satisfy each of the closing conditions set forth in Article VII; (vi) not issue or sell any shares of its capital stock, not issue or sell any securities convertible into, exercisable or exchangeable for, or options or warrants to purchase or rights to subscribe for, any shares of its capital stock, and not enter into any Contract or other understanding or arrangement to do any of the foregoing; 27 (vii) not declare or pay any dividend or distribution on or with respect to its capital stock, not change the number of authorized shares of its capital stock or reclassify, combine, split, subdivide, or redeem or otherwise repurchase any of shares of its capital stock, not issue, deliver, pledge or encumber any additional shares of its capital stock or other securities equivalent to or exchangeable for shares of its capital stock, and not enter into any Contract or other understanding or arrangement to do any of the foregoing; (viii) not take or omit to take any action that would result in the representations and warranties contained in this Agreement and the Related Documents being untrue on the Closing Date; and (ix) not delay or postpone the payment of accounts payable and other obligations and liabilities or accelerate the collection of accounts receivable. 6.3 Efforts to Consummate. Subject to the terms and conditions of this Agreement, each party shall use commercially reasonable efforts to take or cause to be taken all actions and do or cause to be done all things required under all applicable Laws, Orders and Contracts in order to consummate the transactions contemplated hereby, including (i) all commercially reasonable efforts to obtain or make from or with all Persons all such consents, approvals, authorizations, waivers, notifications and filings as are required to be obtained or made by such party under such Laws, Orders and Contracts for the consummation of the transactions contemplated hereby, and (ii) in the case of the Seller Group, all commercially reasonable efforts to assist the Purchaser in replacing the Company's performance bonds and guarantees. The Company and each of its Subsidiaries shall take all actions and do all things, and the Stockholders shall cause the Company and each of its Subsidiaries to take all actions and do all things, required to extinguish at or prior to the Closing all Funded Indebtedness and to release any and all Encumbrances on or affecting any of the Company's or any of the its Subsidiaries' assets or properties, other than the Permitted Encumbrances. 6.4 Negotiation with Others. (a) During the period (the "Exclusivity Period") commencing on January 1, 2005, and ending on the first to occur of (a) the 120th day following January 1, 2005, and (b) the termination of this Agreement pursuant to Section 9.1(i), the Company and the Stockholders will not, either directly or indirectly through their respective representatives, submit, solicit, initiate, or discuss any proposal or offer from or to any person other than the Purchaser, or engage in any discussions that could lead to any proposal or offer from or to any person other than the Purchaser, regarding any possible sale, acquisition, reorganization, recapitalization, or other similar transaction involving the Company or any of its subsidiaries (whether by way of stock sale, sale of all or any material portion of assets, merger, consolidation or otherwise), or any stock sale or issuance or debt and/or equity financing involving the Company or any of its subsidiaries (each, a "Possible Transaction"), unless consented to in writing by the Purchaser. If, during the Exclusivity Period, any of the Stockholders (whether in an individual capacity or as an officer or representative of the Company) is contacted by any other person or receives from 28 any other person any written offer or proposal in connection with a Possible Transaction, the Company will promptly notify the Purchaser thereof, including any details and the identity of the person making any such offer or proposal and a copy thereof. During the Exclusivity Period, the Company will, and the Stockholders will cause the Company to, continue to operate its business in the ordinary course, unless otherwise consented to by the Purchaser. (b) The parties recognize and acknowledge that a breach of this Section 6.4 will cause irreparable and material loss and damage to the non-breaching party as to which it will not have an adequate remedy at law or in equity. Accordingly, each party acknowledges and agrees that the issuance of an injunction or other equitable remedy is an appropriate remedy for any such breach. 6.5 Notice of Prospective Breach. Each party shall promptly notify the other parties in writing upon the occurrence, or the failure to occur, of any event, which occurrence or failure to occur would be reasonably likely to cause (i) any representation or warranty of such party that is contained in this Agreement or any Related Document to be untrue or inaccurate in any respect at any time from the date of this Agreement to the Closing as if such representation and warranty were made at such time, or (ii) any failure of any party hereto to comply with or satisfy any covenant or agreement to be complied with or satisfied by it under this Agreement or any Related Document. 6.6 Public Announcements. From and after the date hereof until the earlier of the Closing or the termination of this Agreement pursuant to Article IX, each member of the Seller Group, each of the Company's Subsidiaries, and the Purchaser agree that, except (i) as otherwise required by Law, (ii) for disclosure to his, her or its respective directors, officers, employees, financial advisors, financing sources, legal counsel, independent certified public accountants or other agents, advisors or representatives on a need-to-know basis and with whom such party has a confidential relationship, and (iii) in the case of the Purchaser, in connection with its compliance with the disclosure requirements under federal and state securities Laws, he, she or it will not issue any reports, statements or releases, in each case pertaining to this Agreement or any Related Document to which he, she or it is a party or the transactions contemplated hereby or thereby, without the prior written consent of the Company and the Purchaser, which consent shall not unreasonably be withheld or delayed. 6.7 Exchange Proceeds. If, between the date hereof and the Closing, the Company or any of its Subsidiaries receives any proceeds in consideration for the exchange of any of its assets, whether from the sale of any such assets, from insurance proceeds payable on account of any loss or casualty to such assets, any proceeds from the taking of such assets pursuant to the power of eminent domain, or any other proceeds from whatever source relating to the disposition of such assets (the "Exchange Proceeds"), the Company and/or its Subsidiaries shall, and each of the Stockholders shall cause the Company and/or such Subsidiary to, promptly notify the Purchaser of such receipt of such Exchange Proceeds and shall consult with the Purchaser with respect to the application of any such Exchange Proceeds. 6.8 Non-Competition Covenant. (a) Each Stockholder acknowledges and agrees that as a mutual condition to the respective obligations of the parties at the Closing, and as a material inducement to the Purchaser to enter into and perform its obligations hereunder and in consideration of the payments and other consideration to be 29 received by the Stockholders under this Agreement and the Related Documents, such Stockholder shall not, without the prior written consent of the Purchaser, at any time during the period beginning on the Closing Date and ending on the fifth anniversary thereof (the "Restrictive Period"), (i) directly or indirectly engage in, represent in any way, or be connected with, any Competing Business (as defined below), whether such engagement shall be as a director, an officer, an owner, an employee, a partner, an Affiliate or other participant in such Competing Business, (ii) assist others in engaging in any Competing Business in the manner described in clause (i) above, (iii) induce any employees of the Purchaser or any of its Subsidiaries or other Affiliates, or any employees of the Company or any of its Subsidiaries, at any time during the Restrictive Period to terminate their employment with the Purchaser or any of its Subsidiaries or other Affiliates, or to terminate their employment with the Company or any of its Subsidiaries, or to engage in any Competing Business, or (iv) induce any customer, vendor or agent or any other Person with which the Purchaser or any or its Subsidiaries or other Affiliates, or with which the Company or any of its Subsidiaries, has a business relationship, contractual or otherwise, at any time during the Restrictive Period to terminate or alter such business relationship. This covenant is considered an integral part of this Agreement. (b) As used herein, the term "Competing Business" means (i) any business conducted in (A) any county in the State of Texas, and (B) every other state, province, or other political subdivision of the United States, Canada, Mexico, Japan, China, South America or Europe that is engaged in the business of providing wireless data communications of GSM networks to serve mobile gaming subscribers, or (ii) any business described in the foregoing clause (i) if such business or the services or products provided or sold by it are competitive, directly or indirectly, with the Business on the date hereof or on the Closing Date (or with respect to which there are fixed plans on the date hereof or on the Closing Date for the provision or sale of the same by the Business). (c) If, at the time of enforcement of this Section 6.8, a court holds that the restrictions stated herein are unreasonable under the circumstances then existing, the parties agree that the maximum period, scope or geographical area reasonable under such circumstances shall be substituted for the stated period, scope or geographical area. Additionally, with respect to each county in the State of Texas, the covenant not to compete set forth in Section 6.8(a) is intended as a separate covenant with respect thereto. If any one of such covenants is declared invalid for any reason, such determination shall not affect the validity of the remainder of the covenants. The other covenants set forth in Section 6.8(a) shall remain in effect as if the provision had been executed without the invalid covenants. The parties hereto hereby declare that they intend that the remaining covenants of the provision continue to be effective without any covenants that have been declared invalid. The parties hereto acknowledge that money damages would be an inadequate remedy for any breach of this Section 6.8. Therefore, in the event of a breach or threatened breach of this Section 6.8, the Purchaser and/or its successors or assigns may, in addition to other rights and remedies existing in its or their favor, apply to any court of competent jurisdiction for specific performance and/or injunctive relief in order to enforce or prevent any violations of the provisions of this Section 6.8 (without posting a bond or other security). 6.9 Disclosure of Information. (a) As used in this Agreement, the term "Confidential Information" means, with respect to any Person, all information (whether written or oral) furnished (whether before or after the date hereof) by such Person or its owners, members, partners, directors, officers, employees, Affiliates, representatives (including its financial advisors, attorneys and accountants) or 30 agents (collectively, "Representatives") to any other Person or its Representatives, and all analyses, compilations, forecasts, studies or other documents prepared by such other Person or its Representatives in connection with the transactions contemplated by this Agreement that contain or reflect any such information; provided, however, that the term "Confidential Information" shall not include information that (i) is or becomes publicly available other than as a result of a disclosure by any Person or its Representatives in violation of this Agreement, or (ii) is or becomes available to such other Person on a non-confidential basis from a source that is not prohibited from disclosing such information by any legal, contractual or fiduciary obligation; provided further, however, that for purposes of this Section 6.9, from and after the Closing, Confidential Information of the Company or any of its Subsidiaries shall be deemed Confidential Information of the Purchaser and shall, as of such time, no longer be deemed Confidential Information of the Company or such Subsidiaries, as applicable. (b) The Purchaser will keep all Confidential Information of the Company and each of its Subsidiaries confidential and will not (except as required by applicable Law, regulation or legal process) without the prior written consent of the Company or such Subsidiary, as applicable, disclose any of such Confidential Information in any manner whatsoever, directly or indirectly, and will not use any Confidential Information of the Company or any of its Subsidiaries except for the purposes contemplated by this Agreement; provided, however, that the Purchaser may reveal Confidential Information of the Company or any of its Subsidiaries to its Representatives (i) who need to know such Confidential Information for the purposes contemplated by this Agreement and (ii) who are informed by the Purchaser of the confidential nature of the Confidential Information. In the event that the Purchaser or any of its Representatives is requested pursuant to, or required by, applicable Law, regulation or legal process to disclose any Confidential Information of the Company or any of its Subsidiaries, the Purchaser will notify the Company or such Subsidiary, as applicable, promptly so that it may seek a protective order or other appropriate remedy or, in its sole and absolute discretion, waive compliance with the terms of this Section 6.9(b). In any event, the Purchaser will furnish only that portion of the Confidential Information of the Company any its Subsidiaries that it is advised by counsel is legally required and will exercise all commercially reasonable efforts to obtain reliable assurance, to the extent it is possible to obtain the same, that confidential treatment will be afforded to such Confidential Information. (c) The Company and each of the Stockholders will keep all Confidential Information of the Purchaser confidential and will not (except as required by applicable Law, regulation or legal process), without the prior written consent of the Purchaser, disclose any of such Confidential Information in any manner whatsoever, directly or indirectly, and will not use any Confidential Information of the Purchaser except for the purposes contemplated by this Agreement; provided, however, that the Company and the Stockholders may reveal Confidential Information of the Purchaser to his, her or its Representatives (i) who need to know such Confidential Information for the purposes contemplated by this Agreement and (ii) who are informed by the Company or such Stockholder of the confidential nature of the Confidential Information. In the event that the Company, any Stockholder or any of their respective Representatives is requested pursuant to, or required by, applicable Law, regulation or legal process to disclose any Confidential Information of the Purchaser, the Company or such Stockholder will notify the Purchaser promptly so that it may seek a protective order or other appropriate remedy or, in its sole and absolute discretion, waive compliance with the terms of this Section 6.9(c). In any event, the Company or such Stockholder will furnish only that portion of 31 the Confidential Information of the Purchaser that he, she or it is advised by counsel is legally required and will exercise all commercially reasonable efforts to obtain reliable assurance, to the extent it is possible to obtain the same, that confidential treatment will be afforded to such Confidential Information. (d) Each of the parties hereto recognizes and acknowledges that a breach of his, her or its covenants in Section 6.9(b) or Section 6.9(c), as the case may be, will cause irreparable and material loss and damage to the other parties, the amount of which cannot be determined readily and as to which such other parties will not have an adequate remedy at law or in damages. Accordingly, in addition to any remedy such other parties may have in damages by an action at law, such other parties shall be entitled to the issuance of an injunction restraining any such breach or threatened breach or any other remedy at law or in equity for any such breach. 6.10 Use of Proprietary Name. From and after the Closing, no Stockholder shall use the name "Globicom Wireless" or any derivation thereof for any purpose. 6.11 Supplements to Schedules. Prior to the Closing, the Company and each of the Stockholders shall promptly supplement or amend any Schedule with respect to any matter arising after the date of this Agreement that, if existing or occurring on the date of this Agreement, would have been required to be set forth or described in such Schedule. No supplement or amendment of a Schedule made pursuant to this Section 6.11 shall be deemed to constitute a cure of any breach of any representation or warranty made by the Company or such Stockholder pursuant to this Agreement unless consented to in writing by the Purchaser, which consent may be withheld by the Purchaser in its sole and absolute discretion for any reason. For purposes of the rights and obligations of the parties hereunder, upon the occurrence of the Closing, any such supplemental or amended disclosure consented to in writing by the Purchaser as aforesaid shall be deemed to have been disclosed as of the date of this Agreement. ARTICLE VII CLOSING OBLIGATIONS 7.1 Conditions to Each Party's Obligations. The respective obligations of the parties to consummate the transactions contemplated hereby are subject to the satisfaction prior to the Closing Date of the following conditions, unless waived (to the extent such conditions can be waived) by the Company or the Purchaser, as applicable: (a) Approvals. All authorizations, consents, Orders or approvals of, or declarations or filings with, or expiration of waiting periods imposed by, any Governmental Entity necessary for the consummation of the transactions contemplated hereby shall have been obtained or made. (b) No Injunctions or Restraints. No temporary restraining order, preliminary or permanent injunction, or other Order issued by any court or Governmental Entity of competent jurisdiction, nor other legal restraint or prohibition preventing the consummation of the transactions contemplated hereby, shall be in effect. 32 (c) Actions and Statutes. No action, suit or proceeding shall have been taken or threatened, and no statute, rule, regulation or Order shall have been enacted, promulgated, issued or deemed applicable to the transactions contemplated by this Agreement or any of the Related Documents by any Governmental Entity that would (i) make the consummation of the transactions contemplated hereby or thereby illegal or substantially delay the consummation of any material aspect of the transactions contemplated hereby or thereby, or (ii) render any party unable to consummate the transactions contemplated hereby or thereby. 7.2 Conditions to Obligations of the Purchaser. The obligations of the Purchaser to consummate the transactions contemplated by this Agreement are subject to the satisfaction of the following conditions, unless waived (to the extent such conditions can be waived) by the Purchaser: (a) Accuracy of Representations and Warranties. All representations and warranties made by the Company and the Stockholders in this Agreement and each of the Related Documents shall be true and correct in all material respects at and as of the Closing Date with the same effect as if such representations and warranties had been made at and as of the Closing Date (provided, however, that to the extent a representation is already limited to matters characterized as "material," it shall be correct in all respects), and the Purchaser shall have received a certificate to that effect signed by a principal executive officer of the Company and each Stockholder. (b) Performance of Obligations of the Company and the Stockholders. The Company and each of the Stockholders shall have performed in all material respects all obligations and covenants required to be performed by each of them under this Agreement and each of the Related Documents prior to or as of the Closing Date, and the Purchaser shall have received a certificate to that effect signed by a principal executive officer of the Company and each Stockholder. (c) Authorization. All action necessary to authorize the execution, delivery and performance of this Agreement and each of the Related Documents by the Company and each of the Stockholders and the consummation of the transactions contemplated hereby and thereby, including the requisite shareholder approvals, shall have been duly and validly taken by the Company and each of the Stockholders, and the Company and each of the Stockholders shall have the full power and right to consummate the transactions contemplated hereby and thereby on the terms provided herein and therein. (d) Financial Statements. The Purchaser shall have (i) received a true, correct and complete copy of the Interim Balance Sheets and Interim Financial Statements for each month ending after December 31, 2004, up to the Closing Date and (ii) received, or received confirmation from the Company and the Company's auditors that Purchaser will receive within sixty (60) days following the Closing, audited financial statements of the Company as of and for the years ended December 31, 2003, and December 31, 2004, in form and substance acceptable to Purchaser in its sole discretion (e) Consents and Approvals. The Seller Group shall deliver to the Purchaser duly executed copies of all consents and approvals required for or in connection with (i) the execution and delivery by the Company and each Stockholder of this Agreement and each of the Related Documents to which each of them is a party, and the consummation of the transactions contemplated hereby and thereby, in form and substance reasonably satisfactory to the Purchaser and 33 its counsel, and (ii) the continued conduct of the Business as previously conducted (including any consent identified on Schedule 4.3), in form and substance reasonably satisfactory to the Purchaser and its counsel. (f) Absence of Material Adverse Change. Since the Latest Balance Sheet Date, there shall have been no Material Adverse Change in the business of the Company or any of its Subsidiaries. (g) Delivery of the Shares. The Purchaser shall have received all of the Shares in accordance with Section 1.4. (h) Related Documents. The Seller Group shall cause each of the following documents (each, a "Related Document," and collectively, the "Related Documents") to be executed and/or delivered by the parties thereto at the Closing: (i) General Release. Each of the Stockholders shall enter into a General Release in favor of the Company and each of its Subsidiaries substantially in the form of Exhibit B attached hereto (the "General Release"); (ii) Gifford Employment Agreement. Greg Gifford shall execute and deliver an employment agreement with the Company substantially in the form of Exhibit C attached hereto (the "Gifford Employment Agreement"); (iii) Rodriguez Employment Agreement. Tony Rodriguez shall execute and deliver an employment agreement with the Company substantially in the form of Exhibit D attached hereto (the "Rodriguez Employment Agreement"); and (iv) Stapp Employment Agreement. Ron Stapp shall execute and deliver an employment agreement with the Company substantially in the form of Exhibit E attached hereto (the "Stapp Employment Agreement"). (i) Seller Certificates. The Seller Group shall cause each of the following certificates to be executed and/or delivered, as the case may be, by the Person who or which is the subject thereof: (i) a certificate of the secretary of the Company, dated as of the Closing Date, certifying (A) that true, correct and complete copies of the Company's Charter Documents as in effect on the Closing Date are attached thereto, (B) as to the incumbency and genuineness of the signatures of each officer of the Company executing this Agreement and the Related Documents on behalf of the Company; and (C) the genuineness of the resolutions (attached thereto) of the board of directors or similar governing body of the Company and the Stockholders authorizing the execution, delivery and performance of this Agreement and the Related Documents to which the Company is a party and the consummation of the transactions contemplated hereby and thereby; (ii) a certificate of the secretary of each of the Company's Subsidiaries, dated as of the Closing Date, certifying that true and complete copies of such Subsidiary's Charter Documents as in effect on the Closing Date are attached thereto; (iii) certificates dated within ten (10) days of the Closing Date of the secretaries of state of the states in which the 34 Company and each of its Subsidiaries is organized and qualified to do business, certifying as to the good standing and non-delinquent Tax status of such Person; and (iv) certificates of each Stockholder and a principal executive officer of the Company, each dated as of the Closing Date, certifying that such Stockholder and the Company, as applicable, are not foreign persons within the meaning of Section 1445 of the Code. (j) Due Diligence. Purchaser shall have completed, to Purchaser's sole and absolute satisfaction, Purchaser's due diligence investigation of the Company, including legal, business, financial and accounting due diligence of the Company and its business, assets and properties, financial condition and results of operations. (k) Securities Law Compliance. Purchaser shall have received investment representation certificates from each of the Stockholders, in form and substance satisfactory to Purchaser. The transactions contemplated by this Agreement and the issuance of TGTL Shares to the Stockholders shall comply, to Purchaser's sole and absolute satisfaction, with applicable Law, including, without limitation, the availability and compliance with applicable exemptions from the registration requirements of the Securities Act and applicable state securities laws. 7.3 Conditions to Obligations of the Seller Group. The obligations of the Seller Group to consummate the transactions contemplated by this Agreement are subject to the satisfaction of the following conditions, unless waived (to the extent such conditions can be waived) by the Seller Group: (a) Accuracy of Representations and Warranties. All representations and warranties made by the Purchaser in this Agreement and each of the Related Documents shall be true and correct in all material respects at and as of the Closing Date with the same effect as if such representations and warranties had been made at and as of the Closing Date, and the Seller Group shall have received a certificate to that effect signed by a principal executive officer of the Purchaser. (b) Performance of Obligations of the Purchaser. The Purchaser shall have performed in all material respects all obligations and covenants required to be performed by it under this Agreement and each of the Related Documents prior to or as of the Closing Date, and the Seller Group shall have received a certificate to that effect signed by a principal executive officer of the Purchaser. (c) Authorization. All action necessary to authorize the execution, delivery and performance of this Agreement and each of the Related Documents by the Purchaser and the consummation of the transactions contemplated hereby and thereby, including the requisite shareholder approvals, shall have been duly and validly taken by the Purchaser, and the Purchaser shall have the full power and right to consummate the transactions contemplated hereby and thereby on the terms provided herein and therein. (d) Consents and Approvals. The Purchaser shall deliver to the Seller Group duly executed copies of all consents and approvals required for or in connection with the execution and delivery by the Purchaser of this Agreement and each of the Related Documents to which it is a party, and the consummation of the transactions contemplated hereby and thereby, in form and substance reasonably satisfactory to the Seller Group. 35 (e) Related Documents. The Purchaser shall cause each of the Related Documents to which the Purchaser is a party to be executed and/or delivered by the Purchaser at the Closing. (f) Purchaser Certificates. The Purchaser shall cause each of the following certificates to be executed and/or delivered, as the case may be, by the Person who or which is the subject thereof: (i) a certificate of the secretary of the Purchaser, dated as of the Closing Date, certifying (A) that true, correct and complete copies of the Purchaser's Charter Documents as in effect on the Closing Date are attached thereto, (B) as to the incumbency and genuineness of the signatures of each officer of the Purchaser executing this Agreement and the Related Documents on behalf of the Purchaser; and (C) the genuineness of the resolutions (attached thereto) of the board of directors or similar governing body of the Purchaser authorizing the execution, delivery and performance of this Agreement and the Related Documents to which the Purchaser is a party and the consummation of the transactions contemplated hereby and thereby; and (ii) certificates dated within ten (10) days of the Closing Date of the secretaries of state of the states in which the Purchaser is organized, certifying as to the good standing and non-delinquent Tax status of the Purchaser. ARTICLE VIII INDEMNIFICATION 8.1 Generally. (a) Subject to the further provisions of this Article VIII, the Seller Indemnifying Persons, jointly and severally, shall indemnify the Purchaser Indemnified Persons for, and hold each of them harmless from and against, any and all Purchaser Losses arising from or in connection with any of the following: (i) the untruth, inaccuracy or breach of any representation or warranty of the Company contained in this Agreement or any Related Document or in any certificate delivered by the Company or any of the Company's Subsidiaries in connection herewith or therewith at or before the Closing (or any facts or circumstances constituting any such untruth, inaccuracy or breach); (ii) the breach of any covenant or agreement of the Company contained in this Agreement or any Related Document and (iii) all obligations, liabilities, indebtedness, claims, damages, expenses and Losses, contingent or otherwise, irrespective of whether or not such item was disclosed to Purchaser in a Schedule or otherwise, in any manner caused by, resulting from, or relating to the operation or ownership of the Company and its business, that existed, arose or accrued prior to and including the Closing Date, including without limitation any federal, state or local taxes of the Company, any such taxes that are payable as a result of the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby and claims under or in respect of any environmental law, any payables or indebtedness or any contract, agreement or obligation of the Company. 36 (b) Subject to the further terms of this Article VIII, each Stockholder shall, severally and not jointly, indemnify the Purchaser Indemnified Persons for, and hold each of them harmless from and against, any and all Purchaser Losses arising from or in connection with any of the following: (i) the untruth, inaccuracy or breach of any representation or warranty of such Stockholder contained in Article III of this Agreement or any Related Document or in any certificate delivered by such Stockholder (in his, her or its capacity as a stockholder of the Company) in connection herewith or therewith at or before the Closing (or any facts or circumstances constituting any such untruth, inaccuracy or breach); (ii) the breach of any covenant or agreement of such Stockholder contained in this Agreement or any Related Document. (c) Subject to the further terms of this Article VIII, the Purchaser shall indemnify the Seller Indemnified Persons for, and hold each of them harmless from and against, any and all Seller Losses arising from or in connection with any of the following: (i) the untruth, inaccuracy or breach of any representation or warranty of Purchaser contained in this Agreement or any Related Document or in any certificate delivered by the Purchaser in connection herewith or therewith at or before the Closing (or any facts or circumstances constituting any such untruth, inaccuracy or breach); and (ii) the breach of any covenant or agreement of the Purchaser contained in this Agreement or any Related Document. 8.2 Assertion of Claims. No claim for indemnification shall be brought under Section 8.1 for a breach of a representation or warranty unless the Indemnified Persons, or any of them, at any time prior to the applicable Survival Date, give the Indemnifying Persons (a) written notice of the existence of any such claim, specifying the nature and basis of such claim and the amount thereof, to the extent known, or (b) written notice pursuant to Section 8.3 of any Third Party Claim, the existence of which might give rise to such a claim for indemnification. Upon the giving of such written notice as aforesaid, the Indemnified Persons, or any of them, shall have the right to commence legal proceedings subsequent to the Survival Date for the enforcement of their rights under Section 8.1. 8.3 Notice and Defense of Third Party Claims. The obligations and liabilities of an Indemnifying Person with respect to Losses resulting from the assertion of liability by third parties (each, a "Third Party Claim") shall be subject to the following terms and conditions: (a) The Indemnified Persons shall give prompt written notice to the Indemnifying Persons of any Third Party Claim that might give rise to any Loss by the Indemnified Persons, stating the nature and basis of such Third Party Claim, and the amount thereof to the extent known; provided, however, that no delay on the part of the Indemnified Persons in notifying any Indemnifying Persons shall relieve the Indemnifying Persons from any liability or obligation hereunder unless (and then solely to the extent that) the Indemnifying Person 37 thereby is prejudiced by the delay. Such notice shall be accompanied by copies of all relevant documentation with respect to such Third Party Claim, including any summons, complaint or other pleading that may have been served, any written demand or any other document or instrument. (b) If the Indemnifying Persons acknowledge in a writing delivered to the Indemnified Persons that such Third Party Claim is properly subject to their indemnification obligations hereunder, and the Indemnifying Persons demonstrate to the Indemnified Persons' reasonable satisfaction that the Indemnifying Persons have the financial resources to meet such indemnification obligations, then the Indemnifying Persons shall have the right to assume the defense of any Third Party Claim at their own expense and by their own counsel, which counsel shall be reasonably satisfactory to the Indemnified Persons; provided, however, that the Indemnifying Persons shall not have the right to assume the defense of any Third Party Claim, notwithstanding the giving of such written acknowledgment, if (i) the Indemnified Persons have been advised by counsel that there are one or more legal or equitable defenses available to them that are different from or in addition to those available to the Indemnifying Persons, and, in the reasonable opinion of the Indemnified Persons, counsel for the Indemnifying Persons could not adequately represent the interests of the Indemnified Persons because such interests could be in conflict with those of the Indemnifying Persons, (ii) such action or proceeding involves, or could have a material effect on, any matter beyond the scope of the indemnification obligation of the Indemnifying Persons, or (iii) the Indemnifying Persons have not assumed the defense of the Third Party Claim in a timely fashion. (c) If the Indemnifying Persons assume the defense of a Third Party Claim (under circumstances in which the proviso to Section 8.3(b) is not applicable), the Indemnifying Persons shall not be responsible for any legal or other defense costs subsequently incurred by the Indemnified Persons in connection with the defense thereof. If the Indemnifying Persons do not exercise their right to assume the defense of a Third Party Claim by giving the written acknowledgment referred to in Section 8.3(b), or are otherwise restricted from so assuming by the proviso to Section 8.3(b), the Indemnifying Persons nevertheless shall be entitled to participate in such defense with their own counsel and at their own expense. If the defense of a Third Party Claim is assumed by the Indemnified Persons pursuant to clause (i) or clause (ii) of the proviso to Section 8.3(b), the Indemnified Persons shall not be entitled to settle such Third Party Claim without the prior written consent of the Indemnifying Persons, which consent shall not be unreasonably withheld or delayed. (d) If the Indemnifying Persons exercise their right to assume the defense of a Third Party Claim, (i) the Indemnified Persons shall be entitled to participate in such defense with their own counsel at their own expense, and (ii) the Indemnifying Persons shall not make any settlement of any claims without the prior written consent of the Indemnified Persons, which consent shall not be unreasonably withheld or delayed. 8.4 Survival of Representations and Warranties. (a) Subject to the further provisions of this Section 8.4, the representations and warranties of the Seller Group contained in Article IV or in any certificate or other writing delivered in connection with this Agreement shall survive the Closing, and shall expire and be of no further force or effect on September 1, 2006; provided, however, that the representations and warranties contained in Article III, Section 4.1, Section 4.2, Section 4.3, Section 4.4, Section 4.5, Section 4.10 and Section 4.20 shall survive the Closing 38 indefinitely and the representations and warranties contained in Section 4.9 and Section 4.18 shall survive the Closing until ninety (90) days after the expiration of the applicable statutes of limitations for claims applicable to the matters covered thereby (the "Excluded Seller Representations"). Subject to the further provisions of this Section 8.4, the representations and warranties of the Stockholders contained in Article III or in any certificate or other writing delivered in connection with this Agreement and the representations and warranties of the Purchaser contained in Article V or in any certificate or other writing delivered in connection with this Agreement shall survive the Closing indefinitely. The covenants and other agreements of the Seller Group and the Purchaser contained in this Agreement shall survive the Closing until they are performed in full or otherwise expire or are terminated by their terms. For convenience of reference, the date upon which any representation or warranty contained herein shall terminate, if any, is referred to as the "Survival Date." (b) From and after the Closing, no Stockholder shall have any recourse against the Company for any breach of any representation, warranty, covenant or agreement of the Company set forth in this Agreement or in any certificate or other writing delivered by the Company in connection with this Agreement. 8.5 Limitation on Indemnification. From and after the Closing the sum of all Losses incurred by the Purchaser Indemnified Persons (or any member thereof) pursuant to which indemnification is payable by the Stockholder pursuant to Section 8.1(a)(i) shall be satisfied and any recovery may be made only against any TGTL Shares held pursuant to the Escrow Agreement and not against any of the other assets or property of the Stockholder; provided, however, that in no event shall the limitations set forth in this Section 8.5 apply with respect to (i) the Excluded Seller Representations, (ii) any willful or knowing breach of such representations or warranties or any fraudulent or intentional acts or intentional misrepresentations of any member of the Seller Group or (iii) any other Losses incurred by the Purchaser Indemnified Persons (or any member thereof) pursuant to which indemnification is payable by the Stockholders or any other Person pursuant to this Agreement or otherwise. 8.6 Satisfaction of Indemnification Obligations. The obligations of the Seller Indemnifying Persons to indemnify the Purchaser Indemnified Persons for Purchaser Losses (incurred as a result of the indemnification events set forth in Section 8.1(a) and Section 8.1(b)) shall be paid as follows: (a) in the case of an indemnification event pursuant to Section 8.1(a), by the Seller Indemnifying Persons and (b) in the case of an indemnification event pursuant to Section 8.1(b), solely by the Seller Indemnifying Person or Seller Indemnifying Persons, as the case may be, who caused such indemnification event, in each case by forfeiting for no consideration, that number of TGTL Shares, to the extent then outstanding, having a Market Price (as determined at the time of such forfeiture by the Board of Directors of the Purchaser) equal to the amount of the Purchaser Losses. ARTICLE IX TERMINATION; EFFECT OF TERMINATION 9.1 Termination. This Agreement may be terminated at any time prior to the Closing by: (i) the mutual consent of the Purchaser and the Company; 39 (ii) the Purchaser, if there has been a breach by any member of the Seller Group of any representation, warranty, covenant or agreement set forth in this Agreement that such breaching party fails to cure within ten (10) Business Days after notice thereof is given by the Purchaser (except no cure period shall be provided for any such breach that by its nature cannot be cured); (iii) the Company, if there has been a breach by the Purchaser of any representation, warranty, covenant or agreement set forth in this Agreement that the Purchaser fails to cure within ten (10) Business Days after notice thereof is given by the Company (except no cure period shall be provided for any such breach that by its nature cannot be cured); (iv) the Purchaser, if the conditions set forth in Section 7.1 or Section 7.2 have not been satisfied or waived by the Purchaser by June 17, 2005; (v) the Company, if the conditions set forth in Section 7.1 or Section 7.3 have not been satisfied or waived by the Company by June 17, 2005; or (vi) the Purchaser or the Company if any permanent injunction or other Order of a court or other competent Governmental Entity preventing the Closing shall have become final, binding and non-appealable; provided, however, that neither the Purchaser nor the Company shall be entitled to terminate this Agreement pursuant to clause (iv) or clause (v) of this Section 9.1, respectively, if such party's breach (or, with respect to such termination by the Company, any Stockholder's breach) of this Agreement has prevented the satisfaction of any such condition. Any termination pursuant to clause (i) of this Section 9.1 shall be effected by a written instrument signed by the Purchaser and the Company, and any termination pursuant to this Section 9.1 (other than a termination pursuant to clause (i) of this Section 9.1) shall be effected by written notice from the party or parties so terminating to the other parties hereto, which notice shall specify the Section of this Agreement pursuant to which this Agreement is being terminated. 9.2 Effect of Termination. In the event of the termination of this Agreement pursuant to Section 9.1, this Agreement shall be of no further force or effect, except for Section 6.4, Section 6.9, this Section 9.2 and Article X, each of which shall survive the termination of this Agreement; provided, however, that the Liability of any party for any breach by such party of the representations, warranties, covenants or agreements of such party set forth in this Agreement occurring prior to the termination of this Agreement shall survive the termination of this Agreement, and, in the event of any action for breach of contract in the event of a termination of this Agreement, the prevailing party shall be reimbursed by the other party to such action for all fees, costs and expenses relating to such action incurred by the prevailing party, including the fees, costs and expenses of attorneys, accountants and other professional advisers, and including those incurred in the investigation of any such breach and in enforcing the terms of this Section 9.2. 40 ARTICLE X MISCELLANEOUS PROVISIONS 10.1 Amendment. This Agreement may not be altered or otherwise amended except pursuant to an instrument in writing signed by each party, except that any party may waive any obligation owed to it by another party under this Agreement. No waiver by any party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence. 10.2 Entire Agreement. This Agreement and the other agreements and documents referenced herein (including the Schedules, Annexes and Exhibits (in their executed form) attached hereto) and any other document or agreement contemporaneously entered into with this Agreement contain all of the agreements among the parties hereto with respect to the transactions contemplated hereby and supersede all prior agreements or understandings among the parties with respect thereto (including the Letter of Intent dated January 12, 2005, by and between the Company and the Purchaser). 10.3 Severability. It is the desire and intent of the parties that the provisions of this Agreement be enforced to the fullest extent permissible under the Laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, in the event that any provision of this Agreement would be held in any jurisdiction to be invalid, prohibited or unenforceable for any reason, such provision, as to such jurisdiction, shall be ineffective, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. Notwithstanding the foregoing, if such provision could be more narrowly drawn so as not to be invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. 10.4 Benefits of Agreement. All of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns. Except as expressly provided herein, this Agreement shall not confer any rights or remedies upon any Person other than the foregoing. Anything contained herein to the contrary notwithstanding, (a) this Agreement shall not be assignable by any member of the Seller Group without the express written consent of the Purchaser and (b) the Purchaser may, without the consent of any other party hereto, assign any or all of its rights and interests hereunder to one or more of its Affiliates and designate one or more of its Affiliates to perform its obligations hereunder. 10.5 Expenses; Sales and Transfer Taxes. Except as otherwise provided in this Agreement, the Purchaser on the one hand and the Seller Group on the other hand shall each bear their own expenses incurred in connection with this Agreement and the Related Documents 41 (including the legal, accounting and due diligence fees, costs and expenses incurred by such party and the audit fees incurred by the Company) and shall each pay their own sales, use, gains and excise Taxes and all registration or transfer taxes that may be payable in connection with or arising as a result of the consummation of the transaction contemplated by this Agreement and the Related Documents, other than amounts due to Daniels & Associates, which shall be paid by [_____________]. 10.6 Remedies. The parties each shall have and retain all rights and remedies existing in their favor under this Agreement, at law or in equity, including rights to bring actions for specific performance, injunctive and other equitable relief (including the remedy of rescission) to enforce or prevent a breach or violation of any provision of this Agreement, and all such rights and remedies shall, to the extent permitted by applicable Law, be cumulative and a party's pursuit of any such right or remedy shall not preclude such party from exercising or pursuing any other available right or remedy. 10.7 Notices. All notices or other communications pursuant to this Agreement shall be in writing and shall be deemed to be sufficient if delivered personally, telecopied, sent by nationally-recognized, overnight courier or mailed by registered or certified mail (return receipt requested), postage prepaid, to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (i) if to the Company, to: Globicom, Inc. 6311 N. O'Conner, Suite N53 Irving, Texas 75039 Attention: Greg Gifford, President and CEO Telephone No.: (469) 360-9314 Facsimile No.: --------------------------- (ii) if to the Purchaser, to: Tiger Telematics, Inc. 10201 Centurion Parkway North Suite 600 Jacksonville, Florida 32256 Attention: Michael W. Carrender Telephone No.:(904) 279-9240 Facsimile No.:(904) 279-9242 with a copy to: Smith Hulsey & Busey 225 Water Street, Suite 1800 Jacksonville, Florida 32202 Attention: John R. Smith, Jr., Esq. Telephone No.:(904) 359-7700 Facsimile No.:(904) 359-7712 42 All such notices and other communications shall be deemed to have been given and received (i) in the case of personal delivery, on the date of such delivery, (ii) in the case of delivery by telecopy, on the date of such delivery, (iii) in the case of delivery by nationally-recognized, overnight courier, on the Business Day following dispatch, and (iv) in the case of mailing, on the third Business Day following such mailing. 10.8 Counterparts and Facsimile Execution. This Agreement may be executed in two or more counterparts, and each such counterpart shall be deemed to be an original instrument. All such counterparts shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered (by facsimile or otherwise) to the other parties, it being understood that all parties need not sign the same counterpart. Any counterpart or other signature hereupon delivered by facsimile shall be deemed for all purposes as constituting good and valid execution and delivery of this Agreement by such party. 10.9 Governing Law. (a) THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF FLORIDA, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICTING PROVISION OR RULE (WHETHER OF THE STATE OF FLORIDA, OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF FLORIDA TO BE APPLIED. (b) BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH THAT APPLICABLE LAWS, EVIDENTIARY RULES AND JUDICIAL PROCEDURES APPLY OR THAT APPLICABLE LAWS AND ARBITRATION RULES IN CASES IN WHICH THE PARTIES HAVE EXPRESSLY AGREED TO SUBMIT ANY SUCH DISPUTES TO BINDING ARBITRATION APPLY, THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS, EVIDENTIARY RULES AND JUDICIAL PROCEDURES, OR BY AN ARBITRATOR APPLYING APPLICABLE LAWS AND ARBITRATION RULES IN SUCH CASES WHERE THEY HAVE EXPRESSLY AGREED TO BINDING ARBITRATION. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT OR ANY DOCUMENTS RELATED HERETO. THE PARTIES HERETO AGREE THAT ALL DISPUTES AMONG THEM ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT SHALL BE RESOLVED EXCLUSIVELY BY STATE OR FEDERAL COURTS LOCATED IN THE CITY OF JACKSONVILLE, FLORIDA, AND ANY APPELLATE COURT FROM ANY THEREOF. 10.10 Jurisdiction and Venue. (a) Each of the parties hereto hereby irrevocably and unconditionally submits, for himself, herself or itself and his, her or its 43 property, to the exclusive jurisdiction of any Florida state court or federal court of the United States of America sitting in Jacksonville, Florida, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, any of the Related Documents or the transactions contemplated hereunder or thereunder or for recognition or enforcement of any judgment relating thereto, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in any such Florida state court or, to the extent permitted by law, in any such federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. (b) Each of the parties hereto hereby irrevocably and unconditionally waives, to the fullest extent he, she or it may legally and effectively do so, any objection that he, she or it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement, any of the Related Documents or the transactions contemplated hereunder or thereunder in any Florida state or federal court of the United States of America sitting in Jacksonville, Florida. Each of the parties hereto hereby irrevocably waives, to the fullest extent he, she or it may legally and effectively do so, the defense of an inconvenient forum to the maintenance of such suit, action or proceeding in any such court. (c) Each of the parties hereto hereby agree that the mailing by certified or registered mail, return receipt requested, of any process required by any such court shall constitute valid and lawful service of process against them, without the necessity for service by any other means provided by law. 10.11 Mutual Contribution. The parties to this Agreement and their respective counsel have contributed mutually to the drafting of this Agreement. Consequently, no provision of this Agreement shall be construed against any party on the ground that a party drafted the provision or caused it to be drafted. 10.12 No Third Party Beneficiaries. Except as expressly provided in this Agreement, this Agreement shall not confer any rights or remedies upon any Person other than the parties hereto and their respective successors and permitted assigns. 10.13 Independence of Covenants and Representations and Warranties. All covenants hereunder shall be given independent effect so that if a certain action or condition constitutes a default under a certain covenant, the fact that such action or condition is permitted by another covenant shall not affect the occurrence of such default, unless expressly permitted under an exception to such initial covenant. In addition, all representations and warranties hereunder shall be given independent effect so that if a particular representation or warranty proves to be incorrect or is breached, the fact that another representation or warranty concerning the same or similar subject matter is correct or is not breached shall not affect the incorrectness of or a breach of a representation and warranty hereunder. 10.14 Interpretation; Construction. The term "Agreement" means this Stock Purchase Agreement together with all Schedules, Annexes and Exhibits hereto, as the same may from time to time be amended, modified, supplemented or restated in accordance with the terms hereof. 44 Certain capitalized terms used and not otherwise defined elsewhere in this Agreement have the meanings given to them in Annex II attached hereto. In this Agreement, the term "best knowledge" of any Person means (i) the actual knowledge of such Person, and (ii) that knowledge that should have been acquired by such Person after making such due inquiry and exercising such due diligence as a prudent businessperson would have made or exercised in the management of his or her business affairs, including due inquiry of those directors, officers, key employees and professional advisors (including attorneys, accountants and consultants) of such Person who could reasonably be expected to have actual knowledge of the matters in question. For purposes of the preceding sentence, the knowledge, both actual and constructive, of each Stockholder and each other director, officer and key employee of the Company and its Subsidiaries shall be imputed to each member of the Seller Group. The use in this Agreement of the word "including" means "including, without limitation." The words "herein," "hereof," "hereunder," "hereby," "hereto," "hereinafter," and other words of similar import refer to this Agreement as a whole, including the Schedules, Annexes and Exhibits, as the same may from time to time be amended, modified, supplemented or restated, and not to any particular article, section, subsection, paragraph, subparagraph or clause contained in this Agreement. All references to articles, sections, subsections, paragraphs, subparagraphs, clauses, Schedules, Annexes and Exhibits mean such provisions of this Agreement and the Schedules, Annexes and Exhibits attached to this Agreement, except where otherwise stated. The title of and the article, section and paragraph headings in this Agreement are for convenience of reference only and shall not govern or affect the interpretation of any of the terms or provisions of this Agreement. The use herein of the masculine, feminine or neuter forms also shall denote the other forms, as in each case the context may require. Where specific language is used to clarify by example a general statement contained herein, such specific language shall not be deemed to modify, limit or restrict in any manner the construction of the general statement to which it relates. The language used in this Agreement has been chosen by the parties to express their mutual intent, and no rule of strict construction shall be applied against any party. Accounting terms used but not otherwise defined herein shall have the meanings given to them under GAAP. Unless expressly provided otherwise, the measure of a period of one month or year for purposes of this Agreement shall be that date of the following month or year corresponding to the starting date, provided that if no corresponding date exists, the measure shall be that date of the following month or year corresponding to the next day following the starting date. For example, one month following February 18 is March 18, and one month following March 31 is May 1. * * * * * 45 IN WITNESS WHEREOF, the parties hereto have executed this Stock Purchase Agreement as of the date first written above. Purchaser: Stockholders - --------- ------------ TIGER TELEMATICS, INC. _______________________________________ Mace G. Gifford By:________________________________ Michael Carrender, CEO _______________________________________ Antonio Rodriguez _______________________________________ Donna Butler Company: - ------- _______________________________________ Walter R. Fawcett GLOBICOM, INC. _______________________________________ William Jasperson By:________________________________ Greg Gifford, President and CEO _______________________________________ Roger & Judy Hill _______________________________________ Ruben & Shelley Duron _______________________________________ Gerry Mecca _______________________________________ Rick Tanner _______________________________________ Dal Barry _______________________________________ Kevin Kerr _______________________________________ Marcus and Linda Magee _______________________________________ Carsten Holmdie PMT Research, Inc. By:_______________________________ Name:_____________________________ Title:____________________________ Jasperson Marital Trust By:_______________________________ Name:_____________________________ Title:____________________________ 46 ANNEX I Stockholders ------------ Name and Address Number of Globicom Shares - ---------------- ------------------------- Mace G. Gifford 2,800,000 601 Gifford Ct. Coppell, TX 75019 Antonio Rodriguez 1,500,000 3936 Cedar Bayou Dallas, TX 75244 Donna Butler 1,395,109 246 E. Elm Street Albion, IL 62806 PMT Research, Inc., c/o Rae Albertini 447,408 411 Southridge Lakes Parkway Southlake, TX 76092 Walter R. Fawcett 225,454 600 N. Buffalo Grove Road-Suite 200 Buffalo Grove, IL 60089 William Jasperson 100,000 8111 Preston Road Suite 715 Dallas, TX 75225 Roger & Judy Hill 94,062 2801 Rock Port Cove Grapevine, TX 76051 Jasperson Marital Trust 72,443 8111 Preston Road Suite 715 Dallas, TX 75225 Ruben & Shelley Duron 60,000 10 Winding Hollow Coppell, TX 75019 Gerry Mecca 50,000 2210 Mediterranean Arlington, TX 76011 Rick Tanner 40,000 2410 S. Stemmons Frwy Ste. F Lewisville, TX 75067 Dal Barry 32,000 7623 Queens Garden Dallas, TX 75248 Kevin Kerr 25,000 1400 Suncreek Dr. Allen, TX 75013 Marcus and Linda Magee 10,000 2408 Ainsley Dr. Flower Mound, TX 75028 Carsten Holmdie 10,000 3925 Evesham Dr. Plano, TX 75025 47 ANNEX II Certain Definitions ------------------- "Acquisition Proposal" means any offer, proposal or indication of interest in (i) the direct or indirect acquisition or sale of all or any material part of the Company or any of its Subsidiaries (whether by stock sale or asset sale), (ii) a merger, consolidation or other similar business combination, or a reorganization, recapitalization or other similar transaction, directly or indirectly involving the Company or any of its Subsidiaries, (iii) the direct or indirect acquisition of any capital stock or other securities of the Company or any of its Subsidiaries, or (iv) any stock sale or issuance or debt and/or equity financing directly or indirectly involving the Company or any of its Subsidiaries. "Affiliate" means, with respect to any Person, (i) a partner, member, owner, shareholder, trustee, director or officer of such Person or of any Person identified in clause (iii) below, (ii) a spouse, parent, sibling or descendant of such Person (or spouse, parent, sibling or descendant of any partner, member, owner, shareholder, trustee, director or officer of such Person or of any Person identified in clause (iii) below), and (iii) any other Person that, directly or indirectly through one or more intermediaries, Controls, is Controlled by or is under common Control with such Person. "Business Day" means any day that is not a Saturday, Sunday or a day on which banking institutions in New York, New York are authorized or required to be closed. "Capital Lease" means any obligation to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) assets or properties, whether real, personal or mixed, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person as of such date computed in accordance with GAAP. "Charter Documents" means, (i) as to any corporation, the articles, certificate or memorandum of incorporation or association of such corporation, the by-laws of such corporation, and each other instrument or other document governing such corporation's existence and internal affairs, (ii) as to any limited partnership, the certificate of limited partnership of such partnership, the agreement of limited partnership of such partnership, and each other instrument or other document governing such partnership's existence and internal affairs, (iii) as to any limited liability company, the articles, certificate or memorandum of organization of such limited liability company, the operating agreement of such limited liability company, and each other instrument or other document governing such limited liability company's existence and internal affairs, and (iv) as to any trust, the agreement or other instrument creating such trust and any and all other documents, instruments and certificates granting (and limiting) the powers and authorities of such trust and the trustee(s) thereof and governing the activities and operations of such trust and the trustee(s) thereof, in each case in clauses (i) through (iv) above, as amended and restated and in effect at the time in question. "Commission" means the Securities and Exchange Commission, or any Governmental Entity succeeding to the functions thereof. "Contract" means any loan or credit agreement, note, bond, mortgage, indenture, license, lease, sublease, grant of easement, right of way, purchase order, sale order, service order, or other contract, agreement, commitment, instrument, permit, concession, franchise or license, whether written or oral. "Control" means, with respect to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by Contract or otherwise. "Employee Benefit Plan" means (i) any qualified or non-qualified Employee Pension Benefit Plan (as defined in Section 3(2) of ERISA), including any Multi-employer Plan (as defined in Section 3(37) of ERISA), Multiple Employer Plan (as defined in Section 413 of the Code), or Defined Benefit Pension Plan (as defined in Section 3(35) of ERISA), (ii) any Employee Welfare Benefit Plan (as defined in Section 3(1) of ERISA), or (iii) any employee benefit, fringe benefit, compensation, severance, incentive, bonus, profit-sharing, stock option, stock purchase or other plan, program or arrangement, whether or not subject to ERISA and whether or not funded. "Encumbrances" means and includes security interests, mortgages, liens, pledges, charges, easements, reservations, restrictions, 48 rights of way, servitudes, options, rights of first refusal, community property interests, equitable interests, restrictions of any kind and all other encumbrances, whether or not relating to the extension of credit or the borrowing of money. "Environmental, Health and Safety Laws" means all Laws, Permits, Orders, Contracts and common law relating to or addressing pollution or protection of the environment, public health and safety, or employee health and safety, including all those relating to the presence, use, production, generation, handling, transportation, treatment, storage, disposal, distribution, labeling, testing, processing, discharge, release, threatened release, control or cleanup of any hazardous materials, substances or wastes, chemical substances or mixtures, pesticides, pollutants, contaminants, toxic chemicals, petroleum products or byproducts, asbestos, polychlorinated biphenyls, noise or radiation, in each case as amended and in effect from time to time. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and any successor legislation thereto, and the rules and regulations promulgated thereunder, all as the same shall be in effect from time to time. "ERISA Affiliate" means, with respect to any Person, any other Person that is a member of a "controlled group of corporations" with, or is under "common control" with, or is a member of the same "affiliated service group" with such Person as defined in Section 414(b), 414(c), 414(m) or 414(o) of the Code. "Funded Indebtedness" means, without duplication, the aggregate amount (including the current portions thereof) of all (i) indebtedness for money borrowed by the Company or any of its Subsidiaries from other Persons (including any prepayment and similar penalties) and purchase money indebtedness (other than accounts payable in the ordinary course of business, consistent with past practice); (ii) indebtedness of the type described in clause (i) above guaranteed, directly or indirectly, in any manner by the Company or any of its Subsidiaries or in effect guaranteed, directly or indirectly, in any manner by the Company or any of its Subsidiaries through a Contract or other understanding or arrangement, contingent or otherwise, to supply funds to, or in any other manner invest in, the debtor, or to purchase indebtedness, or to purchase and pay for property if not delivered or pay for services if not performed, primarily for the purpose of enabling the debtor to make payment of the indebtedness or to assure the owners of the indebtedness against loss (any such Contract or other understanding or arrangement being referred to as a "Guaranty") (but the term "Guaranty" shall exclude endorsements of checks and other instruments in the ordinary course or business, consistent with past practice); (iii) all indebtedness of the type described in clause (i) above secured by any Encumbrance upon assets or properties owned by the Company or any of its Subsidiaries even though the Company or any such Subsidiary has not in any manner become liable for the payment of such indebtedness; (iv) Capital Leases, and (v) all interest expense and other charges accrued but unpaid, and all prepayment penalties and premiums, on or relating to any of such indebtedness. Funded Indebtedness of the Company and each of its Subsidiaries as of the date hereof is set forth on Schedule 4.13(d). "GAAP" means generally accepted accounting principles in the United States, as promulgated by the American Institute of Certified Public Accountants, consistently applied. "Governmental Entity" means any domestic or foreign government or political subdivision thereof, whether on a federal, state, provincial or local level and whether legislative, executive, judicial in nature, including any agency, authority, board, bureau, commission, court, department or other instrumentality thereof. "Guaranty" has the meaning given to it in the definition of Funded Indebtedness. "Income Taxes" means all income Taxes (including any Tax on or based upon net income, gross income, income as specially defined, earnings, profits or selected items of income, earnings or profits (including state Taxes imposed on subchapter S corporations)). "Indemnified Persons" means and includes the Seller Indemnified Persons and/or the Purchaser Indemnified Persons, as the case may be. "Indemnifying Persons" means and includes the Seller Indemnifying Persons and/or the Purchaser Indemnifying Persons, as the case may be. "Intellectual Property Rights" means all intellectual property rights, including patents, patent applications, trademarks, trademark applications, trade names, service marks, service mark applications, trade dress, logos and designs, and the goodwill connected with the foregoing, 49 copyrights and copyright applications, know-how, trade secrets, proprietary processes and formulae, confidential information, franchises, licenses, inventions, instructions, marketing materials and all documentation and media constituting, describing or relating to the foregoing, including manuals, memoranda and records. "Law" means any applicable domestic or foreign law, statute, treaty, rule, directive, regulation, ordinance or similar provision having the force or effect of law, whether on a federal, state, provincial or local level (including all Environmental, Health and Safety Laws), or any applicable Order of any Governmental Entity. "Liability" means any actual or potential liability or obligation, whether known or unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued, or liquidated or unliquidated, and whether due or to become due, regardless of when asserted. "Litigation Expense" means any out-of-pocket expenses incurred in connection with investigating, defending or asserting any claim, legal or administrative action, suit or Proceeding incident to any matter indemnified against hereunder, including court filing fees, court costs, arbitration fees or costs, witness fees, and fees and disbursements of outside legal counsel, investigators, expert witnesses, accountants and other professionals. "Losses" means any and all losses (including a diminution in the value of the Company's capital stock), claims, shortages, damages, expenses (including reasonable attorneys' and accountants' and other professionals' fees and Litigation Expenses), assessments, Taxes (including interest and penalties thereon), and insurance premium increases arising from or in connection with any such matter that is the subject of indemnification under Article VIII, as reduced by (i) the amount actually recovered under insurance policies (net of deductibles and incidental expenses resulting therefrom), and (ii) Tax benefits actually realized under Tax Laws in respect of such Losses, net of all reasonable costs and expenses of recovering any such Tax benefits. For purposes of determining Tax benefits actually realized, there shall be included only those Tax benefits resulting from such Loss that are actually realized before the taxable year in which a payment for a Loss is received and Tax benefits resulting from such Loss that are actually realized in the taxable year in which a payment for a Loss is received, as increased by (x) the amount of any Taxes payable on such indemnification payment and (y) the amount of any Taxes payable on the payment referred to in clause (x) hereof. "Market Price" of any security means the average of the closing prices of such security's sales on all securities exchanges on which such security may at the time be listed, or, if there has been no sales on any such exchange on any day, the average of the highest bid and lowest asked prices on all such exchanges at the end of such day, or, if on any day such security is not so listed, the average of the representative bid and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time, or, if on any day such security is not quoted in the NASDAQ System, the average of the highest bid and lowest asked prices on such day in the domestic over-the-counter market as reported by the National Quotation Bureau, Incorporated, or any similar successor organization, in each such case averaged over a period of 15 trading days consisting of the day as of which "Market Price" is being determined and the 14 consecutive business days prior to such day. "NASDAQ" means the National Association of Securities Dealers, Inc. Automated Quotation System. "Orders" means judgments, writs, decrees, compliance agreements, injunctions or judicial or administrative orders and determinations of any Governmental Entity or arbitrator. "Permits" means all permits, licenses, authorizations, registrations, franchises, approvals, consents, certificates, variances and similar rights obtained, or required to be obtained, from a Governmental Entity. "Permitted Encumbrances" means (i) Encumbrances for Taxes not yet due and payable or being contested in good faith by appropriate Proceedings and for which there are adequate reserves on the books, (ii) workers' or unemployment compensation liens arising in the ordinary course of business, and (iii) mechanic's, materialman's, supplier's, vendor's or similar liens arising in the ordinary course of business, consistent with past practice, securing amounts that are not delinquent. "Person" shall be construed as broadly as possible and shall include an individual or natural person, a partnership (including a limited liability partnership), a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, a business, a Governmental Entity, and any other entity. 50 "Proceeding" means any action, suit, investigation or proceeding before any Governmental Entity or arbitrator. "Purchaser Indemnified Persons" means and includes the Purchaser and its Affiliates (including, following the Closing, the Company), their respective successors and assigns, and the respective officers, directors and controlling parties of each of the foregoing; provided, however, that any such Person who was, prior to the Closing Date, an officer, director, employee, Affiliate, successor or assign of the Company or any of its Subsidiaries, or a Stockholder, shall not in such capacity, be a Purchaser Indemnified Person with respect to a breach of this Agreement or any Related Document based on facts or circumstances occurring, or actions taken by such Person, at or prior to the Closing. "Purchaser Indemnifying Persons" means the Purchaser and its successors. "Purchaser Losses" means any and all Losses sustained, suffered or incurred by any Purchaser Indemnified Person arising from or in connection with any matter that is the subject of indemnification under Article VIII. "Securities" means "securities" as defined in Section 2(1) of the Securities Act. "Securities Act" means the Securities Act of 1933, as amended, or any successor federal statute, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect from time to time. "Securities Exchange Act" means the United States Securities Exchange Act of 1934, as amended, or any successor federal statute, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect from time to time. "Seller Indemnified Persons" means and includes either (i) if the Closing does not occur, the Company, each of the Company's Subsidiaries, each Stockholder, and their respective Affiliates, directors, officers, personal representatives, estates, heirs, successors and permitted assigns or (ii) if the Closing occurs, each Stockholder and his personal representatives, estate, heirs, successors and permitted assigns. "Seller Indemnifying Persons" means and includes either (i) if the Closing does not occur, the Company, each of the Company's Subsidiaries, each Stockholder, and their respective personal representatives, estates, heirs, successors and permitted assigns, or (ii) if the Closing occurs, each Stockholder and his personal representative, estate, heirs, successors and permitted assigns. "Seller Losses" means any and all Losses sustained, suffered or incurred by any Seller Indemnified Person arising from or in connection with any matter that is the subject of indemnification under Article VIII. "Subsidiary" means, with respect to any Person, any other Person (i) whose Securities having a majority of the general voting power in electing the board of directors or equivalent governing body of such Person (excluding Securities entitled to vote only upon the failure to pay dividends thereon or the occurrence of other contingencies) are, at the time as of which any determination is being made, owned by such Person either directly or indirectly through one or more other entities constituting Subsidiaries, or (ii) a fifty percent (50%) interest in the profits or capital of whom is, at the time as of which any determination is being made, owned by such Person either directly or indirectly through one or more other entities constituting Subsidiaries. "Tax Return" means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof. "Taxes" means, with respect to any Person, (i) all Income Taxes and all gross receipts, sales, use, ad valorem, transfer, franchise, license, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property or windfall profits taxes, alternative or add-on minimum taxes, customs duties and other taxes, fees, assessments or charges of any kind whatsoever, together with all interest and penalties, additions to tax, and other additional amounts imposed by any taxing authority (domestic or foreign) on such Person, and (ii) any liability for the payment of any amount of the type described in the foregoing clause (i) as a result of (A) being a "transferee" (within the meaning of Section 6901 of the Code or any other applicable Law) of another Person, (B) being a member of an affiliated, combined or consolidated group, or (C) a Contract or other understanding or arrangement. 51 "TGTL Shares" means, restricted shares of common stock, .001 Dollar par value per share, of Purchaser, issued as "restricted securities" within the meaning of the Securities Act and represented by stock certificates bearing the following legend: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. WITHOUT SUCH REGISTRATIONS, SUCH SECURITIES MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED, EXCEPT UPON DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATIONS ARE NOT REQUIRED FOR SUCH TRANSFER OR THE SUBMISSION TO THE COMPANY TO THE EFFECT THAT ANY SUCH TRANSFER WILL NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED, APPLICABLE STATE SECURITIES LAWS OR ANY RULE OR REGULATION PROMULGATED THEREUNDER." 52 EXHIBIT A --------- Form of Escrow Agreement ESCROW AGREEMENT This ESCROW AGREEMENT dated as of June ____, 2005, is by and among TIGER TELEMATICS, INC, a Delaware corporation ("Purchaser"), the individual stockholders of Globicom, Inc., a Texas corporation, set forth on Schedule A attached hereto (collectively, the "Stockholders"), and Smith Hulsey & Busey, P.A., as escrow agent ("Escrow Agent"). Preliminary Statement. Pursuant to that certain Stock Purchase Agreement dated as of June 17, 2005 (the "Agreement"), Purchaser acquired from the Stockholders a total of 6,861,476 issued and outstanding shares of common stock of Globicom, Inc., a Texas corporation ("Globicom"). In accordance with Article 1 of the Agreement, Purchaser has agreed to place an aggregate total of 138,462 TGTL Shares, registered in the names of the Stockholders in accordance with Schedule A attached hereto (the "Escrow Stock"), into escrow on the terms set forth herein. The Escrow Stock represents the TGTL Shares Portion of the Purchase Price paid by Purchaser to Stockholders pursuant to the terms of the Agreement. The purpose of this Escrow Agreement is to establish the escrow arrangements for the Escrow Stock and to set forth the agreements among Purchaser, each Stockholder and Escrow Agent with respect thereto. ACCORDINGLY, the parties hereto agree as follows: Section 1. Terms. All terms used herein without definition that are defined in the Agreement shall have the same meanings herein as they have in the Agreement. Section 2. Escrow Agent. Each Stockholder and Purchaser hereby appoint and designate Escrow Agent to act as the Escrow Agent for the purposes set forth herein, and Escrow Agent hereby accepts such appointment and designation. Section 3. Deposit of Stock Certificate. Escrow Agent hereby acknowledges receipt from Purchaser of the Escrow Stock. Section 4. Escrow Agent's Duties. Stockholder and Purchaser hereby authorize Escrow Agent to hold and disburse the Escrow Stock on the terms set forth in this Escrow Agreement and in accordance with the terms of the Agreement. Escrow Agent undertakes to perform only such duties as are expressly set forth herein, and there shall be no implied duties or obligations imposed upon Escrow Agent. Section 5. Disbursement of Escrow Stock. Upon receipt of written instructions signed by Purchaser, Escrow Agent shall be authorized to disburse the Escrow Stock in accordance with such instructions. Purchaser and each Stockholder acknowledge and agree that shares of the Escrow Stock may be used to satisfy Purchaser Losses incurred by any Purchaser Indemnified Persons pursuant to which indemnification is payable by the Stockholders pursuant to Article 8 of the Agreement or otherwise. The obligations of the Seller Indemnifying Persons to indemnify the Purchaser Indemnified Persons for Purchaser Losses shall be paid by forfeiting for no consideration, that number of TGTL Shares, to the extent then outstanding, having a Market Price (as determined at the time of such forfeiture by the Board of Directors of the Purchaser) equal to the amount of the Purchaser Losses. Each Stockholder acknowledges and agrees that Purchaser may cancel that number of TGTL Shares that were forfeited to satisfy Purchaser Losses and Purchaser shall cause Purchaser's transfer books to reflect that such shares of TGTL Stock have been canceled. After the Purchaser's transfer books have been so modified, the Stockholder shall not be considered to own any forfeited shares of TGTL Stock and shall have no rights as a stockholder of the Purchaser to the extent of the shares of TGTL Stock so canceled. Each Stockholder hereby appoints the secretary of the Purchaser as his, her or its agent and attorney-in-fact for the purpose of executing and delivering any and all documents necessary to effect the provisions of this Section 5, and any cancellation by such agent and attorney-in-fact shall be a cancellation of all of the Stockholder's right, title and interest in and to the TGTL Stock so cancelled. This power of attorney is coupled with an interest and shall not expire upon the death or incapacity of a Stockholder, nor may this power of attorney be terminated by a Stockholder as long as this Agreement remains in effect. Purchaser and Stockholder acknowledge and agree that in the event Purchaser notifies Escrow Agent that a Purchaser Indemnified Person has made a claim for indemnification pursuant to Article 8 of the Agreement specifying the amount of 53 such claim and the number of shares of Escrow Stock required to satisfy such claim based on the then current Market Price (the "Reserve Stock"), Escrow Agent shall not disburse or distribute any of the Reserve Stock until Escrow Agent receives written instructions from Purchaser directing Escrow Agent on the proper disbursement or cancellation of the Reserve Stock or as directed by a court of competent jurisdiction. Purchaser and Stockholder acknowledge and agree that the Reserve Stock will be reserved and withheld from shares of Escrow Stock that would otherwise be distributed to Stockholder pursuant to the Agreement. Section 6. Nature of Escrow Obligations. The duties of Escrow Agent hereunder are purely ministerial in nature, and it shall not be liable for any error of judgment, fact or law, or any act done or omitted to be done, except for its own gross negligence or willful misconduct. Its determination as to whether an event or condition has occurred, or been met or satisfied, or as to whether a provision of this Escrow Agreement has been complied with, or as to whether sufficient evidence of the event or condition or compliance with the provision has been furnished to it, shall not subject it to any claim, liability or obligation whatsoever, even if it shall be found that such determination was improper or incorrect, provided only that Escrow Agent shall not have been guilty of gross negligence or willful misconduct in making such determination. Escrow Agent shall not be responsible for the genuineness or validity of any document or item deposited with it or any notice or instruction given to it, other than to follow faithfully the instructions contained herein, and it shall be protected fully in acting in accordance with any written instruction or instrument given to it hereunder and believed by it to have been signed by the proper parties. Section 7. Conflicting Notices. If at any time Escrow Agent shall receive conflicting notices, claims, demands or instructions with respect to the Escrow Stock, or if for any other reason it shall be unable in good faith to determine the party entitled to receive the Escrow Stock, Escrow Agent may refuse to take any action and may retain the Escrow Stock in its possession until it shall have received instructions in writing concurred in by all parties in interest, or until directed by an arbitration award or a final order or judgment of a court of competent jurisdiction, whereupon it shall make such disposition in accordance with such instructions or such award, order or judgment. If Escrow Agent is unable to determine in good faith the party entitled to receive the Escrow Stock, Escrow Agent may commence an arbitration proceeding in Jacksonville, Florida, in accordance with the Rules of the American Arbitration Association then in effect, and all parties agree that any dispute in determining the entitlement to the Escrow Stock or any other dispute under this Escrow Agreement shall be determined exclusively by arbitration in Jacksonville, Florida, and the determination of the arbitration panel shall be binding on Purchaser, Stockholder, and Escrow Agent. The costs of the arbitration proceeding shall be borne equally between Purchaser and Stockholder. Section 8. Resignation of Escrow Agent. Escrow Agent may resign at any time upon giving the parties hereto fifteen (15) days' notice to that effect. In such event the successor escrow agent shall be such person, firm or corporation as shall be selected by Purchaser. Escrow Agent's resignation shall not be effective until a successor escrow agent agrees to act hereunder; provided however, in the event no successor escrow agent is appointed and acting within fifteen (15) days after such notice, Escrow Agent may deposit the Escrow Stock at any time thereafter into the registry of a court of competent jurisdiction. Upon the delivery of the Escrow Stock to a successor escrow agent or into the registry of such court, Escrow Agent shall be released and discharged from any further liability or obligation hereunder. Section 9. Indemnification of Escrow Agent. From and at all times after the date of this Escrow Agreement, Purchaser and each Stockholder, jointly and severally, shall, to the fullest extent permitted by law, defend, indemnify and hold harmless, Escrow Agent and each director, officer, employee, attorney, agent and affiliate of Escrow Agent (collectively, the "Indemnified Parties") against any and all actions, claims (whether or not valid), losses, damages, liabilities, costs and expenses of any kind or nature whatsoever (including without limitation reasonable attorneys' fees, costs and expenses) incurred by or asserted against any of the Indemnified Parties from and after the date hereof, whether direct, indirect or consequential, as a result of or arising from or in any way relating to any claim, demand, suit, action or proceeding (including any inquiry or investigation) by any person, whether threatened or initiated, arising from or in connection with the negotiation, preparation, execution, performance or failure of performance of this Escrow Agreement or any transactions contemplated herein, whether or not any such Indemnified Party is a party to any such action, proceeding, suit or the target of any such inquiry or investigation; provided, however, that no Indemnified Party shall have the right to be indemnified hereunder for any liability finally determined by a court of competent jurisdiction, subject to no further appeal, to have resulted solely from the gross negligence or willful misconduct of such Indemnified Party. Each Indemnified Party shall, in its sole discretion, have the right to select and employ separate counsel with respect to any action or claim brought or asserted against it, and the reasonable fees of such counsel shall be paid upon demand by the Purchaser and Stockholder jointly and severally. The obligations of Purchaser and Stockholder under this Section 9 shall survive any termination of this Escrow Agreement and the resignation or removal of Escrow Agent. 54 Section 10. Notices. Any notices or other communications to Stockholder or Purchaser shall be personally delivered, sent by certified or registered mail, return receipt requested, by Federal Express or similar service that records delivery, or by facsimile transmission combined with any of the foregoing methods of notice, to the addresses set forth below, or to such other address as Stockholder or Purchaser may designate, from time to time, by written notice to the other. If to Stockholder: To the address listed on Schedule A attached hereto. If to Purchaser: Tiger Telematics, Inc. 10201 Centurion Parkway North, Suite 600 Jacksonville, Florida 32256 Attention: Michael W. Carrender Telephone No.: (904) 279-9240 Facsimile No.: (904) 279-9242 If to Escrow Agent, to: Smith Hulsey & Busey 1800 First Union National Bank Tower 225 Water Street Jacksonville, Florida 32202 Attn: John R. Smith, Jr., Esq. Telephone No.: (904) 359-7700 Facsimile No.: (904) 359-7708 Section 11. Entire Agreement. This Escrow Agreement contains the entire agreement among the parties with respect to the subject matter hereof. This Escrow Agreement may not be amended, supplemented or discharged, and no provision hereof may be modified or waived, except expressly by an instrument in writing signed by all of the parties hereto. No waiver of any provision hereof by any party shall be deemed a continuing waiver of any matter by such party. Section 12. Severability. If any term, covenant or condition of this Escrow Agreement or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Escrow Agreement or the application of such term, covenant or condition to persons or circumstances, other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term, covenant or condition of this Escrow Agreement shall be valid and be enforced to the fullest extent permitted by law. Section 13. Construction. This Escrow Agreement shall be governed by and construed in accordance with the laws of the State of Florida. The parties acknowledge and agree that they have been represented by counsel and that they have participated in the drafting of this Escrow Agreement. Accordingly, the parties agree that the language, terms and conditions in this Escrow Agreement are not to be construed in any way against or in favor of any party hereto by reason of the responsibilities of the parties in connection with the preparation of this Escrow Agreement. Section 14. Assignments. Except as provided in Section 8 hereof, this Escrow Agreement may not be assigned by any party hereto without the prior written consent of the other parties, and any purported assignment (including, without limitation, any such action pursuant to any action of any federal, state or other governmental agency) without such consent shall be void. 55 IN WITNESS WHEREOF, the parties hereto have executed and delivered this Escrow Agreement as of the day and year first above written. TIGER TELEMATICS, INC. By:__________________________________ Michael W. Carrender, CEO STOCKHOLDER _____________________________________ Print Name:__________________________ SMITH HULSEY & BUSEY, P.A. By:__________________________________ A Shareholder 56 SCHEDULE A ---------- Name and Address Number of TGTL Shares - ---------------- --------------------- Mace G. Gifford 47,686 601 Gifford Ct. Coppell, TX 75019 Antonio Rodriguez 25,560 3936 Cedar Bayou Dallas, TX 75244 Donna Butler 23,760 246 E. Elm Street Albion, IL 62806 PMT Research, Inc., c/o Rae Albertini 7,615 411 Southridge Lakes Parkway Southlake, TX 76092 Walter R. Fawcett 3,835 600 N. Buffalo Grove Road-Suite 200 Buffalo Grove, IL 60089 William Jasperson 1,703 8111 Preston Road Suite 715 Dallas, TX 75225 Roger & Judy Hill 1,606 2801 Rock Port Cove Grapevine, TX 76051 Jasperson Marital Trust 1,232 8111 Preston Road Suite 715 Dallas, TX 75225 Ruben & Shelley Duron 1,025 10 Winding Hollow Coppell, TX 75019 Gerry Mecca 858 2210 Mediterranean Arlington, TX 76011 Rick Tanner 678 2410 S. Stemmons Frwy Ste. F Lewisville, TX 75067 Dal Barry 540 7623 Queens Garden Dallas, TX 75248 Kevin Kerr 429 1400 Suncreek Dr. Allen, TX 75013 Marcus and Linda Magee 166 2408 Ainsley Dr. Flower Mound, TX 75028 Carsten Holmdie 166 3925 Evesham Dr. Plano, TX 75025 57 EXHIBIT C --------- Form of Employment Agreement with Greg Gifford EMPLOYMENT AGREEMENT This EMPLOYMENT AGREEMENT (this "Agreement"), dated as of June 17, 2005, is by and between GLOBICOM INC., a Texas corporation (the "Company"), and MACE G. GIFFORD (the "Employee"). PREAMBLE The Company and the Employee are entering into this Agreement to set forth the terms of the Employee's employment with the Company. ACCORDINGLY, in consideration of the mutual representations, warranties, covenants and agreements set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the Company and the Employee, the Company and the Employee hereby agree as follows: Section 1. Duties. On the terms and subject to the conditions contained in this Agreement, the Employee will be employed by the Company as President and General Manager. The Employee shall perform such duties and services on behalf of the Company and its subsidiaries and other affiliates consistent with such position as may reasonably be assigned to the Employee from time to time by the Board of Directors of the Company (the "Board") or the more senior officers of the Company. Section 2. Term. Unless sooner terminated in accordance with the applicable provisions of this Agreement, the Employee's employment hereunder shall be for the period (including any extensions thereof, the "Employment Period") commencing on the date hereof (the "Commencement Date") and initially ending on the first anniversary of the date hereof. Subject to the applicable provisions of this Agreement regarding earlier termination, the Employment Period shall be extended automatically one day prior to each anniversary of the Commencement Date, beginning with the first anniversary thereof, in each case for an additional period of one year. Section 3. Time to be Devoted to Employment; Place of Performance. During the Employment Period, the Employee shall devote all of the Employee's working energies, efforts, interest, abilities and time exclusively to the business and affairs of the Company and its subsidiaries and other affiliates. The Employee shall not engage in any other business or activity that, in the reasonable judgment of the Board, would conflict or interfere with the performance of the Employee's duties as set forth herein, whether or not such activity is pursued for gain, profit or other pecuniary advantage. The Employee shall perform his duties and conduct his business at the principal Employee offices of the Company, except for required travel on the Company's business. Section 4. Base Salary; Bonus; Benefits. (a) During the Employment Period, the Company (or any of its subsidiaries or other affiliates) shall pay the Employee an annual base salary (the "Base Salary") of Ninety Thousand Dollars ($90,000.00), payable in such installments (but not less often than monthly) as is generally the policy of the Company from time to time with respect to the payment of regular compensation to its executive officers. During the Employment Period, the Employee will be entitled to (i) no less than two (2) weeks vacation per calendar year occurring during the Employment Period, which shall accrue and be taken in accordance with the Company's policy in effect from time to time, and (ii) such other benefits as may be made available from time to time to other executive officers of the Company generally, including, without limitation, participation in such health, life and disability insurance programs and retirement or savings plans, if any, as the Company may from time to time maintain in effect, subject to the Company's rights from time to time to amend, modify, change or terminate in any respect any of its employee benefit plans, policies, programs or benefits. (b) In addition to the Base Salary and benefits set forth in 10.14(a), during the Employment Period the Employee will be eligible to receive an equity incentive bonus based on the earn out schedule attached hereto as Schedule A, as determined by the Board in its sole discretion, with respect to each calendar year occurring during the Employment Period, commencing with calendar year 2005. Anything contained in this Agreement to the contrary notwithstanding, if the Employee's employment with the Company is terminated for any reason, neither the Company nor any of its subsidiaries or other affiliates shall be obligated to pay the Employee any bonus with respect to the calendar year of the Company in which such termination occurred or thereafter. 58 (c) All references herein to compensation to be paid to the Employee are to the gross amounts thereof that may be due hereunder. The Company shall have the right to deduct therefrom all sums that may be required to be deducted or withheld under any provision of law (including, without limitation, social security payments, income tax withholding, and any other deduction required by law) as in effect at all relevant times during the term of this Agreement. Section 5. Reimbursement of Expenses. During the Employment Period, the Company shall reimburse the Employee in accordance with the Company's policy for all reasonable and necessary traveling expenses and other disbursements incurred by the Employee for or on behalf of the Company in connection with the performance of the Employee's duties hereunder upon presentation of appropriate receipts or other documentation therefor, in accordance with all applicable policies of the Company. Section 6. Termination. The Company may terminate the Employee's employment hereunder at any time with or without "cause" by giving the Employee written notice of such termination, which termination shall be effective as of the date set forth in such notice, provided that such date shall not be earlier than the date of such notice. Section 7. Effect of Termination. Upon the effective date of termination of the Employee's employment under this Agreement, neither the Employee nor the Employee's beneficiaries or estate shall have any further rights under this Agreement or any claims against the Company or any of its subsidiaries or other affiliates arising out of this Agreement, except the right to receive, within thirty (30) days after the effective date of such termination (or such earlier period as may be required by applicable law): (i) the unpaid portion of the Base Salary provided for in Section 4, computed on a per diem basis to the effective date of such termination; and (ii) reimbursement for any expenses for which the Employee shall not have theretofore been reimbursed, as provided in Section 5. Section 8. Disclosure of Information; Non-competition. (d) From and after the date hereof, the Employee shall not at any time use or disclose, divulge, furnish, or make accessible to any person or entity (other than any officer, director, employee, affiliate or representative of the Company), except as required in connection with the performance of the Employee's duties under and in compliance with this Agreement and as required by law and judicial process (after giving the Company reasonably timely notice of the receipt of any such legal or judicial requirement), any Confidential Information (as defined in Section 8(e)) heretofore acquired or acquired during the Employment Period for any reason or purpose whatsoever, nor shall the Employee make use of any of the Confidential Information for the Employee's own purposes or for the benefit of any person or entity except the Company or any of its subsidiaries or other affiliates. (e) For purposes of this Agreement, "Confidential Information" means (i) the Intellectual Property Rights (as defined in 10.14(f)) of the Company and its subsidiaries and other affiliates, and (ii) all other knowledge and information of a proprietary or confidential nature relating to the Company or any of its subsidiaries or other affiliates, or the business or assets of the Company or any of its subsidiaries or other affiliates, including, without limitation, books, records, agent and independent contractor lists and related information, customer lists and related information, vendor lists and related information, supplier lists and related information, distribution channels, pricing information, cost information, marketing plans, strategies, forecasts, financial statements, budgets and projections, other than (A) information that is generally available to the public on the date hereof, or that becomes generally available to the public after the date hereof without action by the Employee, or (B) information that the Employee receives from a third party who does not have any independent obligation to the Company to keep such information confidential. (f) For purposes of this Agreement, the term "Intellectual Property Rights" means all industrial and intellectual property rights, including, without limitation, patents, patent applications, letters patent, patent rights, trademarks, trademark applications, trade names, service marks, service mark applications, copyrights, copyright applications, know-how, certificates of public convenience and necessity, franchises, licenses, trade secrets, proprietary processes and formulae, inventions, discoveries, improvements, ideas, development tools, marketing materials, instructions, confidential information, trade dress, logos and designs, and all documentation and media constituting, describing or relating to the foregoing. 59 (g) The Employee shall not during the Employment Period and the period commencing on the effective date of the termination of his employment with the Company and its subsidiaries and other affiliates for any reason and ending on the second anniversary of the effective date of such termination of employment (such periods together being called the "Non-competition Period" herein) (i) in any geographic area where the Company or any of its subsidiaries or other affiliates conducts business during the Non-competition Period, engage in or participate in, directly or indirectly (whether as an officer, director, employee, partner, consultant, holder of an equity or debt investment, lender or in any other manner or capacity, including, without limitation, by the rendering of services or advice to any person), or lend his name (or any part or variant thereof) to, any Competing Business (as defined in 10.14(h)); (ii) deal, directly or indirectly, in a competitive manner with any customers doing business with the Company or any of its subsidiaries or other affiliates during the Non-competition Period; (iii) solicit or employ any officer, director or agent of the Company or any of its subsidiaries or other affiliates to become an officer, director, or agent of the Employee, the Employee's affiliates or anyone else; or (iv) engage in or participate in, directly or indirectly, any business conducted under any name that shall be the same as or similar to the name of the Company or any of its subsidiaries or other affiliates or any trade name used by any of them. The Employee's ownership for investment purposes only of less than two percent (2%) of the outstanding shares of capital stock or class of debt securities of any corporation with one or more classes of its capital stock listed on a national securities exchange or actively traded in the over-the-counter market shall not constitute a breach of the foregoing covenant. The Employee is entering into the foregoing covenant to induce the Company to extend this Agreement to, and to enter into this Agreement with, the Employee. (h) For purposes of this Agreement, the term "Competing Business" means any wireless data communication, telematics, handheld gaming, software or other business that the Company or any of its subsidiaries or other affiliates has engaged in at any time during the Employment Period in any city or county in any state of the United States or Europe. Section 9. Resignation. Upon the termination of Employee's employment hereunder, Employee shall automatically be deemed to have resigned as an officer and director of the Company, any subsidiary and any affiliate and as a fiduciary of any benefit plan of any of the foregoing. The Employee shall execute any further documentation of such resignation as is reasonably requested by the Company. Section 10. Entire Agreement; Amendment and Waiver. This Agreement contains the entire agreement between the Employee and the Company with respect to the subject matter hereof and supersedes any and all prior and contemporaneous agreements and understandings between the Employee and the Company or any predecessor of the Company or any of their respective subsidiaries or other affiliates regarding the subject matter hereof. No waiver, amendment or modification of any provision of this Agreement shall be effective unless in writing and signed by the Employee and the Company. The waiver by either party of a breach of any provision of this Agreement by the other party shall not operate or be construed as a waiver of any subsequent breach by such other party. Section 11. Notices. (i) All notices or other communications pursuant to this Agreement shall be in writing and shall be deemed to be sufficient if delivered personally, telecopied, sent by nationally-recognized, overnight courier, or mailed by registered or certified mail (return receipt requested), postage prepaid, to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (i) if to the Company, to it at: ______________________________ ______________________________ Attention: __________________ Telecopier: (___) ____________ Telephone: (___) ____________ (ii) if to the Employee, to him at his last known address contained in the records of the Company. (b) All such notices and other communications shall be deemed to have been given and received (i) in the case of personal delivery, on the date of such delivery, (ii) in the case of delivery by telecopy, on the date 60 of such delivery (if sent on a business day, and if not sent on a business day, then on the next business day after the date sent), (iii) in the case of delivery by nationally-recognized, overnight courier, on the next business day following dispatch, and (iv) in the case of mailing, on the third business day following such mailing. Section 12. Headings. The section headings in this Agreement are for convenience only and shall not control or affect the meaning of any provision of this Agreement. Section 13. Severability. It is the desire and intent of the parties that the provisions of this Agreement be enforced to the fullest extent permissible under the law and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, in the event that any provision of this Agreement would be held in any jurisdiction to be invalid, prohibited or unenforceable for any reason, such provision, as to such jurisdiction, shall be ineffective, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. Notwithstanding the foregoing, if such provision could be more narrowly drawn so as not to be invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. Section 14. Remedies. The Employee acknowledges and understands that the provisions of this Agreement are of a special and unique nature, the loss of which cannot be adequately compensated for in damages by an action at law, and thus, the breach or threatened breach of the provisions of this Agreement would cause the Company irreparable harm. The Employee further acknowledges that the covenants contained in Section 8 and Section 9 are independent covenants and in the event of a breach of any of the covenants contained in Section 8 or Section 9, the Company shall be entitled to immediate relief enjoining such violations in any court or before any judicial body having jurisdiction over such a claim. All remedies hereunder are cumulative, are in addition to any other remedies provided for by law and may, to the extent permitted by law, be exercised concurrently or separately, and the exercise of any one remedy shall not be deemed to be an election of such remedy or to preclude the exercise of any other remedy. Section 15. Representation. The Employee hereby represents and warrants to the Company that (i) the execution, delivery and performance of this Agreement by the Employee does not breach, violate or cause a default under any agreement, contract or instrument to which the Employee is a party or any judgment, order or decree to which the Employee is subject, and (ii) the Employee is not a party to or bound by any employment agreement, consulting agreement, non-compete agreement, confidentiality agreement or similar agreement with any other person or entity. Section 16. Benefits of Agreement; Assignment. The terms and provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns, representatives, heirs and estates, as applicable. This Agreement shall not be assignable by any party hereto without the prior written consent of the other party hereto, except that the Company may assign this Agreement or its rights hereunder to a direct or indirect wholly-owned subsidiary of the Company or to any person or entity succeeding to all or any substantial portion of their respective businesses. Section 17. Governing Law. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of Florida without giving effect to any choice of law provision or rule (whether of the State of Florida or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Florida. Section 18. Mutual Waiver of Jury Trial. THE PARTIES WISH THAT APPLICABLE LAWS APPLY TO THE RESOLUTION OF ANY DISPUTES ARISING UNDER THIS AGREEMENT AND THE SUBJECT MATTER HEREOF, AND THAT THEIR DISPUTES BE RESOLVED BY AN EXPERIENCED PERSON APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND APPLICABLE LAWS, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT OR ANY DOCUMENTS RELATED HERETO. Section 19. Counterparts. This Agreement may be executed in any number of counterparts, and each such counterpart shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. 61 IN WITNESS WHEREOF, the parties have executed and delivered this Agreement effective as of the date first written above. THE COMPANY: ----------- GLOBICOM, INC. By:______________________________ Name:____________________________ Title:___________________________ THE EMPLOYEE: ------------ _________________________________ Name: Mace G. Gifford 62 EXHIBIT A --------- Equity Incentive Bonus Mace G. Gifford 2005 (Year 1): 8,437.5 shares of common stock if the Globicom network is up-and-running 120 days from the closing date of the initial stock purchase transaction with Tiger Telematics, Inc. The Globicom network must support Tiger Telematics' Gizmondo unit. An additional 8,437.5 shares of common stock if the Company achieves Gross Profit of $330,000 for the twelve month period beginning with the first full month immediately following the closing date of the initial stock purchase transaction with Tiger Telematics, Inc. 120 day network up and running = 8,437.5 shares. Year 1 $330,000 Gross Profit = 8,437.5 shares Year 1 Total Share Earning Target = 16,875 shares 2006 (Year 2): 8,437.5 shares of common stock if the Company achieves Operating Income at the Globicom business unit of at least $1,350,000 for the twelve month period beginning with the first full month one year from the closing date of the initial stock purchase transaction with Tiger Telematics, Inc. Year 2 $1,350,000 Operating Income = 8,437.5 shares Year 2 Total Share Earning Target = 8,437.5 shares 2007 (Year 3): 8,437.5 shares of common stock if the Company achieves Operating Income at the Globicom business unit of at least $3,650,000 for the twelve month period beginning with the first full month two years from the closing date of the initial stock purchase transaction with Tiger Telematics, Inc. Year 3 $3,650,000 = 8,437.5 shares Year 3 Total Share Earning Target = 8,437.5 AGGREGATE TOTAL SHARES = 33,750 The Equity Incentive Bonus under this Agreement will become fully vested and immediately exercisable upon the occurrence of a "Change of Control." A Change of Control means the occurrence of any of the following: (i) the acquisition (other than from the Company directly) by any "person" group or entity within the meaning of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934) of beneficial ownership of more than fifty (50%) percent of the outstanding voting stock of the Company; (ii) the stockholders of the Company approve a merger, reorganization or consolidation of the Company, whereby the stockholders of the Company immediately prior to such approval do not, immediately after consummation of such reorganization, merger or consolidation, own more than 50% of the outstanding voting stock of the surviving entity; or (iii) a liquidation or dissolution of the Company, or the sale of all or substantially all of the Company's assets. In the event of a stock split or stock dividend by the Company, an appropriate adjustment will be made in the number of shares subject to the Equity Incentive Bonus, as determined by the Company's Board of Directors. 63 EXHIBIT D --------- Form of Employment Agreement with Tony Rodriguez EMPLOYMENT AGREEMENT This EMPLOYMENT AGREEMENT (this "Agreement"), dated as of June ____, 2005, is by and between GLOBICOM INC., a Texas corporation (the "Company"), and ANTONIO RODRIGUEZ (the "Employee"). PREAMBLE The Company and the Employee are entering into this Agreement to set forth the terms of the Employee's employment with the Company. ACCORDINGLY, in consideration of the mutual representations, warranties, covenants and agreements set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the Company and the Employee, the Company and the Employee hereby agree as follows: Section 1. Duties. On the terms and subject to the conditions contained in this Agreement, the Employee will be employed by the Company as Vice President-Operations. The Employee shall perform such duties and services on behalf of the Company and its subsidiaries and other affiliates consistent with such position as may reasonably be assigned to the Employee from time to time by the Board of Directors of the Company (the "Board") or the more senior officers of the Company. Section 2. Term. Unless sooner terminated in accordance with the applicable provisions of this Agreement, the Employee's employment hereunder shall be for the period (including any extensions thereof, the "Employment Period") commencing on the date hereof (the "Commencement Date") and initially ending on the first anniversary of the date hereof. Subject to the applicable provisions of this Agreement regarding earlier termination, the Employment Period shall be extended automatically one day prior to each anniversary of the Commencement Date, beginning with the first anniversary thereof, in each case for an additional period of one year. Section 3. Time to be Devoted to Employment; Place of Performance. During the Employment Period, the Employee shall devote all of the Employee's working energies, efforts, interest, abilities and time exclusively to the business and affairs of the Company and its subsidiaries and other affiliates. The Employee shall not engage in any other business or activity that, in the reasonable judgment of the Board, would conflict or interfere with the performance of the Employee's duties as set forth herein, whether or not such activity is pursued for gain, profit or other pecuniary advantage. The Employee shall perform his duties and conduct his business at the principal Employee offices of the Company, except for required travel on the Company's business. Section 4. Base Salary; Bonus; Benefits. (j) During the Employment Period, the Company (or any of its subsidiaries or other affiliates) shall pay the Employee an annual base salary (the "Base Salary") of Seventy-Eight Thousand Dollars ($78,000.00), payable in such installments (but not less often than monthly) as is generally the policy of the Company from time to time with respect to the payment of regular compensation to its executive officers. During the Employment Period, the Employee will be entitled to (i) no less than two (2) weeks vacation per calendar year occurring during the Employment Period, which shall accrue and be taken in accordance with the Company's policy in effect from time to time, and (ii) such other benefits as may be made available from time to time to other executive officers of the Company generally, including, without limitation, participation in such health, life and disability insurance programs and retirement or savings plans, if any, as the Company may from time to time maintain in effect, subject to the Company's rights from time to time to amend, modify, change or terminate in any respect any of its employee benefit plans, policies, programs or benefits. (k) In addition to the Base Salary and benefits set forth in 10.14(a), during the Employment Period the Employee will be eligible to receive an equity incentive bonus based on the earn out schedule attached hereto as Schedule A, as determined by the Board in its sole discretion, with respect to each calendar year occurring during the Employment Period, commencing with calendar year 2005. Anything contained in this Agreement to the contrary notwithstanding, if the Employee's employment with the Company is terminated for 64 any reason, neither the Company nor any of its subsidiaries or other affiliates shall be obligated to pay the Employee any bonus with respect to the calendar year of the Company in which such termination occurred or thereafter. (l) All references herein to compensation to be paid to the Employee are to the gross amounts thereof that may be due hereunder. The Company shall have the right to deduct therefrom all sums that may be required to be deducted or withheld under any provision of law (including, without limitation, social security payments, income tax withholding, and any other deduction required by law) as in effect at all relevant times during the term of this Agreement. Section 5. Reimbursement of Expenses. During the Employment Period, the Company shall reimburse the Employee in accordance with the Company's policy for all reasonable and necessary traveling expenses and other disbursements incurred by the Employee for or on behalf of the Company in connection with the performance of the Employee's duties hereunder upon presentation of appropriate receipts or other documentation therefor, in accordance with all applicable policies of the Company. Section 6. Termination. The Company may terminate the Employee's employment hereunder at any time with or without "cause" by giving the Employee written notice of such termination, which termination shall be effective as of the date set forth in such notice, provided that such date shall not be earlier than the date of such notice. Section 7. Effect of Termination. Upon the effective date of termination of the Employee's employment under this Agreement, neither the Employee nor the Employee's beneficiaries or estate shall have any further rights under this Agreement or any claims against the Company or any of its subsidiaries or other affiliates arising out of this Agreement, except the right to receive, within thirty (30) days after the effective date of such termination (or such earlier period as may be required by applicable law): (i) the unpaid portion of the Base Salary provided for in Section 4, computed on a per diem basis to the effective date of such termination; and (ii) reimbursement for any expenses for which the Employee shall not have theretofore been reimbursed, as provided in Section 5. Section 8. Disclosure of Information; Non-competition. (m) From and after the date hereof, the Employee shall not at any time use or disclose, divulge, furnish, or make accessible to any person or entity (other than any officer, director, employee, affiliate or representative of the Company), except as required in connection with the performance of the Employee's duties under and in compliance with this Agreement and as required by law and judicial process (after giving the Company reasonably timely notice of the receipt of any such legal or judicial requirement), any Confidential Information (as defined in Section 8(e)) heretofore acquired or acquired during the Employment Period for any reason or purpose whatsoever, nor shall the Employee make use of any of the Confidential Information for the Employee's own purposes or for the benefit of any person or entity except the Company or any of its subsidiaries or other affiliates. (n) For purposes of this Agreement, "Confidential Information" means (i) the Intellectual Property Rights (as defined in 10.14(f)) of the Company and its subsidiaries and other affiliates, and (ii) all other knowledge and information of a proprietary or confidential nature relating to the Company or any of its subsidiaries or other affiliates, or the business or assets of the Company or any of its subsidiaries or other affiliates, including, without limitation, books, records, agent and independent contractor lists and related information, customer lists and related information, vendor lists and related information, supplier lists and related information, distribution channels, pricing information, cost information, marketing plans, strategies, forecasts, financial statements, budgets and projections, other than (A) information that is generally available to the public on the date hereof, or that becomes generally available to the public after the date hereof without action by the Employee, or (B) information that the Employee receives from a third party who does not have any independent obligation to the Company to keep such information confidential. (o) For purposes of this Agreement, the term "Intellectual Property Rights" means all industrial and intellectual property rights, including, without limitation, patents, patent applications, letters patent, patent rights, trademarks, trademark applications, trade names, service marks, service mark applications, copyrights, copyright applications, know-how, 65 certificates of public convenience and necessity, franchises, licenses, trade secrets, proprietary processes and formulae, inventions, discoveries, improvements, ideas, development tools, marketing materials, instructions, confidential information, trade dress, logos and designs, and all documentation and media constituting, describing or relating to the foregoing. (p) The Employee shall not during the Employment Period and the period commencing on the effective date of the termination of his employment with the Company and its subsidiaries and other affiliates for any reason and ending on the second anniversary of the effective date of such termination of employment (such periods together being called the "Non-competition Period" herein) (i) in any geographic area where the Company or any of its subsidiaries or other affiliates conducts business during the Non-competition Period, engage in or participate in, directly or indirectly (whether as an officer, director, employee, partner, consultant, holder of an equity or debt investment, lender or in any other manner or capacity, including, without limitation, by the rendering of services or advice to any person), or lend his name (or any part or variant thereof) to, any Competing Business (as defined in 10.14(h)); (ii) deal, directly or indirectly, in a competitive manner with any customers doing business with the Company or any of its subsidiaries or other affiliates during the Non-competition Period; (iii) solicit or employ any officer, director or agent of the Company or any of its subsidiaries or other affiliates to become an officer, director, or agent of the Employee, the Employee's affiliates or anyone else; or (iv) engage in or participate in, directly or indirectly, any business conducted under any name that shall be the same as or similar to the name of the Company or any of its subsidiaries or other affiliates or any trade name used by any of them. The Employee's ownership for investment purposes only of less than two percent (2%) of the outstanding shares of capital stock or class of debt securities of any corporation with one or more classes of its capital stock listed on a national securities exchange or actively traded in the over-the-counter market shall not constitute a breach of the foregoing covenant. The Employee is entering into the foregoing covenant to induce the Company to extend this Agreement to, and to enter into this Agreement with, the Employee. (q) For purposes of this Agreement, the term "Competing Business" means any wireless data communication, telematics, handheld gaming, software or other business that the Company or any of its subsidiaries or other affiliates has engaged in at any time during the Employment Period in any city or county in any state of the United States or Europe. Section 9. Resignation. Upon the termination of Employee's employment hereunder, Employee shall automatically be deemed to have resigned as an officer and director of the Company, any subsidiary and any affiliate and as a fiduciary of any benefit plan of any of the foregoing. The Employee shall execute any further documentation of such resignation as is reasonably requested by the Company. Section 10. Entire Agreement; Amendment and Waiver. This Agreement contains the entire agreement between the Employee and the Company with respect to the subject matter hereof and supersedes any and all prior and contemporaneous agreements and understandings between the Employee and the Company or any predecessor of the Company or any of their respective subsidiaries or other affiliates regarding the subject matter hereof. No waiver, amendment or modification of any provision of this Agreement shall be effective unless in writing and signed by the Employee and the Company. The waiver by either party of a breach of any provision of this Agreement by the other party shall not operate or be construed as a waiver of any subsequent breach by such other party. Section 11. Notices. (r) All notices or other communications pursuant to this Agreement shall be in writing and shall be deemed to be sufficient if delivered personally, telecopied, sent by nationally-recognized, overnight courier, or mailed by registered or certified mail (return receipt requested), postage prepaid, to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (i) if to the Company, to it at: _______________________________ _______________________________ Attention: ___________________ Telecopier: (___) _____________ Telephone: (___) _____________ (ii) if to the Employee, to him at his last known address contained in the records of the Company. 66 (c) All such notices and other communications shall be deemed to have been given and received (i) in the case of personal delivery, on the date of such delivery, (ii) in the case of delivery by telecopy, on the date of such delivery (if sent on a business day, and if not sent on a business day, then on the next business day after the date sent), (iii) in the case of delivery by nationally-recognized, overnight courier, on the next business day following dispatch, and (iv) in the case of mailing, on the third business day following such mailing. Section 12. Headings. The section headings in this Agreement are for convenience only and shall not control or affect the meaning of any provision of this Agreement. Section 13. Severability. It is the desire and intent of the parties that the provisions of this Agreement be enforced to the fullest extent permissible under the law and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, in the event that any provision of this Agreement would be held in any jurisdiction to be invalid, prohibited or unenforceable for any reason, such provision, as to such jurisdiction, shall be ineffective, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. Notwithstanding the foregoing, if such provision could be more narrowly drawn so as not to be invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. Section 14. Remedies. The Employee acknowledges and understands that the provisions of this Agreement are of a special and unique nature, the loss of which cannot be adequately compensated for in damages by an action at law, and thus, the breach or threatened breach of the provisions of this Agreement would cause the Company irreparable harm. The Employee further acknowledges that the covenants contained in Section 8 and Section 9 are independent covenants and in the event of a breach of any of the covenants contained in Section 8 or Section 9, the Company shall be entitled to immediate relief enjoining such violations in any court or before any judicial body having jurisdiction over such a claim. All remedies hereunder are cumulative, are in addition to any other remedies provided for by law and may, to the extent permitted by law, be exercised concurrently or separately, and the exercise of any one remedy shall not be deemed to be an election of such remedy or to preclude the exercise of any other remedy. Section 15. Representation. The Employee hereby represents and warrants to the Company that (i) the execution, delivery and performance of this Agreement by the Employee does not breach, violate or cause a default under any agreement, contract or instrument to which the Employee is a party or any judgment, order or decree to which the Employee is subject, and (ii) the Employee is not a party to or bound by any employment agreement, consulting agreement, non-compete agreement, confidentiality agreement or similar agreement with any other person or entity. Section 16. Benefits of Agreement; Assignment. The terms and provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns, representatives, heirs and estates, as applicable. This Agreement shall not be assignable by any party hereto without the prior written consent of the other party hereto, except that the Company may assign this Agreement or its rights hereunder to a direct or indirect wholly-owned subsidiary of the Company or to any person or entity succeeding to all or any substantial portion of their respective businesses. Section 17. Governing Law. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of Florida without giving effect to any choice of law provision or rule (whether of the State of Florida or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Florida. Section 18. Mutual Waiver of Jury Trial. THE PARTIES WISH THAT APPLICABLE LAWS APPLY TO THE RESOLUTION OF ANY DISPUTES ARISING UNDER THIS AGREEMENT AND THE SUBJECT MATTER HEREOF, AND THAT THEIR DISPUTES BE RESOLVED BY AN EXPERIENCED PERSON APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND APPLICABLE LAWS, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT OR ANY DOCUMENTS RELATED HERETO. 67 Section 19. Counterparts. This Agreement may be executed in any number of counterparts, and each such counterpart shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. * * * * * * 68 IN WITNESS WHEREOF, the parties have executed and delivered this Agreement effective as of the date first written above. THE COMPANY: ----------- GLOBICOM, INC. By:______________________________ Name:____________________________ Title:___________________________ THE EMPLOYEE: ------------ _________________________________ Name: Antonio Rodriguez 69 EXHIBIT A --------- Equity Incentive Bonus Antonio Rodriguez 2005 (Year 1): 5,625 shares of common stock if the Globicom network is up-and-running 120 days from the closing date of the initial stock purchase transaction with Tiger Telematics, Inc. The Globicom network must support Tiger Telematics' Gizmondo unit. An additional 5,625 shares of common stock if the Company achieves Gross Profit of $330,000 for the twelve month period beginning with the first full month immediately following the closing date of the initial stock purchase transaction with Tiger Telematics, Inc. 120 day network up and running = 5,625 shares. Year 1 $330,000 Gross Profit = 5,625 shares Year 1 Total Share Earning Target = 11,250 shares 2006 (Year 2): 5,625 shares of common stock if the Company achieves Operating Income at the Globicom business unit of at least $1,350,000 for the twelve month period beginning with the first full month one year from the closing date of the initial stock purchase transaction with Tiger Telematics, Inc. Year 2 $1,350,000 Operating Income = 5,625 shares Year 2 Total Share Earning Target = 5,625 shares 2007 (Year 3): 5,625 shares of common stock if the Company achieves Operating Income at the Globicom business unit of at least $3,650,000 for the twelve month period beginning with the first full month two years from the closing date of the initial stock purchase transaction with Tiger Telematics, Inc. Year 3 $3,650,000 = 5,625 shares Year 3 Total Share Earning Target = 5,625 AGGREGATE TOTAL SHARES = 22,500 The Equity Incentive Bonus under this Agreement will become fully vested and immediately exercisable upon the occurrence of a "Change of Control." A Change of Control means the occurrence of any of the following: (i) the acquisition (other than from the Company directly) by any "person" group or entity within the meaning of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934) of beneficial ownership of more than fifty (50%) percent of the outstanding voting stock of the Company; (ii) the stockholders of the Company approve a merger, reorganization or consolidation of the Company, whereby the stockholders of the Company immediately prior to such approval do not, immediately after consummation of such reorganization, merger or consolidation, own more than 50% of the outstanding voting stock of the surviving entity; or (iii) a liquidation or dissolution of the Company, or the sale of all or substantially all of the Company's assets. In the event of a stock split or stock dividend by the Company, an appropriate adjustment will be made in the number of shares subject to the Equity Incentive Bonus, as determined by the Company's Board of Directors. 70 EXHIBIT E --------- Form of Employment Agreement with Ron Stapp EMPLOYMENT AGREEMENT This EMPLOYMENT AGREEMENT (this "Agreement"), dated as of June____, 2005, is by and between GLOBICOM INC., a Texas corporation (the "Company"), and RONNIE D. STAPP (the "Employee"). PREAMBLE The Company and the Employee are entering into this Agreement to set forth the terms of the Employee's employment with the Company. ACCORDINGLY, in consideration of the mutual representations, warranties, covenants and agreements set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the Company and the Employee, the Company and the Employee hereby agree as follows: Section 1. Duties. On the terms and subject to the conditions contained in this Agreement, the Employee will be employed by the Company as Vice President-Network Services. The Employee shall perform such duties and services on behalf of the Company and its subsidiaries and other affiliates consistent with such position as may reasonably be assigned to the Employee from time to time by the Board of Directors of the Company (the "Board") or the more senior officers of the Company. Section 2. Term. Unless sooner terminated in accordance with the applicable provisions of this Agreement, the Employee's employment hereunder shall be for the period (including any extensions thereof, the "Employment Period") commencing on the date hereof (the "Commencement Date") and initially ending on the first anniversary of the date hereof. Subject to the applicable provisions of this Agreement regarding earlier termination, the Employment Period shall be extended automatically one day prior to each anniversary of the Commencement Date, beginning with the first anniversary thereof, in each case for an additional period of one year. Section 3. Time to be Devoted to Employment; Place of Performance. During the Employment Period, the Employee shall devote all of the Employee's working energies, efforts, interest, abilities and time exclusively to the business and affairs of the Company and its subsidiaries and other affiliates. The Employee shall not engage in any other business or activity that, in the reasonable judgment of the Board, would conflict or interfere with the performance of the Employee's duties as set forth herein, whether or not such activity is pursued for gain, profit or other pecuniary advantage. The Employee shall perform his duties and conduct his business at the principal Employee offices of the Company, except for required travel on the Company's business. Section 4. Base Salary; Bonus; Benefits. (s) During the Employment Period, the Company (or any of its subsidiaries or other affiliates) shall pay the Employee an annual base salary (the "Base Salary") of Seventy-Two Thousand Dollars ($72,000.00), payable in such installments (but not less often than monthly) as is generally the policy of the Company from time to time with respect to the payment of regular compensation to its executive officers. During the Employment Period, the Employee will be entitled to (i) no less than two (2) weeks vacation per calendar year occurring during the Employment Period, which shall accrue and be taken in accordance with the Company's policy in effect from time to time, and (ii) such other benefits as may be made available from time to time to other executive officers of the Company generally, including, without limitation, participation in such health, life and disability insurance programs and retirement or savings plans, if any, as the Company may from time to time maintain in effect, subject to the Company's rights from time to time to amend, modify, change or terminate in any respect any of its employee benefit plans, policies, programs or benefits. (t) In addition to the Base Salary and benefits set forth in 10.14(a), during the Employment Period the Employee will be eligible to receive an equity incentive bonus based on the earn out schedule attached hereto as Schedule A, as determined by the Board in its sole discretion, with respect to each calendar year occurring during the Employment Period, commencing with calendar year 2005. Anything contained in this Agreement to the contrary notwithstanding, if the Employee's employment with the Company is terminated for any reason, neither the Company nor any of its subsidiaries or other affiliates shall be obligated to pay the Employee any bonus with respect to the calendar year of the Company in which such termination occurred or thereafter. 71 (u) All references herein to compensation to be paid to the Employee are to the gross amounts thereof that may be due hereunder. The Company shall have the right to deduct therefrom all sums that may be required to be deducted or withheld under any provision of law (including, without limitation, social security payments, income tax withholding, and any other deduction required by law) as in effect at all relevant times during the term of this Agreement. Section 5. Reimbursement of Expenses. During the Employment Period, the Company shall reimburse the Employee in accordance with the Company's policy for all reasonable and necessary traveling expenses and other disbursements incurred by the Employee for or on behalf of the Company in connection with the performance of the Employee's duties hereunder upon presentation of appropriate receipts or other documentation therefor, in accordance with all applicable policies of the Company. Section 6. Termination. The Company may terminate the Employee's employment hereunder at any time with or without "cause" by giving the Employee written notice of such termination, which termination shall be effective as of the date set forth in such notice, provided that such date shall not be earlier than the date of such notice. Section 7. Effect of Termination. Upon the effective date of termination of the Employee's employment under this Agreement, neither the Employee nor the Employee's beneficiaries or estate shall have any further rights under this Agreement or any claims against the Company or any of its subsidiaries or other affiliates arising out of this Agreement, except the right to receive, within thirty (30) days after the effective date of such termination (or such earlier period as may be required by applicable law): (i) the unpaid portion of the Base Salary provided for in Section 4, computed on a per diem basis to the effective date of such termination; and (ii) reimbursement for any expenses for which the Employee shall not have theretofore been reimbursed, as provided in Section 5. Section 8. Disclosure of Information; Non-competition. (v) From and after the date hereof, the Employee shall not at any time use or disclose, divulge, furnish, or make accessible to any person or entity (other than any officer, director, employee, affiliate or representative of the Company), except as required in connection with the performance of the Employee's duties under and in compliance with this Agreement and as required by law and judicial process (after giving the Company reasonably timely notice of the receipt of any such legal or judicial requirement), any Confidential Information (as defined in Section 8(e)) heretofore acquired or acquired during the Employment Period for any reason or purpose whatsoever, nor shall the Employee make use of any of the Confidential Information for the Employee's own purposes or for the benefit of any person or entity except the Company or any of its subsidiaries or other affiliates. (w) For purposes of this Agreement, "Confidential Information" means (i) the Intellectual Property Rights (as defined in 10.14(f)) of the Company and its subsidiaries and other affiliates, and (ii) all other knowledge and information of a proprietary or confidential nature relating to the Company or any of its subsidiaries or other affiliates, or the business or assets of the Company or any of its subsidiaries or other affiliates, including, without limitation, books, records, agent and independent contractor lists and related information, customer lists and related information, vendor lists and related information, supplier lists and related information, distribution channels, pricing information, cost information, marketing plans, strategies, forecasts, financial statements, budgets and projections, other than (A) information that is generally available to the public on the date hereof, or that becomes generally available to the public after the date hereof without action by the Employee, or (B) information that the Employee receives from a third party who does not have any independent obligation to the Company to keep such information confidential. (x) For purposes of this Agreement, the term "Intellectual Property Rights" means all industrial and intellectual property rights, including, without limitation, patents, patent applications, letters patent, patent rights, trademarks, trademark applications, trade names, service marks, service mark applications, copyrights, copyright applications, know-how, certificates of public convenience and necessity, franchises, licenses, trade secrets, proprietary processes and formulae, inventions, discoveries, improvements, ideas, development tools, marketing materials, instructions, confidential information, trade dress, logos and designs, and all documentation and media constituting, describing or relating to the foregoing. 72 (y) The Employee shall not during the Employment Period and the period commencing on the effective date of the termination of his employment with the Company and its subsidiaries and other affiliates for any reason and ending on the second anniversary of the effective date of such termination of employment (such periods together being called the "Non-competition Period" herein) (i) in any geographic area where the Company or any of its subsidiaries or other affiliates conducts business during the Non-competition Period, engage in or participate in, directly or indirectly (whether as an officer, director, employee, partner, consultant, holder of an equity or debt investment, lender or in any other manner or capacity, including, without limitation, by the rendering of services or advice to any person), or lend his name (or any part or variant thereof) to, any Competing Business (as defined in 10.14(h)); (ii) deal, directly or indirectly, in a competitive manner with any customers doing business with the Company or any of its subsidiaries or other affiliates during the Non-competition Period; (iii) solicit or employ any officer, director or agent of the Company or any of its subsidiaries or other affiliates to become an officer, director, or agent of the Employee, the Employee's affiliates or anyone else; or (iv) engage in or participate in, directly or indirectly, any business conducted under any name that shall be the same as or similar to the name of the Company or any of its subsidiaries or other affiliates or any trade name used by any of them. The Employee's ownership for investment purposes only of less than two percent (2%) of the outstanding shares of capital stock or class of debt securities of any corporation with one or more classes of its capital stock listed on a national securities exchange or actively traded in the over-the-counter market shall not constitute a breach of the foregoing covenant. The Employee is entering into the foregoing covenant to induce the Company to extend this Agreement to, and to enter into this Agreement with, the Employee. (z) For purposes of this Agreement, the term "Competing Business" means any wireless data communication, telematics, handheld gaming, software or other business that the Company or any of its subsidiaries or other affiliates has engaged in at any time during the Employment Period in any city or county in any state of the United States or Europe. Section 9. Resignation. Upon the termination of Employee's employment hereunder, Employee shall automatically be deemed to have resigned as an officer and director of the Company, any subsidiary and any affiliate and as a fiduciary of any benefit plan of any of the foregoing. The Employee shall execute any further documentation of such resignation as is reasonably requested by the Company. Section 10. Entire Agreement; Amendment and Waiver. This Agreement contains the entire agreement between the Employee and the Company with respect to the subject matter hereof and supersedes any and all prior and contemporaneous agreements and understandings between the Employee and the Company or any predecessor of the Company or any of their respective subsidiaries or other affiliates regarding the subject matter hereof. No waiver, amendment or modification of any provision of this Agreement shall be effective unless in writing and signed by the Employee and the Company. The waiver by either party of a breach of any provision of this Agreement by the other party shall not operate or be construed as a waiver of any subsequent breach by such other party. Section 11. Notices. (aa) All notices or other communications pursuant to this Agreement shall be in writing and shall be deemed to be sufficient if delivered personally, telecopied, sent by nationally-recognized, overnight courier, or mailed by registered or certified mail (return receipt requested), postage prepaid, to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (i) if to the Company, to it at: _______________________________ _______________________________ Attention: ___________________ Telecopier: (___) _____________ Telephone: (___) _____________ (ii) if to the Employee, to him at his last known address contained in the records of the Company. (d) All such notices and other communications shall be deemed to have been given and received (i) in the case of personal delivery, on the date of such delivery, (ii) in the case of delivery by telecopy, on the date of such delivery (if sent on a business day, and if not sent on a business day, 73 then on the next business day after the date sent), (iii) in the case of delivery by nationally-recognized, overnight courier, on the next business day following dispatch, and (iv) in the case of mailing, on the third business day following such mailing. Section 12. Headings. The section headings in this Agreement are for convenience only and shall not control or affect the meaning of any provision of this Agreement. Section 13. Severability. It is the desire and intent of the parties that the provisions of this Agreement be enforced to the fullest extent permissible under the law and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, in the event that any provision of this Agreement would be held in any jurisdiction to be invalid, prohibited or unenforceable for any reason, such provision, as to such jurisdiction, shall be ineffective, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. Notwithstanding the foregoing, if such provision could be more narrowly drawn so as not to be invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. Section 14. Remedies. The Employee acknowledges and understands that the provisions of this Agreement are of a special and unique nature, the loss of which cannot be adequately compensated for in damages by an action at law, and thus, the breach or threatened breach of the provisions of this Agreement would cause the Company irreparable harm. The Employee further acknowledges that the covenants contained in Section 8 and Section 9 are independent covenants and in the event of a breach of any of the covenants contained in Section 8 or Section 9, the Company shall be entitled to immediate relief enjoining such violations in any court or before any judicial body having jurisdiction over such a claim. All remedies hereunder are cumulative, are in addition to any other remedies provided for by law and may, to the extent permitted by law, be exercised concurrently or separately, and the exercise of any one remedy shall not be deemed to be an election of such remedy or to preclude the exercise of any other remedy. Section 15. Representation. The Employee hereby represents and warrants to the Company that (i) the execution, delivery and performance of this Agreement by the Employee does not breach, violate or cause a default under any agreement, contract or instrument to which the Employee is a party or any judgment, order or decree to which the Employee is subject, and (ii) the Employee is not a party to or bound by any employment agreement, consulting agreement, non-compete agreement, confidentiality agreement or similar agreement with any other person or entity. Section 16. Benefits of Agreement; Assignment. The terms and provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns, representatives, heirs and estates, as applicable. This Agreement shall not be assignable by any party hereto without the prior written consent of the other party hereto, except that the Company may assign this Agreement or its rights hereunder to a direct or indirect wholly-owned subsidiary of the Company or to any person or entity succeeding to all or any substantial portion of their respective businesses. Section 17. Governing Law. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of Florida without giving effect to any choice of law provision or rule (whether of the State of Florida or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Florida. Section 18. Mutual Waiver of Jury Trial. THE PARTIES WISH THAT APPLICABLE LAWS APPLY TO THE RESOLUTION OF ANY DISPUTES ARISING UNDER THIS AGREEMENT AND THE SUBJECT MATTER HEREOF, AND THAT THEIR DISPUTES BE RESOLVED BY AN EXPERIENCED PERSON APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND APPLICABLE LAWS, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT OR ANY DOCUMENTS RELATED HERETO. Section 19. Counterparts. This Agreement may be executed in any number of counterparts, and each such counterpart shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. 74 IN WITNESS WHEREOF, the parties have executed and delivered this Agreement effective as of the date first written above. THE COMPANY: ----------- GLOBICOM, INC. By:______________________________ Name:____________________________ Title:___________________________ THE EMPLOYEE: ------------ _________________________________ Name: Ronnie D. Stapp 75 EXHIBIT A --------- Equity Incentive Bonus Ronnie D. Stapp 2005 (Year 1): 4,687.50 shares of common stock if the Globicom network is up-and-running 120 days from the closing date of the initial stock purchase transaction with Tiger Telematics, Inc. The Globicom network must support Tiger Telematics' Gizmondo unit. An additional 4,687.50 shares of common stock if the Company achieves Gross Profit of $330,000 for the twelve month period beginning with the first full month immediately following the closing date of the initial stock purchase transaction with Tiger Telematics, Inc. 120 day network up and running = 4,687.50 shares. Year 1 $330,000 Gross Profit = 4,687.50 shares Year 1 Total Share Earning Target = 9,375 shares 2006 (Year 2): 4,687.50 shares of common stock if the Company achieves Operating Income at the Globicom business unit of at least $1,350,000 for the twelve month period beginning with the first full month one year from the closing date of the initial stock purchase transaction with Tiger Telematics, Inc. Year 2 $1,350,000 Operating Income = 4,687.50 shares Year 2 Total Share Earning Target = 4,687.50 shares 2007 (Year 3): 4,687.50 shares of common stock if the Company achieves Operating Income at the Globicom business unit of at least $3,650,000 for the twelve month period beginning with the first full month two years from the closing date of the initial stock purchase transaction with Tiger Telematics, Inc. Year 3 $3,650,000 = 4,687.50 shares Year 3 Total Share Earning Target = 4,687.50 AGGREGATE TOTAL SHARES = 18,750 The Equity Incentive Bonus under this Agreement will become fully vested and immediately exercisable upon the occurrence of a "Change of Control." A Change of Control means the occurrence of any of the following: (i) the acquisition (other than from the Company directly) by any "person" group or entity within the meaning of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934) of beneficial ownership of more than fifty (50%) percent of the outstanding voting stock of the Company; (ii) the stockholders of the Company approve a merger, reorganization or consolidation of the Company, whereby the stockholders of the Company immediately prior to such approval do not, immediately after consummation of such reorganization, merger or consolidation, own more than 50% of the outstanding voting stock of the surviving entity; or (iii) a liquidation or dissolution of the Company, or the sale of all or substantially all of the Company's assets. In the event of a stock split or stock dividend by the Company, an appropriate adjustment will be made in the number of shares subject to the Equity Incentive Bonus, as determined by the Company's Board of Directors. 76 Schedule 1.3 Stockholder Percentages for Allocation of Purchase Price -------------------------------------------------------- STOCKHOLDER % Mace G. Gifford 34.44% Antonio Rodriguez 18.46% Danny Butler 17.16% Rae Albertini 5.50% Ohoud Sharbatly 5.28% Walter R. Fawcett 2.77% Ron Stapp 2.46% William S. Jasperson 1.23% Roger & Judy Hill 1.16% Jasperson Marital Trust 0.89% Ruben & Shelley Duron 0.74% Gerry Mecca 0.62% Rick Tanner 0.49% Dal Barry 0.39% Kevin Kerr 0.31% Joe Marshall 0.29% Connie Gifford 3.21% Aliza Michelle Perez 1.13% James D. Roland 0.92% Christopher & Krista Wagner 0.50% Geoffrey & Amy Royal 0.41% David E. Thornton 0.41% Jett & Diane Rominger 0.37% Richard D. Baxter 0.22% Randall C. Mecca 0.21% Marcus & Linda Magee 0.12% Carsten Holmdie 0.12% Glen Griggs 0.09% Joe Sugarek 0.06% Kimberly F. Drake 0.04% TOTAL 100.00% These percentages represent fully-diluted ownership after conversion of preferred shares with accumulated interest, creditor indebtedness with accumulated interest, and warrants. 77 Schedule 3.4 Stockholder Consents -------------------- Attached 78 Schedule 4.1 Foreign Qualifications for the Company and Its Subsidiaries ----------------------------------------------------------- None 79 Schedule 4.3 Company Consents ---------------- Attached 80 Schedule 4.4(a) Capitalization Table of the Company and It's Subsidiaries --------------------------------------------------------- COMMON STOCK Authorized 10,000,000 shares No Par Value Mace G. Gifford 2,800,000 Antonio Rodriguez 1,500,000 Danny Butler 1,395,109 PMT Research Inc. 447,408 Ohoud Sharbatly 428,968 Connie Gifford 261,228 Walter R. Fawcett 225,454 Ron Stapp 200,000 William S. Jasperson 100,000 Roger & Judy Hill 94,062 Aliza Michelle Perez 92,213 James D. Roland 75,000 Jasperson Marital Trust 72,443 Ruben & Shelley Duron 60,000 Gerry Mecca 50,000 Christopher & Krista Wagner 40,359 Rick Tanner 40,000 Jeff & Amy Royal 33,631 David E. Thornton 33,333 Dal Barry 32,000 Jett & Diane Rominger 30,000 Kevin Kerr 25,000 Joe Marshall 23,498 Richard D. Baxter 17,500 Randall C. Mecca 16,667 Marcus & Linda Magee 10,000 Carsten Holmdie 10,000 Glen Griggs 7,000 Joe Sugarek 5,000 Kimberly F. Drake 3,333 Issued and Outstanding 8,129,206 These shares represent fully-diluted ownership after conversion of preferred shares with accumulated interest, creditor indebtedness with accumulated interest, and warrants. 81 Schedule 4.4(b) Options, Warrants, Voting Agreements, etc. ------------------------------------------ The Company has no options or warrants issued as of the closing date of this agreement. 82 Schedule 4.5 Subsidiaries and Investments ---------------------------- The Company has no subsidiaries and investments as of the closing date of this agreement. 83
Schedule 4.6(a) Financial Statements -------------------- Globicom, Inc. Unaudited Income Statement Jan - Dec Jan - Dec Jan - Dec Jan - Dec Jan - Dec Jan - Jul 00 01 02 03 04 05 --------- --------- --------- --------- --------- --------- Income Other Regular Income 0 1,200 7,235 26,718 0 0 Product Revenue 2,534 113,867 308,433 74,503 0 0 Subscription Revenue 738 62,752 173,256 228,422 21,262 0 --------- --------- --------- --------- --------- --------- Total Income 3,272 177,819 488,924 329,643 21,262 0 Cost of Goods Sold Cost of Goods Sold 2,431 94,650 291,968 61,563 0 0 Cost of Subscriptions 312 46,835 98,792 141,397 20,275 0 --------- --------- --------- --------- --------- --------- Total COGS 2,743 141,485 390,760 202,960 20,275 0 --------- --------- --------- --------- --------- --------- Gross Profit 529 36,334 98,164 126,683 987 0 Expense Building Occupancy 4,393 45,859 51,145 44,284 4,978 9,912 Data Center Costs 30,892 24,527 27,454 12,970 765 0 Depreciation Expense 590 6,174 10,685 11,259 3,530 1,404 General & Administrative 19,244 78,235 103,675 58,902 20,464 459 Payroll Expenses 0 300,401 369,478 257,802 80,259 31,945 Sales & Marketing Expense 8,672 17,628 10,805 2,133 0 0 Software OEM Lic. Amort. 0 0 800 1,100 0 0 Taxes 0 2,521 3,660 -1,113 207 0 --------- --------- --------- --------- --------- --------- Total Expense 63,791 475,345 577,702 387,337 110,203 43,720 --------- --------- --------- --------- --------- --------- Net Ordinary Income -63,262 -439,011 -479,538 -260,654 -109,216 -43,720 Other Income/Expense Interest Income 734 3,360 2,935 2,424 0 0 --------- --------- --------- --------- --------- --------- Total Other Income 734 3,360 2,935 2,424 0 0 Other Expense Interest Expense 2,438 9,417 37,061 70,806 71,234 5,963 --------- --------- --------- --------- --------- --------- Total Other Expense 2,438 9,417 37,061 70,806 71,234 5,963 --------- --------- --------- --------- --------- --------- Net Other Income -1,704 -6,057 -34,126 -68,383 -71,234 -5,963 --------- --------- --------- --------- --------- --------- Net Income -64,966 -445,068 -513,664 -329,037 -180,449 -49,683 ========= ========= ========= ========= ========= =========
84
Schedule 4.6(a) Financial Statements -------------------- Globicom, Inc. Unaudited Balance Sheet Dec 31, 00 Dec 31, 01 Dec 31, 02 Dec 31, 03 Dec 31, 04 Jul 31, 05 ---------- ---------- ---------- ---------- ---------- ---------- ASSETS Current Assets Cash & Equivalents 144 3,256 43,239 9,892 1,816 1,816 Accounts Receivable 3,371 15,844 38,129 8,892 6,710 6,710 Other Current Assets 4,654 17,085 63,052 62,746 62,485 62,485 ---------- ---------- ---------- ---------- ---------- ---------- Total Current Assets 8,169 36,185 144,420 81,530 71,012 71,012 Fixed Assets Net of Deprec 13,734 29,350 27,165 15,907 6,687 5,283 Total Other Assets 42,534 132,012 157,334 15,211 4,100 4,100 ---------- ---------- ---------- ---------- ---------- ---------- TOTAL ASSETS 64,437 197,547 328,919 112,648 81,798 80,394 ========== ========== ========== ========== ========== ========== LIABILITIES & EQUITY Liabilities Current Liabilities Accounts Payable 23,195 72,612 88,157 113,719 128,.680 139,051 Other Current Liabilities 1,500 136,233 666,329 821,129 947,187 984,367 ---------- ---------- ---------- ---------- ---------- ---------- Total Current Liabilities 24,695 208,845 754,486 934,849 1,075,867 1,123,418 Long Term Liabilities Interest Payable 2,438 10,461 18,856 27,416 35,999 36,726 ---------- ---------- ---------- ---------- ---------- ---------- Total Long Term Liabilities 2,438 10,461 18,856 27,416 35,999 36,726 ---------- ---------- ---------- ---------- ---------- ---------- Total Liabilities 27,133 219,306 773,342 934,849 1,111,866 1,160,145 Equity Capital Stock 102,270 488,275 579,275 503,105 503,108 503,108 Retained Earnings 0 -64,966 -510,035 -1,023,699 -1,352,726 -1,533,176 Net Income -64,966 -445,068 -513,664 -329,037 -180,449 -49,683 ---------- ---------- ---------- ---------- ---------- ---------- Total Equity 37,304 -21,759 -444,424 -849,618 -1,030,067 -1,079,750 ---------- ---------- ---------- ---------- ---------- ---------- TOTAL LIABILITIES & EQUITY 64,437 197,547 328,918 112,648 81,798 80,397 ========== ========== ========== ========== ========== ==========
85
Schedule 4.6(a) Financial Statements -------------------- Globicom, Inc. Unaudited Statement of Cashflows Jan - Dec Jan - Dec Jan - Dec Jan - Dec Jan - Dec 00 01 02 03 04 Jan 05 --------- --------- --------- --------- --------- --------- OPERATING ACTIVITIES Net Income -64,966 -445,068 -513,664 -329,037 -180,449 -49,683 Adjustments to reconcile Net Income to net cash provided by operations: Accounts Receivable -3,371 -12,473 -22,285 29,238 2,182 -- Employee Advances -- -2,000 -3,200 4,940 260 -- Inventory Assets -- (12,558) (26,102) 25,391 -- -- Other Current Assets -4,654 2,127 -16,665 -30,025 -- -- Other Assets -42,534 2,387 -2,335 42,481 -- -- Accounts Payable 23,195 49,418 15,546 25,562 21,597 10,371 Other Current Liabilities 1,500 80,740 119,298 32,778 56,771 31,945 --------- --------- --------- --------- --------- --------- Net cash provided by Operating Activities -90,830 -337,427 -449,407 -185,955 -99,639 -7,367 INVESTING ACTIVITIES Fixed Assets Purchases -14,323 -21,790 -8,500 -- 36,029 -- Fixed Assets Purchases- A/D 591 6,174 10,685 11,258 -26,809 1,404 Other Assets -- -91,866 -22,987 99,642 11,111 -- --------- --------- --------- --------- --------- --------- Net cash provided by Investing Activities -13,732 -107,482 -20,802 110,900 20,331 1,404 FINANCING ACTIVITIES Loans from Stockholders -- 52,600 135,900 94,896 29,494 2,427 Short Term Borrowings -- 1,394 274,896 27,136 33,156 2,808 Interest Payable 2,438 8,023 8,395 8,560 8,583 727 Common Stock 15,270 366,005 91,000 (76,167) -- -- Preferred Stock 87,000 20,000 -- -- -- -- --------- --------- --------- --------- --------- --------- Net cash provided by Financing Activities 104,708 448,022 510,191 54,425 71,233 5,963 Net cash increase for period 146 3,113 39,982 -33,347 -8,076 0 --------- --------- --------- --------- --------- --------- Cash at beginning of period -- 144 3,257 43,239 9,892 1,816 --------- --------- --------- --------- --------- --------- Cash at end of period 146 3,257 43,239 9,892 1,816 1,816 ========= ========= ========= ========= ========= =========
86
Schedule 4.6(c) Accounts Payable and Accounts Receivable ---------------------------------------- Accounts Payable as of Jan. 30, 2005 1 - 30 31 - 60 61 - 90 > 90 TOTAL ------ --------- ----------- ------------- ------------- AT&T Wireless Services1 0.00 0.00 0.00 74,831.15 74,831.15 Greg Gifford 0.00 0.00 0.00 7,900.31 7,900.31 Ron Stapp 0.00 0.00 0.00 7,012.43 7,012.43 T-Mobile Equipment Purchases 0.00 0.00 0.00 6,024.50 6,024.50 Verizon-CDPD2 0.00 0.00 0.00 5,780.46 5,780.46 Wireless Developer2 0.00 0.00 0.00 4,800.00 4,800.00 Motient2 0.00 0.00 0.00 3,354.92 3,354.92 Springbow Solutions2 0.00 0.00 0.00 3,187.88 3,187.88 Paradigm Suites 0.00 1,412.91 1,412.91 11,321.94 14,147.76 Global Wireless Data2 0.00 0.00 0.00 2,602.46 2,602.46 TXU Electric2 0.00 0.00 0.00 1,784.06 1,784.06 McDonald Sanders2 0.00 0.00 0.00 1,606.20 1,606.20 T-Mobile Wireless Service2 0.00 0.00 0.00 1,120.27 1,120.27 Buy & Save V2 0.00 0.00 0.00 902.50 902.50 A Rodriguez 0.00 0.00 0.00 861.76 861.76 Allegiance Telecom2 0.00 0.00 0.00 847.61 847.61 Verizon-1xRTT2 0.00 0.00 0.00 777.02 777.02 Miscellaneous Vendors2 0.00 0.00 0.00 2,463.69 2,463.69 ------ --------- ----------- ------------- ------------- TOTALTRADE PAYABLES 0.00 1,412.91 1,412.91 137,638.24 140,464.06 Sales Tax Payable 0.00 0.00 0.00 1,542.90 1,542.90 Loans - Stockholders3 0.00 0.00 0.00 238,500.00 238,500.00 Loans -Stockholders-Interest3 0.00 0.00 0.00 76,817.48 76,817.48 Deferred Payroll 0.00 4,563.50 4,563.50 97,818 106,945 Payroll Liabilities 0.00 0.00 0.00 213,048.25 213,048.25 Short Term Borrowings3 0.00 0.00 0.00 273,387.81 273,387.81 Short Term Borrowings-Interest3 0.00 0.00 0.00 65,666.50 65,666.50 Preferred Interest Payable3 0.00 0.00 0.00 36,726.36 36,726.36 ------ --------- ----------- ------------- ------------- TOTAL OTHER LIABILITIES 0.00 4,563.50 4,563.50 1,011,966.39 1,021,093.39 TOTAL PAYABLES 0.00 5,976.41 5,976.41 1,148,191.72 1,160,144.54
1 The Company is negotiating with AT&T for the application of credits for transferring of CDPD customer base, for de-commissioning of CDPD network and CDPD contract withdrawal. 2 The majority of these payable listed are pre-reorganization liabilities. The Company believes that the majority of the over 90 trade payables have been determined to be uncollectible by the vendor and do not require payment. 3 The Company will be converting the Loans-Stockholders, Loans-Stockholders-Interest, Short Term Borrowings, Short Term Borrowings-Interest, and Preferred Interest Payable will be converted to common stock prior to closing. 87 Schedule 4.6(c) Accounts Payable and Accounts Receivable ---------------------------------------- 1 - 31 - 61 - 30 60 90 > 90 TOTAL ----- ------ ------ ---------- -------- City of Grapevine 0.00 0.00 0.00 2,187.45 2,187.45 Medstar 0.00 0.00 0.00 1,932.85 1,932.85 Hill Country Mobile Net 0.00 0.00 0.00 1,016.16 1,016.16 Travis County ESD#6 0.00 0.00 0.00 719.20 719.20 Transcore 0.00 0.00 0.00 324.48 324.48 Austin Commercial 0.00 0.00 0.00 322.91 322.91 Erin Nelsen 0.00 0.00 0.00 177.64 177.64 SUNTX 0.00 0.00 0.00 173.64 173.64 COI Inc. 0.00 0.00 0.00 159.80 159.80 Cordola Marble 0.00 0.00 0.00 119.90 119.90 Keenan A. Haight 0.00 0.00 0.00 119.90 119.90 Trinity Industries 0.00 0.00 0.00 71.20 71.20 Andrea Kesler 0.00 0.00 0.00 59.95 59.95 Ron Suich 0.00 0.00 0.00 59.95 59.95 City of Southlake 0.00 0.00 0.00 39.95 39.95 NEC Solutions 0.00 0.00 0.00 1.00 1.00 Unapplied Credits 0.00 0.00 0.00 -776.42 -776.42 ----- ------ ------ ---------- -------- TOTAL 0.00 0.00 0.00 6,709.56 6,709.56 ===== ====== ====== ========== ======== The Company believes that these receivables may be uncollectible. 88 Schedule 4.7 Undisclosed Liabilities ----------------------- The Company has no undisclosed liabilities as of the closing date of this agreement. 89 Schedule 4.8 Absence of Changes ------------------ None 90 Schedule 4.9(a) Tax Matters ----------- The Company has the following tax liabilities as of the closing date of this agreement. The Company has developed a plan of action to address these liabilities utilizing the cash portion of the transaction in conjunction with a structured settlement. Payroll Tax Liabilities ----------------------------------- 95,031 Federal Withholding Medicare Employee 10,465 Social Security Employee 44,746 Federal Unemployment 6,270 Medicare Company Paid 10,465 Social Security Company Paid 44,746 ----------- 211,723 Total Payroll Tax Liabilities City of Irving Property Taxes 1,202 Total Tax Liabilities 212,924 =========== The Company has the following estimated Net Operating Loss carry-forwards reported on its Form 1120 U.S. Corporation Income Tax Returns: NOL Carryover Year Amount ------------------------------- 2004 $ 112,744 2003 298,731 2002 504,446 2001 438,253 2000 63,865 ---------------- Total NOL Carryover $ 1,418,039 Form 1120 U.S. Corporation Income Tax Returns for the following tax years are in the due diligence binder: Form 1120 - 2004 Form 1120 - 2003 Form 1120 - 2002 Form 1120 - 2001 Form 1120 - 2000 91 Schedule 4.9(c) Taxing Authority Notifications ------------------------------ None 92 Schedule 4.10(a) Encumbrances ------------ The Company has the following encumbrances as of the closing date of this agreement. The Company has developed a plan of action to address these encumbrances utilizing the cash portion of the transaction. UCC Filing # 02-0030467840 - PMT Research Inc. UCC Filing # 03-0007213349 - Voicestream Wireless Corp. 93 Schedule 4.10(b) Tangible Personal Property -------------------------- The Company has the following tangible personal property as of the closing date of this agreement. Data Center Equipment: Compaq Proliant Rack Server 19" Secure Rack Cabinet w/ lock Power Supply (2) Compaq Proliant 6400R Servers w/ Quad Xeon 550Mhz Processors Quad 18gb SCSI Hot Swap Drives 1Gb Fast RAM 1Mb Cache Data Communications: Cisco PIX Firewall Cisco Catalyst 5500 Switch (2) ADC Kentrox Data Smart T1 2 Port CSU/DSU (2) ADC Kentrox Satelite 651 DSU (2) Motorolla Power PC Vanguard Routers (2) AT&T Paradyn 4 port CSU/DSU 3Com Total Control 440 ISP Switch Administrative: Gateway Department File Server G6-450 3 SCSI RAID 3 Dell P3 500Mhz Desktop PC's w/ 15' Displays 2 eMachines P3 65Mhz PC's NEC LCD 1830 18' Flatpannel Display NEC LX 750 Laptop Konica Minolta Magicolor 2300DL Color Laser Printer HP Scanjet 3970 HP Deskjet 750C JetFax M900 Fax Machine 94 Schedule 4.11(a) Real Property ------------- The Company has no real property as of the closing date of this agreement. The Company is renting office space on a month-to-month basis from Paradigm Office Suites located at 400 E. Royal Lane, Irving, Texas 75039. 95 Schedule 4.11(b) Real Property Proceedings, Notices and Exceptions ------------------------------------------------- The Company has no real property proceedings, notices and encumbrances as of the closing date of this agreement. 96 Schedule 4.12(a) Intellectual Property Rights ---------------------------- The Company has intellectual property rights to the following: Company logos and trademarks as described in the diligence binder. 97 Schedule 4.12(b) Actions to Protect Intellectual Property Rights ----------------------------------------------- The Company has no actions in progress to protect intellectual property rights as of the closing date of this agreement. 98 Schedule 4.13(a) Material Contracts ------------------ The Company has the following material contracts in effect as of the closing date of this agreement. These agreements are located in the diligence binder. ATT Wireless services contract for CDPD is terminated with ATT as the networked has been decommissioned for new subscribers and will eventually be dismantled. This network would have no material impact for the Purchaser. ATT/Cingular Wireless ATT Wireless Reseller Agreement for GPRS service is provided in the binder. ATT Wireless (Now Cingular Wireless) will execute this agreement upon change in control of Globicom Wireless under an agreement with the Purchaser. This Agreement has been fully negotiated to support pricing schedules material to the Purchaser users of the Purchaser's mobile gaming console. The network interconnect APN from Globicom's network servers and data center to Cingular data center are communicated in this agreement. This wholesale agreement is appropriate for The Purchaser's users in the US and is a core relationship for Globicom to provide managed services. The economic responsibility and impact for this agreement is provided in the forward moving financial model for The Purchaser that Globicom Wireless has prepared and adopted for the Purchaser and subsidiaries. Additionally, the addendum for automated subscriber activation from The Purchaser's public access portal are provided in this section. As this network is the appropriate wireless data network to deploy to support The Purchaser, this agreement will have a material impact on the merger. Cingular Wireless Cingular Interactive Dealer Agreement to provide data communications for blackberry is provided in the binder. This agreement has no material impact on The Purchaser. Motient - Reseller wholesale agreement for data services provided. This will have no material impact for the Purchaser. Sprint PCS - Dealer Agreement for services is provided. Sprint network protocol is not compatible with the Purchaser and will have no material impact on this transaction. T-Mobile - National Premier Dealer Agreement is provided. While this agreement is for GPRS services, it is not a wholesale relationship that will allow the Purchaser to add private subscribers, bill company owned subscribers or create a dedicated APN interconnect that is necessary to serve the Purchaser's users. This agreement will be terminated. Verizon Wireless - Dealer Agreement for services is provided. Verizon network protocol is not compatible with the Purchaser and will have no material impact on this transaction. Technology Hyperspace Communications supplier agreement to provide compression component for Globicom WISPR platform is provided. Software Incubators - licensing agreement for Globicom to re-brand and implement browser bass for Globicom blackberry users is provided. This has no material impact for the Purchaser 99 Web Messenger - Globicom license for Instant Messaging is provided. This has no material impact for the Purchaser Netseal - Re-branding agreement for MPN Mobile Private Network software is provided. This will have no material impact for the Purchaser. Rodopi Operating and Support Services- software licensing platform is provided and will be used to bill the Purchaser's subscribers through pay-as-you-go and user selected subscription products managed by the Company. This platform will contain the API from the Purchaser's activation portal. Employment Agreements The company has employment agreements with the following employees copies of which are included in the due diligence binder: Mace G. Gifford Antonio Rodriguez Ron Stapp 100 Schedule 4.13(d) Funded Indebtedness ------------------- The Company has the following funded indebtedness in effect as of January 31, 2005. The Company will be converting the Loans to Stockholders, Loans to Stockholders-Interest, Short Term Borrowings, Short Term Borrowings-Interest, Preferred Interest Payable, and Warrants will be converted to common stock prior to closing. Promissory Notes: ----------------- Holder Date Principle Interest ------ ---- --------- -------- Connie Gifford 6/7/2001 $14,000 $4,093 Connie Gifford 9/12/2001 8,000 2,169 Connie Gifford 10/12/2001 8,000 2,116 Connie Gifford 12/5/2001 15,000 3,791 Connie Gifford 2/5/2002 4,500 1,076 Connie Gifford 5/9/2002 15,000 3,248 Connie Gifford 11/1/2002 17,000 3,063 Danny Butler 9/28/2001 7,000 1,873 Danny Butler 2/15/2001 50,000 14,808 Danny Butler 6/30/2003 50,000 7,203 Convertible Notes: ------------------ Holder Date Principle Interest ------ ---- --------- -------- Walter R. Fawcett 3/4/2002 $50,000 $33,377 Secured Notes with Warrants: ---------------------------- Holder Date Principle Interest Warrants ------ ---- --------- -------- -------- PMT Research, Inc. 6/7/2001 $78,383 $14,405 333,334 Ohoud Sharbatly 9/12/2001 100,000 31,003 266,667 Jasperson Marital Trust 10/12/2001 45,332 13,009 100,000 Walter R. Fawcett 12/5/2001 50,000 7,249 50,000 101 Schedule 4.14(a) Litigation, Etc. ---------------- The Company has the following litigation issues in effect as of the closing date of this agreement. City of Irving v. Globicom Wireless Personal Property Tax due for 2003 $ 554.84 Penalty and Interest $ 144.26 Collection Fee $ 104.87 Personal Property Tax due for 2003 $ 364.90 Penalty and Interest $ 32.85 Total $ 1,201.72 The Company will address this liability with the cash proceeds. 102 Schedule 4.14(b) Resolved Litigation ------------------- The Company has the following resolved litigation issues as of the closing date of this agreement. PMT Research, Inc. v. Globicom Wireless Agreed Order for Delivery of Garnished Funds and for release of Garnishment Bond No. 03-02670 District Court of Dallas County, TX 44th Judicial District Agreement for Entry of Judgment and to Forgo Levy and Execution of Judgment No. 03-02669-B District Court of Dallas County, TX 44th Judicial District PMT Research/Rae Albertini has agreed to accept the debt conversion offer that will convert his remaining outstanding principle, interest and warrants into shares of the Company's common stock and subsequently to TGTL restricted stock. 103 Schedule 4.15 Compliance with Laws -------------------- The Company has a plan of action to address compliance with the following issues in effect as of the closing date of this agreement. Form 1120 U.S. Corporation Income Tax Returns for the following tax years are due and will be filed by February 22, 2005: Form 1120 - 2004 Form 1120 - 2003 Form 1120 - 2002 Form 1120 - 2001 Form 1120 - 2000 Form 941 U.S. Corporation Income Tax Returns for the following tax years are due and will be filed immediately after closing: Form 941 - 2004 Form 941 - 2003 Form 941 - 2002 Form 941 - 2001 Form 941 - 2000 Texas State Franchise Tax Returns for the following tax years are due and will be filed by February 22, 2005: Texas Franchise Tax Return - 2004 Texas Franchise Tax Return - 2003 104 Schedule 4.16(a) Insurance Policies ------------------ The Company has no insurance policies in effect as of the closing date of this agreement. 105 Schedule 4.16(b) Insurance Claims, Etc. ---------------------- The Company has no insurance claims as of the closing date of this agreement. 106 Schedule 4.17(a) Directors, Officers and Key Employees. -------------------------------------- The following individuals are on the Board of Directors of the Company as of the closing date of this agreement. Mace Gregory Gifford Chairman Antonio Rodriguez Treasurer and Secretary The following individuals are the Officers and Key Employees of the Company as of the closing date of this agreement. Mace Gregory Gifford President and Chief Executive Officer Antonio Rodriguez Chief Financial Officer Ron Stapp Vice President 107 Schedule 4.17(b) Number of Employees, Independent Contractors, etc. -------------------------------------------------- The following individuals are the three employees of the Company as of the closing date of this agreement. Mace Gregory Gifford Antonio Rodriguez Ron Stapp The Company has no independent contractors as of the closing date of this agreement. 108 Schedule 4.17(c) Labor Relations --------------- The Company has no labor relations issues as of the closing date of this agreement. 109 Schedule 4.17() Labor Proceedings ----------------- The Company has no labor proceedings as of the closing date of this agreement. 110 Schedule 4.17(f) Joint Employee Matters ---------------------- The Company has no joint employee matters as of the closing date of this agreement. 111 Schedule 4.17(g) Independent Contractor Agreements --------------------------------- The Company has no independent contractor agreements as of the closing date of this agreement. 112 Schedule 4.18(a) Employee Benefit Plans ---------------------- The Company has no employee benefit plans as of the closing date of this agreement. 113 Schedule 4.18(b) ERISA Compliance ---------------- The Company has no ERISA plans in effect as of the closing date of this agreement. 114 Schedule 4.19(a) Environmental Laws - Violations ------------------------------- The Company has no environmental law violations as of the closing date of this agreement. 115 Schedule 4.19(b) Environmental Compliance -Previously Owned Properties ----------------------------------------------------- The Company has no environmental compliance issues on previously owned or inhabited property as of the closing date of this agreement. 116 Schedule 4.21(a) Related Party Transactions -------------------------- The Company has the following related party transactions as of the closing date of this agreement. 117 Schedule 4.21(b) Distributions ------------- The Company has made the following distributions as of the closing date of this agreement. 118 Schedule 4.22 Accounts and Notes Receivable ----------------------------- The Company has no collectible accounts and notes receivable as of the closing date of this agreement. 119 Schedule 4.23 Bank Accounts; Power of Attorney -------------------------------- The Company has the following bank accounts as of the closing date of this agreement. The Company has no powers of attorney in effect as of the closing date of this agreement. 120 Schedule 4.24 Suppliers and Vendors --------------------- The Company has following key suppliers and vendors as of the closing date of this agreement. Cingular Wireless Rodopi Software 121 EX-10.4 5 tiger10k123104ex104.txt 2005 INCENTIVE PLAN Exhibit 10.4 TIGER TELEMATICS, INC. 2005 INCENTIVE PLAN 1. PURPOSE. The purpose of the Tiger Telematics, Inc. 2005 Incentive Plan (the "Plan") is to provide an incentive to Board members, employees, professional advisors and other independent contractors who provide services to Tiger Telematics, Inc., a Delaware corporation (the "Corporation"), or its subsidiary corporations (the "Subsidiary" or "Subsidiaries"), as defined in Section 414(f) of the Internal Revenue Code of 1986, as amended (the "Code"), who are in a position to contribute materially to the long-term success of the Corporation, to increase their proprietary interest in the success of the Corporation and to aid in attracting and retaining directors, employees and independent contractors of outstanding ability. The above aims will be effectuated through the granting of awards in the form of shares of the Corporation's common stock (the "Stock Awards"). 2. ADMINISTRATION. 2.1 The Board of Directors of the Corporation (the "Board") shall appoint an award committee for the purpose of administering the Plan (the "Administrator"). The Administrator from time to time in its sole and absolute discretion shall determine: (a) the Board members, employees, professional advisors and other independent contractors who provide services to the Corporation and its Subsidiaries (from the class of persons eligible under Section 3 to receive Stock Awards under the Plan) to whom Stock Awards will be granted; (b) the time or times at which Stock Awards will be granted; (c) the number of shares of the Corporation's common stock subject to each Stock Award; and (d) all other terms and conditions of each Stock Award and to make all other determinations related to the Plan and any Stock Award that is necessary or advisable. 2.2 The Board from time to time may remove the Administrator and appoint a new Administrator. 2.3 The Administrator shall have the full and exclusive power to construe and interpret the Plan, to prescribe, amend and rescind rules and regulations relating to the Plan and to take all actions necessary or advisable for the administration of the Plan. The interpretation and construction by the Administrator of any provisions of the Plan or of any Stock Award granted under it shall be final. 2.4 No member of the Board or the Administrator shall be liable for any action or determination made in good faith by the Board or the Administrator with respect to the Plan or any Stock Award granted under the Plan. 1 3. ELIGIBILITY. 3.1 The persons who will be eligible to receive Stock Awards (a "Recipient") shall be such Board members, employees, professional advisors and other independent contractors who provide services to the Corporation or its Subsidiaries as the Administrator shall select from time to time. 3.2 A Recipient may hold more than one Stock Award, but only on the terms and subject to the restrictions set forth in the Plan. 4. STOCK. 4.1 The stock subject to the Stock Awards shall be the shares of the Corporation's authorized and unissued or reacquired $.001 par value per share Common Stock (the "Shares"). The aggregate number of Shares that may be issued as Stock Awards pursuant to the Plan shall not exceed 1,000,000 Shares. The limitations established by each of the preceding sentences shall be subject to adjustment as provided in Section 5.1(c). 4.2 In the event that any Shares transferred under a Stock Award are forfeited by the Recipient or redeemed by the Corporation, such Shares may again be subjected to a Stock Award under the Plan. 5. TERMS AND CONDITIONS FOR STOCK AWARDS. 5.1 Stock Awards granted pursuant to the Plan shall be authorized by the Administrator and shall be evidenced by Stock Award agreements in such form as the Administrator from time to time shall approve, which agreements shall contain or shall be subject to the following terms and conditions, whether or not such terms and conditions are specifically included therein except to the extent otherwise expressly limited in the applicable Stock Award agreement: (a) The Number of Shares. Each Stock Award shall state the number of shares to which it pertains ("Award Shares"). (b) Shareholder Rights. Upon issuance of the Award Shares, the Recipient thereupon shall be a shareholder with respect to all of the Shares represented by such certificate or certificates and shall have all of the rights of a shareholder with respect to all such Shares, including the right to vote such Shares and to receive all dividends and other distributions; provided, however, that such Shares shall be subject to the restrictions hereinafter described in Section 5.1(e). Certificates representing Award Shares shall be imprinted with a legend to the effect that the Shares represented thereby may not be sold, exchanged, transferred, pledged, hypothecated or otherwise disposed of except in accordance with the terms of this Plan. (c) Recapitalization. In the event that, as a result of a stock split or stock dividend or a combination of shares or any other change, or exchange for other securities by reclassification, reorganization, merger, consolidation, recapitalization or otherwise, the Recipient shall, as owner of the Award Shares, be entitled to new or additional or different shares of stock or securities, as determined by the Administrator to be appropriate. The certificate or certificates for, or other evidences of, such new or additional or different shares or securities shall be imprinted with the legend as provided in Section 5.1(b). (d) Restricted Period. The term "Restricted Period" with respect to Award Shares (after which restrictions shall lapse) shall 2 mean a period commencing on the date of issuance of such Shares to the Recipient and ending on a date or dates established by the Administrator upon issuance of Shares hereunder. (e) Restrictions. The restrictions to which Award Shares may be subject are as follows: (i) During the Restricted Period applicable to such Award Shares and except as otherwise specifically provided in the Plan, none of such Award Shares shall be sold, exchanged, transferred, pledged, hypothecated or otherwise disposed of; (ii) If the service relationship between a Recipient and the Corporation shall be terminated for any reason, including such Recipient's death or disability, at any time prior to the end of the Restricted Period, at the option of the Corporation, the Award Shares may be forfeited to the Corporation or redeemed by the Corporation at a purchase price determined by the Administrator; and/or (iii) Any additional restrictions that the Administrator determines are necessary or appropriate including restrictions imposed under Federal or State securities laws. (f) Lapse at the Discretion of the Administrator. The Administrator shall have the authority to accelerate the time at which the restrictions will lapse or to remove any of such restrictions whenever it may decide in its absolute discretion that, by reason of changes in applicable tax or other laws or changes in circumstances arising after the date of the Stock Award, such action is in the best interest of the Corporation. (g) Compliance with SEC Requirements. No certificate for Award Shares distributed pursuant to the Plan shall be issued until the Corporation shall have taken such action, if any, as is required to comply with the provisions of the Securities Act of 1933, as amended, the Securities Act of 1934, as amended, any other applicable laws and the requirements of any exchange in which the Shares may, at the time, be listed. The Corporation may require that, in acquiring any Award Shares, the Recipient agree with and represent to the Corporation that he is acquiring such Award Shares for the purpose of investment and with no present intention to transfer, sell or otherwise dispose such Shares. (h) Income Tax Provisions. Each Recipient shall agree at the time his Stock Award is granted, and as a condition thereof, that the Corporation or participating Subsidiary shall to the extent required by law, and may, to the extent permitted by law, deduct from any payment of any kind otherwise due to such Recipient, the aggregate amount of any federal, state or local taxes of any kind required by law to be withheld with respect to the Award Shares or, if no such payments are due or to become due to such Recipient, that such Recipient will pay to the Corporation, or make arrangements satisfactory to the Corporation regarding payment by the Corporation of, the aggregate amount of any such taxes. Until such amount has been paid or arrangements satisfactory to the Corporation have been made, no stock certificates under this Plan shall be issued to Recipient. If the Recipient refuses to make the payments or arrangements required by the Corporation, the Administrator may cause the Award Shares to be forfeited. (i) Legend. A legend in substantiality the following form will be placed on any certificate(s) or other document(s) evidencing the Stock Awards: 3 THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED, OR ANY U.S. STATE SECURITIES LAWS. WITHOUT SUCH REGISTRATIONS, SUCH SECURITIES MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED, EXCEPT UPON DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATIONS ARE NOT REQUIRED FOR SUCH TRANSFER OR THE SUBMISSION TO THE COMPANY TO THE EFFECT THAT ANY SUCH TRANSFER WILL NOT BE IN VIOLATION OF THE U.S. SECURITIES ACT OF 1933, AS AMENDED, APPLICABLE STATE SECURITIES LAWS OR ANY RULE OR REGULATION PROMULGATED THEREUNDER. (j) Other Provisions. Stock Awards authorized under the Plan shall contain such other terms, conditions, provisions and restrictions as the Administrator shall deem advisable subject to any limitation on the discretion of the Administrator required by law. 6. INDEMNIFICATION OF BOARD AND ADMINISTRATOR. In addition to such other rights of indemnification as the members of the Board may have as Directors, the members of the Board and members of the Administrator shall be indemnified by the Corporation against the reasonable expenses, including attorneys' fees, actually incurred in connection with the defense of any pending, threatened or possible action, suit or proceeding, or in connection with any pending, threatened or possible appeal therein, to which they or any of them may be a party by reason of any actual or alleged action taken or failure to act under or in connection with the Plan or any Stock Award granted thereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by the Corporation) or paid by them in satisfaction of a judgment in any such action, suit or preceding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such Board or Administrator member is liable for gross negligence or willful misconduct in the performance of his duties; provided that within sixty (60) days after institution of any such action, suit or proceeding a Board or Administrator member shall in writing offer the Corporation the opportunity, at its own expense, to handle and defend the same. 7. AMENDMENT TO THE PLAN. The Board insofar as permitted by law, from time to time, with respect to any Shares at the time not subject to Stock Awards, may suspend, terminate or discontinue the Plan or revise or amend it in any respect whatsoever. 8. CONFLICTS. No Board member shall be entitled to vote on any matter before the Board relating to the issuance of Stock Awards to such Board member or the enforcement of any provision of this Plan or a Stock Award granted to such Board member. 9. EFFECT OF PLAN. The granting of a Stock Award pursuant to the Plan shall not give the Recipient any right to similar grants in future years or any right to be retained in the employ of the Corporation or a Subsidiary, but a Recipient shall remain subject to discharge to the same effect as if the Plan were not in effect. 4 Executed as of the ____ day of May, 2005. TIGER TELEMATICS, INC. By: /s/ Michael Carrender Michael Carrender Chief Executive Officer 5 EX-10.5 6 tiger10k123104ex105.txt EMPLOYMENT AGREEMENT - MICHAEL W. CARRENDER Exhibit 10.5 EMPLOYMENT AGREEMENT AGREEMENT made as of the 1st day of March 2004, between Tiger Telematics, Inc. a Delaware corporation (the "Company") and Michael W. Carrender (the "Executive"). WHEREAS, the Executive is desirous of committing himself to serve the Company on the terms herein provided, and the Company desires to have the services of the Executive on the terms herein provided, NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and agreements of the parties herein contained, the parties hereto agree as follows: 1. Employment. The Company hereby agrees to employ the Executive and the Executive hereby agrees to serve the Company, on the terms and conditions set forth herein for the period commencing on the date hereof and expiring 3 years after the commencement date (the "Term"). This Agreement shall be automatically extended for unlimited successive one year periods unless it is terminated during the pendency of either the initial term or any successor term by a termination event as set forth in Section 9 or at the end of any such term by one party furnishing the other with written notice, at least 90 days prior to the expiration of such term, of an intent to terminate this Agreement upon the expiration of such term. 2. Position and Duties. Chief Executive Officer of Tiger Telematics, Inc. Executive shall serve reporting to the Board of Directors of the Company, and shall have supervision and control over, and responsibility for, the general management and operation of the Company, and shall have such other powers and duties as may from time to time be prescribed by the Board, provided that such duties are consistent with his present duties and with the Executive's position as a chief executive officer in charge of the general management of the Company. The Executive shall devote his full business time and efforts as shall be necessary to the proper discharge of his duties and responsibilities under this Agreement. Notwithstanding the foregoing, the Executive may pursue such non-competitive activities such as teaching, consulting or other remunerative or non-remunerative activities, including charitable endeavors, as do not interfere, to any material degree, with the complete performance of his obligations hereunder. The Executive shall perform his duties hereunder with due care and with professionalism commensurate with his duties in the manner he has heretofore performed such duties and will comply with all policies which from time to time may be in effect or adopted by the Company. In connection with his employment by the Company, the Executive shall be based at the Company's principal executive offices. The Company shall not, without the Executive's consent, remove the Executive's principal place of residence. 3. Compensation and Related Matters. (a) Base Salary. The Executive shall receive a minimum base salary ("Base Salary") at the annual rate of $900,000 during each year of the Term hereof payable in no less than equal semimonthly installments. Any increase in Base Salary or other compensation granted by the Compensation Committee of the Board ("the Compensation Committee") shall in no way limit or reduce any other obligation of the Company hereunder and, once established at an increased specified rate, the Executive's Base Salary hereunder shall not thereafter be reduced. (b) Bonus Payments. In addition to Base Salary, the Executive shall be entitled to receive annual bonus payments up to 200% of Base Salary, based on criteria established by the Compensation Committee for each year. 32 (c) Expenses. During the term of his employment hereunder, the Executive shall be entitled to receive prompt reimbursement for all properly substantiated reasonable expenses incurred by him in performing services hereunder in accordance with the policies and procedures presently established by the Company. (d) Other Benefits. The Company shall not make any changes in any Executive benefit plans or arrangements in effect on the date hereof in which the Executive participates which would adversely affect the Executive's rights or benefits hereunder, unless such change occurs pursuant to a program applicable to all Executives of the Company and does not result in a proportionately greater reduction in the rights of or benefits to the Executive as compared with any other Executive of the Company. The Executive shall be entitled to participate in or receive benefits under any Executive benefit plan or arrangement made available by the Company in the future to its Executives and key management Executives, subject to and on a basis consistent with the terms, conditions and overall administration of such plan or arrangement. Nothing paid to the Executive under any plan or arrangement presently in effect or made available in the future shall be deemed to be in lieu of the salary payable to the Executive pursuant to paragraph (a) of this Section 3. Notwithstanding the foregoing, the Company shall at a minimum provide the Executive with reimbursement for medical, dental, disability and life insurance coverage in an amount reasonably acceptable to the Executive and similar to coverage provided to similarly situated executives in similar businesses. (e) Vacations. The Executive shall be entitled to the number of paid vacation days in each calendar year determined by the Company from time to time for its senior Executive officers, but not less than four weeks in any calendar year. The Executive shall also be entitled to all paid holidays given by the Company to its senior Executive officers. (f) Equity Interest. The Executive shall be granted a Nonqualified Option outside the Company Stock Option Plan to purchase 10 million shares of stock in the Company at $.50 at per share, vesting one third (1/3) upon on one year after execution of this agreement, one third (1/3) on two year after anniversary, and one third (1/3) on three years after anniversary. As provided in this Stock Option Agreement, all remaining options would vest immediately upon change of control of the corporation. 4. Indemnity. The Executive agrees to serve as part of the Board of Directors and the management team of the Company, and the Company shall indemnify the Executive to the fullest extent permitted by the Delaware Law. The Company agrees to keep in place a Directors and Officers Liability Insurance Policy providing not less than one million dollars ($1,000,000) in coverage for the benefit and protection of all officers and directors of the Company. 5. Non-Competition. (a) For the applicable period set forth below (the "Restricted Period"), the Executive shall not, directly or indirectly, own an interest in, manage, operate, join, control, consult, advise, or render other assistance to or participate in or be connected with, as an officer, Executive, partner, stockholder, consultant or otherwise, any individual, partnership, firm, corporation or other business organization or entity ("Person") that, at such time, is engaged in any business which may be deemed competitive with the Company's business of selling and supplying vehicle telematics products and services. (the "Restricted Business"). If the Executive is terminated by the Company for cause pursuant to Section 9(c) or the Executive terminates his employment other than pursuant to Section 9(d), the Restricted Period shall be one (1) year from the termination date of the Executive's employment by the Company. If the Executive's employment is terminated without Cause, if the Executive terminates his employment for Good Reason or if the Company declines to renew the Employment Agreement after the expiration of the initial or any successor term of this Agreement, then the Restriction Period shall be six months from the date of the termination of the Executive's employment by the Company, while the Executive is paid 33 six months' salary as a severance payment pursuant to Section 10(d). (b) During the Restricted Period, the Executive shall not directly or indirectly (i) hire or employ on any basis, (ii) solicit or endeavor to entice away from the Company or its and each of its subsidiaries, affiliates, licensors, licensees, successors or assigns (collectively, the "Affiliates"), or (iii) otherwise interfere with the relationship of the Company or its Affiliates with, any person who is employed by the Company or any of its Affiliates or any person who was employed by the Company or its Affiliates within the then most recent six-month period. Further, the Executive shall not interfere in any manner with any customer, consultant, supplier or client of the Company or its Affiliates, or any Person who was a customer, consultant, supplier or client of the Company or its Affiliates within the then most recent six-month period. (c) Nothing in this Agreement shall prohibit the Executive from acquiring or holding up to an aggregate of one per cent (1%) of any issue of stock or securities of any company listed on a national securities exchange or quoted on the automated quotation system of the National Association of Securities Dealers, Inc., which company engages in Restricted Business; provided, however, the Executive and the members of his immediate families shall not own any voting securities or any other interest in, or lend or contribute monies, properties or services to, any other company engaging in a Restricted Business. (d) The Executive acknowledges that a material breach of any of the covenants contained in this Section 4 would result in material irreparable injury to the Company for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that the Company shall be entitled to obtain a temporary restraining order and/or a preliminary or permanent injunction restraining the Executive from engaging in activities prohibited by this Section 4, and such other relief as may be required to specifically enforce any of the covenants in this Section 4. 6. Confidential Information. (a) During the period of his employment hereunder, and at any time for 2 years after his termination of employment by the Company or the Executive, the Executive shall not, without the written consent of the Company or a person authorized thereby, disclose to any person, other than an Executive of the Company or a person to whom disclosure is reasonably necessary or appropriate in connection with the performance by the Executive of his duties as an Executive of the Company, any material confidential information obtained by him while in the employ of the Company; provided, however, that confidential information shall not include any information known generally to the public (other than as a result of unauthorized disclosure by the Executive) or any information of a type not otherwise considered confidential by persons engaged in the same business or a business similar to that conducted by the Company. (b) Except for information or contacts provided by Executive, Executive agrees: (i) not to use any such information for himself or others; and (ii) not to take any such material or reproductions thereof from the Company's facilities at any time or after during his employment by the Company, except as required in the Executive's duties to the Company. The Executive agrees immediately to return all such material and reproductions thereof in his possession to the Company upon request and in any event upon termination of employment. 7. Ownership of Proprietary Information. (a) Except for Proprietary Information or contacts provided by Executive, Executive agrees that all information that has been created, discovered or developed by the Company or its Affiliates (including, without limitation, information relating to the development of the Company's business created, discovered, developed or made known to the Company or the Affiliates by Executive during the period of employment with the Company and information relating to Company's customers, suppliers, consultants, and licensees) and/or in which property rights have been assigned or otherwise conveyed to the Company or the Affiliates, shall be the sole property of the Company or the Affiliates, as applicable, and the Company or the 34 Affiliates, as the case may be, shall be the sole owner of all patents, copyrights and other rights in connection therewith. All of the aforementioned information is hereinafter called "Proprietary Information." By way of illustration, but not limitation, Proprietary Information includes trade secrets, processes, discoveries, structures, inventions, designs, ideas, works of authorship, copyrightable works, trademarks, copyrights, formulas, data, know-how, show-how, improvements, inventions, product concepts, techniques, information or statistics contained in, or relating to, marketing plans, strategies, forecasts, blueprints, sketches, records, notes, devices, drawings, customer lists, patent applications, continuation applications, continuation-in-part applications, file wrapper continuation applications, and divisional applications and information about the Company's or the Affiliates' Executives and/or consultants (including, without limitation, the compensation, job responsibility and job performance of such Executives and/or consultants). (b) The Executive further agrees that at all times, both during the period of employment with the Company and any time for two years after his termination of this Agreement, he will keep in confidence and trust all Proprietary Information, and he will not use or disclose any Proprietary Information or anything directly relating to it without the written consent of the Company or the Affiliates, as appropriate, except as may be necessary in the ordinary course of performing his duties hereunder. The Executive acknowledges that the Proprietary Information constitutes a unique and valuable asset of the Company and each Affiliate acquired at great time and expense, which is secret and confidential and which will be communicated to the Executive, if at all, in confidence in the course of his performance of his duties hereunder, and that any disclosure or other use of the Proprietary Information other than for the sole benefit of the Company or the Affiliates would be wrongful and could cause irreparable harm to the Company or its Affiliates, as the case may be. Notwithstanding the foregoing, the parties agree that, at all such times, the Executive is free to use (i) information in the public domain not as a result of a breach of this Agreement, and (ii) information lawfully received from a third party who had the right to disclose such information. 8. Disclosure and Ownership of Inventions. (a) During the term of employment until the Termination Date, the Executive agrees that he will promptly disclose to the Company, or any persons designated by the Company, all intellectual property rights related to the Company's business, including but not limited to, improvements, inventions, designs, ideas, works of authorship, copyrightable works, discoveries, patents, trademarks, copyrights, trade secrets, formulas, processes, structures, product concepts, marketing plans, strategies, customer lists, information about the Company's or the Affiliates' Executives and/or consultants (including, without limitation, job performance of such Executives and/or consultants), techniques, blueprints, sketches, records, notes, devices, drawings, know-how, data, whether or not patentable, patent applications, continuation applications, continuation-in-part applications, file wrapper continuation applications and divisional applications (collectively hereinafter referred to as the "Inventions"), made or conceived or reduced to practice or learned by him, either alone or jointly with others, during the Term. (b) The Executive agrees that all Inventions shall be the sole property of the Company to the maximum extent permitted by applicable law and to the extent permitted by law shall be "works made for hire" as that term is defined in the United States Copyright Act (17 US CA, Section 101). The Company shall be the sole owner of all intellectual property rights, including but not limited to, patents, copyrights, trade secret rights, and other rights in connection therewith. The Executive hereby assigns to the Company all right, title and interest he may have or acquire in all Inventions. The Executive further agrees to assist the Company in every proper way (but at the Company's expense) to obtain and from time to time enforce patents, copyrights or other rights on said Inventions in any and all countries. 9. Termination. The Executive's employment hereunder may be terminated without any breach of this Agreement only under the following circumstances: 35 (a) Death. The Executive's employment hereunder shall terminate upon his death. (b)Disability. I{ as a result of the Executive's incapacity due to physical or mental illness, the Executive shall have been absent from his duties hereunder on a full time basis for 90 consecutive calendar days, and within thirty (30) days after written notice of termination is given (which may occur before or after the end of such 90 day period) shall not have returned to the performance of his duties hereunder on a full time basis, the Company may terminate the Executive's employment hereunder. (c) Cause. The Company may terminate the Executive's employment hereunder for Cause. For purposes of this Agreement, the Company shall have "Cause" to terminate the Executive's employment hereunder upon (A) the willful and continued failure by the Executive to substantially perform his duties hereunder (other than any such failure resulting from the Executive's incapacity due to physical or mental illness) after demand for substantial performance is delivered by the Company specifically identifying the manner in which the Company believes the Executive has not substantially performed his duties, or (B) the willful engaging by the Executive in misconduct which is materially injurious to the business or financial condition of the Company, monetarily or otherwise, or (C) the willful violation by the Executive of the provisions of Sections 6, 7 and 8 hereof provided that such violation results in material injury to the Company. For purposes of this paragraph, no act, or failure to act, on the Executive's part shall be considered "willful" unless done, or omitted to be done, by him not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for "Cause" unless and until there shall have been delivered to the Executive a copy of a resolution, duly adopted by the affirmative vote of not less than a majority of the Members of the Board, excluding the Executive, finding that in the good faith opinion of the Board, the Executive was guilty of conduct set forth above in clause (A), (B), or (C) of the preceding sentence, and specifying the particulars thereof in detail. (d) Termination by the Executive. The Executive may terminate his employment hereunder for Good Reason. For purposes of this Agreement "Good Reason" shall mean (A) a change in control of the Company (as defined below), or (B) a reduction in the Executive's base salary as it may have been increased from time to time, or any other failure by the Company to comply with Section 3 hereof, or (C) failure of the Company to obtain the assumption of the agreement to perform this Agreement by any successor as contemplated in Section 11 hereof, (D) a defacto reduction in the Executives role or responsibilities as President and COO, or (B) A breach by the Company of any of its obligations hereunder. Termination by the Executive for any reason within this paragraph shall immediately accelerate vesting of all options granted to Executive under this Agreement For purposes of this Agreement, a "change in control of the Company" shall be deemed to have occurred if (Y) any "person' (as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than the Company or any "person" who on the date hereof is a director or officer of the Company, is or becomes the "beneficial owner" (as defined in Rule 1 3d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of the Company's then outstanding securities, or (Z) during any period of two consecutive years during the term of this Agreement, individuals who at the beginning of such period constitute the Board cease for any reason to constitute at least a majority thereof, unless the election of each director who was not a director at the beginning of such period has been approved in advance by directors representing at least two-thirds of the directors then in office who were directors at the beginning of the period. 36 (e) Notice of Termination. Any termination of the Executive's employment by the Company or by the Executive (other than termination pursuant to subsection (a) above) shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. (f) Date of Termination. "Date of Termination" shall mean (i) if the Executive's employment is terminated by his death, the date of his death, (ii) if the Executive's employment is terminated pursuant to subsection (b) above, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the performance of his duties on a full-time basis during such thirty (30) day period), (iii) if the Executive's employment is terminated pursuant to subsection (c) above, the date specified in the Notice of Termination, and (iv) if the Executive's employment is terminated for any other reason, the date an which a Notice of Termination is given; provided that if within thirty (30) days after any Notice of Termination is given the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, by a binding and final arbitration award or by a final judgment order or decree of a court of competent jurisdiction (the time for appeal there from having expired and no appeal having been perfected). 10. Compensation Upon Termination or Death or Disability (a) If the Executive's employment shall be terminated by reason of his death, the Company shall pay to such Person as he shall designate in a notice filed with the Company, or, if no such person shall be designated, to his estate as a lump sum death benefit, his full Base Salary to the date of his death in addition to any payments the Executive's spouse, beneficiaries or estate may be entitled to receive pursuant to any pension or Executive benefit plan or life insurance policy presently maintained by the Company, and such payments shall fully discharge the Company's obligations hereunder. (b) During any period that the Executive fails to perform his duties hereunder as a result of incapacity due to physical or mental illness (provided that the Executive shall have furnished the Company with a written statement from a qualified doctor to such effect and provided, further, that at the Company's request and expense the Executive shall submit to an examination by a doctor selected by the Company and such doctor shall have concurred in the conclusion of the Executive's doctor), the Executive shall continue to receive his full Base Salary and bonus payments until the Executive's employment is terminated pursuant to Section 9(b) hereof, or until the Executive terminates his employment pursuant to Section 9(d) hereof, whichever first occurs. After termination, the Executive shall be paid 100% of his Base Salary at the rate in effect at the time Notice of Termination is given for six (6) months and thereafter an annual amount equal to 75% of such Base Salary for the remainder of the Term hereunder less, in each case, any disability payments otherwise payable by or pursuant to plans provided by the Company and actually paid to the Executive in substantially equal monthly installments. (c) If the Executive's employment shall be terminated for Cause, the Company shall pay the Executive his full Base Salary through the Date of Termination at the rate in effect at the time Notice of Termination is given and the Company shall have no further obligations to the Executive under this Agreement. (d) If (A) in breach of this Agreement, the Company shall terminate the Executive's employment other than pursuant to Sections 9(b) or 9(c) hereof (it being understood that a purported termination pursuant to Section 9(b) or 9(c) hereof which is disputed and finally determined not to have been proper shall be a termination by the Company in breach of this Agreement) or (B) the Executive shall terminate his employment for Good Reason or (C) the Company fails to renew the Agreement at the end of the initial or any successor term hereof, then 37 (i) the Company shall pay the Executive his full Base Salary through the last day of the Term at the rate in effect at the time Notice of Termination is given and the amount, if any, with respect to any year then ended, such bonus which would have accrued to the Executive on the basis of the Company's performance but which has not yet been paid to him; (ii) in addition to salary payments pursuant to Section 9(d)(i), the Company shall pay as severance pay to the Executive on the fifth day following the Date of Termination, a lump sum amount equal to the 50% of Executive's annual Base Salary at the highest rate in effect during the twelve (12) months immediately preceding the Date of Termination; and (iii) the Company shall pay all other damages to which the Executive may be entitled as a result of the Company's termination of his employment under this Agreement, including damages for any and all loss of benefits to the Executive under the Company's Executive benefit plans which he would have received if the Company had not breached this Agreement and had his employment confirmed for the full term provided in Section 1 hereof, and including all legal fees and expenses incurred by him in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement. (e) Unless the Executive is terminated for Cause, the Company shall maintain in full force and effect, for the continued benefit of the Executive to the last day of the Term all Executive benefit plans and programs in which the Executive was entitled to participate immediately prior to the Date of Termination provided that the Executive's continued participation is possible under the general terms and provisions of such plans and programs. In the event that the Executive's participation in any such plan or program is barred, the Company shall arrange to provide the Executive with benefits substantially similar to those which the Executive would otherwise have been entitled to receive under such plans and programs from which his continued participation 5 barred. (f) The Executive shall not be required to mitigate the amount of any payment provided for in this Section 9 by seeking other employment or otherwise, nor shall the amount of any payment provided for in this Section 9 be reduced by any compensation earned by the Executive as the result of employment by another Company after the Date of Termination, or otherwise. (g) Upon termination of the Executive's employment, the Executive shall have a put option to the Company for Executive's entire equity interest in the Company. The purchase price shall be established by a mutually acceptable appraiser, or absent such agreement on an appraiser, then by an appraiser chosen by the Executive, one chosen by the Company, and one chosen by the two appraisers. This process shall be conducted so that the valuation is completed and the Executive can received full compensation for his entire equity interest within sixty (60) days of his termination. 11. Successors; Binding Agreement. (a) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to the Executive, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as he would be entitled to hereunder if he terminated his employment for Good Reason, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which executes and delivers the agreement provided for in this Section 11 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. 38 (b) This Agreement and all rights of the Executive hereunder shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amounts would still be payable to him hereunder if he had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive's devi see, legatee, or other designee or, if there be no such designee, to the Executive's estate. 12. Notice. For purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: Fax: at 386-752-5029 E-mail: mwcarrender@cs.com. If to the Company: Tiger Telematics, Inc. 10201 Centurion Parkway North Ste. 600, Florida 32255 Fax: 904-279-9242 Attention: Corporate Secretary or to such other address as any party may have furnished to the others in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. 13. Severability of Provisions. If any provision of this Agreement shall be declared by a court of competent jurisdiction to be invalid, illegal or incapable of being enforced in whole or in part, the remaining conditions and provisions or portions thereof shall nevertheless remain in full force and effect and enforceable to the extent they are valid, legal and enforceable, and no provision shall be deemed dependent upon any other covenant or provision unless so expressed herein. 14. Entire Agreement: Modification. This Agreement contains the entire agreement of the parties relating to the subject matter hereof, and the parties hereto have made no agreements, representations or warranties relating to the subject matter of this Agreement which are not set forth herein. No modification of this Agreement shall be valid unless made in writing and signed by the parties hereto. 15. Non-Waiver. The failure of any party to insist upon the strict performance of any of the terms, conditions and provisions of this Agreement shall not be construed as a waiver or relinquishment of future compliance therewith, and said terms, conditions and provisions shall remain in full force and effect. No waiver of any term or condition of this Agreement on the part of either party shall be effective for any purpose whatsoever unless such waiver is in writing and signed by such party. 16. Remedies for Breach. The Executive understands and agrees that any breach of Sections 4,6, 7 or 8 of this Agreement by the Executive would result in irreparable damage to the Company and to the Affiliates, and that monetary damages alone would not be adequate and, in the event of such breach, the Company shall have, in addition to any and all remedies at law, the right to an injunction, specific performance or other equitable relief necessary to prevent or redress the violation of the Company's obligations under such Sections. 17. Governing Law. This Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of Florida without regard to such State's principles of conflict of laws. The parties irrevocably and unconditionally agree that the exclusive place of jurisdiction for any action, suit or proceeding ("Actions") relating to this Agreement shall be in the courts of the United States of America sitting in the State of Florida or, if such courts shall not have jurisdiction over the subject matter thereof, in the courts of the State of Florida sitting therein, and each such party hereby irrevocably and unconditionally agrees to submit to the jurisdiction of such courts for purposes of any such Actions. Each party irrevocably and unconditionally waives any objection it may have to the venue of any Action brought in such courts or to the convenience of the forum. Final judgment in any such Action shall be conclusive and may be enforced in other jurisdictions by suit on the judgment, a certified or true copy of which shall be conclusive evidence of the fact and the amount of any indebtedness or liability of any party therein described. 18. Headings: Construction. The headings of paragraphs are inserted for convenience and shall not affect any interpretation of this Agreement. The parties hereto agree that should an occasion arise in which interpretation of this Agreement becomes necessary, such construction or interpretation shall not presume that the terms hereof be more strictly construed against one party by reason of any rule of construction or authorship. 19. Counterparts. This Agreement may be executed in counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties. 20. Relationship of the Parties. Except as otherwise provided herein, no party shall have any right, power or authority to create any obligation, express or implied, on behalf of any other party. Nothing in this Agreement is intended to create or constitute a joint venture, partnership or revenue sharing arrangement between the parties hereto or persons referred to herein. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. Executive: By Michael W. Carrender ______________________________ Company: Tiger Telematics, Inc. ______________________________ By: Name: Title: AMENDMENT TO EMPLOYMENT AGREEMENT. AGREEMENT made as of the 22nd day of October 2004, between Tiger Telematics, Inc. a Delaware corporation (the "Company") and Michael W. Carrender Executive. WHEREAS, the Executive had an employment agreement with the Company dated March 1, 2004 as approved by the Board of Directors. WHEREAS, the Board of Director's has determined to increase the compensation paid executive at a Board of Directors Meeting held on October 22, 2004, based on the performance of the Company relative to completing the development of the Gizmondo, the launch of the product, fund raising of capital and other positive performance issues. WHEREAS, whereas Executive and Board have agreed to memorialize this provision by amending the existing employment agreement. NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and agreements of the parties herein contained, the parties hereto agree as follows: 1. Amend Section 3 Compensation and Related Matters (a) Base Salary to read $1,800,000. 2. Said amendment is effective October 1, 2004 as the beginning of the month. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. Executive: By Michael W. Carrender ______________________________ Company: Tiger Telematics, Inc. ______________________________ By: Name: Title: SECOND AMENDMENT TO THE EMPLOYMENT AGREEMENT This SECOND AMENDMENT TO THE EMPLOYMENT AGREEMENT dated September 14, 2005, is by and between Tiger Telematics, Inc. ("Tiger") and Michael W. Carrender ("Carrender"). RECITALS -------- Tiger and Carrender are parties to that certain Employment Agreement dated March 1, 2004 (the "Employment Agreement"). Tiger and Carrender acknowledge and agree that (i) a provision in the Employment Agreement granting a nonqualified stock option to Carrender was erroneously included in the Employment Agreement and (ii) this term was not part of the negotiated terms of the Employment Agreement, was not effected and had no force or effect as of the execution of the Employment Agreement. On May 5, 2004, Tiger's Board of Directors approved an amendment to the Employment Agreement on the terms set forth herein. Tiger and Carrender have agreed to memorialize their agreement pursuant to this Amendment. AGREEMENT --------- For and in consideration of the mutual covenants herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Tiger and Carrender agree as follows: 1. Amendment to Employment Agreement. Subpart (f) of item 3 of the Employment Agreement, titled "Equity Interest", is hereby deleted in its entirety as of the initial execution date of the Employment Agreement and is of no force or effect as of such date. 2. Miscellaneous. (a) This Agreement may be executed in a number of identical counterparts which, taken together, shall constitute collectively one agreement. (b) Any future waiver, alteration, amendment or modification of any of the provisions of this Agreement with respect to the subject matter hereof shall not be valid or enforceable unless in writing and signed by all parties hereto. (c) This Amendment and the Employment Agreement represent the final and entire agreement among the parties with respect to the subject matter hereof and may not be contradicted by evidence of prior oral or written agreements, or contemporaneous or subsequent oral agreement among the parties. There are no unwritten oral agreements among the parties. EXECUTED and DELIVERED as of the date above. TIGER TELEMATICS, INC. By:_________________________ Name:_______________________ Title:______________________ ____________________________ Michael W. Carrender 508706 EX-10.6 7 tiger10k123104ex106.txt EMPLOYMENT AGREEMENT - CARL FREER Exhibit 10.6 EMPLOYMENT AGREEMENT AGREEMENT made as of the 1st day of March 2004, between Gametrac Europe, Ltd. and Tiger Telematics, Inc. a Delaware corporation (the "Company") and Carl Freer (the "Executive"). WHEREAS, the Executive is desirous of committing himself to serve the Company on the terms herein provided, and the Company desires to have the services of the Executive on the terms herein provided, NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and agreements of the parties herein contained, the parties hereto agree as follows: 1. Employment. The Company hereby agrees to employ the Executive and the Executive hereby agrees to serve the Company, on the terms and conditions set forth herein for the period commencing on the date hereof and expiring 3 years after the commencement date (the "Term"). This Agreement shall be automatically extended for unlimited successive one year periods unless it is terminated during the pendency of either the initial term or any successor term by a termination event as set forth in Section 9 or at the end of any such term by one party furnishing the other with written notice, at least 90 days prior to the expiration of such term, of an intent to terminate this Agreement upon the expiration of such term. 2. Position and Duties. Managing Director of Gametrac Europe Ltd. a wholly owned subsidiary of Tiger Telematics, Inc. Executive shall serve reporting to the Board of Directors of the Company and the Chief Executive Officer, and shall have supervision and control over, and responsibility for, the general management and operation of the Company, and shall have such other powers and duties as may from time to time be prescribed by the Board, provided that such duties are consistent with his present duties and with the Executive's position as a senior executive officer in charge of the general management of the Company. The Executive shall devote his full business time and efforts as shall be necessary to the proper discharge of his duties and responsibilities under this Agreement. Notwithstanding the foregoing, the Executive may pursue such non-competitive activities such as teaching, consulting or other remunerative or non-remunerative activities, including charitable endeavors, as do not interfere, to any material degree, with the complete performance of his obligations hereunder. The Executive shall perform his duties hereunder with due care and with professionalism commensurate with his duties in the manner he has heretofore performed such duties and will comply with all policies which from time to time may be in effect or adopted by the Company. In connection with his employment by the Company, the Executive shall be based at the Company's principal executive offices. The Company shall not, without the Executive's consent, remove the Executive's principal place of residence. 3. Compensation and Related Matters. (a) Base Salary. The Executive shall receive a minimum base salary ("Base Salary") at the annual rate of (pound)500,000 during each year of the Term hereof payable in no less than equal semimonthly installments. Any increase in Base Salary or other compensation granted by the Compensation Committee of the Board ("the Compensation Committee") shall in no way limit or reduce any other obligation of the Company hereunder and, once established at an increased specified rate, the Executive's Base Salary hereunder shall not thereafter be reduced. (b) Bonus Payments. In addition to Base Salary, the Executive shall be entitled to receive annual bonus payments up to 200% of Base Salary, based on criteria established by the Compensation Committee for each year. 32 (c) Expenses. During the term of his employment hereunder, the Executive shall be entitled to receive prompt reimbursement for all properly substantiated reasonable expenses incurred by him in performing services hereunder in accordance with the policies and procedures presently established by the Company. (d) Other Benefits. The Company shall not make any changes in any Executive benefit plans or arrangements in effect on the date hereof in which the Executive participates which would adversely affect the Executive's rights or benefits hereunder, unless such change occurs pursuant to a program applicable to all Executives of the Company and does not result in a proportionately greater reduction in the rights of or benefits to the Executive as compared with any other Executive of the Company. The Executive shall be entitled to participate in or receive benefits under any Executive benefit plan or arrangement made available by the Company in the future to its Executives and key management Executives, subject to and on a basis consistent with the terms, conditions and overall administration of such plan or arrangement. Nothing paid to the Executive under any plan or arrangement presently in effect or made available in the future shall be deemed to be in lieu of the salary payable to the Executive pursuant to paragraph (a) of this Section 3. Notwithstanding the foregoing, the Company shall at a minimum provide the Executive with reimbursement for medical, dental, disability and life insurance coverage in an amount reasonably acceptable to the Executive and similar to coverage provided to similarly situated executives in similar businesses. (e) Vacations. The Executive shall be entitled to the number of paid vacation days in each calendar year determined by the Company from time to time for its senior Executive officers, but not less than four weeks in any calendar year. The Executive shall also be entitled to all paid holidays given by the Company to its senior Executive officers. (f) Equity Interest. The Executive shall be granted a Nonqualified Option outside the Company Stock Option Plan to purchase 10 million shares of stock in the Company at $.50 at per share, vesting one third (1/3) upon on one year after execution of this agreement, one third (1/3) on two year after anniversary, and one third (1/3) on three years after anniversary. As provided in this Stock Option Agreement, all remaining options would vest immediately upon change of control of the corporation. 4. Indemnity. The Executive agrees to serve as part of the Board of Directors and the management team of the Company, and the Company shall indemnify the Executive to the fullest extent permitted by the Delaware Law. The Company agrees to keep in place a Directors and Officers Liability Insurance Policy providing not less than one million dollars ($1,000,000) in coverage for the benefit and protection of all officers and directors of the Company. 5. Non-Competition. (a) For the applicable period set forth below (the "Restricted Period"), the Executive shall not, directly or indirectly, own an interest in, manage, operate, join, control, consult, advise, or render other assistance to or participate in or be connected with, as an officer, Executive, partner, stockholder, consultant or otherwise, any individual, partnership, firm, corporation or other business organization or entity ("Person") that, at such time, is engaged in any business which may be deemed competitive with the Company's business of selling and supplying vehicle telematics products and services. (the "Restricted Business"). If the Executive is terminated by the Company for cause pursuant to Section 9(c) or the Executive terminates his employment other than pursuant to Section 9(d), the Restricted Period shall be one (1) year from the termination date of the Executive's employment by the Company. If the Executive's employment is terminated without Cause, if the Executive terminates his employment for Good Reason or if the Company declines to renew the Employment Agreement after the expiration of the initial or any successor term of this Agreement, then the Restriction Period shall be six months from the date of the termination of the Executive's employment by the Company, while the Executive is paid 33 six months' salary as a severance payment pursuant to Section 10(d). (b) During the Restricted Period, the Executive shall not directly or indirectly (i) hire or employ on any basis, (ii) solicit or endeavor to entice away from the Company or its and each of its subsidiaries, affiliates, licensors, licensees, successors or assigns (collectively, the "Affiliates"), or (iii) otherwise interfere with the relationship of the Company or its Affiliates with, any person who is employed by the Company or any of its Affiliates or any person who was employed by the Company or its Affiliates within the then most recent six-month period. Further, the Executive shall not interfere in any manner with any customer, consultant, supplier or client of the Company or its Affiliates, or any Person who was a customer, consultant, supplier or client of the Company or its Affiliates within the then most recent six-month period. (c) Nothing in this Agreement shall prohibit the Executive from acquiring or holding up to an aggregate of one per cent (1%) of any issue of stock or securities of any company listed on a national securities exchange or quoted on the automated quotation system of the National Association of Securities Dealers, Inc., which company engages in Restricted Business; provided, however, the Executive and the members of his immediate families shall not own any voting securities or any other interest in, or lend or contribute monies, properties or services to, any other company engaging in a Restricted Business. (d) The Executive acknowledges that a material breach of any of the covenants contained in this Section 4 would result in material irreparable injury to the Company for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that the Company shall be entitled to obtain a temporary restraining order and/or a preliminary or permanent injunction restraining the Executive from engaging in activities prohibited by this Section 4, and such other relief as may be required to specifically enforce any of the covenants in this Section 4. 6. Confidential Information. (a) During the period of his employment hereunder, and at any time for 2 years after his termination of employment by the Company or the Executive, the Executive shall not, without the written consent of the Company or a person authorized thereby, disclose to any person, other than an Executive of the Company or a person to whom disclosure is reasonably necessary or appropriate in connection with the performance by the Executive of his duties as an Executive of the Company, any material confidential information obtained by him while in the employ of the Company; provided, however, that confidential information shall not include any information known generally to the public (other than as a result of unauthorized disclosure by the Executive) or any information of a type not otherwise considered confidential by persons engaged in the same business or a business similar to that conducted by the Company. (b) Except for information or contacts provided by Executive, Executive agrees: (i) not to use any such information for himself or others; and (ii) not to take any such material or reproductions thereof from the Company's facilities at any time or after during his employment by the Company, except as required in the Executive's duties to the Company. The Executive agrees immediately to return all such material and reproductions thereof in his possession to the Company upon request and in any event upon termination of employment. 7. Ownership of Proprietary Information. (a) Except for Proprietary Information or contacts provided by Executive, Executive agrees that all information that has been created, discovered or developed by the Company or its Affiliates (including, without limitation, information relating to the development of the Company's business created, discovered, developed or made known to the Company or the Affiliates by Executive during the period of employment with the Company and information relating to Company's customers, suppliers, consultants, and licensees) and/or in which property rights have been assigned or otherwise conveyed to the Company or the Affiliates, shall be the sole property of the Company or the Affiliates, as applicable, and the Company or the 34 Affiliates, as the case may be, shall be the sole owner of all patents, copyrights and other rights in connection therewith. All of the aforementioned information is hereinafter called "Proprietary Information." By way of illustration, but not limitation, Proprietary Information includes trade secrets, processes, discoveries, structures, inventions, designs, ideas, works of authorship, copyrightable works, trademarks, copyrights, formulas, data, know-how, show-how, improvements, inventions, product concepts, techniques, information or statistics contained in, or relating to, marketing plans, strategies, forecasts, blueprints, sketches, records, notes, devices, drawings, customer lists, patent applications, continuation applications, continuation-in-part applications, file wrapper continuation applications, and divisional applications and information about the Company's or the Affiliates' Executives and/or consultants (including, without limitation, the compensation, job responsibility and job performance of such Executives and/or consultants). (b) The Executive further agrees that at all times, both during the period of employment with the Company and any time for two years after his termination of this Agreement, he will keep in confidence and trust all Proprietary Information, and he will not use or disclose any Proprietary Information or anything directly relating to it without the written consent of the Company or the Affiliates, as appropriate, except as may be necessary in the ordinary course of performing his duties hereunder. The Executive acknowledges that the Proprietary Information constitutes a unique and valuable asset of the Company and each Affiliate acquired at great time and expense, which is secret and confidential and which will be communicated to the Executive, if at all, in confidence in the course of his performance of his duties hereunder, and that any disclosure or other use of the Proprietary Information other than for the sole benefit of the Company or the Affiliates would be wrongful and could cause irreparable harm to the Company or its Affiliates, as the case may be. Notwithstanding the foregoing, the parties agree that, at all such times, the Executive is free to use (i) information in the public domain not as a result of a breach of this Agreement, and (ii) information lawfully received from a third party who had the right to disclose such information. 8. Disclosure and Ownership of Inventions. (a) During the term of employment until the Termination Date, the Executive agrees that he will promptly disclose to the Company, or any persons designated by the Company, all intellectual property rights related to the Company's business, including but not limited to, improvements, inventions, designs, ideas, works of authorship, copyrightable works, discoveries, patents, trademarks, copyrights, trade secrets, formulas, processes, structures, product concepts, marketing plans, strategies, customer lists, information about the Company's or the Affiliates' Executives and/or consultants (including, without limitation, job performance of such Executives and/or consultants), techniques, blueprints, sketches, records, notes, devices, drawings, know-how, data, whether or not patentable, patent applications, continuation applications, continuation-in-part applications, file wrapper continuation applications and divisional applications (collectively hereinafter referred to as the "Inventions"), made or conceived or reduced to practice or learned by him, either alone or jointly with others, during the Term. (b) The Executive agrees that all Inventions shall be the sole property of the Company to the maximum extent permitted by applicable law and to the extent permitted by law shall be "works made for hire" as that term is defined in the United States Copyright Act (17 US CA, Section 101). The Company shall be the sole owner of all intellectual property rights, including but not limited to, patents, copyrights, trade secret rights, and other rights in connection therewith. The Executive hereby assigns to the Company all right, title and interest he may have or acquire in all Inventions. The Executive further agrees to assist the Company in every proper way (but at the Company's expense) to obtain and from time to time enforce patents, copyrights or other rights on said Inventions in any and all countries. 9. Termination. The Executive's employment hereunder may be terminated without any breach of this Agreement only under the following circumstances: 35 (a) Death. The Executive's employment hereunder shall terminate upon his death. (b)Disability. I{ as a result of the Executive's incapacity due to physical or mental illness, the Executive shall have been absent from his duties hereunder on a full time basis for 90 consecutive calendar days, and within thirty (30) days after written notice of termination is given (which may occur before or after the end of such 90 day period) shall not have returned to the performance of his duties hereunder on a full time basis, the Company may terminate the Executive's employment hereunder. (c) Cause. The Company may terminate the Executive's employment hereunder for Cause. For purposes of this Agreement, the Company shall have "Cause" to terminate the Executive's employment hereunder upon (A) the willful and continued failure by the Executive to substantially perform his duties hereunder (other than any such failure resulting from the Executive's incapacity due to physical or mental illness) after demand for substantial performance is delivered by the Company specifically identifying the manner in which the Company believes the Executive has not substantially performed his duties, or (B) the willful engaging by the Executive in misconduct which is materially injurious to the business or financial condition of the Company, monetarily or otherwise, or (C) the willful violation by the Executive of the provisions of Sections 6, 7 and 8 hereof provided that such violation results in material injury to the Company. For purposes of this paragraph, no act, or failure to act, on the Executive's part shall be considered "willful" unless done, or omitted to be done, by him not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for "Cause" unless and until there shall have been delivered to the Executive a copy of a resolution, duly adopted by the affirmative vote of not less than a majority of the Members of the Board, excluding the Executive, finding that in the good faith opinion of the Board, the Executive was guilty of conduct set forth above in clause (A), (B), or (C) of the preceding sentence, and specifying the particulars thereof in detail. (d) Termination by the Executive. The Executive may terminate his employment hereunder for Good Reason. For purposes of this Agreement "Good Reason" shall mean (A) a change in control of the Company (as defined below), or (B) a reduction in the Executive's base salary as it may have been increased from time to time, or any other failure by the Company to comply with Section 3 hereof, or (C) failure of the Company to obtain the assumption of the agreement to perform this Agreement by any successor as contemplated in Section 11 hereof, (D) a defacto reduction in the Executives role or responsibilities as President and COO, or (B) A breach by the Company of any of its obligations hereunder. Termination by the Executive for any reason within this paragraph shall immediately accelerate vesting of all options granted to Executive under this Agreement For purposes of this Agreement, a "change in control of the Company" shall be deemed to have occurred if (Y) any "person' (as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than the Company or any "person" who on the date hereof is a director or officer of the Company, is or becomes the "beneficial owner" (as defined in Rule 1 3d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of the Company's then outstanding securities, or (Z) during any period of two consecutive years during the term of this Agreement, individuals who at the beginning of such period constitute the Board cease for any reason to constitute at least a majority thereof, unless the election of each director who was not a director at the beginning of such period has been approved in advance by directors representing at least two-thirds of the directors then in office who were directors at the beginning of the period. 36 (e) Notice of Termination. Any termination of the Executive's employment by the Company or by the Executive (other than termination pursuant to subsection (a) above) shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. (f) Date of Termination. "Date of Termination" shall mean (i) if the Executive's employment is terminated by his death, the date of his death, (ii) if the Executive's employment is terminated pursuant to subsection (b) above, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the performance of his duties on a full-time basis during such thirty (30) day period), (iii) if the Executive's employment is terminated pursuant to subsection (c) above, the date specified in the Notice of Termination, and (iv) if the Executive's employment is terminated for any other reason, the date an which a Notice of Termination is given; provided that if within thirty (30) days after any Notice of Termination is given the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, by a binding and final arbitration award or by a final judgment order or decree of a court of competent jurisdiction (the time for appeal there from having expired and no appeal having been perfected). 10. Compensation Upon Termination or Death or Disability (a) If the Executive's employment shall be terminated by reason of his death, the Company shall pay to such Person as he shall designate in a notice filed with the Company, or, if no such person shall be designated, to his estate as a lump sum death benefit, his full Base Salary to the date of his death in addition to any payments the Executive's spouse, beneficiaries or estate may be entitled to receive pursuant to any pension or Executive benefit plan or life insurance policy presently maintained by the Company, and such payments shall fully discharge the Company's obligations hereunder. (b) During any period that the Executive fails to perform his duties hereunder as a result of incapacity due to physical or mental illness (provided that the Executive shall have furnished the Company with a written statement from a qualified doctor to such effect and provided, further, that at the Company's request and expense the Executive shall submit to an examination by a doctor selected by the Company and such doctor shall have concurred in the conclusion of the Executive's doctor), the Executive shall continue to receive his full Base Salary and bonus payments until the Executive's employment is terminated pursuant to Section 9(b) hereof, or until the Executive terminates his employment pursuant to Section 9(d) hereof, whichever first occurs. After termination, the Executive shall be paid 100% of his Base Salary at the rate in effect at the time Notice of Termination is given for six (6) months and thereafter an annual amount equal to 75% of such Base Salary for the remainder of the Term hereunder less, in each case, any disability payments otherwise payable by or pursuant to plans provided by the Company and actually paid to the Executive in substantially equal monthly installments. (c) If the Executive's employment shall be terminated for Cause, the Company shall pay the Executive his full Base Salary through the Date of Termination at the rate in effect at the time Notice of Termination is given and the Company shall have no further obligations to the Executive under this Agreement. (d) If (A) in breach of this Agreement, the Company shall terminate the Executive's employment other than pursuant to Sections 9(b) or 9(c) hereof (it being understood that a purported termination pursuant to Section 9(b) or 9(c) hereof which is disputed and finally determined not to have been proper shall be a termination by the Company in breach of this Agreement) o