Exhibit 10.8

 

 

 

ASSET PURCHASE AGREEMENT

by and among

WEBMESSENGER, INC.

a California corporation

(“Seller”)

and

CALLWAVE, INC.

a Delaware corporation

(“Purchaser”)

 

 

 

August 4, 2008

 

 

 

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ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (this “Agreement”) is made and entered into,
effective as of August 4, 2008 (the “Effective Date”), by and between CALLWAVE,
INC., a Delaware corporation (“Purchaser”); and WEBMESSENGER, INC., a California
corporation (“Seller” and, together with Purchaser and Seller, the “Parties” and
individually, a “Party”), with reference to the following facts:

RECITALS:

A. Seller is engaged in the business of delivering mobile messaging
software-based products and services, which provide mobile real-time presence,
VoIP and collaboration products for instant message connectivity,
interoperability, mobility and security, and other features (the “Business”).

B. Purchaser is a provider of value-added messaging and communications services
and solutions to individuals and businesses around the globe.

C. Seller is the owner of certain “Transferred Assets” (as defined below). The
parties have agreed to execute this Agreement in order to memorialize the terms
and conditions on which Purchaser shall purchase the Transferred Assets from
Seller.

AGREEMENTS:

NOW, THEREFORE, in consideration of and subject to each of the covenants,
representations, warranties, terms and conditions hereinafter set forth, the
receipt and sufficiency of which are hereby acknowledged, the Parties hereby
agree as follows:

ARTICLE 1.

DEFINITIONS

For purposes of this Agreement, the term:

“Agreement” shall have the meaning set forth in the preamble.

“Apptix WM” shall mean Apptix/Webmessenger, Inc., a Delaware corporation.

“Apptix WM Bulgaria” shall mean Apptix WebMessenger Bulgaria EOOD, a limited
liability company organized under the laws of Bulgaria and registered with the
Department of Companies in the City of Sofia.

“Assignment Agreement” means the Assignment and Assumption of Contracts in the
form attached hereto as Exhibit D.

“Assumed Liabilities” shall have the meaning set forth in Section 3.1.

“Babadzhov” shall mean Vladimir B. Babadzhov.

“Best Efforts” shall mean the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to achieve that result as
expeditiously as possible, provided, however, that a Person required to use Best
Efforts under this Agreement will not be thereby required to take actions that
would result in a material adverse change in the benefits to such Person of this
Agreement and the transactions contemplated hereby or to dispose of or make any
change to its business, expend any material funds or incur any other material
burden.

 

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“Bill of Sale” shall mean the Bill of Sale attached hereto as Exhibit A.

“Business Day” shall mean any day excluding Saturday, Sunday and any day on
which banking institutions located in Santa Barbara, California are authorized
or required by applicable Law or other governmental action to be closed.

“Confidential Information” shall have the meaning set forth in the NDA.

“Consent” shall have the meaning set forth in Section 2.3(a).

“Contract” shall mean any material agreement, contract, commitment, indemnity,
lease or license, promise or other undertaking, whether written or oral and
whether express or implied, that is binding upon a party hereto.

“Closing” shall have the meaning set forth in Section 6.1.

“Closing Date” shall have the meaning set forth in Section 6.1.

“Closing Payment” shall have the meaning set forth in Section 5.2.

“Damages” shall have the meaning set forth in Section 10.1.

“Deed of Assignment and Transfer” shall mean that certain Deed of Assignment and
Transfer in the form attached hereto as Exhibit G.

“Escrow Agent” shall mean The Bank of New York Mellon Corporation, a Delaware
corporation.

“Escrow Agreement” shall mean the Escrow Agreement attached hereto as Exhibit B.

“Excluded Assets” shall have the meaning set forth in Section 2.2.

“Excluded Liabilities” shall have the meaning set forth in Section 3.2.

“Governmental Authority” shall mean any domestic, foreign or local government,
administrative agency, commission, department or other governmental, regulatory
or self-regulatory authority.

“Governmental Authorization” shall mean any license, permit, approval,
registration or other authorization granted, given or made available by or on
behalf of any Governmental Authority.

“Indemnified Parties” shall have the meaning set forth in Section 10.1.

“Indemnity Escrow Amount” shall have the meaning set forth in Section 5.2(c).

“Intellectual Property” shall have the meaning set forth in Section 7.13(a).

“Intellectual Property Rights” shall mean all intellectual property,
proprietary, or similar rights, and embodiments thereof, including, without
limitation: (i) all inventions, trade secrets, discoveries, the Software and
other works of authorship (and all improvements and derivative works thereof,
relating thereto or emanating therefrom), including any and all U.S.,
international, and foreign utility or design patents including, without limit,
any applications or rights of priority under any statute or treaty therefor, and
any and all provisionals, divisions, renewals, extensions, reissues,
continuations, and continuations-in-part thereof; (ii) copyright, copyright
registrations, and applications therefor, and all other rights

 

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corresponding thereto throughout the world; (iii) any and all trademarks, trade
names, and applications therefor throughout the world; and (iv) any and all
similar or equivalent rights to the foregoing anywhere in the world.

“Knowledge” shall mean (a) the actual awareness or understanding of a fact or
matter, or (b) knowledge of a fact or matter which a prudent individual could be
expected to discover or otherwise become aware of in the course of conducting a
reasonably comprehensive investigation concerning such fact or matter.

“Law” shall mean any law, regulation, statute, code, decree, order, injunction,
judgment, ruling, or arbitral award of any Governmental Authority, court or
arbitrator.

“Lien” shall mean any mortgage, easement, pledge, hypothecation, license,
option, encumbrance, lien, priority or other security interest or similar
restriction.

“NDA” shall have the meaning set forth in Section 12.1.

“Non-Competition Agreement” shall mean the Non-Competition Agreements between
Purchaser and Seller in the form of Exhibit C-1 attached hereto, between
Babadzhov and Purchaser in the form of Exhibit C-2 attached hereto, and between
each Principal and Purchaser in the form of Exhibit C-3 attached hereto.

“Party” and “Parties” shall have the meanings set forth in the preamble.

“Patent Assignment” means an Assignment of Patents in the form attached hereto
as Exhibit E.

“Person” means any natural Person, and any sole proprietorship, corporation,
partnership of any kind having a separate legal status, limited liability
company, business trust, unincorporated organization or association, mutual
company, joint stock company or joint venture, estate, trust, union or employee
organization or any national, regional or local body of state power, any
ministry or department thereof, and any person exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government (including any independent regulator) or any other governmental
entity, instrumentality, agency, authority, court, corporation, committee or
commission under the direct or indirect control of a government.

“Post-Closing Period” shall mean any period beginning on the Closing Date.

“Principal” shall mean each of Joe G. Naylor and George Emilov.

“Pre-Closing Period” shall mean all periods prior to the Closing Date.

“Proceeding” shall mean any action, arbitration, audit, hearing, investigation,
litigation or suit, whether civil, criminal, administrative, judicial or
investigative, whether formal or informal, whether public or private.

“Purchase Price” shall have the meaning set forth in Section 5.1.

“Purchaser” shall have the meaning set forth in the preamble.

“Seller” shall have the meaning set forth in the preamble.

 

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“Seller’s Disclosure Schedule” shall mean the disclosure schedule required to be
provided or delivered by Seller pursuant to Article 7 of this Agreement, a copy
of which is attached hereto as Schedule 7.

“Seller Financial Statements” has the meaning set forth in Section 7.8.

“Software” shall have the meaning set forth in Section 2.1(a).

“Source Code” shall mean shall mean the version of a computer program that is in
a programming language that is understandable by humans and used to generate the
Software and shall include any existing programmers’ notes and existing similar
documentation, if any.

“Tangible Personal Property” shall have the meaning set forth in Section 2.1(b).

“Trademark Assignment” means a Trademark Assignment in the form attached hereto
as Exhibit F.

“Transferred Assets” shall have the meaning set forth in Section 2.1.

“Transferred Contracts” shall have the meaning set forth in Section 2.1(d).

“U.S. GAAP” shall mean the generally accepted accounting principles for
financial reporting in the United States.

ARTICLE 2.

PURCHASE AND SALE OF ASSETS

2.1 Assets to be Sold. At the Closing, subject to the terms and conditions set
forth in this Agreement, Seller shall sell, convey and transfer to Purchaser,
and Purchaser shall purchase and acquire from Seller, free and clear of any
Liens, all of Seller’s right, title and interest in and to all of the following
(collectively, the “Transferred Assets”):

(a) All Intellectual Property Rights of Seller in and to that certain software
product and service sometimes identified as “WebMessenger” that is used in the
Business, including but not limited to each and every of the following items
pertaining thereto (collectively, the “Software”):

(i) All Source Code for the Software;

(ii) All binaries with respect to the Software;

(iii) All libraries with respect to the Software;

(iv) All XML, HTML, and executables with respect to the Software;

(v) All applications constructed with the Source Code for the Software;

(vi) All documentation describing all or any portion of the Software or the
Source Code therefor; and

(vii) All rights in and to all copyrights with respect to the Software.

 

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(b) All equipment, computer hardware, supplies, materials and other items of
tangible personal property owned or leased by Seller relating to or used in the
Business, including those items included in Schedule 2.1(b) (the “Tangible
Personal Property”);

(c) All contract rights of Seller with users of Seller’s Software (the “Customer
Contracts”);

(d) All contract rights of Seller under supply and distribution contracts to
which Seller is a party (together with the Customer Contracts, the “Transferred
Contracts”);

(e) All rights in and to the trademark “WebMessenger” and each other trademark
used by Seller to market, promote, distribute or sell the Software;

(f) All of Seller’s accounts receivable, other accounts receivable, work in
progress, pending orders, notes receivable and other rights to payment from
customers of the Business, including those items included in Schedule 2.1(c)
(the “Transferred Receivables”);

(g) All Governmental Authorizations and all pending applications therefor or
renewals thereof relating to the foregoing, in each case to the extent
transferable to Purchaser;

(h) All claims of Seller against third parties arising with respect to any of
the foregoing, including contingent claims;

(i) All of the assets of Seller previously owned by Apptix WM that were
transferred to Seller by reason of the merger between Seller and Apptix WM,
including all share capital of Apptix WM Bulgaria; and

(j) The goodwill associated with any of the foregoing.

2.2 Excluded Assets. Notwithstanding anything to the contrary contained in
Section 2.1, above, or elsewhere in this Agreement, Seller will retain its
right, title and interest in and to all of Seller’s cash and all books and
records needed for legal purposes (such other assets, the “Excluded Assets”),
and such Excluded Assets shall not be transferred to Purchaser and shall be
excluded from the Transferred Assets but Seller shall provide Purchaser with
copies of all retained books and records that are necessary or useful for
Purchaser to carry on the business of Seller.

2.3 Consents

(a) If there are any orders, permits, consents, approvals or other
authorizations (“Consents”) set forth in Section 7.4 of the Seller’s Disclosure
Schedule that have not yet been obtained (or otherwise are not in full force and
effect) as of the Closing, in the case of each Transferred Asset as to which
such Consents were not obtained (or otherwise not in full force and effect) (the
“Restricted Assets”), Purchaser may waive the closing conditions as to any such
Consent and elect to have Seller continue its efforts to obtain the Consents.

(b) If Purchaser elects to have Seller continue its efforts to obtain any
Consents and the Closing occurs, notwithstanding Section 2.1 and Section 3.1
hereof, neither this Agreement nor the Assignment Agreement nor any other
document related to the consummation of the transactions contemplated by this
Agreement shall constitute a sale, assignment, assumption, transfer, conveyance
or delivery or an attempted sale, assignment, assumption, transfer, conveyance
or delivery of the Restricted Assets, and following the Closing, the parties
shall use Best Efforts, and cooperate with each other, to

 

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obtain the Consent relating to each Restricted Asset as quickly as practicable.
Pending the obtaining of such Consents relating to any Restricted Asset, the
parties shall cooperate with each other in any reasonable and lawful
arrangements designed to provide to Purchaser the benefits of use of the
Restricted Asset for its term (or any right or benefit arising thereunder,
including the enforcement for the benefit of Purchaser of any and all rights of
Seller against a third party thereunder) and designed to have the expenses and
services related thereto to be performed by Purchaser. Once a Consent for the
sale, assignment, assumption, transfer, conveyance and delivery of a Restricted
Asset is obtained, Seller shall promptly assign, transfer, convey and deliver
such Restricted Asset to Purchaser, and Purchaser shall assume the obligations
under such Restricted Asset assigned to Purchaser from and after the date of
assignment to Purchaser pursuant to a special-purpose Assignment Agreement
substantially similar in terms to those of the Assignment Agreement (which
special-purpose agreement the parties shall prepare, execute and deliver in good
faith at the time of such transfer, all at no additional cost to Purchaser).

ARTICLE 3.

LIMITED ASSUMPTION OF LIABILITIES

Notwithstanding anything to the contrary contained in this Agreement or any
document attached hereto:

3.1 Assumed Liabilities. From and after the Closing, Purchaser will assume and
be liable for, and will pay, perform and discharge as they become due, (a) all
liabilities and obligations arising after the Closing under the Customer
Contracts; (b) any sales tax due related to this Agreement (other than those
arising out of or relating to any breaches thereof that occurred prior to the
Closing); and (c) any accrued vacation or sick time not yet payable that are
owed to employees of Seller that are hired by Purchaser as of the Closing
(collectively, the “Assumed Liabilities”).

3.2 Retained Liabilities. Except as set forth in Section 3.1, above, Seller
shall retain, and Purchaser is not assuming hereunder, any of the liabilities of
Seller arising prior to the Closing Date with respect to the Transferred Assets
or Seller’s Business (the “Excluded Liabilities”).

ARTICLE 4.

ASSIGNMENT AND ASSUMPTION

4.1 Assignment and Assumption. Effective upon the Closing, Seller agrees to
assign, sell, transfer and set over to Purchaser (a) all of Seller’s right,
title, benefit, privileges and interest in and to all of the Transferred Assets
(including but not limited to all contracts between Seller and users of Seller’s
Software), and (b) all of Seller’s burdens, obligations and liabilities in
connection with, each of the Assumed Liabilities. Purchaser agrees to accept
upon the Closing the foregoing assignment and agrees to observe and perform all
of the duties, obligations, terms, provisions and covenants, and to pay and
discharge all of the liabilities of Seller to be observed, performed, paid or
discharged from and after the Closing, in connection with the Assumed
Liabilities. Purchaser will assume no Excluded Liabilities, and the parties
hereto agree that all such “Excluded Liabilities” shall remain the sole
responsibility of Seller.

ARTICLE 5.

PURCHASE PRICE

5.1 Purchase Price. In consideration of the purchase of the Transferred Assets,
Purchaser agrees to (i) assume the Assumed Liabilities, and (ii) pay to Seller
an amount equal to Nine Million Dollars ($9,000,000) (the “Purchase Price”),
subject to adjustment and offset as set forth in Section 5.2(b) and in ARTICLE
10, below.

 

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5.2 Purchase Price Payment. At the Closing, Purchaser shall:

(a) Closing Payment. Pay to Seller in cash on the Closing Date the sum of Seven
Million Two Hundred Thousand Dollars ($7,200,000) (the “Closing Payment”). The
Closing Payment shall be made by wire transfer of immediately available funds to
the account designated by Seller in a written notice delivered to Purchaser at
least one (1) Business Day prior to such date for payment.

(b) Earn-out Amount. Deposit with Escrow Agent an amount of cash equal to Four
Hundred Fifty Thousand Dollars ($450,000) (the “Earn-out Amount”), to be held by
the Escrow Agent in accordance with the Escrow Agreement and released to Seller
or to Purchaser, as applicable in accordance with this Section 5.2(b).

(i) Such Earn-out Amount shall be payable to Seller, within thirty (30) days
after December 31, 2008, in an amount equal to the product of (x) $450,000,
multiplied times (y) a fraction (but in all events not greater than one (1)),
the numerator of which is the amount of Purchaser’s Booked Revenues during the
Measuring Period, and the denominator of which is Two Million Dollars
($2,000,000). Any portion of such Earn-out Amount that does not become payable
to Seller pursuant to the preceding sentence shall be paid to Purchaser
concurrently with the release of any portion of the Earn-out Amount to Seller.
Any interest earned on the Earn-out Amount shall be paid to Seller and Purchaser
in the same proportion in which the Earn-out Amount is paid to the Parties.

(ii) For purposes of this Section 5.2, the term:

(A) “Booked Revenues” means amounts that customers of Purchaser are obligated to
pay to Purchaser for the purchase or license of Purchaser’s “Covered Products”
(as defined below) pursuant to signed binding definitive written contracts
signed by Purchaser and its customers, and binding purchase or sales orders
submitted by Purchaser’s customers and accepted by Purchaser, during the
“Measuring Period” and in accordance with Purchaser’s internal controls for
acceptance and approval of contracts, purchaser orders and sales orders.
Notwithstanding the foregoing, the term “Booked Revenues” shall not include any
revenues earned from any contracts or purchase or sales orders, the
substantially final terms of which been agreed upon by Purchaser and its
customers prior to the commencement of the Measuring Period.

(B) “Covered Products” means products and services sold or licensed by
Purchaser, other than its “Internet Answering Machine” product.

(C) “Measuring Period” shall mean the period from August 4, 2008, through
December 31, 2008, inclusive.

(iii) No portion of the Earn-out Amount shall be subject to any indemnity claims
asserted by Purchaser pursuant to this Agreement.

(c) Indemnity Escrow Amount. Deposit with Escrow Agent an amount of cash equal
to One Million Three Hundred Fifty Thousand Dollars ($1,350,000) (the “Indemnity
Escrow Amount”), to be held by the Escrow Agent in accordance with the Escrow
Agreement to secure the performance of Seller’s obligations under this
Agreement, including but not limited to indemnification obligations which are
notified by Purchaser to Seller within one year from Closing Date. Subject
thereto, the balance of the Indemnity Escrow Amount will be released from the
escrow upon the expiration of one (1) year from the Closing Date.

 

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(d) All amounts to be deposited with Escrow Agent pursuant to this Section 5.2
shall be made by wire transfer and confirmed as being received by the Escrow
Agent to Seller and Seller’s counsel by e-mail and at the e-mail addresses on
the signature page of this Agreement.

ARTICLE 6.

CLOSING

6.1 Time and Place of Closing. The consummation of the transactions contemplated
by this Agreement (the “Closing”) shall take place at 10:00 a.m., Pacific Time,
at the offices of Reicker, Pfau, Pyle & McRoy LLP, 1421 State Street, Suite B,
Santa Barbara, California 93101 simultaneously with execution and delivery of
this Agreement or on such other date, or at such other place, as shall be
mutually agreed upon by the Parties. The date on which the Closing shall occur
in accordance with the preceding sentence is referred to in this Agreement as
the “Closing Date.”

6.2 Purchaser’s Closing Actions. At the Closing, Purchaser shall take such
actions on its part to consummate the transactions contemplated by this
Agreement including (i) the payment of the Closing Payment to Seller in
accordance with Section 5.2(a), (ii) the payment of the Earn-out Amount to
Escrow Agent in accordance with Section 5.2(b), (iii) the payment of the
Indemnity Escrow Amount to the Escrow Agent in accordance with Section 5.2(c),
and (iv) the delivery to Seller the following documents duly authorized and
executed by Purchaser:

(a) this Agreement;

(b) the Assignment Agreement executed by Purchaser;

(c) the Bill of Sale;

(d) the Deed of Assignment and Transfer;

(e) the Seller Non-Competition Agreement;

(f) the Non-Competition Agreement with Babadzhov; and

(g) a Non-Competition Agreement with each Principal.

6.3 Seller’s Closing Actions. At the Closing, Seller shall take such actions on
its part as necessary or appropriate to consummate the transactions contemplated
by this Agreement including (i) the transfer of the Transferred Assets and
Assumed Liabilities, and (ii) the delivery to Purchaser of the following
documents duly authorized and executed by Seller:

(a) a certified copy of resolutions of the Board of Directors and shareholders
of Seller, authorizing the execution, delivery and performance of this Agreement
and the other agreements and documents contemplated hereby;

(b) the Assignment Agreement executed by Seller;

(c) the Bill of Sale executed by Seller;

(d) the Patent Assignment;

(e) the Trademark Assignment;

 

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(f) the Deed of Assignment and Transfer;

(g) the Seller Non-Competition Agreement;

(h) the Non-Competition Agreement executed with Babadzhov;

(i) a Principal Non-Competition Agreement with each Principal; and

(j) all other documents, certificates and instruments reasonably deemed by
Purchaser or its counsel necessary or desirable to consummate the transactions
contemplated hereby.

ARTICLE 7.

REPRESENTATIONS AND WARRANTIES OF SELLER

Except as set forth in the Seller’s Disclosure Schedule, Seller represents and
warrants to Purchaser, as of Closing, that:

7.1 Organization. Seller is a corporation duly organized, validly existing, and
in good standing under the laws of the State of California, with full power and
authority to conduct its business as it is now being conducted, to own or use
the assets that it purports to own or use, to carry on its business as now
conducted and to perform all its obligations under this Agreement. Seller is
duly qualified to do business as a foreign corporation and is in good standing
under the laws of each state or other jurisdiction in which the nature of the
activities conducted by it requires such qualification.

7.2 Authority; Validity. Seller has all necessary power and authority to execute
and deliver this Agreement and to perform all of its obligations hereunder. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized and
approved by all necessary corporate action on the part of Seller. This Agreement
has been duly and validly executed and delivered by Seller, and constitutes the
valid and legally binding obligation of Seller, enforceable against it in
accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium, or similar laws of general application now or hereafter in effect
relating to or affecting creditors’ rights generally, public policy and general
principles of equity.

7.3 No Conflict. Neither the execution and delivery of this Agreement by Seller,
nor the consummation by Seller of the transactions contemplated hereby, will
(a) constitute or result in a violation of any Law; (b) conflict with, result in
the breach of, constitute a default under, or accelerate the performance
provided by, any Contract to which Seller is a party or by which its assets are
bound; or (c) violate the articles of incorporation or bylaws of Seller.

7.4 Consents and Approvals. Except as set forth in Section 7.4 of the Seller’s
Disclosure Schedule, Seller is not required to obtain any Consent of, or
required to make any declaration or filing with, any Governmental Authority or
any other third party in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.

7.5 Title to Transferred Assets. Seller owns, will own at the Closing, and will
deliver to Purchaser at the Closing good, valid and transferable title to all of
the Transferred Assets, free and clear of any Liens.

7.6 Tangible Personal Property. Each item of Tangible Personal Property included
in the Transferred Assets is being transferred on an “AS IS” basis, subject to
all faults, if any. To the

 

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Knowledge of Seller, such Tangible Personal Property is suitable for immediate
use in the ordinary course of business.

7.7 Tax Matters. Seller has timely paid all taxes payable by it for the
Pre-Closing Period, which will have been required to be paid on or prior to the
Closing Date, the non-payment of which (a) could result in any Liens on any of
the Transferred Assets or could otherwise adversely affect the use of the
Transferred Assets; (b) could reasonably be expected to adversely affect
Seller’s ability to perform its obligations under this Agreement or under any
agreements contemplated hereby; or (c) could reasonably be expected to result in
Purchaser becoming liable or responsible therefor. Seller will pay all taxes
payable by it with respect to any Pre-Closing Period when due.

7.8 Financial Statements.

(a) Seller has delivered to Purchaser Seller’s Statement of Revenues and
Expenses – Income Tax Basis for the period from January 18, 2008, through
June 30, 2008 (the “Financial Statements Date”), and Seller’s Statement of
Assets, Liabilities and Stockholders’ Equity – Income Tax Basis as of June 30,
2008, together with the compilation report therefor delivered by Milam, Knecht &
Warner, LLP (collectively, the “Seller Financial Statements”). The balance
sheets referred to in the previous sentence present fairly in all material
respects the financial position of Seller on an income tax basis as of the date
thereof, and the other financial statements referred to in such sentence present
fairly in all material respects the results of Seller’s operations and cash
flows on an income tax basis for the respective fiscal periods therein set
forth, in each case in accordance with Seller’s methods of accounting
consistently applied and consistent with the books and records of Seller. Except
for (i) those liabilities that are fully reflected or reserved against on the
Seller balance sheet included in the Financial Statements or fully disclosed in
the related notes thereto and (ii) liabilities incurred in the ordinary course
of business in amounts consistent with past practice since the Financial
Statements Date and which are either listed in Section 7.8 of the Seller’s
Disclosure Schedule or are not material, individually or in the aggregate,
Seller does not have any liabilities or obligations of any nature, whether
absolute, accrued, contingent or other and whether due or to become due. The
books and records of Seller, true and complete copies of which have been
previously made available to Purchaser, have been maintained in accordance with
good business practices and all applicable Laws and reflect only actual
transactions.

(b) Since the Financial Statements Date, there has not been a material adverse
change in the financial condition, business prospects, or results of operations
of Seller.

7.9 Compliance. Except as otherwise set forth in Section 7.9 of the Seller’s
Disclosure Schedule, Seller is and has been in full compliance with, and no
event has occurred or circumstance exists that (with or without notice or lapse
of time) may constitute or result in a violation of, any Law. Seller has not
received any notice or other communication (whether written or oral) from any
Governmental Authority or any other Person alleging that Seller or the
Transferred Assets actually, allegedly, or potentially violate, or fail to
comply with, any Law.

7.10 Legal Proceedings. There is no pending or, to the Knowledge of Seller,
threatened Proceeding (a) by or against Seller or that otherwise relates to or
may affect the Transferred Assets; or (b) that seeks to enjoin or restrict
Seller’s ability to consummate the transactions contemplated in this Agreement.

7.11 Contracts. Section 7.11 of the Seller’s Disclosure Schedule sets forth an
accurate and complete list of all Contracts relating to the Business (including,
without limitation, all Transferred Contracts) to which Seller is a party,
including reasonably complete descriptions of each such Contract. Each
Transferred Contract is in full force and effect and is valid and enforceable in
accordance with its terms. Seller and each other Person or entity that has or
had any obligation or liability under each Transferred

 

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Contract have been in full compliance with all applicable terms and requirements
of such Transferred Contract.

7.12 Solvency. Seller is not now insolvent and will not be rendered insolvent by
the transactions contemplated by this Agreement. As used in this Section,
“insolvent” means that the sum of the debts and other liabilities of Seller
exceed the present fair saleable value of Seller’s assets. Immediately after
giving effect to the consummation of the transactions contemplated by this
Agreement, Seller (a) will be able to pay its liabilities as they become due in
the usual course of its business; (b) will not have unreasonably small capital
with which to conduct its present or proposed business; and (c) will have assets
the aggregate fair market value of which exceeds the amount of its liabilities.

7.13 Intellectual Property

(a) All of Seller’s Intellectual Property Rights included as part of the
Transferred Assets (collectively, the “Intellectual Property”) are (i) valid and
subsisting, provided that with respect to Seller’s unregistered trademarks,
Seller represents only that to its Knowledge, such unregistered trademarks are
valid and subsisting, and provided further that Purchaser hereby acknowledges
that Seller owns no issued patents, and (ii) not subject to any order, judgment,
decree or agreement adversely affecting Seller’s use thereof or rights thereto.
Seller has the right pursuant to license, sublicense, agreement or permission to
use, in the manner currently used by Seller, all of the Intellectual Property
although with respect to Seller’s unregistered trademarks, Seller represents
only that to its Knowledge, Seller has the right to use such unregistered
trademarks. Immediately after the Closing, Purchaser will have the right to use
all of the Intellectual Property, on terms and conditions that are the same as
those in effect for Seller immediately prior to the Closing.

(b) Each employee of Seller and each employee of the Apptix WM Bulgaria, and
each consultant to Seller and each consultant to Apptix WM Bulgaria that has
been involved in the creation or modification of Seller’s Intellectual Property,
executed an assignment of inventions agreement in the forms provided to
Purchaser, under which such employee or consultant assigned to Seller or to
Apptix WM Bulgaria, as applicable, all rights to all inventions and copyrights
conceived by such employee or consultant in the course of such employment
relationship or engagement with Seller or Apptix WM Bulgaria, as applicable.

(c) There is no material Proceeding pending, asserted or, to the Knowledge of
Seller, threatened concerning Seller’s ownership, validity, registrability,
enforceability, infringement, use or licensed right to use any Intellectual
Property.

(d) Seller has taken reasonable and commercially practicable measures to protect
the secrecy, confidentiality and value of the Intellectual Property.

(e) Seller has executed confidentiality and assignment of invention agreements
with all of its employees and consultants that participated in the creation of
the Intellectual Property.

(f) Neither the Intellectual Property nor any products or services now or
heretofore marketed, distributed, or sold by Seller, nor Seller’s use of the
Intellectual Property at any time prior to the Closing, did and does infringe
(nor has any claim been made that any such action infringes) the patents or
other Intellectual Property Rights of others, provided that with respect to
Seller’s unregistered trademarks, Seller represents only that to its Knowledge,
such unregistered trademarks did not and do not infringe (nor has any claim been
made that any such action infringes) the Intellectual Property Rights of others.

 

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(g) There is set forth in Section 7.13(g) of the Seller’s Disclosure Schedule a
list of all out-bound licenses that have been granted by Seller or Apptix WM
Bulgaria for the use of, and other rights held by any third Person for the use
of, the Intellectual Property Rights of Seller or Apptix WM Bulgaria. Except as
set forth in Sections 7.11 and 7.13(g) of the Seller’s Disclosure Schedule, no
third Person has any rights to use any of the Intellectual Property Rights of
Seller or Apptix WM Bulgaria.

(h) There is set forth in Section 7.13(h) of the Seller’s Disclosure Schedule a
list of all in-bound licenses that have been granted to Seller or Apptix WM
Bulgaria for the use of, and other rights held by Seller or Apptix WM Bulgaria
for the use of, the Intellectual Property Rights of any third Person. Except as
set forth in Section 7.13(h) of the Seller’s Disclosure Schedule, neither Seller
nor Apptix WM Bulgaria has any rights to use any of the Intellectual Property
Rights of any third Person.

(i) There is set forth in Section 7.13(i) of the Seller’s Disclosure Schedule a
list of (i) all issued patents issued to or beneficially owned by Seller,
(ii) all pending patent applications owned by or to which Seller has any rights,
(iii) all trademarks registered to or owned or used by Seller (collectively, the
“Registered Intellectual Property Rights”). Except as set forth in Section 7.13
of the Seller’s Disclosure Schedule, Seller does not own any Registered
Intellectual Property Rights.

7.14 Personal Data. In respect of the personal data (whether automatically or
manually recorded) held by the Seller:

(a) The Seller has complied in all material respects with the provisions of the
Law.

(b) The Seller has not been served with notice of any violation under the Law.

(c) No requests have been received from data subjects for access to the personal
data nor have any complaints been made or concerns raised by such Persons in
respect of such data, and no enforcement notices have been served on the Seller
and no fact or circumstance exists which might give rise to any such complaint,
concern or enforcement notice.

7.15 Apptix WM Bulgaria. Except as otherwise set forth in Section 7.15 of the
Seller’s Disclosure Schedule, with regard to Apptix WM Bulgaria:

(a) Organization, Good Standing, and Qualification. Apptix WM Bulgaria is a
limited liability company duly organized, validly existing, and in good standing
under the laws of Bulgaria and the City of Sofia and has all requisite corporate
power and authority to carry on its business as now conducted and as proposed to
be conducted. Apptix WM Bulgaria is duly qualified to do business and is in good
standing under the laws of each jurisdiction in which the nature of the
activities conducted by it requires such qualification.

(b) Capitalization and Voting Rights. The authorized capital of Apptix WM
Bulgaria consist of one hundred (100) quota of fifty Bulgarian leva (50 BGN),
none of which are certificated (the “Capital Shares”).

(c) Outstanding Capital Shares. Seller owns all of the issued and outstanding
Capital Shares of Apptix WM Bulgaria, and all such Capital Shares are duly and
validly authorized and issued, fully paid and nonassessable, and were issued in
compliance with all applicable laws concerning the issuance of such Capital
Shares.

 

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(d) Capitalization. There are no outstanding options, warrants, rights
(including conversion or preemptive rights) or agreements for the purchase or
acquisition from Apptix WM Bulgaria any shares of its capital interests. Except
for the rights listed in Section 7.15(d) of the Seller’s Disclosure Schedule,
Apptix WM Bulgaria is not a party or subject to any agreement or understanding,
and, to the knowledge of Seller there is no agreement or understanding between
any Persons and/or entities, which affects or relates to the voting or giving of
written consents with respect to any security or by a director of Apptix WM
Bulgaria.

(e) No Conflict. Neither the execution and delivery of this Agreement by Seller,
nor the consummation by Seller of the transactions contemplated hereby, will
(i) constitute or result in a violation of any Law; (ii) conflict with, result
in the breach of, constitute a default under, or accelerate the performance
provided by, any Contract to which Apptix WM Bulgaria is a party or by which its
assets are bound; or (iii) violate the governing corporate documents of Apptix
WM Bulgaria.

(f) Consents and Approvals. Except as set forth in Section 7.15(f) of the
Seller’s Disclosure Schedule, Apptix WM Bulgaria is not required to obtain any
Consent of, or required to make any declaration or filing with, any Governmental
Authority or any other third party in connection with the consummation of the
transactions contemplated by this Agreement.

(g) Subsidiaries. Apptix WM Bulgaria does not presently own or control, directly
or indirectly, or hold any rights to acquire, any interest in any other
corporation, association, or other business entity. Apptix WM Bulgaria is not a
participant in any joint venture, partnership, or similar arrangement.

(h) Tax Matters. Apptix WM Bulgaria has timely paid all taxes payable by it for
the Pre-Closing Period, which will have been required to be paid on or prior to
the Closing Date, the non-payment of which (i) could result in any Liens on any
of the Transferred Assets or could otherwise materially and adversely affect the
use of the Transferred Assets; (ii) could reasonably be expected to materially
and adversely affect Apptix WM Bulgaria’s ability to perform its obligations
under this Agreement or under any agreements contemplated hereby; or (iii) could
reasonably be expected to result in Purchaser becoming liable or responsible
therefor. Apptix WM Bulgaria will pay all taxes payable by it with respect to
any Pre-Closing Period when due.

(i) Valid Issuance. The Capital Shares of Apptix WM Bulgaria owned by Seller and
to be transferred in accordance with the terms of this Agreement, are duly and
validly issued, fully paid and nonassessable and free of restrictions on
transfer, other than restrictions on transfer under applicable securities laws.
At the Closing, Seller shall deliver to Purchaser title to the Capital Shares,
free and clear of all Liens arising from any act or omission of or claim against
Seller or Apptix WM Bulgaria.

(j) Compliance. Except as otherwise set forth in Section 7.15(j) of the Seller’s
Disclosure Schedule, Apptix WM Bulgaria is and has been in compliance, in all
material respects, with, and no event has occurred or circumstance exists that
(with or without notice or lapse of time) may constitute or result in a material
violation of any Law. Neither Seller nor Apptix WM Bulgaria has received any
notice or other communication (whether written or oral) from any Governmental
Authority or any other Person alleging that Apptix WM Bulgaria or the
Transferred Assets actually, allegedly, or potentially violate, or fail to
comply with, any Law. Apptix WM Bulgaria possesses all certificates of authority
and all other governmental authorizations, licenses, franchises and permits, as
are necessary for it to engage in the business and operations currently
conducted.

(k) Legal Proceedings. There is no pending or, to the Knowledge of Seller or
Apptix WM Bulgaria, threatened Proceeding (i) by or against Apptix WM Bulgaria
or that otherwise relates to or may affect the Transferred Assets; or (ii) that
seeks to enjoin or restrict Seller’s ability to consummate the transactions
contemplated in this Agreement.

 

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(l) Financial Statements. The Seller has delivered or made available to
Purchaser financial statements that fairly present the cash items of income and
expense recognized by Apptix WM Bulgaria for the periods January 5, 2008 through
May 30, 2008. Apptix WM Bulgaria does not have any liabilities of any kind or
nature, contingent or otherwise, as of the Closing Date, other than liabilities
incurred in the ordinary course of business (all of which shall be borne by
Seller and paid to Purchaser within five (5) business days following demand
except for any liability for employee accrued vacation or sick time which shall
not exceed thirty thousand dollars ($30,000), the liability for such employee
accrued vacation and sick time shall remain a liability of, and shall be
discharged by, Apptix WM Bulgaria).

(m) Debt. Apptix WM Bulgaria has no outstanding indebtedness for borrowed money
and is not a guarantor or otherwise contingently liable for any such
indebtedness. There exists no default under the provisions of any instrument
evidencing any such indebtedness or of any agreement relating thereto.

(n) Employees, Labor Matters. Except as otherwise set forth in Section 7.15(n)
of the Seller’s Disclosure Schedule: (i) Apptix WM Bulgaria is not a party to
any employment or consulting agreements, compensation, bonus or deferred
compensation agreement, incentive or profit sharing plans or arrangements of any
kind; and (ii) Apptix WM Bulgaria employs a total of thirty-three (33) full-time
employees, and, to the Knowledge of Seller, Seller and Apptix WM Bulgaria
generally enjoy good employer-employee relationships. Apptix WM Bulgaria 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. Section 7.15(n) of the Seller’s Disclosure Schedule sets forth a
complete list of each officer and employee of Apptix WM Bulgaria. The employees
designated on Section 7.15(n) of the Seller’s Disclosure Schedule, if any, as
the “Seller Retained Employees” shall, prior to the Closing Date, be terminated
by Apptix WM Bulgaria.

(o) Corporate Records, Copies of Documents. The books and records of Apptix WM
Bulgaria contain true and complete records of all meetings (and consents in lieu
of meeting of) and any material actions taken by, its owner, its director and
general managers, and committees, if any, of Apptix WM Bulgaria as required by
applicable Law. The copies of the books and records of Apptix WM Bulgaria made
available to Purchaser are true and complete copies.

(p) Bank Accounts and Powers of Attorney. Set forth in Section 7.15(p) of the
Seller’s Disclosure Schedule is an accurate and complete list of: (i) the name
of each bank or other financial institution in which Apptix WM Bulgaria has an
account, credit line, lockbox or safe deposit box, the relevant account or other
identifying number thereof, and the names of all Persons authorized to draw
thereon or who have access thereto, as the case may be, and (ii) the names of
all Persons, if any, holding powers of attorney from Apptix WM Bulgaria and a
summary of the terms thereof.

7.16 Brokers or Finders. Except as disclosed on the Seller’s Disclosure
Schedule, Seller has no obligation or liability, contingent or otherwise, for
brokerage or finders’ fees, agents’ commissions, or any other similar payment in
connection with the transactions contemplated by this Agreement.

 

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ARTICLE 8.

REPRESENTATIONS AND WARRANTIES OF PURCHASER

Purchaser represents and warrants to Seller, as of the date hereof (or as of
such other date as may be expressly provided in any representation or warranty),
as follows:

8.1 Organization. Purchaser is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Delaware, with full
corporate power and authority to conduct its business as it is now being
conducted.

8.2 Authority; Validity. Purchaser has all necessary corporate power and
authority to execute and deliver this Agreement and to perform all of its
obligations hereunder. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized and approved by all necessary corporate action on the part of
Purchaser. This Agreement has been duly and validly executed and delivered by
Purchaser, and constitutes the valid and legally binding obligation of
Purchaser, enforceable against it in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium, or similar laws of general
application now or hereafter in effect relating to or affecting creditors’
rights generally, public policy and general principles of equity.

8.3 No Conflict. Neither the execution and delivery of this Agreement by
Purchaser, nor the consummation by Purchaser of the transactions contemplated
hereby will (a) to the Knowledge of Purchaser, constitute or result in a
violation of any Law; (b) conflict with, result in the breach of, constitute a
default under, or accelerate the performance provided by, any Contract to which
Purchaser is a party or by which its assets are bound; or (c) violate the
articles of incorporation or corporate regulations of Purchaser.

8.4 Consents and Approvals. Purchaser is not required to obtain any Consent of,
or required to make any declaration or filing with, any Governmental Authority
or any third party in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.

8.5 Legal Proceedings. There is no pending or threatened Proceeding that seeks
to or is expected to (a) enjoin or restrict Purchaser’s ability to consummate
the transactions contemplated in this Agreement or (b) materially prevent,
materially delay or make illegal the consummation of the transactions
contemplated by this Agreement.

8.6 Brokers or Finders. The Purchaser has no obligation or liability, contingent
or otherwise, for brokerage or finders’ fees, agents’ commissions, or any other
similar payment in connection with the transactions contemplated by this
Agreement.

ARTICLE 9.

ADDITIONAL COVENANTS

9.1 Best Efforts; Government Approvals. Each Party shall use its Best Efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable to: (a) consummate and make effective as
promptly as practicable the transactions contemplated hereby; and (b) obtain any
required approvals, consents or other authorizations as promptly as practicable.
The Parties shall cooperate with each other in preparing, submitting and filing,
as expeditiously as possible, all applications, notifications and report forms
as may be required by applicable law with respect to the transactions
contemplated by this Agreement.

 

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9.2 Further Assurances. The Parties shall cooperate reasonably with each other
in connection with any steps required to be taken as part of their respective
obligations under this Agreement, and shall (a) furnish upon request to each
other such further information; (b) execute and deliver to each other such other
documents; and (c) do such other acts and things, all as the other Parties may
reasonably request for the purpose of carrying out the intent of this Agreement
and the transactions contemplated hereby. Without limiting the generality of the
foregoing:

(a) Capital Shares of Apptix WM Bulgaria. The parties hereby acknowledge the
ownership of Apptix WM Bulgaria (i.e., through ownership of its Capital Shares)
will need to be registered in the name of Purchaser in the Bulgarian Commercial
Registry after the Closing, and agree that (i) Seller (A) shall not cause or
permit title thereto to be transferred to any Person other than Purchaser, and
shall not grant to any Person other than Purchaser any proxy or other rights
with respect to such Capital Shares, and (B) shall hold and turn over to
Purchaser, upon receipt, any distributions received by Seller on or after the
Closing with respect to the Capital Shares, and (ii) together with Purchaser
their best efforts to cause title to the Capital Shares to be registered in the
name of Purchaser as promptly as reasonably practicable after the Closing.

(b) Limitations Upon Power of Attorney to Assen Lyubenov Kanev. Seller agrees
that upon the Closing, Seller and Purchaser shall deliver to Assen Lyubenov
Kanev a written instruction that (i) he may exercise the powers granted under
the existing power of attorney with respect to the shares of Apptix WM Bulgaria
only with the prior express written consent of Purchaser and (ii) Purchaser
shall be entitled to revoke such power of attorney upon delivery of a written
revocation to Assen Lyubenov Kanev.

9.3 Payment of Excluded Liabilities. Seller shall pay, or make adequate
provision for the payment, in full all of the Excluded Liabilities.

9.4 Post-Closing Delivery of Consolidated Financial Statements. As promptly as
reasonably practicable after the Closing (and in all events within thirty
(30) days thereafter), Seller shall prepare and cause its chief financial
officer to certify and deliver to Purchaser consolidated statements of revenue
and expenses for the period ending July 31, 2008, and a consolidated statement
of assets, liabilities, and stockholders’ equity as of July 31, 2008 (the “July
2008 Financial Statements”), for Seller’s United States operations, prepared in
each instance in a manner consistent with the methods of accounting used in
preparing the Seller Financial Statements. Seller hereby represents and warrants
that:

(a) The balance sheets included as part of the July 2008 Financial Statements
shall present fairly in all material respects the financial position of Seller
as of the date thereof, and the other financial statements included as part of
the July 2008 Financial Statements, shall present fairly in all material
respects the results of Seller’s operations and cash flows for the respective
fiscal periods therein set forth, in each case in accordance with Seller’s
methods of accounting consistently applied and consistent with the books and
records of Seller; and

(b) Except for (i) those liabilities that are fully reflected or reserved
against on the Seller balance sheet included in the July 2008 Financial
Statements or fully disclosed in the related notes thereto and (ii) liabilities
incurred in the ordinary course of business in amounts consistent with past
practice between July 31, 2008, and the Closing Date and which Seller shall list
in written statement delivered to Purchaser with the July 2008 Financial
Statements (none of which shall be material, individually or in the aggregate),
Seller has not incurred and shall not incur between the Financial Statements
Date and the Closing Date any liabilities or obligations of any nature, whether
absolute, accrued, contingent or other and whether due or to become due.

 

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9.5 Post-Closing Delivery of Consents. As promptly as reasonably practicable
following the execution of this Agreement, and in all events within thirty
(30) days, and except to the extent waived by Purchaser in writing, Seller shall
procure the consents of all counterparties to Seller’s Contracts whose consent
is required in order for such Contracts to be assigned to Buyer hereunder.

ARTICLE 10.

INDEMNIFICATION

10.1 Indemnification by Parties

(a) Seller shall indemnify and hold harmless Purchaser and its affiliates,
officers, directors, employees, agents and other representatives (collectively,
the “Purchaser Indemnified Parties”) from and against any and all loss,
liability, claim, damage and expense (including reasonable costs of
investigation and defense and reasonable attorneys’ fees), whether or not
involving a third-party claim (but specifically excluding incidental or
consequential damages) (collectively, “Damages”) arising from or in connection
with:

(i) any breach of any representation or warranty made by Seller in this
Agreement, the Seller’s Disclosure Schedule, or any other certificate or
document delivered by Seller pursuant to this Agreement;

(ii) any breach of any representation or warranty made by Seller in this
Agreement, other than any such breach that is expressly identified in a waiver
executed and delivered by Purchaser;

(iii) any liability arising out of the ownership or operation of the Transferred
Assets, or any service provided by Seller, prior to the Closing Date;

(iv) all debts, liabilities, and obligations of Apptix WM Bulgaria arising with
respect to the operation of Apptix WM Bulgaria prior to the Closing Date;

(v) any Excluded Liabilities;

(vi) any breach by Seller of any of its covenants under this Agreement; and

(vii) any claim by any Person for brokerage or finder’s fees or commissions or
similar payments based upon any agreement or understanding alleged to have been
made by any such Person with Seller (or any Person acting on its behalf) in
connection with any of the transactions contemplated by this Agreement.

(b) Purchaser shall indemnify and hold harmless Seller and its affiliates,
officers, directors, employees, agents and other representatives (collectively,
the “Seller Indemnified Parties” and, together with the Purchaser Indemnified
Parties, the “Indemnified Parties”) from and against any and all loss,
liability, claim, damage and expense (including reasonable costs of
investigation and defense and reasonable attorneys’ fees), whether or not
involving a third-party claim (but specifically excluding incidental or
consequential damages) arising from or in connection with:

(i) any breach of any representation or warranty made by Purchaser in this
Agreement or any certificate or document delivered by Seller pursuant to this
Agreement;

 

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(ii) any liability arising in the Post Closing Period out of Purchaser’s
ownership or operation of the Transferred Assets following the Closing, or any
service provided by Purchaser in the Post Closing Period and all Assumed
Liabilities; and

(iii) any claim by any Person for brokerage or finder’s fees or commissions or
similar payments based upon any agreement or understanding alleged to have been
made by any such Person with Purchaser (or any Person acting on its behalf) in
connection with any of the transactions contemplated by this Agreement.

(c) Except for claims based upon the fraudulent conduct of a Party, the
indemnification rights contained herein shall be the sole and exclusive remedy
for any matter, event, act or failure to act which would constitute a breach of
this Agreement by any party hereto.

10.2 Time Limitations.

(a) If the Closing occurs, (a) Seller will have no liability (for
indemnification or otherwise) with respect to any representation or warranty, or
covenant or obligation to be performed and complied with prior to the Closing
Date, other than those in Sections 7.2, 7.5, 7.7, and 7.13, unless on or before
the expiration of fifteen (15) months following the Closing Date Purchaser
notifies Seller of a claim specifying the factual basis of that claim in
reasonable detail to the extent then known by Purchaser; (b) Seller will have no
liability (for indemnification or otherwise) with respect to a breach of the
representations and warranties in Sections 7.2, 7.5, and 7.13, unless on or
before the expiration of the statute of limitations applicable to such claim,
Purchaser notifies Seller of a claim specifying the factual basis of that claim
in reasonable detail to the extent then known by Purchaser; (c) Seller will have
no liability (for indemnification or otherwise) with respect to a breach of the
representation and warranty in Section 7.7, unless on or before the expiration
of sixty (60) days following the expiration of the statute of limitations
applicable to such claim, Purchaser notifies Seller of a claim specifying the
factual basis of that claim in reasonable detail to the extent then known by
Purchaser.

(b) If the Closing occurs, Purchaser will have no liability (for indemnification
or otherwise) with respect to any representation or warranty, or covenant or
obligation to be performed and complied with prior to the Closing Date, unless
on or before the expiration of fifteen (15) months following the Closing Date
Seller notifies Purchaser of a claim specifying the factual basis of that claim
in reasonable detail to the extent then known by Seller.

10.3 Use of Indemnity Escrow Amount; Damage Limitations. Any obligation of the
Seller under Section 10.1(a) shall initially be satisfied from the funds held in
escrow with the Escrow Agent. To the extent such funds are insufficient to
satisfy an amount payable to Purchaser under this Article 10, Seller shall be
responsible for paying the balance to Purchaser within ten (10) Business Days
following written notice from Purchaser to Seller of such determination,
provided, however, that except for claims of fraud, Seller’s liability for
Damages for any reason shall not exceed the Indemnity Escrow Amount.

10.4 Procedure For Indemnification—Third Party Claims

(a) Promptly after receipt by an Indemnified Party under Section 10.1 of notice
of the commencement of any Proceeding against it, such Indemnified Party will,
if a claim is to be made against a Party under such Section (such Party being
referred to herein as the “Indemnifying Party”), give notice to the Indemnifying
Party of the commencement of such claim, but the failure to notify the
Indemnifying Party will not relieve the Indemnifying Party of any liability that
it may have to any Indemnified Party, except to the extent that the Indemnifying
Party demonstrates that the defense of such action is prejudiced by the
Indemnified Party’s failure to give such notice.

 

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(b) If any Proceeding referred to in Section 10.1(a) is brought against an
Indemnified Party and it gives notice to the Indemnifying Party of the
commencement of such Proceeding, the Indemnifying Party will be entitled to
participate in such Proceeding and shall assume the defense of such Proceeding
with counsel reasonably satisfactory to the Indemnified Party (unless (i) the
Indemnifying Party is also a party to such Proceeding and the Indemnified Party
determines in good faith pursuant to an opinion of counsel would be unethical,
or (ii) the Indemnifying Party fails to provide reasonable assurance to the
Indemnified Party of its financial capacity to defend such Proceeding and
provide indemnification with respect to such Proceeding), and the Indemnifying
Party will not, as long as it diligently conducts such defense, be liable to the
Indemnified Party under this ARTICLE 10 for any fees of other counsel or any
other expenses with respect to the defense of such Proceeding, in each case
subsequently incurred by the Indemnified Party in connection with the defense of
such Proceeding. No compromise or settlement of such claims may be effected by
the Indemnifying Party without the Indemnified Party’s consent (not to be
unreasonably withheld) unless (A) there is no finding or admission of any
violation of Law or any violation of the rights of any Indemnified Party and no
effect on any other claims that may be made against the Indemnified Party, and
(B) the sole relief provided is monetary damages that are paid in full by the
Indemnifying Party; and (iii) the Indemnified Party will have no liability with
respect to any compromise or settlement of such claims effected without its
consent. So long as the Indemnified Party is defending and indemnifying the
Indemnified Party, both the Indemnified Party and the Indemnifying Party will be
bound by any determination made in such Proceeding or any compromise or
settlement effected by the Indemnified Party.

(c) Notwithstanding the foregoing, if an Indemnified Party determines in good
faith that there is a reasonable probability that a Proceeding may adversely
affect it or its affiliates other than as a result of monetary damages for which
it would be entitled to indemnification under this Agreement, the Indemnified
Party may, by notice to Indemnifying Party, assume the exclusive right to
defend, compromise, or settle such Proceeding and the Indemnifying Party shall
be relieved of any further obligations hereunder with a respect thereto and the
Indemnifying Party shall not be bound by any determination of a Proceeding so
defended or any compromise or settlement effected without its consent (which may
not be unreasonably withheld).

(d) The Parties hereby consent to the non-exclusive jurisdiction of any court in
which a Proceeding is brought against any Indemnified Party for purposes of any
claim that an Indemnified Party may have under this Agreement with respect to
such Proceeding or the matters alleged therein.

10.4 Procedure For Indemnification—Other Claims. A claim for indemnification for
any matter not involving a third-party claim may be asserted by written notice
to the Indemnifying Party as provided herein.

10.5 Indemnification In Case Of Strict Liability Or Indemnitee Negligence. THE
INDEMNIFICATION PROVISIONS IN THIS ARTICLE 10 SHALL BE ENFORCEABLE REGARDLESS OF
WHETHER THE LIABILITY IS BASED UPON PAST, PRESENT OR FUTURE ACTS, CLAIMS OR LAW
(INCLUDING ANY PAST, PRESENT OR FUTURE BULK SALES LAW, ENVIRONMENTAL LAW,
FRAUDULENT TRANSFER ACT, OCCUPATIONAL SAFETY AND HEALTH LAW OR PRODUCTS
LIABILITY, SECURITIES OR OTHER LEGAL REQUIREMENT) AND REGARDLESS OF WHETHER ANY
PERSON (INCLUDING THE PERSON FROM WHOM INDEMNIFICATION IS SOUGHT) ALLEGES OR
PROVES THE SOLE, CONCURRENT, CONTRIBUTORY OR COMPARATIVE NEGLIGENCE OF THE
PERSON SEEKING INDEMNIFICATION OR THE SOLE OR CONCURRENT STRICT LIABILITY
IMPOSED UPON THE PERSON SEEKING INDEMNIFICATION.

 

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ARTICLE 11.

TAX MATTERS

11.1 Tax Cooperation. Purchaser and Seller hereby agree to furnish or cause to
be furnished to each other, upon request, as promptly as practicable, such
information and assistance relating to the Transferred Assets as is reasonably
necessary for the filing of all tax returns, and making of any election related
to taxes, the preparation for any audit by any taxing authority, and the
prosecution or defense of any claim, suit or proceeding relating to any tax
return. Purchaser and Seller shall cooperate with each other in the conduct of
any audit or other proceeding related to taxes involving the Business and each
shall execute and deliver such powers of attorney and other documents as are
necessary to carry out the intent of this Section 11.1.

11.2 Allocation of Taxes

(a) Seller shall be responsible for and shall indemnify Purchaser against all
taxes arising by reason of or attributable to the Transferred Assets, or their
use, operation, and transactions with respect thereto during or with respect to
the Pre-Closing Period.

(b) Purchaser shall be responsible for and shall indemnify Seller against all
taxes arising by reason of or attributable to the Transferred Assets, or their
use, operation, and transactions with respect thereto during or with respect to
the Post-Closing Period.

(c) All personal property taxes and similar ad valorem obligations levied with
respect to the Transferred Assets for a taxable period that includes some
portion of the Pre-Closing Period and some potion of the Post-Closing Period
shall be apportioned between Purchaser and Seller based on the number of days of
such taxable period included in the applicable Pre-Closing Period and the number
of days of such taxable period included in the Post-Closing Period. Seller shall
be liable for the proportionate amount of such taxes that are attributable to
the Pre-Closing Period, and Purchaser shall be liable for the proportionate
amount of such taxes that are attributable to the Post-Closing Period.

(d) All taxes relating to, resulting from or arising out of the transfer of
Seller’s assets to Purchaser as contemplated in this Agreement (other than sales
or transfer taxes which shall be borne by the Purchaser) shall be borne by the
Party on whom the tax is imposed by the relevant tax office or agency of any
governmental unit, and each Party covenants and agrees to pay such taxes prior
to delinquency. As illustrative and not exhaustive examples of the preceding
sentence Seller shall bear the responsibility of paying the capital gains tax
imposed.

ARTICLE 12.

CONFIDENTIALITY; MUTUAL PUBLICITY RIGHTS

12.1 Confidentiality. This Agreement, its negotiation, and any information
disclosed relating to the underlying transaction is strictly confidential and
subject to the Nondisclosure Agreement between the Parties dated as of April 25,
2008 (the “NDA”). Notwithstanding the aforementioned, upon the Closing,
(i) Seller may, if required, file a copy of this Agreement on Form 8-K, and
(ii) Seller and Purchaser each may issue a press release announcing, or
otherwise publicly announce (including by filing a Current Report on Form 8-K or
an oral announcement at, for example, an earnings conference call), such
execution or Closing subject to the other Party being provided a meaningful
opportunity to review, comment upon and approve such Party’s press release or
other public announcement, such approval not to be unreasonably withheld.

 

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12.2 Effect of Disclosure. A Party disclosing Confidential Information
(“Disclosing Party”) is not waiving, and will not be deemed to have waived or
diminished, any of its attorney work product protections, attorney-client
privileges or similar protections and privileges as a result of disclosing its
Confidential Information (including Confidential Information related to pending
or threatened litigation) to the other Party (“Receiving Party”), regardless of
whether the Disclosing Party has asserted, or is or may be entitled to assert,
such privileges and protections. The Parties (a) share a common legal and
commercial interest in all of the Disclosing Party’s Confidential Information
that is subject to such privileges and protections; (b) are or may become joint
defendants in Proceedings to which the Disclosing Party’s Confidential
Information covered by such protections and privileges relates; (c) intend that
such privileges and protections remain intact should either Party become subject
to any actual or threatened Proceeding to which the Disclosing Party’s
Confidential Information covered by such protections and privileges relates; and
(d) intend that after the Closing the Receiving Party shall have the right to
assert such protections and privileges. No Receiving Party shall admit, claim or
contend, in Proceedings involving either party or otherwise, that any Disclosing
Party waived any of its attorney work-product protections, attorney-client
privileges or similar protections and privileges with respect to any
information, documents or other material not disclosed to a Receiving Party due
to the Disclosing Party disclosing its Confidential Information (including
Confidential Information related to pending or threatened litigation) to the
Receiving Party.

ARTICLE 13.

MISCELLANEOUS

13.1 Notices. All notices permitted or required by this Agreement shall be in
writing, and shall be deemed to have been delivered and received (a) when
personally delivered, (b) on the third (3rd) business day after the date on
which deposited in the United States mail, postage prepaid, certified or
registered mail, return receipt requested, or (c) on the date on which
transmitted by facsimile or other electronic means producing a tangible receipt
evidencing a successful transmission, or (d) on the next business day after the
date on which deposited with a regulated public carrier or nationally recognized
overnight commercial delivery service (e.g., Federal Express, DHL, etc.),
addressed to the Party for whom intended at the address set forth on the
signature page of this Agreement, or such other address, notice of which has
been delivered in a manner permitted by this Section 13.1.

13.2 Entire Agreement. All Exhibits and Schedules hereto (attached hereto and as
executed) shall be deemed to be incorporated into and made part of this
Agreement. This Agreement, together with all Exhibits and Schedules hereto,
constitutes the entire agreement between the Parties with respect to the subject
matter hereof, and supersedes any and all prior agreements and arrangements,
whether written or oral, that may exist between the Parties with respect to the
subject matter hereof except for the NDA, which shall remain in full force and
effect with respect to the “Confidential Information” described therein and
shall co-exist with this Agreement. This Agreement may not be amended,
supplemented or otherwise modified except by a writing duly executed by
Purchaser and Seller.

13.3 Binding Effect; Assignment. This Agreement shall be binding upon and inure
to the benefit of the Parties and their respective successors and permitted
assigns. Neither Party may assign this Agreement or any of its rights and
obligations hereunder without the prior written consent of the other Parties,
provided however, that Purchaser may assign this Agreements or portions thereof
to its affiliates or subsidiaries without the consent of Seller.

13.4 Non-Waiver. The failure in any one or more instances of a Party to insist
upon performance of any of the terms, covenants or conditions of this Agreement,
to exercise any right or privilege in this Agreement conferred, or the waiver by
said Party of any breach of any of the terms, covenants or

 

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conditions of this Agreement, shall not be construed as a subsequent waiver of
any such terms, covenants, conditions, rights or privileges, but the same shall
continue and remain in full force and effect as if no such forbearance or waiver
had occurred. No waiver shall be effective unless it is in writing and signed by
an authorized representative of the waiving Party.

13.5 Counterparts; Electronic Signature. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, and all
such counterparts shall constitute one and the same instrument. A copy of this
Agreement that is executed by a Party and transmitted by that Party to the other
Party by facsimile or email shall be binding upon the signatory to the same
extent as a copy hereof containing the signing Party’s original signature.

13.6 Severability. The invalidity of any provision of this Agreement or portion
of a provision shall not affect the validity of any other provision of this
Agreement or the remaining portion of the applicable provision.

13.7 Further Assurances. From and after the Closing, each Party covenants and
agrees to make, execute, and deliver such documents and instruments, and to take
such further actions, as may be necessary or convenient for effectuating the
Transactions contemplated by this Agreement.

13.8 Time of Essence. With regard to all dates and time periods set forth or
referred to in this Agreement, time is of the essence.

13.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, without regard to conflicts
of law principles. Any dispute relating to or arising out of or in connection
with this Agreement shall be resolved in the courts of Santa Barbara,
California, with exclusive original jurisdiction in the County of Santa Barbara,
California.

13.10 Expenses. All fees and expenses (including fees of counsel, accountants
and other advisors) incurred by any Party in connection with the negotiation and
execution of this Agreement or the consummation of the transactions contemplated
hereby shall be borne by such Party.

[Signatures appear on following page.]

 

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IN WITNESS WHEREOF, each Party has caused this Agreement to be executed by its
duly authorized officer as of the date first above written.

 

“Seller:”

 

WEBMESSENGER, INC., a California corporation

 

By /s/ Vladimir B. Babadzhov                                        
            

      Vladimir B. Babadzhov, its Chief Executive Officer

 

    

“Purchaser:”

 

CALLWAVE, INC., a Delaware corporation

 

By /s/ Jeffrey M. Cavins                                        
                    

      Jeffrey M. Cavins, Chief Executive Officer

 

Address and Facsimile No. for Notices:

 

WebMessenger, Inc.

9444 Haines Canyon Avenue

Tujunga, CA 91024

 

Telephone No.: (818) 352-7800

Facsimile No.: (818) 352-5445

Email: val@webmessenger.com

 

With a copy to:

 

M. Sean McMillan, Esq.

Greenberg Traurig LLP

2450 Colorado Avenue

Suite 400E

Santa Monica, California 90404

 

Telephone No.: (310) 586-7700

Facsimile No.: (310) 586-7800

Email: mcmillan@gtlaw.com

 

    

Date

 

Address and Facsimile No. for Notices:

 

CallWave, Inc.

ATTN: Chief Financial Officer

136 West Canon Perdido, Suite A

Santa Barbara, CA 93101

 

Telephone No.: (805) 690-4035

Facsimile No.: (805) 456-6413

Email: Mark.Stubbs@callwave.com

 

With a copy to:

 

Michael E. Pfau, Esq.

Reicker, Pfau, Pyle & McRoy LLP

1421 State Street, Suite B

P.O. Box 1470

Santa Barbara, CA 93102-1470

 

Telephone No.: (805) 966-2440

Facsimile No.: (805) 966-3320

Email: mpfau@rppmh.com

 

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