EXHIBIT 10.1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated as of July 1, 2002, (the
"Agreement") is entered into by and between INVESTCO, INC., a Nevada corporation
("Buyer") and HORIZON TELEPHONE SYSTEMS, INC., a Texas corporation ("Seller")
relating to the purchase and sale of all of the assets of Seller's Houston,
Texas office as hereinafter described.
PREAMBLE
WHEREAS, Seller engages in the business of distributing and providing
business communications systems, voicemail systems and networking applications
(the "Business"); and
WHEREAS, Seller, in connection with its operation of the Business, owns
and lawfully uses various assets associated with its Houston, Texas office as
more fully described below (the "Assets"); and
WHEREAS, Seller desires to convey, sell and assign to Buyer all of
Seller's right, title and interest in and to the Assets, upon the terms and
conditions contained in this Agreement; and
WHEREAS, Buyer desires to purchase the Assets as described in an
unaudited balance sheet and attached documentation upon the terms and conditions
contained in this Agreement.
NOW THEREFORE, in consideration of the mutual promises and other good
and valuable consideration, the sufficiency of which is hereby acknowledged, the
parties agree as follows:
1. SALE AND PURCHASE OF ASSETS.
1.1 SALE AND PURCHASE OF ASSETS. Subject to the terms and conditions of this
Agreement, at the closing described in Section 6 (the "Closing"), Seller shall
sell to Buyer, and Buyer shall purchase from Seller, those assets of Seller
identified on Schedule 1.1 (the "Assets").
1.2 LIABILITIES ASSUMED AND EXCLUDED. In connection with Buyer's purchase of the
Assets, Buyer shall not assume and will not become responsible for the payment
of any indebtedness of Seller (the "Liabilities"), except that which is incurred
during the normal business of the Houston office, unless agreed to by this
agreement and identified on Schedule 1.2 (the "Liabilities").
2. PURCHASE PRICE; PAYMENT; ALLOCATION.
2.1 PURCHASE PRICE. The purchase price for the Assets shall be paid by delivery
to Seller or its designee(s), at the Closing, of the following:
(1) CONVERTIBLE PREFERRED STOCK of the Company that converts into an
aggregate of 600,000 shares of common stock of Buyer (the "Investco Shares");
and
(2) the sum of $100,000, payable in cash, as follows: $25,000 at time
of closing; $25,000 within five (5) working days from the date of closing and
$50,000 within 30 days from date of closing.
(3) Seller shall have piggyback registration rights on the shares
identified in 2.1(1) above in sufficient quantity to ensure payment of $150,000,
but in no case would it be less than 100,000 shares. Buyer agrees to file
registration statement of said shares within 180 days of closing of this
agreement.
(4) Buyer agrees that if the registration statement has not been filed
within 120 days of closing of this agreement the Seller may, at Sellers option,
demand cash payment of $150,000 balance due Seller by the Buyer. In addition,
because of the delay in payment, Seller is entitled to retain 100,000 shares of
the Company and return only 500,000 shares to the Buyer. Also, the 100,000
shares would be included in the Company's registration statement when filed. The
Seller has 10 business days to elect this option from the Buyer. If Seller does
not notify the Buyer within 10 business days following the 120-day deadline that
it wishes to receive a cash payment for the balance, the Seller will be
obligated to keep the 600,000 shares and will retain their piggyback
registration rights.
2.2 THE INVESTCO SHARES. The Investco Shares have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and such securities
may not be sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of absent registration under the Securities Act or the availability of
an applicable exemption there from. Each certificate evidencing any of the
Investco Shares shall bear the following or substantially similar legend:
These securities have not been registered under the
Securities Act of 1933, as amended, or any state securities
laws and may not be sold or otherwise transferred or disposed
of except pursuant to an effective registration statement
under any applicable federal and state securities laws, or an
opinion of counsel satisfactory to the Company that an
exemption from registration is available.
3. REPRESENTATIONS AND WARRANTIES OF SELLER AND THE PRINCIPALS. Except as
otherwise set forth in a disclosure schedule delivered by Seller at the time
this Agreement is executed and delivered (the "Seller Disclosure Schedule"),
Seller, jointly and severally, hereby makes the following representations and
warranties to Buyer, as of the date hereof and as of the Closing Date which may
take place simultaneously. The Seller Disclosure Schedule will be arranged in
paragraphs corresponding to the lettered and numbered paragraphs contained in
this Agreement.
3.1 ORGANIZATION AND GOOD STANDING. Seller is a corporation duly incorporated,
validly existing and in good standing under the laws of its jurisdiction of
formation, with full corporate power and authority to own, lease and operate its
respective business and properties and to carry on its respective business in
the places and in the manner as presently conducted or proposed to be conducted.
Seller is in good standing as a foreign corporation in each jurisdiction in
which the properties owned, leased or operated, or the business conducted, by it
requires such qualification except where the failure to so qualify would not
have a material adverse effect on the Assets, the Business or consummation of
the transactions contemplated hereby (a "Seller Material Adverse Effect").
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3.2 AUTHORITY AND ENFORCEMENT. Seller has all requisite corporate power and
authority to execute and deliver this Agreement, and to consummate the
transactions contemplated hereby. Seller has taken all corporate action
necessary for the execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby, and this Agreement constitutes the
valid and binding obligation of Seller, enforceable against Seller in accordance
with its terms, except as may be affected by bankruptcy, insolvency, moratoria
or other similar laws affecting the enforcement of creditors' rights generally
and subject to the qualification that the availability of equitable remedies is
subject to the discretion of the court before which any proceeding therefore may
be brought.
3.3 NO CONFLICTS OR DEFAULTS. The execution and delivery of this Agreement by
Seller and consummation of the transactions contemplated hereby do not and shall
not (a) contravene the Certificate of Incorporation or Bylaws of Seller or (b)
with or without the giving of notice or the passage of time (i) violate,
conflict with, or result in a material breach of, or a material default or loss
of rights under, any covenant, agreement, mortgage, indenture, lease,
instrument, permit or license to which Seller is a party or by which Seller or
any of the Assets is bound, or any judgment, order or decree, or any law, rule
or regulation to which Seller or any of the Assets is subject, (ii) result in
the creation of, or give any party the right to create, any lien, charge,
encumbrance, security interest or any other right or adverse interest ("Liens")
upon any of the Assets, (iii) terminate or give any party the right to
terminate, amend, abandon or refuse to perform, any material agreement,
arrangement or commitment relating to the Business or the Assets, or (iv) result
in a Seller Material Adverse Effect.
3.4 CONSENTS OF THIRD PARTIES. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby by Seller
does not require the consent of any person, or such consent has or will be
obtained, in writing, prior to the Closing.
3.5 ACTIONS PENDING. There is no action, suit, claim, investigation or
proceeding pending or, to the knowledge of Seller, threatened against Seller,
which questions the validity of this Agreement or the transactions contemplated
hereby or any action taken or to be taken pursuant hereto or thereto. There is
no action, suit, claim, investigation or proceeding pending or, to the knowledge
of Seller, threatened against or involving Seller or any of its properties or
assets. There are no outstanding orders, judgments, injunctions, awards or
decrees of any court, arbitrator or governmental or regulatory body against
Seller or affecting its assets.
3.6 TITLE TO ASSETS. Seller has either good and marketable title to, or valid
and enforceable leasehold interest in the Assets free as represented in the
attached schedules and all balance sheets and clear of all Liens, other than
those disclosed in the Seller Balance Sheets. No person or entity has any right
or option to acquire any of the Assets. Seller has the right to operate all of
its facilities in its present locations and the operation of such facilities
does not violate the material provisions of (a) any agreement to which Seller is
a party, (b) the requirements of applicable laws, rules or regulations, and/or
(c) any order of any court or regulatory body of competent jurisdiction that is
binding on Seller, the Business or any of the Assets.
3.7 BALANCE SHEETS. Seller has delivered or, prior to the Closing, will deliver
to Buyer the balance sheets of Seller as at December 31, 2001, and the related
statements of operations, including the report of current month, The Seller and
Buyer recognize that all Balance Sheet documentation is unaudited and both
parties agree to accept unaudited documentation for
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purposes of evaluation and closing. Balance Sheet documentation has been or will
be prepared in accordance with U.S. generally accepted accounting principles
("GAAP") applied on a consistent basis throughout all periods presented, and
present fairly the financial position of the Houston Sales Office as of the date
and for the periods indicated.
3.8 NO UNDISCLOSED LIABILITIES. Seller has and will have no liabilities,
obligations, claims or losses (whether liquidated or unliquidated, secured or
unsecured, absolute, accrued, contingent or otherwise) that would be required to
be disclosed on a balance sheet of Seller (including the notes thereto) in
conformity with GAAP which are not disclosed in the Seller's Balance Sheets,
other than those incurred in the ordinary course of Seller's business since the
date of the Seller Balance Sheets, which, individually or in the aggregate, do
not or would not result in a Seller Material Adverse Effect.
3.9 BOOKS AND RECORDS. The books, records and documents of Seller accurately
reflect in all material respects the information relating to the Business, the
location and collection of its assets, and the nature of all transactions giving
rise to the obligations or accounts receivable of Seller. Seller (a) maintains
books and records that, in reasonable detail, accurately and fairly reflect
transactions and dispositions of its assets, and (b) has devised and maintains a
system of accounting controls sufficient to provide reasonable assurances that
transactions are recorded so as to permit balance sheets to be prepared in
accordance with GAAP and maintain accountability for assets (including cash).
3.10 CONDITION AND SUFFICIENCY OF ASSETS. The Assets are in good operating
condition and repair (reasonable wear and tear excepted), and are adequate for
the uses to which it is being put, and none of the Assets is in need of
maintenance or repairs except for ordinary, routine maintenance and repairs that
are not material in nature or cost. The Assets are sufficient for the continued
conduct of the Business after the Closing, in substantially the same manner as
conducted prior to the Closing.
3.11 INVENTORY. The Inventory of Seller is owned by Seller free and clear of all
Liens, and consists of raw materials and supplies, manufactured and processed
parts, and finished goods, all of which is merchantable and fit for the purpose
for which it was procured or manufactured, and none of which is slow-moving,
obsolete, damaged or defective, subject only to the reserve for inventory
write-down set forth on the face of the most recent balance sheet included in
the Seller Balance Sheets.
3.12 CONTRACTS. The Seller Disclosure Schedule identifies each material
agreement to which Seller is a party. Each such agreement is in full force and
effect. No party to any such agreement is in default of any material obligation
there under and Seller has received no notice of the termination of any such
agreement prior to its scheduled termination date. No event has occurred or
circumstance exists that (with or without notice or lapse of time) may
contravene, conflict with, or result in a violation or breach of, or give Seller
or other person the right to declare a default or exercise any remedy under, or
to accelerate the maturity or performance of, or to cancel, terminate, or
modify, any material agreement to which Seller is a party. Seller has not given
to or received from any other person, any notice or other communication (whether
oral or written) regarding any actual, alleged, possible, or potential violation
or breach of, or default under, any material contract to which Seller is a
party. As it relates to existing Dealer Agreements Seller agrees to support the
efforts of Buyer to establish their own Dealer Agreements and line of credits.
Seller will facilitate sales of Tochiba and Nec and equipment until such dealer
agreements are established by selling to Buyer at prescribed price, for a period
not longer than 90 days of closing.
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3.13 ACCOUNTS RECEIVABLE. The accounts receivable of Seller included in the
Assets are (a) bona fide accounts receivable created in the ordinary course of
business, (b) not subject to counterclaim or setoff, (c) carried net of
discounts and rebates, and (d) current and collectible in the ordinary course of
business.
3.14 INTELLECTUAL PROPERTY. To the extent that the Assets include any right,
title and/or interest in and to trademarks, copyrights, trade names, service
marks, trade secrets, proprietary processes, business methods or similar
tangible or intangible property ("Intellectual Property"), such Intellectual
Property is owned by Seller, free and clear of all Liens or to the lesser extent
disclosed in the Seller Balance Sheets. To the best of the Seller's knowledge,
such Intellectual Property does not infringe upon or otherwise violate the
rights of any third person, and Seller has received no notice of any such
infringement or violation. To the extent that any such Intellectual Property is
licensed by Seller to any third party, the license is in full force and effect,
no party to the license is in material breach or violation of the license
agreement and Seller has no knowledge that any such Intellectual Property is
being used in violation of Seller's proprietary rights. To the extent that any
such Intellectual Property is licensed to Seller by any third party, the license
is in full force and effect, no party to the license is in material breach or
violation of the license agreement and Seller is not using any such Intellectual
Property in violation of the license agreement.
3.15 INSURANCE.
(1) Buyer will assume all insurance policies covering the Assets or the
Business.
3.16 COMPLIANCE WITH LAWS.
(1) Seller is, and at all times has been, in material compliance with
each law, rule and/or regulation ("Legal Requirement") that is or was applicable
to it or to the conduct or operation of its business or the ownership or use of
any of its assets.
(2) No event has occurred or circumstance exists that (with or without
notice or lapse of time) (i) may constitute or result in a material violation by
Seller of, or a failure on the part of Seller to comply with, any Legal
Requirement, or (ii) may give rise to any obligation on the part of Seller to
undertake, or to bear all or any portion of the cost of, any remedial action of
any nature; and
(3) Seller has not received any notice or other communication (whether
oral or written) from any governmental or regulatory authority ("Authority")
having or purporting to have jurisdiction over Seller or any of its assets
regarding (i) any actual, alleged, possible, or potential violation of, or
failure to comply with, any Legal Requirement, or (ii) any actual, alleged,
possible, or potential obligation on the part of Seller to undertake, or to bear
all or any portion of the cost of, any remedial action of any nature.
(4) Seller is, and at all times has been, in material compliance with
all of the terms and requirements of each license, permit and/or authorization
issued by any Authority ("Governmental Authorization") that is held by Seller or
that otherwise relates to the Business.
(5) Each Governmental Authorization is valid and in full force and
effect.
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(6) No event has occurred or circumstance exists that may (with or
without notice or lapse of time) (i) constitute or result directly or indirectly
in a material violation of or a material failure to comply with any term or
requirement of any such Governmental Authorization, or (ii) result directly or
indirectly in the revocation, withdrawal, suspension, cancellation, or
termination of, or any modification to, any such Governmental Authorization.
(7) All Governmental Authorizations collectively constitute all of the
Governmental Authorizations necessary to permit Seller to lawfully conduct and
operate the Business and to permit Seller to own and use the Assets.
3.17 TAX MATTERS. Seller has filed or caused to be filed (on a timely basis
since inception) all federal, state and local tax returns that are or were
required to be filed by or with respect to it pursuant to applicable Legal
Requirements ("Tax Returns"). Copies of all such Tax Returns filed have been
made available to Buyer. Seller has paid, made provision for payment or has
included on its most recent balance sheet included in the Seller Balance Sheets,
all taxes that have or may have become due pursuant to those Tax Returns or
otherwise, or pursuant to any assessment received by Seller, except such taxes,
if any, as are being contested in good faith and as to which adequate reserves
have been provided in the Seller Balance Sheets. All such tax returns are true,
complete and accurate. No tax return of Seller has been audited or is currently
under audit, nor has Seller or any Principal been notified that any such audit
will or may take place.
3.18 EMPLOYEES. Seller is not a party to any collective bargaining arrangements
or agreements covering any of its employees nor is Seller in breach of any
employment contract, agreement regarding proprietary information, noncompetition
agreement, no solicitation agreement, confidentiality agreement, or any other
similar contract or restrictive covenant, relating to the right of any officer,
employee or consultant to be employed or engaged by Seller. No officer,
consultant or key employee of Seller whose termination, either individually or
in the aggregate, would have a Seller Material Adverse Effect, has terminated
or, to the knowledge of Seller has any present intention of terminating his or
her employment or engagement with Seller.
3.19 EMPLOYEE BENEFITS. Buyer and Seller has no obligation to, or arrangement
with, former and current employees for bonuses, incentive compensation,
vacation, severance pay, sick pay, sick leave, insurance, service awards,
relocation, disability or other benefits whether written or oral as provided by
Seller.
3.20 ENVIRONMENTAL, HEALTH, AND SAFETY MATTERS.
(1) Seller has complied and is in compliance with all federal and state
environmental laws, rules and regulations ("Environmental Laws") applicable to
its business.
(2) Without limiting the generality of the foregoing, Seller has
obtained and complied with, and is in compliance with, all permits, licenses and
other authorizations that are required pursuant to Environmental Laws for the
occupation of its facilities and the operation of its business.
(3) Seller has not received any written or oral notice, report or other
information regarding any actual or alleged violation of Environmental Laws, or
any liabilities or potential liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise), including any investigatory, remedial or corrective
obligations, relating to any of them or its facilities arising under any
Environmental Law.
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(4) None of the following exists at any property or facility owned or
operated by Seller: (i) underground storage tanks, (ii) asbestos-containing
material in any form or condition, (iii) materials or equipment containing
polychlorinated biphenyls, or (iv) landfills, surface impoundments, or disposal
areas.
(5) Seller has not treated, stored, disposed of, arranged for or
permitted the disposal of, transported, handled, or released any substance,
including without limitation any hazardous 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 liabilities,
including any liability for response costs, corrective action costs, personal
injury, property damage, natural resources damages or attorney fees, pursuant to
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"), the Solid Waste Disposal Act, as amended ("SWDA")
or any other Environmental Law.
(6) Seller has not, either expressly or by operation of law, assumed or
undertaken any liability, including without limitation any obligation for
corrective or remedial action, of any other person relating to CERCLA, SWDA or
any other Environmental Law.
(7) No facts, events or conditions relating to the past or present
facilities, properties or operations of Seller will prevent, hinder or limit
continued compliance with CERCLA, SWDA or any other Environmental Law, give rise
to any investigatory, remedial or corrective obligations pursuant to any
Environmental Law, or give rise to any other liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise) pursuant to any Environmental
Law, including without limitation any relating to onsite or offsite releases or
threatened releases of hazardous materials, substances or wastes, personal
injury, property damage or natural resources damage.
3.21 CERTAIN PAYMENTS. Neither Seller nor any officer, director, shareholder,
agent, or employee of Seller, has any other person associated with or acting for
or on behalf of Seller, directly or indirectly (a) made any contribution, gift,
bribe, rebate, payoff, influence payment, kickback, or other payment to any
person, private or public, regardless of form, whether in money, property, or
services (i) to obtain favorable treatment in securing business, (ii) to pay for
favorable treatment for business secured, (iii) to obtain special concessions or
for special concessions already obtained, for or in respect of Seller, or (iv)
in violation of any Legal Requirement, (b) established or maintained any fund or
asset that has not been recorded in the books and records of Seller.
3.22 ABSENCE OF CERTAIN DEVELOPMENTS. Since the date of the most recent balance
sheet included in the Seller Balance Sheets, Seller has not:
(1) issued any stock, bonds or other corporate securities or any
rights, options or warrants with respect thereto;
(2) borrowed any amount or incurred or become subject to any
liabilities (absolute or contingent) except current liabilities incurred in the
ordinary course of business which are comparable in nature and amount to the
current liabilities incurred in the ordinary course of business during the
comparable portion of its prior fiscal year, as adjusted to reflect the current
nature and volume of Seller's business;
(3) discharged or satisfied any lien or encumbrance or paid any
obligation or liability (absolute or contingent), other than current liabilities
paid in the ordinary course of business;
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(4) declared or made any payment or distribution of cash or other
property to stockholders with respect to its stock, or purchased or redeemed, or
made any agreements so to purchase or redeem, any shares of its capital stock;
(5) sold, assigned or transferred any other tangible assets, or
canceled any debts or claims, except in the ordinary course of business;
(6) sold, assigned or transferred any patent rights, trademarks, trade
names, copyrights, trade secrets or other intangible assets or Intellectual
Property rights;
(7) suffered any substantial losses or waived any rights of material
value, whether or not in the ordinary course of business;
(8) made any changes in employee compensation except in the ordinary
course of business and consistent with past practices;
(9) made capital expenditures or commitments therefore that aggregate
in excess of $50,000;
(10) entered into any other material transaction, whether or not in the
ordinary course of business;
(11) suffered any material damage, destruction or casualty loss,
whether or not covered by insurance;
(12) suffered a Seller Material Adverse Effect;
(13) experienced any material problems with labor or management in
connection with the terms and conditions of their employment; or
(14) entered into any agreement that could result in any of the
foregoing.
3.23 ACKNOWLEDGMENT OF RISKS. Seller recognizes and acknowledges that the
transactions contemplated by this Agreement are speculative and involve a high
degree of risk. Such risks include, but are not limited to, those risks
identified in Buyer's periodic reports filed with the Securities and Exchange
Commission and press releases.
3.24 SECURITIES LAWS. Seller acknowledges that:
(1) Except as set forth herein, Buyer has not made any representations
or warranties with respect to Buyer or rendered any legal, tax or investment
advice.
(2) Neither Seller nor any shareholder of Seller has authorized any
person or institution to act as its Purchaser Representative (as that term is
defined in Regulation D) in connection with this transaction. Seller and such
shareholders have such knowledge and experience in financial, investment and
business matters that it is capable of evaluating the merits and risks of its
proposed acquisition of the Investco Shares. Seller has consulted with such
independent legal counsel or other advisers, as it has deemed appropriate to
assist the undersigned in evaluating its proposed investment in Buyer.
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(3) Seller and such shareholders (i) have adequate means of providing
for their current financial needs and foreseeable contingencies, and have no
need for liquidity of their investment in the Investco Shares; and (ii) can
afford (A) to hold unregistered securities for an indefinite period of time, as
may be required, and (B) to sustain a complete loss of their entire investment
in the Investco Shares.
(4) Seller and such shareholders have been afforded the opportunity to
ask questions of, and receive answers from the officers and/or directors of
Buyer, concerning the terms and conditions of this transaction and to obtain any
additional information, to the extent that Buyer possesses such information or
can acquire it without unreasonable effort or expense, necessary to verify the
accuracy of the information furnished. Seller and such shareholders have availed
themselves of such opportunity to the extent they consider appropriate in order
to permit them to evaluate the merits and risks of an investment in the Investco
Shares. Seller understands that all documents, records and books pertaining to
this investment have been made available for inspection, and that the books and
records of Buyer will be available upon reasonable notice for inspection by
Seller during reasonable business hours at its principal place of business.
(5) Neither Buyer nor Seller has undertaken to register the Investco
Shares under the Act, and the Investco Shares are "restricted securities" within
the meaning of the Act.
(6) The Investco Shares have not been registered under the Act in
reliance on an exemption for transactions by an issuer not involving a public
offering, and sale of the Investco Shares has not been passed upon or the merits
thereof endorsed or approved by the United States Securities and Exchange
Commission (the "SEC") or any state regulatory authorities.
(7) Buyer may place the following or similar legend on the face of the
certificates evidencing the Securities:
"These securities have not been registered under the
Securities Act of 1933, as amended, or any state securities
laws and may not be sold or otherwise transferred or disposed
of except pursuant to an effective registration statement
under any applicable federal and state securities laws, or an
opinion of counsel satisfactory to the Company that an
exemption from registration is available."
3.25 DISCLOSURE. The representations, warranties and acknowledgments of Seller
set forth herein are true, complete and accurate in all material respects, do
not omit to state any material fact, or omit any fact necessary to make such
representations, warranties and acknowledgments, in light of the circumstances
under which they are made, not misleading.
4. REPRESENTATIONS AND WARRANTIES OF BUYER. Except as otherwise set forth in a
disclosure schedule delivered by Buyer at the time this Agreement is executed
(the "Buyer Disclosure Schedule"), Buyer hereby makes the following
representations and warranties to Seller, as of the date hereof and as of the
Closing Date. The Buyer Disclosure Schedule will be arranged in paragraphs
corresponding to the lettered and numbered paragraphs contained in this
Agreement.
4.1 ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly incorporated,
validly existing and in good standing under the laws of its jurisdiction of
formation, with full corporate
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power and authority to own, lease and operate its business and properties and to
carry on its business in the places and in the manner as presently conducted or
proposed to be conducted. Buyer is in good standing as a foreign corporation in
each jurisdiction in which the properties owned, leased or operated, or the
business conducted, by it requires such qualification, except where the failure
to so qualify would not have a material adverse effect on the business of Buyer,
taken as a whole, or consummation of the transactions contemplated hereby (a
"Buyer Material Adverse Effect").
4.2 AUTHORITY AND ENFORCEMENT. Buyer has all requisite corporate power and
authority to execute and deliver this Agreement, and to consummate the
transactions contemplated hereby. Buyer has taken all corporate action necessary
for the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, and this Agreement constitutes the valid and
binding obligation of Buyer, enforceable in accordance with its terms, except as
may be affected by bankruptcy, insolvency, moratoria or other similar laws
affecting the enforcement of creditors' rights generally and subject to the
qualification that the availability of equitable remedies is subject to the
discretion of the court before which any proceeding therefore may be brought.
4.3 NO CONFLICTS OR DEFAULTS. The execution and delivery of this Agreement by
Buyer and consummation of the transactions contemplated hereby do not and shall
not (a) contravene the Certificate of Incorporation or Bylaws of Buyer or (b)
with or without the giving of notice or the passage of time (i) violate,
conflict with, or result in a material breach of, or a material default or loss
of rights under, any covenant, agreement, mortgage, indenture, lease,
instrument, permit or license to which Buyer is a party or by which Buyer is
bound, or any judgment, order or decree, or any law, rule or regulation to which
Buyer is subject, (ii) result in the creation of, or give any party the right to
create, any Lien upon any assets or properties of Buyer, (iii) terminate or give
any party the right to terminate, amend, abandon or refuse to perform, any
material agreement, arrangement or commitment relating to which Buyer is a
party, or (iv) result in a Buyer Material Adverse Effect.
4.4 CONSENTS OF THIRD PARTIES. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby by Buyer
does not require the consent of any person, or such consent has been or will be
obtained, in writing, prior to the Closing.
4.5 INVESTCO SHARES. The Investco Shares have been duly authorized, and upon
issuance pursuant to the provisions hereof, will be validly issued, fully paid
and non-assessable.
4.6 ACTIONS PENDING. There is no action, suit, claim, investigation or
proceeding pending or, to the knowledge of Buyer, threatened against Buyer,
which questions the validity of this Agreement or the transactions contemplated
hereby or any action taken or to be taken pursuant hereto or thereto.
4.7 DISCLOSURE. The representations, warranties and acknowledgments of Buyer set
forth herein are true, complete and accurate in all material respects and do not
omit any fact necessary to make such representations, warranties and
acknowledgments not misleading.
(1) The Company and its former principal chief executive officer,
Xxxxxx X. Xxxxx, are under investigation by the Securities and Exchange
Commission for potential violations of the federal securities laws. Xx. Xxxxx
has resigned in all capacities with the Company prior to the
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acquisition described above being completed. While the outcome of that
investigation cannot be predicted, it is likely that some level of sanctions
will be imposed upon and agreed to by the Xx. Xxxxx.
4.8 SEC FILINGS. The Company is not current in its filing of its required
periodic reports with the Securities and Exchange Commission, and is obligated
to file its Annual Report on Form 10-KSB for the year ended December 31, 2001
and its Quarterly Report on Form 10-QSB for the quarterly period ended March 31,
2002, and June 30, 2002. The Company believes that it will ultimately be able to
effect compliance with its reporting responsibilities under the Securities
Exchange Act of 1934.
5. CONDITIONS TO CLOSING.
5.1 CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE. The obligation of Buyer
and Seller to consummate the transactions contemplated by this Agreement is
subject to satisfaction of the following conditions on or prior to the Closing
Date:
(1) The representations and warranties of Seller set forth in Section 3
above shall be true and correct in all material respects at and as of the
Closing Date.
(2) Seller shall have performed and complied with all of its covenants
hereunder in all material respects through the Closing Date.
(3) No action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would (i)
prevent or adversely affect Buyer's or Seller's consummation of any of the
transactions contemplated by this Agreement or (ii) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation (and no such injunction, judgment, order, decree, ruling, or charge
shall be in effect).
(4) No material adverse change shall have taken place with respect to
the Assets, and no event shall have occurred, that could result in a Seller
Material Adverse Effect.
5.2 CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE. The obligation of
Seller to consummate the transactions contemplated by this Agreement is subject
to satisfaction of the following conditions on or prior to the Closing Date:
(1) The representations and warranties of Buyer set forth in Section 4
above shall be true and correct in all material respects at and as of the
Closing Date.
(2) Buyer shall each have performed and complied with all of its
covenants hereunder in all material respects through the Closing Date.
(3) Other than the identified items, no action, suit, or proceeding
shall be pending or threatened before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator wherein an unfavorable injunction, judgment, order,
decree, ruling, or charge would (i) prevent or adversely affect Seller's
consummation of any of the transactions contemplated by this Agreement or (ii)
cause any of the transactions contemplated by
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this Agreement to be rescinded following consummation (and no such injunction,
judgment, order, decree, ruling, or charge shall be in effect);
(4) No material adverse change shall have taken place with respect to
Buyer and no event shall have occurred, that could result in a Buyer Material
Adverse Effect.
6. CLOSING; CLOSING DATE. A closing of the transactions contemplated hereby (the
"Closing") will take place at 10:00 am on July 1, 2002, at the offices of
counsel to the Seller, or at such other place, date and time that is agreed upon
by Seller and Buyer. The date on which the Closing is held is referred to in
this Agreement as the "Closing Date."
7. DOCUMENTS TO BE DELIVERED AT THE CLOSING.
7.1 DOCUMENTS TO BE DELIVERED BY SELLER. At the Closing, Seller shall deliver,
or cause to be delivered, to Buyer the following:
(1) a duly executed xxxx of sale, dated the Closing Date, transferring
to Buyer all of Seller's right, title and interest in and to the Assets together
with possession of the Assets;
(2) a duly executed assignment, transferring to Buyer all of Seller's
right, title and interest in and to the contracts, agreements and contract
rights included in the Assets, accompanied by any third party consents
contemplated by Section 3.10.
(3) a copy of resolutions of the board of directors and shareholders of
Seller, authorizing the execution, delivery and performance of this Agreement by
Seller; and
(4) such other certificates, documents and instruments as Buyer may
have reasonably requested in connection with the transaction contemplated
hereby.
7.2 DOCUMENTS TO BE DELIVERED BY BUYER. At the Closing, Buyer shall deliver to
Seller the following:
(1) a copy of resolutions of the board of directors and shareholders,
if required, of Buyer authorizing the execution, delivery and performance of
this Agreement by Buyer and Seller,
(2) certificates evidencing the Investco Shares, or irrevocable
instructions to Seller's' transfer agent to issue the Investco Shares to Seller
or its shareholders;
(3) such other certificates, documents and instruments as Seller may
have reasonably requested in connection with the transaction contemplated
hereby; and
(4) Resignations of Xxxxxx Xxxxx and any other officers and directors
of Buyer, and documents evidencing the election of Xx. Xxxxxx Xxxxxxx as
Chairman of the Board and Chief Executive of Buyer as well as the election of
other officers and directors as specified by Seller.
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8. ADDITIONAL COVENANTS.
8.1 Access to Books and Records. During the course of this transaction, from the
date hereof through Closing, each party agrees to make available for inspection
all corporate books, records and assets, and otherwise afford to each other and
their respective representatives, reasonable access to all documentation ad
other information concerning the business, financial and legal conditions of
each other for the purpose of conducting a due diligence investigation thereof.
Such due diligence investigation shall be for the purpose of satisfying each
party as to the business, financial and legal condition of each other for the
purpose of determining the desirability of consummating the proposed
transaction. The parties further agree to keep confidential and not use for
their own benefit, except in accordance with this Agreement any information or
documentation obtained in connection with any such investigation.
8.2 Further Assurances. If, at any time after the Closing, the parties shall
consider or be advised that any further deeds, assignments or assurances in law
or that any other things are necessary, desirable or proper to complete the
transactions contemplated hereby in accordance with the terms of this agreement
or to vest, perfect or confirm, of record or otherwise, the title to any
property or rights of the parties hereto, the parties agree that their proper
officers and directors shall execute and deliver all such proper deeds,
assignments and assurances in law and do all things necessary, desirable or
proper to vest, perfect or confirm title to such property or rights and
otherwise to carry out the purpose of this Agreement, and that the proper
officers and directors the parties are fully authorized to take any and all such
action.
No Public Disclosure. Without the prior written consent of the other, which
written consent will not be unreasonably withheld, no party to this Agreement
will, and will each cause their respective representatives not to, make any
release to the press or other public disclosure with respect to either the fact
that discussions or negotiations have taken place concerning the transactions
contemplated by this Agreement, the existence or contents of this Agreement or
any prior correspondence relating to this transactions contemplated by this
Agreement, except for such public disclosure as may be necessary, in the written
opinion of outside counsel (reasonably satisfactory to the other parties) for
the party proposing to make the disclosure not to be in violation of or default
under any applicable law, regulation or governmental order. If either party
proposes to make any disclosure based upon such an opinion, that party will
deliver a copy of such opinion to the other party, together with the text of the
proposed disclosure, as far in advance of its disclosure as is practicable, and
will in good faith consult with and consider the suggestions of the other party
concerning the nature and scope of the information it proposes to disclose.
9. INDEMNIFICATION AND RELATED MATTERS.
9.1 INDEMNIFICATION BY SELLER. Seller hereby indemnifies and holds Buyer
harmless from and against any and all damages, losses, liabilities, obligations,
costs or expenses incurred by Buyer and arising out of the breach of any
representation or warranty of Seller hereunder, and/or Seller's failure to
perform any covenant or obligation required to be performed by it hereunder.
9.2 INDEMNIFICATION BY BUYER. Buyer hereby indemnifies and holds Seller harmless
from and against any and all damages, losses, liabilities, obligations, costs or
expenses incurred by Seller and arising out of the breach of any representation
or warranty of Buyer hereunder, and/or Buyer's failure to perform any covenant
or obligation required to be performed by it hereunder.
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9.3 PROCEDURE FOR INDEMNIFICATION. Any party entitled to indemnification under
this Article IX (an "Indemnified Party") will give written notice to the
indemnifying party of any matters giving rise to a claim for indemnification;
provided, that the failure of any party entitled to indemnification hereunder to
give notice as provided herein shall not relieve the indemnifying party of its
obligations under this Article IX except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice. In case any action,
proceeding or claim is brought against an Indemnified Party in respect of which
indemnification is sought hereunder, the indemnifying party shall be entitled to
participate in and, unless in the reasonable judgment of counsel to the
Indemnified Party a conflict of interest between it and the indemnifying party
may exist with respect of such action, proceeding or claim, to assume the
defense thereof with counsel reasonably satisfactory to the Indemnified Party.
In the event that the indemnifying party advises an Indemnified Party that it
will contest such a claim for indemnification hereunder, or fails, within 30
days of receipt of any indemnification notice to notify, in writing, such person
of its election to defend, settle or compromise, at its sole cost and expense,
any action, proceeding or claim (or discontinues its defense at any time after
it commences such defense), then the Indemnified Party may, at its option,
defend, settle or otherwise compromise or pay such action or claim. In any
event, unless and until the indemnifying party elects in writing to assume and
does so assume the defense of any such claim, proceeding or action, the
Indemnified Party's costs and expenses arising out of the defense, settlement or
compromise of any such action, claim or proceeding shall be losses subject to
indemnification hereunder. The Indemnified Party shall cooperate fully with the
indemnifying party in connection with any settlement negotiations or defense of
any such action or claim by the indemnifying party and shall furnish to the
indemnifying party all information reasonably available to the Indemnified
Party, which relates to such action or claim. The indemnifying party shall keep
the Indemnified Party fully apprised at all times as to the status of the
defense or any settlement negotiations with respect thereto. If the indemnifying
party elects to defend any such action or claim, then the Indemnified Party
shall be entitled to participate in such defense with counsel of its choice at
its sole cost and expense. The indemnifying party shall not be liable for any
settlement of any action, claim or proceeding affected without its prior written
consent. Notwithstanding anything in this Article IX to the contrary, the
indemnifying party shall not, without the Indemnified Party's prior written
consent, settle or compromise any claim or consent to entry of any judgment in
respect thereof which imposes any future obligation on the Indemnified Party or
which does not include, as an unconditional term thereof, the giving by the
claimant or the plaintiff to the Indemnified Party of a release from all
liability in respect of such claim. The indemnity agreements contained herein
shall be in addition to (a) any cause of action or similar rights of the
Indemnified Party against the indemnifying party or others, and (b) any
liabilities the indemnifying party may be subject to.
9.4 TIME FOR ASSERTION. No party to this Agreement shall have any liability (for
indemnification or otherwise) with respect to any representation, warranty or
covenant or obligation to be performed and complied hereunder, unless notice of
any such liability is provided on or before 12 months from the date hereof.
9.5 BASKET. Notwithstanding any conflicting or inconsistent provisions hereof,
Seller shall not be liable in damages, indemnity or otherwise to Buyer or Seller
in respect of the inaccuracy or breach of any representations, warranties,
covenants or agreements herein, except to the extent that the damages to Buyer
and/or Seller, singularly or in the aggregate, exceed the sum of $25,000.
Notwithstanding any conflicting or inconsistent provisions hereof, Buyer and
Seller shall not be liable in damages, indemnity or otherwise to Seller in
respect to the inaccuracy or breach of any representations, warranties,
covenants or agreements herein except to the extent that damages to Seller
exceed, individually or in the aggregate, the sum of $25,000.
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9.6 FURTHER ASSURANCES. Buyer agrees to be responsible for all legal fees that
may arise from a lawsuit by unrelated parties against Seller, an example being a
class action lawsuit against Seller, whereby the Seller may be named in the
action or lawsuit against Seller. The Seller provides the same coverage of legal
fees that may arise from similar action against Seller whereby the Buyer may be
named in the action or lawsuit. The costs covered are all legal, preparation and
court costs.
10. TERMINATION.
10.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be terminated by mutual
consent of the parties, in writing, signed by each of the parties hereto.
10.2 TERMINATION DUE TO LAPSE OF TIME. This Agreement may be terminated by
either party if the Closing does not occur prior to July 30, 2002; provided,
however, that a party wholly or partially responsible for the Closing not
occurring prior to such date may not terminate this Agreement pursuant to this
subsection.
10.3 TERMINATION BY BUYER. This Agreement may be terminated by Buyer by written
notice to Seller, in the event of a material breach of any representation or
warranty of Seller, or in the event Seller fails to perform any material
covenant or obligation required to be performed by it hereunder and such failure
remains uncured for ten days following such written notice.
10.4 TERMINATION BY SELLER. This Agreement may be terminated by Seller by
written notice to Buyer, in the event of a material breach of any representation
or warranty of Buyer hereunder, or in the event Buyer fails to perform any
material covenant or obligation required to be performed by it hereunder and
such failure remains uncured for ten days following such written notice.
10.5 EFFECT OF TERMINATION. Termination of this Agreement under Section 10.2,
10.3 or 10.4 hereof shall not preclude the parties from pursuing all remedies
available to them under applicable law arising by reason of such termination.
11. MISCELLANEOUS.
11.1 FINDERS. Buyer on the one hand, and Seller, on the other hand, represent
and warrant that they have not employed or utilized the services of any broker
or finder in connection with this Agreement or the transactions contemplated by
it. Seller shall indemnify and hold Buyer harmless from and against any and all
claims for brokers' commissions made by any party as a result of this Agreement
and the transaction contemplated hereunder to the extent that any such
commission was incurred, or alleged to have been incurred, by, through or under
Seller. Buyer shall indemnify and hold Seller harmless from and against any and
all claims for brokers' commissions made by any party as a result of this
Agreement and transaction contemplated hereunder to the extent that any such
commission was incurred, or alleged to have been incurred, by, through or under
Buyer.
11.2 EXPENSES. Except as otherwise specifically provided in this Agreement,
Buyer and Seller shall bear their own respective expenses incurred in connection
with this Agreement and in connection with all obligations required to be
performed by each of them under this Agreement.
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11.3 ENTIRE AGREEMENT; No Waiver. This Agreement, the Schedules and any
instruments and agreements to be executed pursuant to this Agreement, set forth
the entire understanding of the parties hereto with respect to its subject
matter, merges and supersedes all prior and contemporaneous understandings with
respect to its subject matter and may not be waived or modified, in whole or in
part, except by a writing signed by each of the parties hereto. No waiver of any
provision of this Agreement in any instance shall be deemed to be a waiver of
the same or any other provision in any other instance. Failure of any party to
enforce any provision of this Agreement shall not be construed as a waiver of
its rights under such provision.
11.4 JURISDICTION AND GOVERNING LAW. This Agreement shall in all respects be
governed by and construed in accordance with the laws of the State of Texas are
applicable to agreements made and fully to be performed in such state, without
giving effect to conflicts of law principles. The parties further: (a) agree
that any legal suit, action or proceeding arising out of or relating to this
Agreement shall be instituted exclusively in any Federal or State court of
competent jurisdiction within the County of Xxxxxx, State of Texas (b) waive any
objection that they may have now or hereafter to the venue of any such suit,
action or proceeding, and (c) irrevocably consent to the in person jurisdiction
of any Federal or State court of competent jurisdiction within the County of
Xxxxxx, State of Texas in any such suit, action or proceeding. The parties each
further agree to accept and acknowledge service of any and all process which may
be served in any such suit, action or proceeding in a Federal or State court of
competent jurisdiction within the County of Xxxxxx, State of Texas, and that
service of process upon the parties mailed by certified mail to their respective
addresses shall be deemed in every respect effective service of process upon the
parties, in any action or proceeding.
11.5 CONSTRUCTION. Headings contained in this Agreement are for convenience only
and shall not be used in the interpretation of this Agreement. References herein
to Articles, Sections and Exhibits are to the articles, sections and exhibits,
respectively, of this Agreement. The Seller Disclosure Schedule and the Buyer
Disclosure Schedule are hereby incorporated herein by reference and made a part
of this Agreement. As used herein, the singular includes the plural, and the
masculine, feminine and neuter gender each includes the others where the context
so indicates.
11.6 NOTICES. All notices and other communications under this Agreement shall be
in writing and shall be deemed given when delivered personally (including by
confirmed legible telecopier transmission) or mailed by certified mail, return
receipt requested, to the parties at the following addresses (or to such address
as a party may have specified by notice given to the other party pursuant to
this provision):
If to Seller, c/o:
Horizon Telephone Systems - Houston, Inc.
00000 Xxxxxxxx Xxxxx
Xxx Xxxxxxx, XX 00000
Attention: Xxx Xxxxxxx
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
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If to Buyer, to:
Investco, Inc.
0000 Xxxxx Xxxxxxx Xxxxxxx
Xxxxx 000
Xxxx Xxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx
Telephone No.: 000-000-0000
Telecopy No.: 000-000-0000
11.7 SEPARABILITY. In the event that any provision hereof would, under
applicable law, be invalid or enforceable in any respect, such provision shall
be construed by modifying or limiting it so as to be valid and enforceable to
the maximum extent compatible with, and permissible under, applicable law. The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement,
which shall remain in full force and effect.
11.8 BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon and inure
to the benefit of the parties and their respective successors and permitted
assigns. Nothing in this Agreement shall create or be deemed to create any third
party beneficiary rights in any person or entity not a party to this Agreement.
No assignment of this Agreement or of any rights or obligation hereunder may be
made by either party (by operation of law or otherwise) without the prior
written consent of the other and any attempted assignment without the required
consent shall be void; provided, however, that no such consent shall be required
of Buyer to assign part or all of its rights under this Agreement to one or more
of its subsidiaries or affiliates.
11.9 COUNTERPARTS. This Agreement may be executed in counterparts, each of which
shall be an original, but which together shall constitute one and the same
Agreement.
HORIZON TELEPHONE SYSTEMS -
HOUSTON, INC.
By: /s/Xxx Xxxxxxx, President
INVESTCO, INC.
By: /s/Xxxxxx Xxxxxxx, Chairman/CEO
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