Exhibit 10.1
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ASSET PURCHASE AGREEMENT
THIS AGREEMENT is entered into as of October 31, 2002 by and among
STARQUEST WIRELESS, INC., an Indiana corporation (the "Purchaser"), and
STARQUEST WIRELESS, LLC, XXXX XXXXXX ("Xxxxxx") and XXXXX XXXXXXX ("Xxxxxxx")
(collectively the "Sellers").
WITNESSETH:
WHEREAS, subject to the terms and conditions hereof, Purchaser desires
to purchase and Sellers desire to sell certain assets relating to or used or
useful in connection with Sellers' business of selling, installing or
maintaining satellite television systems (the "Business");
NOW, THEREFORE, in order to consummate said purchase and sale and in
consideration of the mutual agreements set forth herein, the Parties hereto
agree as follows:
SECTION 1
PURCHASE AND SALE OF ASSETS
1.1 Sale of Assets. Subject to the provisions of this Agreement,
Sellers agree to sell and Purchaser agrees to purchase, on such date (the
"Closing Date"), all of Sellers' right, title and interest in and to a complete
list of Sellers' customers current as of the Closing Date, all accounts
receivable, all sales agency and similar agreements with satellite television
providers (including, but not limited to, DirecTV, Echostar, Pegasus and
Musicland) ("Assumed Contracts"), the telephone numbers used in conjunction with
the operation of the Business and all goodwill relating to the Business as set
forth on the attached Schedule 1.1. All of the assets described or referred to
in this Section 1.1 are hereinafter referred to as the "Subject Assets".
1.2 Assumption of Liabilities It is expressly understood and agreed
that Purchaser is not assuming or becoming liable for any liabilities of Sellers
of any kind or nature at any time existing or asserted, whether known or
unknown, fixed, contingent or otherwise not specifically assumed herein by
Purchaser. Notwithstanding the foregoing, upon the sale and purchase of the
Subject Assets, Purchaser shall accept and assume all of Sellers' rights and
executory obligations under the Assumed Contracts to be performed after the
Closing Date (excluding any obligations or liabilities of Sellers under any
Assumed Contracts that were to have been performed, fulfilled or satisfied on or
prior to the Closing Date).
1.3 Purchase Price. In consideration of the sale by Sellers to
Purchaser of the Subject Assets, and subject to the other terms and conditions
contained herein, Purchaser agrees to pay at Closing, the sum of One Dollar
($1.00) (the "Purchase Price") to Sellers. In addition, Purchaser shall cause to
be issued to both Xxxxxx and Xxxxxxx within thirty (30) days of the date of
Closing, Three Hundred Thousand (300,000) shares of Fortune Diversified
Industries, Inc. ("FDVI") common stock (600,000 shares in total). Of the 600,000
shares, 100,000 shares shall be immediately vested in Xxxxxx and the balance
(500,000) of the shares shall be unvested and subject to the following
conditions:
(i) If Xxxxxxx is employed by Purchaser on March 31, 2003 and Purchaser
has attained a positive cumulative EBITDA during the period October 1, 2002 to
March 31, 2003, Xxxxxxx shall become immediately vested in 100,000 shares of
FDVI common stock.
(ii) If Xxxxxxx fails to become vested in the 100,000 shares of stock
pursuant to Section 1.3(i) above, and Xxxxxxx is employed by Purchaser after
March 31, 2003 and Purchaser has attained a positive cumulative EBITDA at any
time during the period October 1, 2002 to the earlier of x) Xxxxxxx'x
termination of employment; or y)
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September 30, 2004, Xxxxxxx shall become immediately vested in 100,000 shares of
the FDVI common stock.
(iii) If Xxxxxx or Xxxxxxx is employed by Purchaser on September 30,
2004 and Purchaser has attained a positive cumulative EBITDA during the period
of October 1, 2002 to September 30, 2004, he shall become immediately vested in
one (1) share of FDVI common stock for each $1.00 of cumulative EBITDA up to a
maximum of 200,000 shares each (cumulative EBITDA of at least $200,000.00).
(iv) EBITDA shall be defined as Purchaser's accrued earning before any
interest, income taxes, depreciation or amortization. EBITDA shall be calculated
by Purchaser's outside accountant, which calculation shall be final and binding
on Purchaser, Xxxxxx and Xxxxxxx. Each calculation shall be completed within
ninety (90) days after the end of the applicable period.
(v) If Xxxxxx'x or Xxxxxxx'x employment with Purchaser is, for any
reason, terminated prior to September 30, 2004, any unvested shares shall
immediately, without any further action by Xxxxxx, Xxxxxxx or Purchaser, revert
back to Fortune Diversified Industries, Inc. Fortune Diversified Industries,
Inc. shall promptly cancel said shares upon their reversion.
(vi) Prior to vesting, all of the unvested shares shall be retained by
Xxxxxxx Xxxxx brokerage account in care of Xxxx Xxxxxxx. Promptly upon vesting,
all of the newly vested shares shall be delivered to Xxxxxx or Xxxxxxx, as
applicable.
1.4 Transfer of Subject Assets. On the Closing Date, Sellers shall
deliver or cause to be delivered to Purchaser good and sufficient instruments of
transfer, transferring to Purchaser title to all of the Subject Assets. Such
instruments of transfer (a) shall be in the form and will contain the
warranties, covenants and other provisions (not inconsistent with the provisions
hereof) which are usual and customary for transferring the type of property
involved under the laws of the jurisdictions applicable to such transfers, (b)
shall be in form and substance reasonably satisfactory to Purchaser and its
counsel, and (c) except as otherwise provided in this Agreement, shall
effectively vest in Purchaser good and marketable title to all the Subject
Assets free and clear of all licenses, liens, encumbrances, mortgages and
security interests whatsoever (collectively "Liens").
1.5 Related Agreements. On the Closing Date, Purchaser and Sellers
shall have entered into: (a) the Xxxx of Sale made by Sellers in favor of
Purchaser (b) any other agreements necessary to the consummation of this
Agreement and the operation of the Business, which collectively are referred to
herein as the "Related Agreements."
SECTION 2
SELLERS' REPRESENTATIONS AND WARRANTIES
As a material inducement to Purchaser to enter into this Agreement and
consummate the transactions contemplated hereby, Sellers hereby, jointly and
severally, make to Purchaser the representations, warranties and covenants
contained in this Section 2 as of the date of this Agreement.
2.1 Authority of Sellers. Sellers have the full right, authority and
power to enter into this Agreement and each agreement, document and instrument
to be executed and delivered by or on behalf of Sellers pursuant to this
Agreement (the "Sellers Documents") and to carry out the transactions
contemplated hereby and thereby. The execution, delivery and performance by
Sellers of this Agreement and Sellers Documents have been duly authorized by all
necessary action of Sellers and no other action on the part of Sellers is
required in connection therewith. This Agreement and Sellers Documents executed
and delivered by Sellers pursuant to this Agreement constitute, or when executed
and delivered will constitute, valid and binding obligations of Sellers
enforceable in accordance with their respective terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency or other
similar laws affecting creditors' rights. The execution, delivery and
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performance by Sellers of this Agreement, Sellers Documents and the consummation
of the transactions contemplated hereby or thereby:
(a) Does not and will not violate any laws of the United States, or any
state or other jurisdiction applicable to Sellers or require Sellers to obtain
any approval, consent or waiver of, or make any filing with, any person or
entity (governmental or otherwise) that has not been obtained or made;
(b) Does not and will not result in a breach of, constitute a default
under, accelerate any obligation under, or give rise to a right of termination
of any indenture, loan or credit agreement or any other agreement, contract
instrument mortgage, lien, lease, permit authorization, order, writ, judgment,
injunction, decree, determination or arbitration award to which Sellers are a
party or by which any of the property of Sellers are bound or affected, or
result in the creation or imposition of any Lien on any of the Subject Assets.
2.2 Title to Assets. Sellers have good, marketable and indefeasible
title to all of the Subject Assets, free and clear of all claims, liabilities,
restrictions and Liens. Upon the sale, assignment, transfer and delivery of the
Subject Assets to Purchaser under and in accordance with this Agreement and
Sellers Documents, there will be vested in Purchaser good, marketable and
indefeasible title to the Subject Assets, free and clear of all Liens.
2.3 Sellers' Business Operations. Sellers have no liabilities of any
nature, whether accrued, absolute, contingent or otherwise, asserted or
unasserted, known or unknown (including without limitation liabilities as
guarantor or otherwise with respect to obligations of others, or liabilities for
taxes due or then accrued or to become due or contingent or potential
liabilities relating to activities of the Business or the conduct of the
Business) which will materially and adversely affect the conduct of the Business
subsequent to Closing.
2.4 Investment Representations and Covenants.
(i) Xxxxxx and Xxxxxxx each understand that as of the Closing Date the
FDVI Stock will not be registered under the Securities Act of 1933, as amended
(the "Securities Act"), or any state securities laws on the grounds that the
issuance of the FDVI Stock is exempt from registration pursuant to Section 4(2)
of the Securities Act or Regulation D promulgated under the Securities Act and
applicable state securities laws, and that the reliance of FDVI on such
exemptions is predicated in part on Xxxxxx'x and Xxxxxxx'x representations,
warranties, covenants and acknowledgments set forth in this Section 2.4.
(ii) Xxxxxx and Xxxxxxx each represent and warrant that he is an
"accredited investor" as defined in Rule 501 promulgated as part of Regulation D
under the Securities Act.
(iii) Xxxxxx and Xxxxxxx each represent and warrant that the FDVI Stock
to be acquired by him upon consummation of the transactions contemplated herein
will be acquired by him for his own account, not as a nominee or agent, and
without a view to resale or other distribution within the meaning of the
Securities Act and the rules and regulations thereunder, and that he will not
distribute all or any portion of the FDVI Stock in violation of the Securities
Act.
(iv) Xxxxxx and Xxxxxxx each acknowledge that the shares of FDVI Stock
are characterized as "restricted securities" under the federal securities laws
inasmuch as they are being acquired in a transaction not involving a public
offering and that under such laws and applicable regulations such securities may
be resold without registration under the Securities Act, only in certain limited
circumstances.
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(v) Xxxxxx and Xxxxxxx each represent and warrant that he has such
knowledge and experience in financial and business matters such that he is
capable of evaluating the merits and risks of his investment in the FDVI Stock.
(vi) Xxxxxx and Xxxxxxx each are in a financial position to afford to
hold the FDVI Stock indefinitely, Xxxxxx'x and Xxxxxxx'x financial condition
being such that each of them is not presently under (and does not contemplate
any future) necessity or constraint to dispose of the FDVI Stock to satisfy any
existing or contemplated debt or undertaking. Xxxxxx and Xxxxxxx each recognize
that it may not be possible for him to liquidate his investment in the FDVI
Stock and, accordingly, each of them may have to hold the FDVI Stock, and bear
the economic risk of this investment, indefinitely.
(vii) Xxxxxx and Xxxxxxx each understand that neither the Securities
and Exchange Commission nor any other federal or state agency has recommended,
approved or endorsed the purchase of the FDVI Stock as an investment.
(viii) Xxxxxx and Xxxxxxx each confirm that the FDVI Stock was not
offered to him by any means of general solicitation or general advertising, and
that Xxxxxx and Xxxxxxx have each received no representations, warranties or
written communications with respect to the FDVI Stock other than those contained
or described in this Agreement.
(ix) Xxxxxx and Xxxxxxx each acknowledge that he has been provided or
that FDVI has made available to him copies of FDVI's most recent Form 10-KSB,
Form 10-QSB and any Form 8-KS and Form 4s filed since the most recent Form
10-QSB was filed.
(x) Xxxxxx and Xxxxxxx each acknowledge that FDVI has given him a
reasonable opportunity to ask questions and receive answers concerning his
receipt of FDVI Stock and to obtain any additional information which FDVI
possesses or can acquire without unreasonable effort or expense that is
necessary to verify the accuracy of information.
2.5 Accounts Receivable. Schedule 2.5 provides a correct and complete
accounts receivable aging of StarQuest Wireless, LLC as of September 30, 2002.
All accounts receivable existing as of the Closing Date are bona fide, valid and
enforceable claims not subject to any setoffs or counterclaims. In addition, all
accounts receivable will be collectible in accordance with their terms within
ninety (90) days of the Date of Closing by Purchaser exerting commercially
reasonable collection efforts.
2.6 Sales Agency Agreements. Schedule 2.6 provides a correct and
complete copy of a sales agency or similar agreements with DirecTV, Echostar,
Pegasus and Musicland. Each sales agency agreement to which StarQuest Wireless,
LLC is a party or by which it or its assets are bound was made in the ordinary
course of business, is in full force and effect and is valid, binding and
enforceable against StarQuest Wireless, LLC and, to the knowledge of Sellers,
the other parties thereto, each in accordance with its terms, except as the same
may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other laws affecting the enforcement of creditor's rights in
general, and general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or law). StarQuest
Wireless, LLC has performed all material obligations required to be performed by
it under each sales agency agreement as of the Closing Date, and no condition
exists or event has occurred which with notice or lapse of time would constitute
a material default or a basis for delay or non-performance by StarQuest
Wireless, LLC or, to the knowledge of Sellers, by any other party thereto. Each
other party to each sales agency agreement has consented or been given
sufficient notice (where such consent or notice is necessary) that the same
shall remain in full force and effect following the Closing.
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2.7 Taxes.
(a) All federal, state, local and foreign returns and reports relating
to Taxes (as defined herein), or extensions relating thereto, required to be
filed by or with respect to the Business on or before Closing have been timely
and properly filed, and all such returns and reports are materially correct and
complete as to the period then ending.
(b) All federal, state, local and foreign income, profits, franchise,
sales, use, payroll, premium, occupancy, property, severance, excise,
withholding, customs, unemployment, transfer and other taxes, including
interest, additions to tax and penalties (collectively "Taxes") due or properly
shown to be due on any return with respect to taxable periods ending on or prior
to, and the portion of any interim period up to, the date hereof have been fully
and timely paid or, in the case of Taxes not yet due, provided for and there are
no levies, liens, or other encumbrances relating to Taxes existing, threatened
or pending with respect to any of the Subject Assets.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF PURCHASER
As a material inducement to Sellers to enter into this Agreement and
consummate the transactions contemplated hereby, Purchaser hereby makes the
representations and warranties to Sellers contained in this Section 3 as of the
date of this Agreement.
3.1 Organization of Purchaser. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Indiana with full corporate power to own or lease its properties and to conduct
its business in the manner and in the places where such properties are owned or
leased or such business is conducted.
3.2 Authority of Purchaser. Purchaser has full right, authority and
power to enter into this Agreement and each agreement, document and instrument
to be executed and delivered by Purchaser pursuant to this Agreement (the
"Purchaser Documents") and to carry out the transactions contemplated hereby and
thereby. The execution, delivery and performance by Purchaser of this Agreement
and Purchaser Documents have been duly authorized by all necessary action of
Purchaser and no other action on the part of Purchaser is required in connection
therewith. This Agreement and Purchaser Documents executed and delivered by
Purchaser pursuant to this Agreement constitute, or when executed and delivered
will constitute, valid and binding obligations of Purchaser enforceable in
accordance with their terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency or other similar laws affecting creditor's
rights. The execution, delivery and performance by Purchaser of this Agreement
and Purchaser Documents and the consummation of the transactions contemplated
hereby or thereby:
(a) does not and will not violate any provision of the Articles of
Incorporation or By-laws of Purchaser, in each case as amended to date;
(b) does not and will not violate any laws of the United States, or any
state or other jurisdiction applicable to Purchaser or require Purchaser to
obtain any material approval, consent or waiver of, or make any filing with, any
person or entity (governmental or otherwise) that has not been obtained or made;
and
(c) does not and will not result in a breach of, constitute a default
under, accelerate any obligation under, or give rise to a right of termination
of any indenture or loan or credit agreement or any other agreement, contract,
instrument, mortgage, lien, lease, permit, authorization, order, writ, judgment,
injunction decree, determination or arbitration award to which Purchaser is a
party and which is material to the business and financial condition of
Purchaser.
The officers or agents who execute this Agreement and the Related
Agreements on behalf of Purchaser have and shall have all requisite power to do
so in the name of and on behalf of Purchaser.
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SECTION 4
CLOSING
4.1 Time. The Closing hereunder shall occur on or before October ___,
2002 and shall be effective as of 12:01 a.m. on October 9, 2002.
4.2 Deliveries.
(a) At the Closing, Purchaser shall receive all of the following, in
form and substance reasonably satisfactory to Purchaser (it being agreed by
Purchaser that the documents attached hereto as exhibits are satisfactory in
form to Purchaser):
(i) a xxxx of sale and assignment in the form of Exhibit A (the "Xxxx
of Sale"), executed by Sellers; and
(ii) Employment Agreements in the form of Exhibit B executed by Xxxxxx
and Xxxxxxx. ---------
(b) Sellers shall have received from Purchaser all of the following, in
form and substance reasonably satisfactory to Sellers (it being agreed by
Sellers that the documents attached hereto as exhibits are satisfactory in form
to Sellers): (i) payment of the Purchase Price;
(ii) certificates representing the FDVI Stock, duly and validly issued
in the name of Xxxxxx and Xxxxxxx (300,000 shares each) within thirty (30) days
of the date of Closing;
(iii) Employment Agreements in the form of Exhibit B executed by
Purchaser; and
(iv) a certified copy of resolutions of the Board of Directors of
Purchaser authorizing the execution, delivery and performance of this Agreement
and the Related Agreements to which Purchaser is a party.
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SECTION 5
MISCELLANEOUS
5.1 Fees and Expenses. Each of the parties will bear its own expenses
in connection with the negotiation and the consummation of the transactions
contemplated by this Agreement, including but not limited to fees for attorneys,
accountants and other advisers.
5.2 Governing Law. This Agreement and the Related Agreements and all
disputes, whether equitable or legal in nature, that arise under this Agreement
that relate in any way to the rights or duties of the parties hereto or thereto,
shall be governed by the internal laws of the State of Indiana, without regard
to the conflict or choice of laws provisions thereof.
5.3 Entire Agreement. This Agreement and the schedules and exhibits
referred to herein are complete and reflect the entire agreement of the parties
with respect to their subject matter and supersede all previous written or oral
negotiations, commitments and writings. No promises, representations,
understandings, warranties and agreements have been made by either of the
parties except as referred to in this Agreement or in such schedules or exhibits
or Related Agreements, and all inducements to the making of this Agreement
relied upon by either party hereto have been expressed therein or herein or in
such schedules or exhibits or Related Agreements.
5.4 Assignability; Binding Effect. This Agreement shall be assignable
by Purchaser to a creditworthy corporation, partnership or entity, within its
control group provided that such assignment shall not release Purchaser of its
obligations hereunder prior to the assignment. This Agreement shall be binding
upon and enforceable by, and shall inure to the benefit of, the parties hereto
and their respective successors and permitted assigns. The rights, but not the
obligations of Seller, may be assigned by Seller to any person or entity upon
written notice to Purchaser.
5.5 Captions and Gender. The captions in this Agreement are for
convenience only and shall not affect the construction on or interpretation of
any term or provision hereof. The use in this Agreement of the masculine pronoun
in reference to a party hereto shall be deemed to include the feminine or neuter
pronoun, as the context may require.
5.6 Execution in Counterparts. For the convenience of the parties and
to facilitate execution, this Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document.
5.7 Amendments. This Agreement may not be amended or modified, nor may
compliance with any condition or covenant set forth herein be waived, except by
a writing duly and validly executed by each party hereto, or in the case of a
waiver, the party waiving compliance.
5.8 Severability. In the event that any provision or any portion of any
provision of this Agreement shall be held to be void or unenforceable, then the
remaining provisions of this Agreement (and the remaining portion of any
provision held to be void or unenforceable in part only) shall continue in full
force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date set forth above.
STARQUEST WIRELESS, LLC
/s/ Xxxx Xxxxxx
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Xxxx Xxxxxx
/s/ Xxxxx Xxxxxxx
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Xxxxx Xxxxxxx
STARQUEST WIRELESS, INC.
By: /s/ Xxxxxx X. Xxxxxxx
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