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EXHIBIT 4.10
MASTER ACQUISITION AGREEMENT
This Master Acquisition Agreement (this "Agreement"), dated as of July
1, 1998, is made by and among DTR Associates Limited Partnership (d/b/a Direct
to Retail) ("DTR"), DTR Associates, Inc., Xxxxxx Xxxxxx, Xx., Xxxxxxx X.
Xxxxxxx, Xx. and SmarTalk TeleServices, Inc., a California corporation ("SMTK").
WHEREAS, SmarTalk is engaged in the business of selling pre-paid
telecommunications products and services, including Prepaid Cellular Phones (as
defined herein) sold directly to consumers.
WHEREAS, DTR has specialized expertise in the sale of consumer products
sold through retail distribution, including with respect to the Retail Accounts
(as defined herein).
WHEREAS, DTR desires to sell, and SmarTalk desires to purchase, all of
the assets of DTR comprising the Business (as defined herein), on the terms and
conditions specified in this Agreement.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements contained herein, and for other good and
valuable consideration had and received, the receipt and sufficiency of which
are hereby acknowledged, and subject to the terms and conditions set forth
herein, the parties to this Agreement hereby covenant and agree as follows:
I. PRODUCTIVITY OF BUSINESS. During the term of this Agreement, (i) DTR
will be SMTK's retail account representative with respect to prepaid
cellular phones utilizing the handset based Telemac technology and
Xxxxxxxx hardware ("Prepaid Cellular Phones") to the accounts listed on
Exhibit A, (ii) DTR will be permitted to sell prepaid phone cards for
cellular carrier service, whether furnished exclusively or in
conjunction with landline long distance service, and whether offered by
SMTK as a proprietary SMTK-branded card or by an authorized third party,
authorized by SMTK for sale in connection with the Prepaid Cellular
Phones ("Cellular Cards"), and (iii) DTR shall act as SMTK's master
representative for those accounts designated by a double asterisk on
Exhibit A (the "Retail Accounts"). DTR will pay and be solely
responsible for all commissions, fees, costs and expenses payable to
sales representatives, sub-representatives or otherwise incurred by DTR
in connection with the accounts listed on Exhibit A. SMTK and DTR will
cooperate in good faith to transfer the existing sales representative
relationships with respect to the Retail Accounts from SMTK to DTR,
pursuant to a mutually acceptable assignment and assumption agreement.
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II. PURCHASE OF ASSETS. Pursuant to a Xxxx of Sale and Assignment in
substantially the form of Exhibit B, and Assignment and Assumption
Agreements in substantially the form of Exhibit C (which shall be
executed within a reasonable period of time after the execution of this
Agreement and which thereafter shall become attached to and become a
part of this Agreement), DTR shall transfer, convey, assign and deliver
to SMTK, and SMTK shall purchase and assume, all of the assets, rights
and benefits of DTR related to its ownership, marketing, sale or
distribution of any prepaid products or any telecommunications products
(the "Acquired Assets"). Without limiting the generality of the
foregoing, the Acquired Assets shall include (collectively, the
"Business") (i) all of DTR's rights, claims and assets related to its
business and legal relationships with Philips Consumer Communications
and its affiliates ("Xxxxxxxx"), Telemac Cellular Corporation and its
affiliates ("Telemac"), Shared Technologies Cellular, Inc. and its
affiliates ("STC"), Worldwide Direct, Inc. and its affiliates ("WWD"),
(ii) any other assets or rights owned by DTR relating to Prepaid
Cellular Phones or the business of WWD (including all inventory,
equipment, intellectual property or other assets, but excluding all
cash, accounts receivable, office supplies, office equipment, personal
computers, commercially available software and expressly excluding all
rights to use of the name "Direct To Retail" or "DTR" or the associated
logos, trademarks or service marks). SMTK shall also have the right, but
not the obligation, to solicit and hire any of DTR's employees (other
than senior management personnel of DTR) employed in connection with the
Business, and DTR shall cooperate and assist SMTK in connection with
such matters. At any time, SMTK shall also have the right to return all
or any portion of the Acquired Assets to DTR, and such returned assets
shall thereafter no longer be considered part of the "Acquired Assets".
III. NO LIABILITIES. Notwithstanding anything to the contrary contained
herein, in no event will SMTK acquire or be responsible for any
obligations or liabilities, known or unknown, contingent or absolute, of
DTR in connection with the Business arising prior to July 1, 1998. SMTK
shall be responsible for any and all performance obligations arising in
the ordinary course of the Business under contractual rights sold and
transferred hereby and any and all liabilities of the Business accruing
after July 1, 1998. In accordance with Section VIII.J, DTR, Xxxxxx
Xxxxxx, Xx. and Xxxxxxx X. Xxxxxxx, Xx. will indemnify, defend and hold
SMTK harmless against any and all liabilities not expressly assumed by
SMTK hereby.
IV. CONSIDERATION. In full consideration for the purchase of the Acquired
Assets, SMTK shall pay to DTR the following:
A. Fixed Portion. Upon execution of this Agreement:
1. $5,000,000 payable in newly issued voting common stock,
no par value, of SMTK (the "Shares"), valued at the
closing price on the NASDAQ national market on the last
trading day immediately
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preceding the date of issuance of such Shares. SMTK
will cause a shelf registration statement to be filed as
promptly as practicable in order to effect the
registration of the Shares and will use its reasonable
best efforts to cause such registration statement to
become effective on or before December 31, 1998 and
remain continuously in effect with respect to any
additional Shares that may be issued to DTR by SMTK
pursuant to the terms and conditions of this Agreement.
2. A non-interest bearing promissory note in substantially
the form attached hereto as Exhibit D in the principal
amount of $5,000,000 cash payable in installments of:
$1,000,000 on August 30, 1998; $1,000,000 on September
30, 1998; $1,000,000 on October 30, 1998; $1,000,000 on
November 30, 1998; and $1,000,000 on December 30, 1998.
B. Earn-Out bonus Portion:
1. If calendar year 1998 SMTK sales of Prepaid Cellular
Phones sold by DTR or its representatives through the
accounts listed on Exhibit A exceed 200,000 units (net
of all promotions, free goods and returns) ("Unit Net
Sales"), SMTK will pay to DTR $2,000,000 payable, at
SMTK's option, in cash or in additional Shares (valued
at the closing price on the NASDAQ national market on
the last trading day immediately preceding the date of
issuance of such Shares). Any payment due under this
Section IV.B.1 shall be made no later than February 28,
1999.
2. During calendar year 1999, SMTK will pay to DTR an
additional $1,250,000 for each 250,000 unit increment in
Unit Net Sales sold through the accounts listed on
Exhibit A, payable, at SMTK's option in cash or in
additional Shares (valued at the closing price on the
NASDAQ national market on the last day of the month in
which such 250,000th incremental unit is sold);
provided, however, in no event shall the payments earned
under this Section IV.B.2 exceed $5,000,000 in the
aggregate. Any payments due under this Section IV.B.2
shall be made no later than sixty (60) days following
the last day of the calendar quarter during which such
250,000th incremental unit is sold.
3. If calendar year 1999 Unit Net Sales through the
accounts listed on Exhibit A exceed 1,200,000 units in
the aggregate, SMTK will pay to DTR an additional
$2,000,000 payable, at SMTK's option, in cash or in
additional Shares (valued at the closing price on the
NASDAQ national market on the last trading day
immediately preceding the date of issuance of such
Shares). Any payment due
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under this Section IV.B.3 shall be made no later than
February 28, 2000.
C. Earn-Out Percentage Portion. During the term of this Agreement:
1. SMTK shall pay 5% commission to DTR in connection with
SMTK's "net sales" (less any promotions, free goods or
returns) of Prepaid Cellular Phones sold by DTR or its
representatives to the accounts listed on Exhibit A.
2. SMTK shall pay 4% commission to DTR in connection with
SMTK's "net sales" (less any promotions, free goods or
returns) of SMTK prepaid phone cards exclusively for
landline long distance sold by DTR or its
representatives to the accounts listed on Exhibit A.
3. From and after January 1, 1999, SMTK shall pay 1%
commission to DTR in connection with SMTK's "net sales"
(less any promotions, free goods or returns) of Cellular
Cards sold by DTR or its representatives to the accounts
listed on Exhibit A.
4. All payments under this Section IV.C.1-3 with respect to
the Earn-Out Percentage Portion shall be made (i) on net
30 day terms, with respect to unit shipments that occur
within the first 15 calendar days of any calendar month,
and (ii) on net 45 day terms, with respect to unit
shipments that occur on or between the 15th to the 31st
calendar days of any calendar month.
V. SHARED PAYMENT. DTR represents it is owed approximately $2,500,000 due
from STC. If DTR receives from STC payment of $2,000,000 (80% of the
amount owed) on or before December 31, 1998, then SMTK's obligation
under either Section IV.B.2 or Section IV.B.3 with respect to the
Earn-Out Bonus Portion payable for 1999 Unit Net Sales will be reduced
by $1,000,000; provided, however, that (i) such $1,000,000 reduction
shall offset the last payment of the Earn-Out Bonus Portion reasonably
expected to be made with respect to 1999 Units Net Sales and (ii) if
actual 1999 Unit Net Sales are inadequate to permit SMTK to receive full
credit for such $1,000,000 reduction, then DTR will promptly refund or
pay to SMTK any shortfall up to the full amount of such $1,000,000
reduction. DTR will use its reasonable best efforts to collect all its
receivables from STC on or before December 31, 1998.
VI. NON-COMPETE. During the term of this Agreement and for a period of
three (3) years thereafter, except as provided herein or without the
prior written approval of SMTK, DTR, Xxxxxx Xxxxxx, Xx., Xxxxxxx X.
Xxxxxxx, Xx. and Xxxxxxxxx XxXxxxxxx will not, directly or indirectly,
alone or as a partner, joint venturer, officer, director, employee,
consultant, agent, independent contractor, guarantor, financeer,
consultant, option holder or stockholder (other than as an option holder
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or stockholder of less than five percent (5%) of the issued and
outstanding stock of any publicly-held corporation whose common stock is
listed on a national securities exchange or traded on NASDAQ) of any
company or business, participate in, engage in or have a financial
interest in any "Competitive Business" within the United States. For
purposes of the foregoing, "Competitive Business" shall mean any
business, firm, corporation or other business entity related to the
manufacture, marketing, sale or distribution of any telecommunications
products or services, all prepaid products or services and any business
now or hereafter competing with any products or services of SMTK or WWD.
Notwithstanding the foregoing, DTR shall be permitted to present to SMTK
opportunities in writing for the sale at retail of new prepaid products
or services. Such notice shall set forth a reasonable description of
such product and a request by DTR that SMTK approve the sale by DTR of
such products. Upon receipt of such notice, SMTK may, in its sole
discretion, within thirty (30) days of such notice, approve or refuse to
approve in writing the sale by DTR of such products. Any such written
approval with respect to a product once given shall be irrevocable. It
is expressly understood that SMTK would not enter into this Agreement
without the guarantees contained in this paragraph, all of which are
acknowledged by DTR and the individuals listed above to be reasonable as
to duration, geographic coverage and scope.
VII. TERMINATION. SMTK may terminate DTR's sales representative arrangement
and its distribution rights under this Agreement (i) without cause, at
any time upon 30 days advance written notice, provided that SMTK will
thereafter remain obligated to make all payments to DTR otherwise
payable hereunder, whether accruing before or after the date of such
termination, (ii) only for cause (as defined below), immediately without
any further obligation or liability whatsoever to DTR, except for the
obligation to make payments due hereunder properly accruing before the
date of such termination, subject to SMTK's right of offset, or (iii) if
SMTK becomes subject to telecommunications laws or regulations that
would materially conflict with the terms of this Agreement or
substantially prohibit SmarTalk's ability to perform hereunder. For
purposes hereof, "cause" shall be defined as (i) a willful breach by DTR
or its affiliates of any material provision of this Agreement, (ii)
commission by DTR or its affiliates of any criminal or fraudulent act in
connection with SMTK or the Business, or (iii) DTR filing any bankruptcy
proceeding or becoming insolvent, making an assignment for the benefit
of creditors, or failing to pay any indebtedness when due hereunder.
VIII. OTHER PROVISIONS.
A. This Agrement supersedes (i) the Joint Marketing Agreement,
dated February 13, 1998, between WWD and DTR and (ii) the letter
agreement, dated June 10, 1998 between SMTK, DTR and Xxxxxx
Xxxxxx Xx., both of which are hereby expressly terminated and of
no further force or effect. Neither SMTK, WWD, DTR or Xxxxxx
Xxxxxx Xx. shall have any liability to the others based of the
terms of such Joint Marketing Agreement or such letter
agreement.
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B. During 1998, pursuant to the current lease, WWD may continue to
lease all of WWD's existing office space from DTR, at the rate
currently offered to WWD. With respect to calendar year 1999,
DTR and WWD shall amend the lease to provide rent for calendar
year 1999 at one-half of the monthly fair market rental value,
as determined by a third party mutually acceptable to SMTK and
DTR.
C. SMTK will provide at least 90 days advance notice to DTR before
initiating any product change in the Prepaid Cellular Phones as
currently offered for sale by WWD. From time to time, SMTK will
advise DTR of revisions to SMTK's marketing and distribution
strategies to assist DTR in performing its obligations under
this Agreement.
D. SMTK shall be entitled to establish pricing (as well as any
discounts, promotions, credit or return policies) for the
Prepaid Cellular Phones, in it sole discretion, provided that
such pricing is afforded to DTR on a "most favored nations"
basis. SMTK shall also be entitled to establish pricing (as
well as any discounts, promotions, credit or return policies),
in its sole discretion, for all SMTK prepaid wireless and
landline phone cards, whether sold in connection with the
Prepaid Cellular Phones or otherwise.
E. SMTK shall be entitled to all Acquired Assets of DTR as of the
date hereof relating to Prepaid Cellular Phones or the Business.
DTR represents and warrants to SMTK as follows:
1. DTR is validly organized, in good standing and
authorized to enter into this Agreement. This Agreement
constitutes a binding and enforceable Agreement against
DTR or the other signatories hereto.
2. DTR holds good and marketable title to all of the
Acquired Assets, free and clear of any liens, but
subject to any security interests of record, all of
which DTR shall have satisfied, discharged and released
on or before August 1, 1998.
3. The Acquired Assets are all of the assets owned by DTR
relating to the Business, including the conduct of DTR's
business relating to Prepaid Cellular Phones.
4. The payments and other consideration provided to DTR by
SMTK hereunder represent full and complete payment for
(i) all services contemplated to be rendered by DTR
hereunder, (ii) all of the Acquired Assets and (iii) all
of the assets relating to the Business.
F. DTR will use its reasonable best efforts to: (i) assist SMTK in
the development and expansion of its business and of the
business of WWD through the performance in good faith of DTR's
duties and obligations under this Agreement,
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(ii) maximize the value of the business of SMTK and WWD, (iii)
sell Prepaid Cellular Phones and SMTK products and services to
accounts listed on Exhibit A, and (iv) do all other things
necessary or desirable to carry out the purposes and intent of
this Agreement.
G. SMTK represents and warrants to DTR that SMTK is validly
organized, in good standing and authorized to enter into this
Agreement. This Agreement constitutes a binding and enforceable
agreement against SMTK or the other signatories hereto.
H. DTR will provide specified services and merchandising, as
mutually agreed upon with SMTK, to support the procurement of
accounts and increase the sell through of accounts. DTR and
SMTK will cooperate in good faith to develop mutually acceptable
sales plans and strategies designed to increase DTR's sales
performance under this Agreement. DTR will follow all of SMTK's
reasonable directions in connection with selling the Prepaid
Cellular Phones under this Agreement.
I. Without the prior written consent of the non-disclosing party,
DTR and SmarTalk will not, or at any time thereafter for any
reason, in any fashion, form or manner, either directly or
indirectly, divulge, disclose or communicate to any person,
firm, corporation or other business entity, in any manner
whatsoever, any confidential information or trade secrets
concerning the business of DTR or SMTK.
J. DTR, Xxxxxx Xxxxxx, Xx. and Xxxxxxx X. Xxxxxxx, Xx. shall
severally indemnify, defend and hold harmless SMTK and its
affiliates from any inaccuracy in any of DTR's representations
or warranties to SMTK or for any breach by DTR of any of the
provisions of this Agreement; provided, however, in no event
shall DTR or its affiliates be responsible for liabilities
arising from the negligence or willful misconduct of SMTK.
K. SMTK shall indemnify, defend and hold harmless DTR and its
affiliates from any inaccuracy in any of SMTK's representations
or warranties to DTR or for any breach by SMTK of any of the
provisions of this Agreement; provided, however, in no event
shall SMTK be responsible for liabilities arising from the
negligence or willful misconduct DTR or its affiliates.
L. This Agreement and the duties hereunder may not be delegated or
assigned, except with the prior written consent of the other
parties hereto. This Agreement shall remain binding upon
successors and permitted assigns, including successors and
assigns to the business of SMTK or DTR, whether by merger,
purchase of assets or otherwise.
M. Nothing in this Agreement shall create any relationship between
the parties other than that as independent contractor, and no
party shall have any authority to hire
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any person on behalf of any other party, and the employees and
agents of any party will not be considered or construed as being
employees of any other party. No party will, and has no
authority to, enter into any contract or agreement in the name
of or on behalf of any other party. No party will, expressly or
by implication, suggest to any third party that it has any
relationship with any other party other than that of an
independent contractor, nor that it has any authority to enter
into agreements or contracts on behalf of, or in the name of,
any other party.
N. Each party acknowledges the exclusive ownership, right, title
and interest of the other parties (directly or indirectly) in
and to the trademarks and servicemarks, and the patents,
copyrights and software (in each case whether or not registered)
of such other party, and each party acknowledges that nothing in
this Agreement is intended to transfer any ownership, rights,
title or interest in such intellectual property to the other
parties. No party will at any time do or cause to be done any
act or thing contesting or impairing in any way any such other
party's right, title and interest, and no party will, or permit
any employee or other agent to, use any other party's equipment,
software, trademarks, trade names, service marks, licenses,
patents, trade secrets or other intellectual property or other
property for any purpose or activity except as expressly
authorized or contemplated by this Agreement.
O. This Agreement contains the entire agreement among the parties
with respect to the subject matter hereof and shall be
enforceable in accordance with the internal substantive laws of
the State of Ohio.
P. The term of this Agreement will commence as of the date first
written above and end on December 31, 1999, unless earlier
terminated or extended by mutual agreement of the parties. Upon
expiration or termination of this Agreement, all terms and
provisions (except for provisions relating to confidentiality,
indemnification, non-competition or the obligations to make
payments properly accruing before such termination) will cease
and be of no further force and effect, and no party will have
any obligations to the others except as expressly provided
herein.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized representatives.
SMARTALK TELESERVICES, Inc.
/s/ XXXXX X. XXXXXXXXXXX
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By: Xxxxx X. Xxxxxxxxxxx
Its: Chief Executive Officer
DTR ASSOCIATES LIMITED PARTNERSHIP
By its sole general Partner
DTR Associates, Inc.
/s/ XXXXXX XXXXXX, XX.
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By: Xxxxxx Xxxxxx, Xx.
Its: Chief Executive Officer
DTR ASSOCIATES, INC.
/s/ XXXXXX XXXXXX, XX.
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By: Xxxxxx Xxxxxx, Xx.
Its: President
The undersigned execute this Agreement solely with respect to, and to
acknowledge their several responsibilities under, Section II concerning sale of
the Acquired Assets, Section III concerning DTR's liabilities (it being
understood that the undersigned shall only be personally responsible under
Section III to the extent of their personal knowledge), Section VI with respect
to non-competition, and Section VIII.K with respect to indemnification.
/s/ XXXXXX XXXXXX, XX.
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Xxxxxx Xxxxxx, Xx.
/s/ XXXXXXX X. XXXXXXX
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Xxxxxxx X. Xxxxxxx
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The undersigned executes this Agreement solely with respect to Sections
VIII.A and VIII.B.
WORLDWIDE DIRECT, INC.
/s/ XXXXXX XXXXXX, XX.
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By: Xxxxxx Xxxxxx, Xx.
Its: President
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For and in consideration of $5,000 cash had and received, the receipt
and sufficiency of which is hereby acknowledged, the undersigned executes this
Agreement solely with respect to, and to acknowledge her responsibilities
under, Section VI with respect to non-competition.
/s/ XXXXXXXXX XxXXXXXXX
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Name: Xxxxxxxxx XxXxxxxxx
