EXHIBIT 10.1
ASSET PURCHASE AGREEMENT
BETWEEN
FREESTAR TECHNOLOGIES, INC.,
AND
EPAYLATINA
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is entered into as of
this 9th, day of August, 2001, by and between Freestar Technologies, Inc., a
Nevada Corporation (the "Buyer"), and EPayLatina. a Dominican Republic
Corporation (the "Seller"). The Buyer and the Seller are referred to
collectively herein as the "Parties."
This Agreement contemplates a transaction in which the Buyer will
purchase all of the assets (and assume certain of the liabilities) of the Seller
in return for cash and stock.
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. DEFINITIONS.
"Accredited Investor" has the meaning set forth in Regulation D
promulgated under the Securities Act.
"Acquired Assets" means all right, title, and interest in and to all of
the assets of the Seller, including all of its (a) real property, leaseholds and
sub-leaseholds therein, improvements, fixtures, and fittings thereon, and
easements, rights-of-way, and other appurtenants thereto (such as appurtenant
rights in and to public streets), (b) tangible personal property (such as
machinery, equipment, inventories of raw materials and supplies, manufactured
and purchased parts, goods in process and finished goods, furniture,
automobiles, trucks, tractors, trailers, tools, jigs, and dies), (c)
Intellectual Property, goodwill associated therewith, licenses and sub-licenses
granted and obtained with respect thereto, and rights thereunder, remedies
against infringements thereof, and rights to protection of interests therein
under the laws of all jurisdictions, (d) leases, subleases, and rights
thereunder, (e) agreements, contracts, indentures, mortgages, instruments,
Security Interests, guaranties, other similar arrangements, and rights
thereunder, (f) accounts, notes, and other receivables, (g) securities (such as
the capital stock in its Subsidiaries), (h) claims, deposits, prepayments,
refunds, causes of action, choices in action, rights of recovery, rights of set
off, and rights of recoupment (including any such item relating to the payment
of Taxes), (i) franchises, approvals, permits, licenses, orders, registrations,
certificates, variances, and similar rights obtained from governments and
governmental agencies, (j) books, records, ledgers, files, documents,
correspondence, lists, plats, architectural plans, drawings, and specifications,
creative materials, advertising and promotional materials, studies, reports, and
other printed or written materials, (k) Cash, and (l) rights in and with respect
to the assets associated with its Employee Benefit Plans, if any; provided,
however, that the Acquired Assets shall not include (i) the corporate charter,
qualifications to conduct business as a foreign corporation, arrangements with
registered agents relating to foreign qualifications, taxpayer and other
identification numbers, seals, minute books, stock transfer books, blank stock
certificates, and other documents relating to the organization, maintenance, and
existence of the Seller as a corporation or (ii) any of the rights of the Seller
under this Agreement (or under any side agreement between the Seller on the one
hand and the Buyer on the other hand entered into on or after the date of this
Agreement).
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of
Internal Revenue Code ss.1504(a) [or any similar group defined under a similar
provision of state, local, or foreign law].
"Agreement with Seller Stockholders" means the Agreement with Seller
Stockholders entered into concurrently herewith and attached hereto as Exhibit
A.
"Assumed Liabilities" means (a) all Liabilities of the Seller set forth
on the face of the Most Recent Balance Sheet, (b) all obligations of the Seller
under the agreements, contracts, leases, licenses, and other arrangements
referred to in the definition of Acquired Assets either (i) to furnish goods,
services, and other non-Cash benefits to another party after the Closing or (ii)
to pay for goods, services, and other non-Cash benefits that another party will
furnish to it after the Closing, and (c) all other Liabilities and obligations
of the Seller set forth in an appendix to the Disclosure Schedule under an
express statement (that the Buyer has initialed) to the effect that the
definition of Assumed Liabilities will include the Liabilities and obligations
so disclosed; provided, however, that the Assumed
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Liabilities shall not include (i) any Liability of the Seller for Taxes,
excluding sales tax generated by the sale of the assets hereunder, (ii) any
Liability of the Seller for the unpaid Taxes of any Person (other than any of
the Seller and its Subsidiaries) under Reg. ss.1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or successor, by
contract, or otherwise, (iii) any obligation of the Seller to indemnify any
Person (including any of the Seller Stockholders) by reason of the fact that
such Person was a director, officer, employee, or agent of any of the Seller and
its Subsidiaries or was serving at the request of any such entity as a partner,
trustee, director, officer, employee, or agent of another entity (whether such
indemnification is for judgments, damages, penalties, fines, costs, amounts paid
in settlement, losses, expenses, or otherwise and whether such indemnification
is pursuant to any statute, charter document, bylaw, agreement, or otherwise),
(iv) any Liability of the Seller for costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby, or (v) any
Liability or obligation of the Seller under this Agreement (or under any side
agreement between the Seller on the one hand and the Buyer on the other hand
entered into on or after the date of this Agreement).
"Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the basis for
any specified consequence.
"Buyer" has the meaning set forth in the preface above.
"Cash" means cash and cash equivalents (including marketable securities
and short term investments) calculated in accordance with GAAP applied on a
basis consistent with the preparation of the Financial Statements.
"Closing" has the meaning set forth in ss.2(d) below.
"Closing Date" has the meaning set forth in ss.2(d) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Controlled Group of Corporations" has the meaning set forth in Code
ss.1563.
"Deferred Intercompany Transaction" has the meaning set forth in
Reg.ss.1.1502-13.
"Disclosure Schedule" has the meaning set forth in ss.3 below.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multi-employer Plan), or (d) Employee Welfare Benefit Plan or
material fringe benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
ss.3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
ss.3(1).
"Environmental, Health, and Safety Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the
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Occupational Safety and Health Act of 1970, each as amended, together with all
other laws (including rules, regulations, codes, plans, injunctions, judgments,
orders, decrees, rulings, and charges thereunder) of federal, state, local, and
foreign governments (and all agencies thereof) concerning pollution or
protection of the environment, public health and safety, or employee health and
safety, including laws relating to emissions, discharges, releases, or
threatened releases of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes into ambient air, surface water, ground
water, or lands or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, or chemical, industrial, hazardous, or toxic materials
or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excess Loss Account" has the meaning set forth in Reg.ss.1.1502-19.
"Extremely Hazardous Substance" has the meaning set forth in ss.302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"Fiduciary" has the meaning set forth in ERISA ss.3(21).
"Financial Statement" has the meaning set forth in ss.3(g) below.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Xxxx-Xxxxx-Xxxxxx Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended.
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data and
related documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"Knowledge" means actual knowledge after reasonable investigation.
"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"LLC" means Limited Liability Company
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"Most Recent Balance Sheet" means the balance sheet contained within
the Most Recent Financial Statements, including any notes thereto.
"Most Recent Financial Statements" has the meaning set forth in ss.3(g)
below.
"Most Recent Fiscal Month End" has the meaning set forth in ss.3(g)
below.
"Most Recent Fiscal Year End" has the meaning set forth in ss.3(g)
below.
"Multiemployer Plan" has the meaning set forth in ERISA ss.3(37).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"Post Closing Obligations" has the meaning set forth in ss.8 below.
"Process Agent" has the meaning set forth in ss.9(p) below.
"Prohibited Transaction" has the meaning set forth in ERISA ss.406 and
Code ss.4975.
"Purchase Price" has the meaning set forth in ss.2(c) below.
"Reportable Event" has the meaning set forth in ERISA ss.4043.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for Taxes not yet due and payable [or for Taxes
that the taxpayer is contesting in good faith through appropriate proceedings],
(c) purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"Survey" has the meaning set forth in ss.5(i) below.
"Seller" has the meaning set forth in the preface above.
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"Seller Share" means any share of the Common Stock, no stated par
value, of the Seller.
"Seller Stockholder" means any person who or which holds any Seller
Shares.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code ss.59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
2. BASIC TRANSACTION.
(a) Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to purchase from the Seller, and
the Seller agrees to sell, transfer, convey, and deliver to the Buyer, all of
the Acquired Assets at the Closing for the consideration specified below in this
ss.2.
(b) Assumption of Liabilities. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to assume and become responsible
for all of the Assumed Liabilities at the Closing. The Buyer will not assume or
have any responsibility, however, with respect to any other obligation or
Liability of the Seller not included within the definition of Assumed
Liabilities, except that the Buyer will be responsible for any sales tax and/or
transfer tax due as a result of the transfer of assets pursuant to this
Agreement. Additionally Buyer will indemnify, defend and hold Seller harmless
from any leases assumed by Buyer under the terms of this Agreement and Buyer
will use its best efforts to arrange for the release from said leases of Seller
and as soon after closing as reasonably possible.
(c) Purchase Price. At Closing, which shall occur on or before August
30, 2001 the Buyer shall issue to Seller, 1,000,000 shares of Convertible
Preferred stock in Freestar equal to $4,200,000, said shares to be issued
pursuant to Section 4(2) of the Securities Act of 1934, as amended [the Act],
and to be disbursed to the present shareholders of ePaylatina in proportion to
their respective interests in said corporation. These Preferred shares shall
convert into 12,000,000 shares of Common stock, one third of the number of
shares convertible over a period of three years commencing 12 months after the
consummation of the transaction providing the owners meet earning criteria of
not less than one million dollars per year after insurance, depreciation and
interest but before taxes. The Preferred stock shall be voting and each share
shall receive 12 votes on any issue brought before the shareholders.
Additionally, a total of 12,000,000 shares shall be issued to various
consultants are set forth in the Exhibits hereto who have arranged this
transaction and will have worked on the transaction to see it through to
completion. 4,000,000 of these shares shall be registered on a Form S-8 and the
balance of these shares likewise, shall be issued under Section 4(2) of the Act.
2,000,000 of the above referenced S-8 shares shall be locked up and released to
Xxxx Xxxx based upon meeting earning criteria in ePaylatina of a net income of
not less than one million dollars per year after insurance, depreciation and
interest, but before taxes or as is otherwise agreed to by the Board of
Directors in good faith subject to the exercise of their fiduciary duties.
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1) (d) Closing. Closing shall occur at 9:00 A.M., on August 10,
2001, at 000 Xxxxxxxx, 0xx Xxxxx, Xxxxxx Xxxxx, Xxxxxxxxxx as agreed to between
Buyer and Seller, and shall be contingent upon Seller delivering Exhibit "F" and
the assignments attached hereto as Exhibits C and D and Buyer delivering the
consideration specified in ss. 2C. In addition, Seller will provide Buyer with
the following which shall be approved by Buyer in writing prior to close.
(i) A business plan including pro forma projections for at least 5
years;
(ii) An appraisal of the assets of the business of ePaylatina by a
competent business appraiser;
(iii) A certified audit of the assets and liabilities of ePaylatina
for the last two fiscal years demonstrating that ePaylatina
has at least $1,100,000 U.S. in assets;
(iv) Copies of all credit lines with any banks or other entities
with whom ePaylatina has entered into equity financing;
(v) An appraisal of the value of any and all patents owned or held
by ePaylatina or its executive officers which is an asset of
ePaylatina or is a required part of the technology which
ePaylatina has developed;
(e) Deliveries at the Closing. At the Closing, (i) the Seller will
deliver to the Buyer the various certificates, instruments, and documents
referred to in ss.6(a) below; (ii) the Buyer will deliver to the Seller the
various certificates, instruments, and documents referred to in ss.6(b) below;
(iii) the Seller will execute, acknowledge (if appropriate), and deliver to the
Buyer (A) assignments (including real property and Intellectual Property
transfer documents) in the forms attached hereto marked collectively Exhibit C
and (B) such other instruments of sale, transfer, conveyance, and assignment as
the Buyer and its counsel reasonably may request; (iv) the Buyer will execute,
acknowledge (if appropriate), and deliver to the Seller (A) an assumption in the
form attached hereto as Exhibit D and (B) such other instruments of assumption
as the Seller and its counsel reasonably may request; and (v) the Buyer will
deliver to Seller, or on Seller's behalf, the consideration specified in ss.2(c)
above, as well as executed copies of Exhibits G and H..]
(f) Allocation. The Parties agree to allocate the Purchase Price (and
all other capitalizable costs) among the Acquired Assets for all purposes
(including financial accounting and tax purposes) in accordance with the
allocation schedule attached hereto as Exhibit E.
3. Representations and Warranties of the Seller. The Seller, to the best of
Seller's knowledge, represents and warrants to the Buyer that the statements
contained in this ss.3 are correct and complete as of the date of this Agreement
and will be correct and complete as of the Closing Date (as though made then and
as though the Closing Date were substituted for the date of this Agreement
throughout this ss.3), except as set forth in the disclosure schedule
accompanying this Agreement and initialed by the Parties (the "Disclosure
Schedule"). The Disclosure Schedule will be arranged in paragraphs corresponding
to the lettered and numbered paragraphs contained in this ss.3.
(a) Organization of the Seller. The Seller is a Dominican Republic
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation.
(b) Authorization of Transaction. The Seller has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. Without limiting the
generality of the foregoing, the Board of Directors of the Seller and the Seller
Stockholders have duly authorized the
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execution, delivery, and performance of this Agreement by the Seller. This
Agreement constitutes the valid and legally binding obligation of the Seller,
enforceable in accordance with its terms and conditions.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in ss.2 above), will (i)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Seller is subject or any provision of the
charter or bylaws of Seller or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument, or other arrangement
to which Seller is a party or by which it is bound or to which any of its assets
is subject (or result in the imposition of any Security Interest upon any of its
assets). Seller is not required to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or governmental
agency in order for the Parties to consummate the transactions contemplated by
this Agreement (including the assignments and assumptions referred to in ss.2
above).
(d) Brokers' Fees. The Seller has no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Buyer could become
liable or obligated.
(e) Title to Assets. The Seller has good and marketable title to, or a
valid leasehold interest in, the properties and assets used by them, located on
their premises, or shown on the Most Recent Balance Sheet or acquired after the
date thereof, free and clear of all Security Interests, except as disclosed on
the Most Recent Balance Sheet and except for properties and assets disposed of
in the Ordinary Course of Business since the date of the Most Recent Balance
Sheet. Without limiting the generality of the foregoing, the Seller has good and
marketable title to all of the Acquired Assets, free and clear of any Security
Interest or restriction on transfer, except for such security interest as set
forth on the Most Recent Balance Sheet. The assets of ePaylatina being acquired
through this Agreement consist of various intellectual properties (including,
but not limited to, registrations, website domains, software licenses, or rights
related thereto), technology, confidential business and technical information,
research and development, technical know how, trade secrets, strategic alliances
and other operational relationships, existing and to be developed banking
relationships and existing exclusive marketing contracts, management consoles,
computer software and hardware, billing information and all intangible assets
including goodwill and information of competitive advantage.
(f) Tax Returns and Financial Statements. Attached hereto as Exhibit F
are copies of the statement of income, and cash flow statement as of June 30,
2000. The Financial Statements (including the notes thereto) present fairly the
financial condition of the Seller as of such dates and the results of operations
of the Seller for such periods, are correct and complete, and are consistent
with the books and records of the Seller (which books and records are correct
and complete).
(g) Events Subsequent to Most Recent Fiscal Year End. Since the Most
Recent Fiscal Year End, there has not been any material adverse change in the
business, financial condition, operations, results of operations, or future
prospects of any of the Seller. Without limiting the generality of the
foregoing, since that date:
(i) Seller has not sold, leased, transferred, or assigned any
of its assets, tangible or intangible, other than for a fair
consideration in the Ordinary Course of Business;
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(ii) Seller has note entered into any agreement, contract,
lease, or license (or series of related agreements, contracts, leases,
and licenses) either involving more than $10,000.00 or outside the
Ordinary Course of Business;
(iii) no party has accelerated, terminated, modified, or
canceled any agreement, contract, lease, or license (or series of
related agreements, contracts, leases, and licenses) involving more
than $10,000.00 to which Seller is a party or by which any of them is
bound;
(iv) Seller has not imposed any Security Interest upon any of
its assets, tangible or intangible;
(v) Seller has not made any capital expenditure (or series of
related capital expenditures) outside the Ordinary Course of Business;
(vi) Seller has not made any capital investment in, any loan
to, or any acquisition of the securities or assets of, any other Person
(or series of related capital investments, loans, and acquisitions)
outside the Ordinary Course of Business;
(vii) Seller has not issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any indebtedness
for borrowed money or capitalized lease obligation either involving
more than $2,500.00 singly or $5,000.00 in the aggregate;
(viii) Seller has not delayed or postponed the payment of
accounts payable and other Liabilities outside the Ordinary Course of
Business;
(ix) Seller has not canceled, compromised, waived, or released
any right or claim (or series of related rights and claims) either
involving more than $2,500.00 or outside the Ordinary Course of
Business;
(x) Seller has not granted any license or sublicense of any
rights under or with respect to any Intellectual Property other than
agreements entered into in the Ordinary Course of Business and as are
more specifically set forth in Paragraph 2(d);
(xi) Seller has not made or authorized any change in its
articles of incorporation or bylaws of any of the Seller and its
Subsidiaries;
(xii) Seller has not issued, sold, or otherwise disposed of
any of its capital stock, or granted any options, warrants, or other
rights to purchase or obtain (including upon conversion, exchange, or
exercise) any of its capital stock;
(xiii) Seller has not declared, set aside, or paid any
dividend or made any distribution with respect to its capital stock
(whether in cash or in kind) or redeemed, purchased, or otherwise
acquired any of its capital stock;
(xiv) Seller has not experienced any damage, destruction, or
loss (whether or not covered by insurance) to its property;
(xv) Seller has not made any loan to, or entered into any
other transaction with, any of its directors, officers, and employees
outside the Ordinary Course of Business;
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August 8, 2001
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(xvi) Seller has not entered into any employment contract or
collective bargaining agreement, written or oral, or modified the terms
of any existing such contract or agreement;
(xvii) Seller has not granted any increase in the base
compensation of any of its directors, officers, and employees outside
the Ordinary Course of Business;
(xviii) Seller has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or other
plan, contract, or commitment for the benefit of any of its directors,
officers, and employees (or taken any such action with respect to any
other Employee Benefit Plan);
(xix) Seller has not made any other change in employment terms
for any of its directors, officers, and employees outside the Ordinary
Course of Business;
(xx) Seller has not made or pledged to make any charitable or
other capital contribution outside the Ordinary Course of Business;
(xxi) Seller has not paid any amount to any third party with
respect to any Liability or obligation (including any costs and
expenses the Seller has incurred or may incur in connection with this
Agreement and the transactions contemplated hereby) which would not
constitute an Assumed Liability if in existence as of the Closing;
(xxii) there has not been any other material occurrence,
event, incident, action, failure to act, or transaction outside the
Ordinary Course of Business involving any of the Seller and its
Subsidiaries; and
(xxiii) Seller has not committed to any of the foregoing.
(h) Undisclosed Liabilities. Seller has no Liability (and there is no
Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of them giving
rise to any Liability other than in the Ordinary Course of Business), except for
(i) Liabilities set forth on the face of the Most Recent Balance Sheet (rather
than in any notes thereto) and (ii) Liabilities which have arisen after the Most
Recent Fiscal Month End in the Ordinary Course of Business (none of which
results from, arises out of, relates to, is in the nature of, or was caused by
any breach of contract, breach of warranty, tort, infringement, or violation of
law).
(i) Legal Compliance. Seller and its respective predecessors and
Affiliates has complied with all applicable laws (including rules, regulations,
codes, plans, injunctions, judgments, orders, decrees, rulings, and charges
thereunder) of federal, state, local, and foreign governments (and all agencies
thereof), and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced against any of
them alleging any failure so to comply.
(j) Disclosure Schedule
(i) ss.3(l)(i) of the Disclosure Schedule lists and describes
briefly all assets owned by the Seller. The Seller has delivered to the Buyer
correct and complete copies of the agreements and assignments of the Selelr and
appropriate assignments listed in ss.3(l)(ii) of the Disclosure Schedule (as
amended to date). With respect to each lease and sublease listed in ss.3(l)(ii)
of the Disclosure Schedule:
(l) Real Property.
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(i) ss.3(l)(i) of the Disclosure Schedule lists and describes
briefly all real property leased to the Seller, including the corporate
offices as is more fully disclosed in the due diligence documents
previously submitted prior to the execution hereof. The Seller has
delivered to the Buyer correct and complete copies of the leases and
subleases listed in ss.3(l)(ii) of the Disclosure Schedule (as amended
to date). With respect to each lease and sublease listed in ss.3(l)(ii)
of the Disclosure Schedule:
(A) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect;
(B) the lease or sublease will continue to be legal,
valid, binding, enforceable, and in full force and effect on
identical terms following the consummation of the transactions
contemplated hereby (including the assignments and assumptions
referred to in ss.2 above);
(C) no party to the lease or sublease is in breach or
default, and no event has occurred which, with notice or lapse
of time, would constitute a breach or default or permit
termination, modification, or acceleration thereunder;
(D) no party to the lease or sublease has repudiated
any provision thereof;
(E) there are no disputes, oral agreements, or
forbearance programs in effect as to the lease or sublease;
(F) with respect to each sublease, the
representations and warranties set forth in subsections (A)
through (E) above are true and correct with respect to the
underlying lease;
(G) Seller has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the
leasehold or subleasehold;
(H) all facilities leased or subleased thereunder
have received all approvals of governmental authorities
(including licenses and permits) required in connection with
the operation thereof and have been operated and maintained in
accordance with applicable laws, rules, and regulations;
(I) all facilities leased or subleased thereunder are
supplied with utilities and other services necessary for the
operation of said facilities; and
(m) Intellectual Property.
(i) The Seller owns or has the right to use pursuant to
license, sublicense, agreement, or permission all Intellectual Property
necessary or desirable for the operation of the businesses of the
Seller as presently conducted and as presently proposed to be
conducted. Each item of Intellectual Property owned or used by Seller
immediately prior to the Closing hereunder will be owned or available
for use by the Buyer on identical terms and conditions immediately
subsequent to the Closing hereunder. Seller has taken all necessary
action to maintain and protect each item of Intellectual Property that
it owns or uses.
(ii) Seller has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of third parties, and the directors and officers (and
employees with responsibility for Intellectual Property matters) of the
Seller has not received any charge, complaint, claim,
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Freestar Technologies, Inc.,
August 8, 2001
page 12
demand, or notice alleging any such interference, infringement,
misappropriation, or violation (including any claim that Seller and its
Subsidiaries must license or refrain from using any Intellectual
Property rights of any third party). To the Knowledge of the Seller and
its directors and officers (and employees with responsibility for
Intellectual Property matters), no third party has interfered with,
infringed upon, misappropriated, or otherwise come into conflict with
any Intellectual Property rights of the Seller.
(iii) ss.3(m)(iii) of the Disclosure Schedule identifies each
patent or registration which has been issued to the Seller with respect
to its Intellectual Property, identifies each pending patent
application or application for registration which any of the Seller has
made with respect to any of its Intellectual Property, and identifies
each license, agreement, or other permission which the Seller has
granted to any third party with respect to any of its Intellectual
Property (together with any exceptions). The Seller has delivered to
the Buyer correct and complete copies of all such patents,
registrations, applications, licenses, agreements, and permissions (as
amended to date) [and has made available to the Buyer correct and
complete copies of all other written documentation evidencing ownership
and prosecution (if applicable) of each such item]. ss.3(l)(iii) of the
Disclosure Schedule also identifies each trade name or unregistered
trademark used by any of the Seller and its Subsidiaries in connection
with any of its businesses. With respect to each item of Intellectual
Property required to be identified in ss.3(m)(iii) of the Disclosure
Schedule:
(A) the Seller and its Subsidiaries possess all
right, title, and interest in and to the item, free and clear
of any Security Interest, license, or other restriction;
(B) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
(C) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending
or is threatened which challenges the legality, validity,
enforceability, use, or ownership of the item; and
(D) Seller has not agreed to indemnify any Person for
or against any interference, infringement, misappropriation,
or other conflict with respect to the item.
(iv) ss.3(m)(iv) of the Disclosure Schedule identifies each
item of Intellectual Property that any third party owns and that any of
the Seller and its Subsidiaries uses pursuant to license, sublicense,
agreement, or permission. The Seller has delivered to the Buyer correct
and complete copies of all such licenses, sublicenses, agreements, and
permissions (as amended to date). With respect to each item of
Intellectual Property required to be identified in ss.3(m)(iv) of the
Disclosure Schedule;
(A) the license, sublicense, agreement, or permission
covering the item is legal, valid, binding, enforceable, and
in full force and effect;
(B) the license, sub-license, agreement, or
permission will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated
hereby (including the assignments and assumptions referred to
in ss.2 above);
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Freestar Technologies, Inc.,
August 8, 2001
page 13
(C) no party to the license, sub-license, agreement,
or permission is in breach or default, and no event has
occurred which with notice or lapse of time would constitute a
breach or default or permit termination, modification, or
acceleration thereunder;
(D) no party to the license, sub-license, agreement,
or permission has repudiated any provision thereof;
(E) with respect to each sub-license, the
representations and warranties set forth in subsections (A)
through (D) above are true and correct with respect to the
underlying license;
(F) the underlying item of Intellectual Property is
not subject to any outstanding injunction, judgment, order,
decree, ruling, or charge;
(G) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending
or is threatened which challenges the legality, validity, or
enforceability of the underlying item of Intellectual
Property; and
(H) Seller has not granted any sublicense or similar
right with respect to the license, sublicense, agreement, or
permission.
(v) To the Knowledge of the Seller and its directors and
officers (and employees with responsibility for Intellectual Property
matters), Seller will not interfere with, infringe upon,
misappropriate, or otherwise come into conflict with, any Intellectual
Property rights of third parties as a result of the continued operation
of its businesses as presently conducted and as presently proposed to
be conducted.
(vi) Seller and its directors and officers (and employees with
responsibility for Intellectual Property matters) are not aware of any
new products, inventions, procedures, or methods of manufacturing or
processing that any competitors or other third parties have developed
which reasonably could be expected to supersede or make obsolete any
product or process of any of the Seller and its Subsidiaries.]
(n) Tangible Assets. The Seller and its Subsidiaries own or lease all
buildings, machinery, equipment, and other tangible assets necessary for the
conduct of their businesses as presently conducted and as presently proposed to
be conducted. Each such tangible asset is free from defects (patent and latent),
has been maintained in accordance with normal industry practice, is in good
operating condition and repair (subject to normal wear and tear), and is
suitable for the purposes for which it presently is used and presently is
proposed to be used.
(o) Inventory. The inventory of the Seller and its Subsidiaries
consists of Intellectula Properties forth in the Most Recent Balance Sheet as
adjusted for the passage of time through the Closing Date in accordance with the
past custom and practice of the Seller.
(p) Contracts. ss.3(p) of the Disclosure Schedule lists the following
contracts and agreements to which Seller is a party:
(i) any agreement (or group of related agreements) for the
lease of personal property to or from any Person providing for lease
payments in excess of $1,000.00 per annum;
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Freestar Technologies, Inc.,
August 8, 2001
page 14
(ii) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or
other personal property, or for the furnishing or receipt of services,
the performance of which will extend over a period of more than one
year, result in a material loss to Seller, or involve consideration in
excess of $5,000.00;
(iii) any agreement concerning a partnership or joint venture;
(iv) any agreement (or group of related agreements) under
which it has created, incurred, assumed, or guaranteed any indebtedness
for borrowed money, or any capitalized lease obligation, in excess of
$5,000.00 or under which it has imposed a Security Interest on any of
its assets, tangible or intangible;
(v) any agreement concerning confidentiality or
noncompetition;
(vi) any agreements between Seller and its shareholders,
officers and directors;
(vii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other material plan
or arrangement for the benefit of its current or former directors,
officers, and employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual
compensation in excess of $20,000.00 or providing severance benefits;
(x) any agreement under which it has advanced or loaned any
amount to any of its directors, officers, and employees outside the
Ordinary Course of Business;
(xi) any agreement under which the consequences of a default
or termination could have a material adverse effect on the business,
financial condition, operations, results of operations, or future
prospects of any of the Seller and its Subsidiaries; or
(xii) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $5,000.00.
The Seller has delivered to the Buyer a correct and complete copy of each
written agreement listed in ss.3(p) of the Disclosure Schedule (as amended to
date) and a written summary setting forth the terms and conditions of each oral
agreement referred to in ss.3(p) of the Disclosure Schedule. With respect to
each such agreement: (A) the agreement is legal, valid, binding, enforceable,
and in full force and effect; (B) the agreement will continue to be legal,
valid, binding, enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby (including
the assignments and assumptions referred to in ss.2 above); (C) no party is in
breach or default, and no event has occurred which with notice or lapse of time
would constitute a breach or default, or permit termination, modification, or
acceleration, under the agreement; and (D) no party has repudiated any provision
of the agreement.
(q) Notes and Accounts Receivable. All notes and accounts receivable of
the Seller is reflected properly on its books and records, are valid receivables
subject to no setoffs or counterclaims, are current and collectible, and will be
collected in accordance with their terms at their recorded amounts, subject only
to the reserve for bad debts
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Freestar Technologies, Inc.,
August 8, 2001
page 15
set forth on the face of the Most Recent Balance Sheet (rather than in any notes
thereto) as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of the Seller and its Subsidiaries.
(r) Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of any of the Seller.
(s) Insurance. ss.3(s) of the Disclosure Schedule sets forth the
following information with respect to each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) to which Seller has been a party, a named insured,
or otherwise the beneficiary of coverage at any time within the past 5 years:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder,
and the name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the
coverage was on a claims made, occurrence, or other basis) and amount
(including a description of how deductibles and ceilings are calculated
and operate) of coverage; and
(v) a description of any retroactive premium adjustments or
other loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect; (B) the policy will continue
to be legal, valid, binding, enforceable, and in full force and effect on
identical terms following the consummation of the transactions contemplated
hereby (including the assignments and assumptions referred to in ss.2 above);
(C) neither any of the Seller and its Subsidiaries nor any other party to the
policy is in breach or default (including with respect to the payment of
premiums or the giving of notices), and no event has occurred which, with notice
or the lapse of time, would constitute such a breach or default, or permit
termination, modification, or acceleration, under the policy; and (D) no party
to the policy has repudiated any provision thereof. Seller been covered during
the past five years by insurance in scope and amount customary and reasonable
for the businesses in which it has engaged during the aforementioned period.
ss.3(s) of the Disclosure Schedule describes any self-insurance arrangements
affecting Seller.
(t) Litigation. ss.3(t) of the Disclosure Schedule sets forth each
instance in which Seller (i) is subject to any outstanding injunction, judgment,
order, decree, ruling, or charge or (ii) is a party or is threatened to be made
a party to any action, suit, proceeding, hearing, or investigation of, in, or
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator. None of the
actions, suits, proceedings, hearings, and investigations set forth in ss.3(t)
of the Disclosure Schedule could result in any material adverse change in the
business, financial condition, operations, results of operations, or future
prospects of any of the Seller. Seller and its directors and officers (and
employees with responsibility for litigation matters) have no reason to believe
that any such action, suit, proceeding, hearing, or investigation may be brought
or threatened against Seller.
(v) Employees. To the Knowledge of Seller and its directors and
officers (and employees with responsibility for employment matters), no
executive, key employee, or group of employees has any plans to terminate
employment with Seller. Seller is not a party to or bound by any collective
bargaining agreement, nor has any of them experienced any strikes, grievances,
claims of unfair labor practices, or other collective bargaining disputes.
Seller has not committed any unfair labor practice. Seller and its directors and
officers (and employees with
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Freestar Technologies, Inc.,
August 8, 2001
page 16
responsibility for employment matters) has no Knowledge of any organizational
effort presently being made or threatened by or on behalf of any labor union
with respect to employees of Seller.
(w) Employee Benefits.
(i) ss.3(x) of the Disclosure Schedule lists each Employee
Benefit Plan that Seller maintains or to which Seller contributes.
(A) Each such Employee Benefit Plan (and each related
trust, insurance contract, or fund) complies in form and in
operation in all respects with the applicable requirements of
ERISA, the Code, and other applicable laws.
(B) All required reports and descriptions (including
Form 5500 Annual Reports, Summary Annual Reports, PBGC-1's,
and Summary Plan Descriptions) have been filed or distributed
appropriately with respect to each such Employee Benefit Plan.
The requirements of Part 6 of Subtitle B of Title I of ERISA
and of Code ss.4980B have been met with respect to each such
Employee Benefit Plan which is an Employee Welfare Benefit
Plan.
(C) All contributions (including all employer
contributions and employee salary reduction contributions)
which are due have been paid to each such Employee Benefit
Plan which is an Employee Pension Benefit Plan and all
contributions for any period ending on or before the Closing
Date which are not yet due have been paid to each such
Employee Pension Benefit Plan or accrued in accordance with
the past custom and practice of the Seller. All premiums or
other payments for all periods ending on or before the Closing
Date have been paid with respect to each such Employee Benefit
Plan which is an Employee Welfare Benefit Plan.
(D) Each such Employee Benefit Plan which is an
Employee Pension Benefit Plan meets the requirements of a
"qualified plan" under Code ss.401(a) and has received, within
the last two years, a favorable determination letter from the
Internal Revenue Service.
(E) The market value of assets under each such
Employee Benefit Plan which is an Employee Pension Benefit
Plan (other than any Multiemployer Plan) equals or exceeds the
present value of all vested and nonvested Liabilities
thereunder determined in accordance with PBGC methods,
factors, and assumptions applicable to an Employee Pension
Benefit Plan terminating on the date for determination.
(F) The Seller has delivered to the Buyer correct and
complete copies of the plan documents and summary plan
descriptions, the most recent determination letter received
from the Internal Revenue Service, the most recent Form 5500
Annual Report, and all related trust agreements, insurance
contracts, and other funding agreements which implement each
such Employee Benefit Plan.
(ii) With respect to each Employee Benefit Plan that Seller
maintains or ever has maintained or to which it contributes, ever has
contributed, or ever has been required to contribute:
(A) No such Employee Benefit Plan which is an
Employee Pension Benefit Plan (other than any Multiemployer
Plan) has been completely or partially terminated or been the
subject of a
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Freestar Technologies, Inc.,
August 8, 2001
page 17
Reportable Event as to which notices would be required to be
filed with the PBGC. No proceeding by the PBGC to terminate
any such Employee Pension Benefit Plan (other than any
Multiemployer Plan) has been instituted or threatened.
(B) There have been no Prohibited Transactions with
respect to any such Employee Benefit Plan. No Fiduciary has
any Liability for breach of fiduciary duty or any other
failure to act or comply in connection with the administration
or investment of the assets of any such Employee Benefit Plan.
No action, suit, proceeding, hearing, or investigation with
respect to the administration or the investment of the assets
of any such Employee Benefit Plan (other than routine claims
for benefits) is pending or threatened. Seller and its
directors and officers (and employees with responsibility for
employee benefits matters) possess no Knowledge of any Basis
for any such action, suit, proceeding, hearing, or
investigation.
(C) Seller has not incurred, and neither Seller nor
its directors and officers (and employees with responsibility
for employee benefits matters) have any reason to expect that
Seller will incur any Liability to the PBGC (other than PBGC
premium payments) or otherwise under Title IV of ERISA
(including any withdrawal Liability) or under the Code with
respect to any such Employee Benefit Plan which is an Employee
Pension Benefit Plan.
(iii) Seller has never contributed to, or ever has been
required to contribute to any Multiemployer Plan or has any Liability
(including withdrawal Liability) under any Multiemployer Plan.
(iv) Seller has never maintained or contributes, ever has
contributed, or ever has been required to contribute to any Employee
Welfare Benefit Plan providing medical, health, or life insurance or
other welfare-type benefits for current or future retired or terminated
employees, their spouses, or their dependents (other than in accordance
with Code ss.4980B).
(D) Xxxx Xxxx ("Xxxx") will become the Chief
Executive Officer of Freestar and will be solely responsible
for distributing the stock in Freestar to the existing
shareholders of ePaylatina in accordance which such
shareholders respective interests.Xxxx Xxxx, Xxxxxx X.
Xxxxxxxx and Xxxxxx Xxxx will at all times hereafter maintain
a position on Freestar's Board of Directors. Unanimous vote of
the Board of Directors shall be required to authorize a
substantial change in control, issuance of additional shares,
reorganization, or a sale of significant assets of Freestar.
(x) Guaranties. Seller is not a guarantor or otherwise is liable for
any Liability or obligation (including indebtedness) of any other Person.
(y) Environment, Health, and Safety.
(i) Each of the Seller, and its predecessors and Affiliates
has complied with all Environmental, Health, and Safety Laws, and no
action, suit, proceeding, hearing, investigation, charge, complaint,
claim, demand, or notice has been filed or commenced against any of
them alleging any failure so to comply. Without limiting the generality
of the preceding sentence, each of the Seller, and its predecessors and
Affiliates has obtained and been in compliance with all of the terms
and conditions of all permits, licenses, and other authorizations which
are required under, and has complied with all other limitations,
restrictions, conditions, standards,
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Freestar Technologies, Inc.,
August 8, 2001
page 18
prohibitions, requirements, obligations, schedules, and timetables
which are contained in, all Environmental, Health, and Safety Laws.
(ii) Seller has no Liability (and Seller and its predecessors
and Affiliates has not handled or disposed of any substance, arranged
for the disposal of any substance, exposed any employee or other
individual to any substance or condition, or owned or operated any
property or facility in any manner that could form the Basis for any
present or future action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand against Seller giving rise to any
Liability) for damage to any site, location, or body of water (surface
or subsurface), for any illness of or personal injury to any employee
or other individual, or for any reason under any Environmental, Health,
and Safety Law.
(iii) All properties and equipment used in the business of the
Seller and its respective predecessors and Affiliates have been free of
asbestos, PCB's, methylene chloride, trichloroethylene,
1,2-trans-dichloroethylene, dioxins, dibenzofurans, and Extremely
Hazardous Substances.
(aa) Indemnity Agreement. Seller's Stockholders have executed the
Indemnity Agreement attached hereto, marked Exhibit "A" and incorporated by
reference.
(bb) Disclosure. The representations and warranties contained in this
ss.3 do not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements and information
contained in this ss.3 not misleading.
(cc) Stock Splits The Seller agrees that it will not recommend to the
shareholders or allow the Board of Directors to recommend, advocate or allow a
forward or reverse split of the Common stock in Freestar for a period of at
least three (3) years following the consummation of this transaction nor shall
the Board further dilute the stock by issuing stock to themselves or their
immediate family, agents or representatives other than through the issuance of
an SB-2 as is more fully set forth elsewhere herein.
4. Representations and Warranties of the Buyer. The Buyer represents
and warrants to the Seller that the statements contained in this ss.4 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this ss.4),
except as set forth in the Disclosure Schedule. The Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this ss.4.
(a) Organization of the Buyer. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
(b) Authorization of Transaction. The Buyer has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of the Buyer, enforceable
in accordance with its terms and conditions.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in ss.2 above), will (i)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Buyer is subject or any provision of
its charter or bylaws or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of,
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Freestar Technologies, Inc.,
August 8, 2001
page 19
create in any party the right to accelerate, terminate, modify, or cancel, or
require any notice under any agreement, contract, lease, license, instrument, or
other arrangement to which the Buyer is a party or by which it is bound or to
which any of its assets is subject. The Buyer does not need to give any notice
to, make any filing with, or obtain any authorization, consent, or approval of
any government or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement (including the assignments and
assumptions referred to in ss.2 above).
(d) Stock Splits The Buyer agrees that it will not recommend to the
shareholders or allow the Board of Directors to recommend, advocate or allow a
forward or reverse split of the Common stock in Freestar for a period of at
least three (3) years following the consummation of this transaction nor shall
the Board further dilute the stock by issuing stock to themselves or their
immediate family, agents or representatives other than as may occur with the
filing and approval of the SB-2 more fully set forth herein.
5. Pre-Closing Covenants. The Parties agree as follows with respect to
the period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use its reasonable best efforts
to take all action and to do all things necessary, proper, or advisable in order
to consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing conditions set forth in
ss.6 below).
(b) Notices and Consents. The Seller will give any notices to third
parties that the Buyer reasonably may request in connection with the matters
referred to in ss.3(c) above. Each of the Parties will give any notices to, make
any filings with, and use its reasonable best efforts to obtain any
authorizations, consents, and approvals of governments and governmental agencies
in connection with the matters referred to in ss.3(c) and ss.4(c) above.
(c) Operation of Business. The Seller will not engage in any practice,
take any action, or enter into any transaction outside the Ordinary Course of
Business. Without limiting the generality of the foregoing, the Seller will not
(i) declare, set aside, or pay any dividend or make any distribution with
respect to its capital stock or redeem, purchase, or otherwise acquire any of
its capital stock, (ii) pay any amount to any third party with respect to any
Liability or obligation (including any costs and expenses the Seller has
incurred or may incur in connection with this Agreement and the transactions
contemplated hereby) which would not constitute an Assumed Liability if in
existence as of the Closing, (iii) otherwise engage in any practice, take any
action, or enter into any transaction of the sort described in ss.3(h) above.
(d) Preservation of Business. The Seller will keep its business and
properties substantially intact, including its present operations, physical
facilities, working conditions, and relationships with lessors, licensors,
suppliers, customers, and employees.
(e) Full Access. The Seller will permit representatives of the Buyer to
have full access at all reasonable times, and in a manner so as not to interfere
with the normal business operations of the Seller to all premises, properties,
personnel, books, records (including Tax records), contracts, and documents of
or pertaining to Seller.
(f) Notice of Developments. Each Party will give prompt written notice
to the other Party of any material adverse development causing a breach of any
of its own representations and warranties in ss.3 and ss.4 above. No disclosure
by any Party pursuant to this ss.5(f), however, shall be deemed to amend or
supplement the Disclosure Schedule or to prevent or cure any misrepresentation,
breach of warranty, or breach of covenant.
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Freestar Technologies, Inc.,
August 8, 2001
page 20
(g) Exclusivity. The Seller will not (and the Seller will not cause or
permit any of its Subsidiaries to) (i) solicit, initiate, or encourage the
submission of any proposal or offer from any Person relating to the acquisition
of any capital stock or other voting securities, or any substantial portion of
the assets, of Seller (including any acquisition structured as a merger,
consolidation, or share exchange) or (ii) participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt by any
Person to do or seek any of the foregoing. The Seller will notify the Buyer
immediately if any Person makes any proposal, offer, inquiry, or contact with
respect to any of the foregoing.
(h) Capital Infusion Freestar shall use its best efforts to arrange for
an infusion of capital into the business in an amount of not less than
$1,000,000 to facilitate the building of the business and to support various
costs of the business until such time as a cash flow begins to develop and shall
undertake to register, in the sole and absolute discretion of the Seller, 20
million shares pursuant to an SB-2 Registration Statement with the SEC.
(i) Freestar represents and warrants that the corporation currently has
6,861,500 shares of common stock issued and outstanding and has 80,000,000
shares of common stock currently authorized. Additionally, Xxxx agrees to allow
Freestar to spin off ePaylatina for consideration to be determined in the Board
of Directors discretion at any time after two (2) years subsequent to the
execution of this Agreement and will give existing shareholders of Freestar at
said date twenty percent (20%) of the issued and outstanding shares in the form
of a stock dividend distribution.
(j) It is agreed and understood that irrespective o control of the
Board of Directors, the parties will cause an employment agreement to be entered
into with Xxxx Xxxx with compensation as follows: $150,000 for the first year,
$250,000 for the second and third year and based upon a performance standard to
be agreed upon by the Board of Directors for a period of three (3) years,
exclusive of director and officer benefits offered to current executive
employees, officer and directors of Freestar plus stock options for employees
and directors to be determined by the Board of Directors who will provide a
stock option plan for directors and employees.
(k) It is agreed and understood that the shareholders of Freestar will
use their best efforts to place the products offered by ePaylatina with
appropriate businesses and Xxxx will receive, as additional compensation, a
finders fee equal to five (5) per cent of the gross revenues generated by
companies Xxxx develops strategic alliances as such revenues are collected by
Freestar.
(l) Prior to the transfer and acquisition of the assets of ePaylatina,
except as required by law or the rules of any stock exchange, no public
announcement or other publicity regarding the transactions referred to herein
shall be made by Freestar or ePaylatina or any of their respective affiliates,
officers, directors, employees, representative or agent, without prior written
consent of Xxxx Xxxx and Xxxxxx X. Xxxxxxxx, in any case, as to form, content,
timing and manner of distribution or publication; provided however that nothing
in this section shall prevent such parties from discussing such transaction with
such persons whose approval agreement or opinion, as the case may be, required
for consummation of such particular transaction or transactions.
6. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyer. The obligation of the Buyer
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
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Freestar Technologies, Inc.,
August 8, 2001
page 21
(i) the representations and warranties set forth inss.3 above
shall be true and correct in all material respects at and as of the
Closing Date;
(ii) the Seller shall have performed and complied with all of
its covenants hereunder in all material respects through the Closing;
(iii) the Seller and its Subsidiaries shall have procured all
of the third party consents specified inss.5(b) above;
(iv) no action, suit, or proceeding shall be pending 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 (A) prevent consummation of any of the transactions contemplated
by this Agreement, (B) cause any of the transactions contemplated by
this Agreement to be rescinded following consummation, or (C) affect
adversely the right of the Buyer to own the Acquired Assets and to
operate the former businesses of the Seller;
(v) the Seller shall have delivered to the Buyer a certificate
to the effect that each of the conditions specified above in
ss.6(a)(i)-(iv) is satisfied in all respects; and
(vii) the relevant parties shall have entered into side
agreements in form and substance as set forth in Exhibits G through H
attached hereto and the same shall be in full force and effect; and
The Buyer may waive any condition specified in this ss.6(a) if it executes a
writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Seller. The obligation of the
Seller to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth inss.4 above
shall be true and correct in all material respects at and as of the
Closing Date;
(ii) the Buyer shall have performed and complied with all of
its covenants hereunder in all material respects through the Closing;
(iii) no action, suit, or proceeding shall be pending 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 (A) prevent consummation of any of the transactions contemplated
by this Agreement or (B) 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);
(iv) the Buyer shall have delivered to the Seller a
certificate to the effect that each of the conditions specified above
in ss.6(b)(i)-(iii) is satisfied in all respects;
(v) the relevant parties shall have entered into side
agreements in form and substance as set forth in Exhibits G through H
and the same shall be in full force and effect;
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Freestar Technologies, Inc.,
August 8, 2001
page 22
The Seller may waive any condition specified in this ss.6(b) if it executes a
writing so stating at or prior to the Closing.
7. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate this
Agreement as provided below:
(i) the Buyer and the Seller may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(ii) the Buyer may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing (A) in the event
the Seller has breached any material representation, warranty, or
covenant contained in this Agreement in any material respect, the Buyer
has notified the Seller of the breach, and the breach has continued
without cure for a period of 10 days after the notice of breach or (B)
if the Closing shall not have occurred on or before August 30, 2001, by
reason of the failure of any condition precedent under ss.6(a) hereof
(unless the failure results primarily from the Buyer itself breaching
any representation, warranty, or covenant contained in this Agreement);
and
(iv) the Seller may terminate this Agreement by giving written
notice to the Buyer at any time prior to the Closing (A) in the event
the Buyer has breached any material representation, warranty, or
covenant contained in this Agreement in any material respect, the
Seller has notified the Buyer of the breach, and the breach has
continued without cure for a period of 10 days after the notice of
breach or (B) if the Closing shall not have occurred on or before
August 30, 2001, by reason of the failure of any condition precedent
under ss.6(b) hereof (unless the failure results primarily from the
Seller itself breaching any representation, warranty, or covenant
contained in this Agreement).
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to ss.7(a) above, all rights and obligations of the Parties hereunder
shall terminate without any Liability of any Party to any other Party (except
for any Liability of any Party then in breach).
8. Post Closing Obligations. None
9. Miscellaneous.
(a) Survival of Representations and Warranties. All of the
representations and warranties of the Parties contained in this Agreement shall
survive the Closing hereunder as and to the extent provided in the Agreement
with Seller Stockholders.
(b) Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement prior to the Closing without the prior written approval of the
other Party; provided, however, that any Party may make any public disclosure it
believes in good faith is required by applicable law or any listing or trading
agreement concerning its publicly-traded securities (in which case the
disclosing Party will use its reasonable best efforts to advise the other Party
prior to making the disclosure).
22
Freestar Technologies, Inc.,
August 8, 2001
page 23
(c) No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents referred
to herein) constitutes the entire agreement between the Parties and supersedes
any prior understandings, agreements, or representations by or between the
Parties, written or oral, to the extent they related in any way to the subject
matter hereof.
(e) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party; provided, however, that the Buyer may (i) assign any or all
of its rights and interests hereunder to one or more of its Affiliates and (ii)
designate one or more of its Affiliates to perform its obligations hereunder (in
any or all of which cases the Buyer nonetheless shall remain responsible for the
performance of all of its obligations hereunder).
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Seller:
-----------------
Xxxxxx Xxxxxxxx
Freestar Technologies, Inc.,
00000 Xxxxxxx Xxxx., Xxxxx 000
Xxxxxx, XX 00000
If to the Buyer:
---------------- -
Xxxx Xxxx
ePayLatina.
Xxxxx Xxxxxxx
Xxxxx, Xx. 00 Xxxxxxxx
Jbaez, 2nd Floor
Santa Xxxxxxx
Dominican Republic
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Party
notice in the manner herein set forth.
23
Freestar Technologies, Inc.,
August 8, 2001
page 24
(i) Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of California without giving
effect to any choice or conflict of law provision or rule (whether of the
Dominican Republic or any other jurisdiction) that would cause the application
of the laws of any jurisdiction other than the State of California.
(j) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Seller. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
(k) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(l) Expenses. Each of the Buyer and the Seller will bear his or its own
costs and expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby.
(m) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
(n) Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
(o) Specific Performance. Each of the Parties acknowledges and agrees
that the other Party would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that
the other Party shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action instituted in any
court of the United States or any state thereof having jurisdiction over the
Parties and the matter [(subject to the provisions set forth in ss.8(p) below)],
in addition to any other remedy to which it may be entitled, at law or in
equity.
(p) Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in the Central District of
California in any action or proceeding arising out of or relating to this
Agreement and agrees that all claims in respect of the action or proceeding may
be heard and determined in any such court.
(o) Bulk Transfer Laws. The Buyer acknowledges that the Seller will not
comply with the provisions of any bulk transfer laws, if any, of any
jurisdiction in connection with the transactions contemplated by this Agreement.
24
Freestar Technologies, Inc.,
August 8, 2001
page 25
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
[as of] the date first above written..
Freestar Technologies, Inc.,
a Nevada Corporation
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------------------------------
Xxxxxx X. Xxxxxxxx
Title: Interim Chief Executive Officer
EPayLatina.,
a Dominican Republic Corporation
By: /s/ Xxxx Xxxx
-------------------------------------------------
Xxxx Xxxx
Title: Chief Executive Officer
25
Freestar Technologies, Inc.,
August 8, 2001
page 26
EXHIBIT "A"
Indemnity Agreement with Seller's Stockholders
26
Freestar Technologies, Inc.,
August 8, 2001
page 27
EXHIBIT "B"
List of Acquired Assets
All right, title, and interest in and to all of the assets of the Seller,
including all of its
7.1 Real property, leaseholds and sub-leaseholds therein, improvements,
fixtures, and fittings thereon, and easements, rights-of-way, and other
appurtenants thereto (such as appurtenant rights in and to public streets),
(b) Tangible personal property (such as machinery, equipment,
inventories of raw materials and supplies, manufactured and purchased
parts, goods in process and finished goods, furniture, automobiles,
trucks, tractors, trailers, tools, jigs, and dies),
7.2 Intellectual Property, goodwill associated therewith, licenses and
sub-licenses granted and obtained with respect thereto, and rights thereunder,
remedies against infringements thereof, and rights to protection of interests
therein under the laws of all jurisdictions,
7.3 Leases, subleases, and rights thereunder,
(d) Agreements, contracts, indentures, mortgages, instruments,
Security Interests, guaranties, other similar arrangements, and rights
thereunder,
(f) Accounts, notes, and other receivables,
(g) Claims, deposits, prepayments, refunds, causes of action,
choses in action, rights of recovery, rights of set off, and rights of
recoupment (including any such item relating to the payment of Taxes),
(h) Franchises, approvals, permits, licenses, orders,
registrations, certificates, variances, and similar rights obtained
from governments and governmental agencies,
(i) Books, records, ledgers, files, documents, correspondence,
lists, plats, architectural plans, drawings, and specifications,
creative materials, advertising and promotional materials, studies,
reports, and other printed or written materials, (j) Cash, and
(k) Rights in and with respect to the assets associated with
its Employee Benefit Plans; provided, however, that the Acquired Assets
shall not include (i) the corporate charter, qualifications to conduct
business as a foreign corporation, arrangements with registered agents
relating to foreign qualifications, taxpayer and other identification
numbers, seals, minute books, stock transfer books, blank stock
certificates, and other documents relating to the organization,
maintenance, and existence of the Seller as a corporation or (ii) any
of the rights of the Seller under this Agreement (or under any side
agreement between the Seller on the one hand and the Buyer on the other
hand entered into on or after the date of this Agreement).
27
Freestar Technologies, Inc.,
August 8, 2001
page 28
28
Freestar Technologies, Inc.,
August 8, 2001
page 29
EXHIBIT "C"
List and Forms of Assignments
29
Freestar Technologies, Inc.,
August 8, 2001
page 30
EXHIBIT "D"
List of Assumed Liabilities
Form of Assumption
All Liabilities of the Seller set forth on the face of the Most Recent
Form 10Q (rather than in any notes thereto),
All Liabilities of the Seller which have arisen after the Most Recent
Fiscal Month End in the Ordinary Course of Business (other than any Liability
resulting from, arising out of, relating to, in the nature of, or caused by any
breach of contract, breach of warranty, tort, infringement, or violation of law)
All obligations of the Seller under the agreements, contracts, leases,
licenses, and other arrangements referred to in the definition of Acquired
Assets either
(i) to furnish goods, services, and other non-Cash benefits to
another party after the Closing, or
(ii) to pay for goods, services, and other non-Cash benefits that
another party will furnish to it after the Closing, and
All other Liabilities and obligations of the Seller set forth in an
appendix to the Disclosure Schedule under an express statement (that the Buyer
has initialed) to the effect that the definition of Assumed Liabilities will
include the Liabilities and obligations so disclosed; provided, however, that
the Assumed Liabilities shall not include
(i) any Liability of the Seller for Taxes,
(ii) any Liability of the Seller for the unpaid Taxes of any Person
(other than any of the Seller and its Subsidiaries) under
Reg.ss.1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or
otherwise,
(iii) any obligation of the Seller to indemnify any Person
(including any of the Seller Stockholders) by reason of the
fact that such Person was a director, officer, employee, or
agent of any of the Seller and its Subsidiaries or was serving
at the request of any such entity as a partner, trustee,
director, officer, employee, or agent of another entity
(whether such indemnification is for judgments, damages,
penalties, fines, costs, amounts paid in settlement, losses,
expenses, or otherwise and whether such indemnification is
pursuant to any statute, charter document, bylaw, agreement,
or otherwise),
(iv) any Liability of the Seller for costs and expenses incurred in
connection with this Agreement and the transactions
contemplated hereby, or
(v) any Liability or obligation of the Seller under this Agreement
(or under any side agreement between the Seller on the one
hand and the Buyer on the other hand entered into on or after
the date of this Agreement).
30
Freestar Technologies, Inc.,
August 8, 2001
page 31
EXHIBIT "E"
Allocation Schedule
31
Freestar Technologies, Inc.,
August 8, 2001
page 32
EXHIBIT "F"
Seller's Financial Statements and Tax Returns
32
Freestar Technologies, Inc.,
August 8, 2001
page 33
EXHIBIT "G"
Management Stock Bonus Agreement
33
Freestar Technologies, Inc.,
August 8, 2001
page 34
EXHIBIT "H"
Employment Agreement
34
Freestar Technologies, Inc.,
August 8, 2001
page 35
Disclosure Statement
ss.3 Representations and Warranties of Seller.
Seller Disclosure Statement
Any exceptions toss.3 of Agreement listed in Disclosure Statement
(1) Organization of Seller
(2) Authorization of Board of Directors to Sell
(3) Noncontravention (sale will not violate corporate charter, bylaws, laws
or contract)
(4) No Commissions/Brokerage Fees
(5) Good/Marketable Title to Acquired Assets
(6) Tax Returns/Financial Statements (Exhibit F) are true an correct
(7) No material changes since date of most recent Financial Statement/Tax
Return
(8) No undisclosed liabilities or pending/threatened litigation
(9) Seller and its predecessors have complied with all laws no
citations/charges
(10) Seller has filed all tax returns, no extensions, paid al taxes, no
assessments/liens
(11) (Blank)
(12) All real property and leases of Seller listed and described/ copies of
leases attached/breaches or defaults do not exist or are described.
(13) Intellectual Property - all copyrights, patents, trademarks, tradenames
or licenses for any of the foregoing are listed and identified by
registration number, etc. Seller warrants its right to use all
tradenames, manufacturing processes, designs, etc...
(14) Right to Use All Equipment on Premises - working and in good order
except for ordinary wear and tear
(15) Inventory on Premises if merchantable and fit for use in Seller's
operations - no obsolete, damaged or defective inventory which should
be written down or off
(16) List of Contracts to which Seller is a party [purchase contracts in
excess of $5,000 or that extend over a one year period of time; leases;
joint venture or partnership agreements; security agreements; loan
agreements; confidentiality & non-competition agreements Copies of all
agreements attached.
(17) Notes and Receivables and reserve for Bad Debts, properl accounted for
(i.e., not subject to claims for setoffs or counterclaims or are
uncollectible)
(18) No Powers of Attorney
(19) List of All Insurance Policies -limits, policy periods, names of
insureds, names/addresses of agents; premium information; unless
stated, all policies in force and effect, Seller knows of no breach of
false information on applications
(20) Litigation Pending, Threatened and Historical -- all types, state,
federal, administrative, arbitrations,
(21) Product Warranty information - terms of warranties
(22) Product Warranty claims -
(23) Employee / workforce remains intact, no threatened or pending
resignations
(24) Employee Benefit Plans Identified
(25) Guaranties (If Seller is a guarantor, obligation is identified,
described)
(26) Compliance with Health, Safety Regulatory Laws
(27) Indemnity Signed
(28) Representations and Warranties are true and correct
35
4. Buyer's Warranties
Disclosure Statement of Buyer
1) Buyer is a Nevada Corporation, duly organized, validly existing, good
standing
2) Authorization to consummate transaction
3) Non-contravention
4) No Broker's Fees
Freestar Technologies, Inc.,
a Nevada Corporation
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------------------------
Xxxxxx X. Xxxxxxxx
Title: Interim Chief Executive Officer
EPayLatina.,
a Dominican Republic Corporation
By: /s/ Xxxx Xxxx
-------------------------------------------
Xxxx Xxxx
Title: Chief Executive Officer
36
EXHIBIT I
DUE DILIGENCE CHECKLIST
Seller hereby acknowledge that items marked N/A on the Due Diligence Request
attached hereto are Not Applicable.
Freestar Technologies, Inc.,
a Nevada Corporation
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------------
Xxxxxx X. Xxxxxxxx
Title: Interim Chief Executive Officer
EPayLatina.,
a Dominican Republic Corporation
By: /s/ Xxxx Xxxx
--------------------------------
Xxxx Xxxx
Title: Chief Executive Officer
37
EXHIBIT I
DUE DILIGENCE CHECKLIST
38
