Asset Purchase Agreement Between Canufly.net, Inc. as Seller And XFone USA, Inc., as Purchaser
Exhibit
10.71
Between
Xxxxxxx.xxx,
Inc. as Seller
And
XFone
USA, Inc., as Purchaser
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PAGE
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ARTICLE
1 SALE
AND TRANSFER OF ASSETS
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1
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1.1 Sale
and Transfer of Business and Assets
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1
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1.2 Assumption of Liabilities
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2
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1.3 Purchase
Price
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3
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1.4 Closing
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4
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1.5 Seller's
Obligations at Closing; Further Acts and Assurances
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4
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ARTICLE
2 REPRESENTATIONS
AND WARRANTIES BY SELLER AND SHAREHOLDERS
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5
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2.1 Organization,
Corporate Power and Qualification
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5
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2.2 Capitalization
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5
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2.3 Subsidiaries
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5
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2.4 Financial
Statements
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5
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2.5 Absence
of Undisclosed Liabilities
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6
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2.6 Letters
of Credit
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6
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2.7 Absence
of Certain Recent Changes
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6
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2.8 Title
to Properties
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8
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2.9 Agreements,
Contracts and Commitments
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8
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2.10 Burdensome
Agreements
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11
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2.11 Related
Party Transactions
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11
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2.12 Execution,
Delivery and Performance of Agreement; Authority
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11
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2.13 Customer
Contracts
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11
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2.14 Equipment
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12
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2.15 Receivables
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12
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2.16 Relationship
with Suppliers
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12
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2.17 Guarantees
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12
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2.18 Permits
and Licenses
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12
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2.19 Assets
Necessary to Business
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12
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2.20 Litigation
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12
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2.21 Compliance
With Laws and Other Instruments
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13
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2.22 Taxes
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13
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2.23 Investment
Representation; Legends
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14
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2.24 Environmental
Matters
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14
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2.25 ERISA
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15
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2.26 Employee
Matters
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15
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2.27 Insurance
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15
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2.28 Labor
Matters
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16
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2.29 Books
of Account; Reports; Bank Accounts
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16
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2.30 Intellectual
Property
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16
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2.31 No
Finders or Brokers
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16
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2.32 Restrictions
on Business Activities
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16
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2.33 Disclosure
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16
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ARTICLE
3 REPRESENTATIONS
AND WARRANTIES OF PURCHASER
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17
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3.1 Organization
and Standing of Purchaser
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17
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3.2 Authority;
Binding Effect
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17
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3.3 No
Finders or Brokers
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17
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ARTICLE
4 COVENANTS
OF PURCHASER
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17
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4.1 Corporate
Action
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17
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4.2 Handling
of Documents
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17
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ARTICLE
5 COVENANTS
OF SELLER AND SHAREHOLDERS
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18
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5.1 Access
and Information
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18
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5.2 Conduct
of Business
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18
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5.3 Best
Efforts to Secure Consents
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18
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5.4 Unusual
Events
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18
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5.5 Interim
Financial Statements
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18
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ARTICLE
6 CONDITIONS
PRECEDENT TO THE OBLIGATIONS OF SELLER
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19
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6.1 Representations
and Warranties True
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19
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6.2 No
Obstructive Proceeding
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19
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6.3 Proceedings
and Documents Satisfactory
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19
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6.4 Shareholder
Approval
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19
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ARTICLE
7 CONDITIONS
PRECEDENT TO THE OBLIGATIONS OF PURCHASER
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19
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7.1 Representations
and Warranties True
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19
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7.2 No
Obstructive Proceeding
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20
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7.3 Shareholder
Approval
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20
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7.4 Consents
and Approvals; Releases
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20
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7.5 Proceedings
and Documents Satisfactory
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20
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7.6 No
Adverse Change
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20
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7.7 Federal
and State Approvals; Licensing
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20
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7.8 Due
Diligence
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20
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ARTICLE
8 TERMINATION
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21
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8.1 Optional
Termination
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21
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8.2 Notice
of Abandonment
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21
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8.3 Mandatory
Termination
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21
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8.4 Termination
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21
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ARTICLE
9 INDEMNIFICATION
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22
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9.1 Grant
of Indemnity.
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22
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ARTICLE
10 MISCELLANEOUS
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23
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10.1 Expenses/Taxes
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23
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10.2 Notices
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23
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10.3 Entire
Agreement
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24
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10.4 Governing
Law
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24
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10.5 WAIVER
OF TRIAL BY JURY
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25
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10.6 Legal
Fees and Costs
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25
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10.7 Time
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25
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10.8 Section
Headings
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25
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10.9 Waiver
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25
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10.10 Exhibits
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25
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10.11 Set-off
Rights
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25
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10.12 Assignment
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25
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10.13 Binding
on Successors and Assigns
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26
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10.14 Parties
in Interest
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26
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10.15 Amendments
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26
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10.16 Drafting
Party
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26
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10.17 Counterparts
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26
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10.18 Reproduction
of Documents
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26
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10.19 Public
Disclosure
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26
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10.20 Access
to Records After Closing
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27
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10.21 Non-Competition
and Non-Solicitation
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27
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Asset
Purchase Agreement ("Agreement") executed as of January 10, 2006, to be
effective as of January 1, 2006 between Xxxxxxx.xxx, Inc., a Mississippi
corporation (the "Seller") and XFone USA, Inc., a Mississippi corporation
(the
"Purchaser"), and Xxxxxxx Xxxxxxx, as the principal shareholder of the Seller
(the "Shareholder").
WHEREAS,
Seller
owns, holds, and uses certain assets and rights in connection with the
telecommunications business currently operated by Seller (the
"Business");
WHEREAS,
Purchaser
is a wholly-owned subsidiary of XFone, Inc., an Arizona corporation
("XFone");
WHEREAS,
Buyer
desires to purchase all of assets of Seller, and Seller desires to sell the
assets to Purchaser, all in accordance with and subject to the terms and
conditions hereinafter set forth, and
NOW
THEREFORE, in
consideration of the foregoing and of the mutual covenants and agreements
hereinafter set forth, the parties hereto hereby agree as follows:
ARTICLE
1
SALE
AND TRANSFER OF ASSETS
1.1 Sale
and Transfer of Business and Assets.
Subject
to and upon the terms and conditions set forth in this Agreement, Seller
will
sell, transfer, convey, assign and deliver to Purchaser, and Purchaser will
purchase, at the Closing Date hereunder, all of the business, assets,
properties, goodwill and rights of Seller as a going concern, of every nature,
kind and description, tangible and intangible, wheresoever located and whether
or not carried or reflected on the books and records of Seller (hereinafter
sometimes collectively called "Seller's Assets"), including, without limitation,
(i) the right to use Seller's corporate name and all variations thereof other
than xxxxxxx.xxx and xxxxxxx.xxx, and the customer list and all information
and
records with respect to the customers of the Seller (the “Transferred
Customers”) together with all service contracts with the Transferred Customers
for services provided by the Seller to the Transferred Customers, (ii) the
assets referred to in the form of Xxxx of Sale attached hereto as Schedule
"1"
and (iii) the assets reflected on the Balance Sheet referred to in Section
2.4
hereof, with only such dispositions of such assets reflected on the Balance
Sheet as shall have occurred in the ordinary course of Seller's business
between
the date thereof and the Closing and which are permitted by the terms hereof,
and excluding only (a) the minute books, corporate seal and stock records
of
Seller, or (b) the assets set forth on Exhibit “A” to the Xxxx of Sale
(collectively the "Excluded Assets"). Seller's Assets shall be conveyed free
and
clear of all liabilities, obligations, liens and encumbrances excepting only
those liabilities and obligations which are expressly to be assumed by Purchaser
hereunder and those liens and encumbrances securing the same which are
specifically disclosed herein or expressly permitted by the terms
hereof.
-1-
1.2 Assumption of Liabilities.
Purchaser
hereby agrees to assume, pay, perform and discharge only the liabilities
of
Seller set forth on Schedule 2 (the "Assumed Liabilities").
It
is
expressly acknowledged and agreed that Purchaser will not assume and shall
not
be liable, either expressly or impliedly, for any of the obligations or
liabilities of Seller of any kind and nature other than those specifically
assumed in Section 1.2
as set
forth on Schedule 2; without limiting the foregoing, Purchaser shall not
assume
or become liable (expressly or impliedly) with respect to any of the
following:
(a) except
as
set forth on Schedule 2, any liability of Seller, either directly or indirectly,
for either principal or interest, with respect to advances or loans made
to or
owed by Seller;
(b) any
liability or claim arising out of or related to the operation and use of
the
Seller's Assets prior to the Closing Date (as hereinafter defined), including,
without limitation, any obligations or liabilities of Seller with respect
to
contract, negligence, strict liability in tort, product liability or breach
of
warranty claims;
(c) except
as
set forth on Schedule 2, any liability arising out of any employee benefit
plans
maintained by Seller for the benefit of any employees of Seller or any other
liability of Seller with respect to any employees including but not limited
to
incentive compensation plans, severance pay, accrued salaries, wages, bonuses,
payroll taxes, hospitalization and medical insurance, deferred compensation
and
vacation and sick pay;
(d) any
liability attributable to personal property tax assessed by any governmental
entity, federal, state, or local, against any of the assets to be conveyed
or
leased hereunder, such taxes to remain the responsibility of Seller;
and
(e) any
liability for any other tax assessed by any governmental entity, federal,
state,
or local, attributable to the business of Seller relating to the period on
or
before the Closing Date, including but not limited to, any income, franchise,
excise, sales, or use taxes.
Seller
covenants and agrees to satisfy or pay when due, any and all liabilities
of
Seller not expressly assumed by Purchaser.
-2-
1.3 Purchase
Price.
(a) In
consideration of the sale, transfer, conveyance, assignment and delivery
of the
Seller's Assets by Seller to Purchaser, and in reliance upon the representations
and warranties made herein by Seller, Purchaser will, in full payment thereof,
pay to Seller at the Closing a total purchase price of up to $740,000.00,
payable as follows:
(i) Cash
in
the amount of One Hundred Eighty-five Thousand and no/100 Dollars payable
in
twelve equal monthly installments with the first installment of $15,416.66
to be
paid at closing and thereafter on the last day of the month for the eleven
months following closing.
(ii) Purchaser
shall payoff the loan with the B&K Bank in an amount not to exceed
$275,000.
(iii) A
number
of restricted shares of the common stock of XFone, Inc. (“Purchaser Common
Stock”) with an agreed market value of $90,000.00 determined using the average
closing price of the Parent Common Stock for the ten (10) trading days preceding
the trading day immediately prior to the Closing Date, which shall be issued
to
the Seller’s stockholders on a pro-rata basis based on their respective
ownership interest in the Seller as certified by the Seller and Stockholder
at
Closing.
(iv) A
number
of Parent Stock Warrants (as defined herein) with a value of $45,000.00
calculated one day prior to the Closing Date assuming a 90% volatility of
the
underlying Parent Common Stock pursuant to the Black Scholes option - pricing
model, which shall be issued to the stockholders of Seller on a pro-rata
basis
based on their respective ownership interest in the Seller as certified by
the
Seller and Stockholder as of the Closing Date. “Parent Stock Warrants’ shall
mean warrants convertible on a one to one basis into Parent Common Stock
with a
term of five (5) years, a strike price that is 10% above the closing price
of
the Parent Common Stock on the Closing Date and the Parent Common Stock into
which the warrant is convertible is restricted stock.
(v) Escrow
Additional Parent Common Stock and Additional Common Stock Warrants. Provided
that one year from the Closing Date, the monthly revenue from the Transferred
Customers is at 85% or more of the December 2005 monthly revenue of the
Transferred Customers as set forth in Schedule 3 hereto, then there shall
be
issued a number of Parent Common Stock with a value equal to $90,000 and
Parent
Stock Warrants equal in value to $45,000, which Parent Common Stock and Parent
Stock Warrants shall be valued as on the same basis the Parent Common Stock
and
Parent Stock Warrants issued at the Closing Date; provided for every one
percent
(1%) that the average customer xxxxxxxx fall below eighty-five percent, then
there would be a reduction in value of $2,450 for the Parent Stock Warrants
and
$4,950 for the Parent Common Stock; and further provided there shall be a
dollar
for dollar reduction for any Loss (as defined in Article 9) of the Purchaser
Indemnified Parties, for which two-thirds of the Loss shall be applied to
reduce
the amount of the Parent Common Stock and one-third of the Loss shall be
applied
to reduce the amount of Parent Stock Warrants. In the event a claim for a
Loss
has been made but not finally determined, then an amount of Parent Common
Stock
and Parent Stock Warrants shall be reserved to cover the alleged Loss until
finally resolved. During the one year period, the Purchaser shall provide
to the
Seller on a monthly basis as report of the monthly revenue xxxxxxxx for the
Transferred Customers. At the end of the one year period, the Purchaser shall
provide notice to the Seller of the amount of the Escrow Additional Parent
Common Stock and Additional Stock Warrants it proposes to be issued and the
basis therefore based on the calculation of the monthly revenue of the
Transferred Customers. In the event the Seller does not notify the Purchaser
in
writing within ten business days from the date of receipt of the notice that
it
disputes the calculation, the calculation shall be deemed final. In the event
the Seller shall dispute the calculation by giving notice, then in such event
the parties shall attempt in good faith for thirty (30) days to resolve the
dispute and if the parties are able to resolve the dispute, the parties shall
set forth its agreement in writing. In the event the parties are not able
to
resolve the dispute, the parties agree to submit the claim to arbitration
to be
administered by the American Arbitration Association in accordance with its
Commercial Arbitration Rules by a single arbitrator and the decision of the
arbitrator shall be binding on the parties. The Additional Parent Common
Stock
and Parent Stock Warrants shall be issued to the Xxxxxxx.xxx, Inc. stockholders
on the same basis as the Parent Common Stock and Parent Stock Warrants issued
at
Closing.
-3-
1.4 Closing.
The
Closing shall take place at 10:00 A.M., local time, on the 24th day of January,
2006 at the offices of Xxxxxxx Xxxxxx Winter & Stennis, P.A. or such other
time and place as the parties may agree upon provided that the parties agree
that the closing and transfer of assets shall be effective as of January
1, 2006
(the “Closing Date”). January 1, 2006 is herein sometimes referred to as the
Closing Date. In the event either of the parties is entitled not to close
on the
scheduled date because a condition to the Closing set forth in Article 6
or 7
hereof has not been met (or waived by the party or parties entitled to waive
it), such party may postpone the Closing from time to time, by giving at
least
five days prior notice to the other party, until the condition has been met
(which all parties will use their best efforts to cause to happen), but in
no
event to a date later than June 30, 2006.
1.5 Seller's
Obligations at Closing; Further Acts and Assurances.
(a) At
the
Closing, Seller will deliver to Purchaser and the Purchaser will deliver
the
Purchase Price:
(i) a
Xxxx of
Sale duly executed by Seller in the form of Schedule “1” annexed hereto (the
“Xxxx of Sale”);
(ii) a
certificate of the Seller setting forth (i) all the stockholders of the Seller
as of the Closing Date and the number of shares owned by each and each
stockholders respective ownership interest in the Seller at the Closing Date;
(ii) a certified resolution of the Seller’s Board of Directors and Shareholder
approving this Agreement and the transactions contemplated hereby; and (iii)
the
certifications required by Article 7;
(iii) all
Required Consents as set out in Exhibit
5.3
of the
Exhibit Volume;
(iv) such
other good and sufficient instruments of conveyance, and transfer, in form
and
substance satisfactory to Purchaser's counsel, as shall be effective to vest
in
Purchaser good and marketable title to Seller's Assets;
(v) all
contracts, files and other data and documents pertaining to Seller's Assets,
except Seller's minute books and stock ledger records; and
(vi) all
documents required to be delivered to Purchaser under the provisions of this
Agreement.
(b) At
any
time and from time to time after the Closing, at Purchaser's request and
without
further consideration, Seller and Shareholder will execute and deliver such
other instruments of sale, transfer, conveyance, assignment and confirmation
and
take such action as Purchaser may reasonably deem necessary or desirable
in
order to more effectively transfer, convey and assign to Purchaser, and to
confirm Purchaser's title to, all of Seller's Assets, to put Purchaser in
actual
possession and operating control thereof and to assist Purchaser in exercising
all rights with respect thereto.
(c) Seller
agrees that Purchaser shall have the right and authority to collect for its
own
account all receivables and other items which shall be transferred to Purchaser
as provided herein and to endorse with the name of Seller any checks received
on
account of any such receivables or other items. Seller agrees that it will
promptly transfer and deliver to Purchaser any cash or other property which
Seller may receive in respect of such receivables or other items.
-4-
ARTICLE
2
REPRESENTATIONS
AND WARRANTIES BY SELLER AND SHAREHOLDERS
Seller
and Shareholder, jointly and severally, hereby represent and warrant to
Purchaser as follows:
2.1 Organization,
Corporate Power and Qualification.
Seller
is
a corporation duly organized, validly existing and in good standing under
the
laws of the State of Mississippi and has full corporate power and authority
and
all authorizations, licenses and permits necessary to own, lease and operate
its
properties and assets and to carry on its business as and where it is now
being
conducted, to enter into this Agreement, and to consummate the transactions
contemplated hereby Seller is duly qualified to do business and is in good
standing in each jurisdiction in which the character of the properties owned
or
leased by it or the nature of the business transacted by it makes such
qualification necessary. A copy of Seller's Articles of Incorporation and
all
amendments thereto as of the date hereof and a copy of Seller's by-laws,
as
amended to the date hereof (both certified by the Secretary of Seller), are
included as Exhibit
2.1B
of the
Exhibit Volume and are true, accurate and complete as of the date hereof.
2.2 Capitalization.
Except
as
noted in Exhibit
2.2,
the
authorized capital stock of Seller consists of 1,000,000 shares of no par
value
common stock, of which as of the date hereof, 669,154.92 shares have been
duly
authorized by all necessary corporate action on the part of Seller, are validly
issued and outstanding, fully paid and non-assessable and all of which are
owned
beneficially and of record by the Shareholders as set forth in Exhibit
2.2.
There
are no other authorized or outstanding or authorized equity securities of
Seller
of any class, kind or character, and there are no outstanding rights, contracts,
rights to subscribe, conversion rights, exchange rights, warrants, options,
calls puts or other agreements or commitments of any character relating to
the
capital stock of Seller or any securities convertible or exchangeable or
exercisable for any shares of stock of any class of capital stock of
Seller.
2.3 Subsidiaries.
Seller
has and at Closing will have no direct or indirect ownership interest in,
by way
of stock ownership or otherwise, any corporation, association, joint venture,
partnership or business enterprise and has no commitment to purchase any
such
interest, direct or indirect.
2.4 Financial
Statements.
Exhibit
2.4
consists
of the following financial statements of Seller: unaudited balance sheet
(“Balance Sheet”) of Seller as of December 31, 2005 (“Balance Sheet Date”) and
unaudited Statement of Operations of Seller for the month ending December
31,
2005 and year ending 2005, (unaudited financial statements and the related
notes
being herein called "Seller Financial Statements").
The
Seller Financial Statements are true, complete and accurate, have been based
upon the information contained in the books and records of Seller and present
fairly the assets, liabilities and financial condition of Seller as at the
respective dates thereof and the results of their operations for the periods
ended at the respective dates thereof, in each case prepared in conformity
with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved and with prior periods, except that in the
unaudited portion of the Seller Financial Statements (i) are subject to year-end
audit adjustments, and (ii) do not contain footnotes. The Seller Financial
Statements do not contain any material inaccuracy and do not suffer from
any
material omissions.
-5-
2.5 Absence
of Undisclosed Liabilities. Except
as
and to the extent reflected or reserved against in the Balance Sheet as of
the
Balance Sheet Date, Seller had no liabilities, claims or obligations (whether
accrued, absolute, contingent, unliquidated or otherwise, whether or not
known
to Seller or Shareholder or any directors, officers or employees of Seller,
whether due to become payable and regardless of when or by whom asserted).
Since
the Balance Sheet Date, Seller has not made any contract, agreement or
commitment or incurred any obligation or liability (contingent or otherwise),
nor has there been any discharge or satisfaction of any obligation or liability
owed by Seller, which is not in the ordinary course of business nor has there
occurred any loss or material injury to any of the Seller’s Assets as the result
of any fire, accident, act of God or the public enemy, or other casualty,
or any
adverse material change in the any of the Seller’s Assets or in the condition
(financial or otherwise) of the Business.
2.6 Letters
of Credit.
Except
as
disclosed in Exhibit
2.6
hereto,
there are no outstanding letters of credit issued at the request of Seller
to
any suppliers or obligees of Seller with respect to the operations of
Seller.
2.7 Absence
of Certain Recent Changes.
Except
as
expressly provided in this Agreement or as set forth on Exhibit
2.7
in
alphabetical order corresponding to the following subsections since the Balance
Sheet Date, and through the Closing Date, Seller has not been and will not
have:
(a) except
current liabilities for trade or business obligations incurred in connection
with the purchase of goods or services in the usual and ordinary course of
business, consistent with past practice, and in an amount which is usual
and
normally incurred, both individually and in the aggregate, any indebtedness
or
other liabilities (whether accrued, absolute, contingent or otherwise),
guaranteed any indebtedness or sold any assets other than inventory in the
normal course of business;
(b) suffered
any damage, destruction or loss, whether or not covered by
insurance;
(c) suffered
the resignation or other termination of any management personnel of Seller,
or
the loss of or other termination of a business relationship with any customers
or suppliers of Seller's business;
(d) increased
the regular rate of compensation payable to any employee, other than normal
merit and cost of living increases granted in the ordinary course of business;
or increased such compensation by bonus, percentage, compensation service
award
or similar arrangement theretofore in effect for the benefit of any employees,
and no such increase is required;
(e) established
or agreed to establish, amended or terminated any pension, retirement or
welfare
plan or arrangement for the benefit of their employees not theretofore in
effect;
(f) suffered
any change in financial condition, assets, liabilities, operations, prospects
or
business or suffered any other event or condition of any character which
individually or in the aggregate has or might reasonably have a material
adverse
effect on Seller;
-6-
(g) had
any
change in the capitalization of Seller, including, without limitation, the
issuance by Seller of any shares of stock of any class, any subscriptions,
options, warrants, convertible securities, rights, calls, agreements,
commitments or rights affecting or relating in any manner whatsoever to any
equitable interests in Seller;
(h) declared
or paid any dividend or other distribution on any class of the capital stock
of
Seller or purchased or redeemed any of its capital stock;
(i) failed
to
replenish its inventories and supplies in a normal and customary manner
consistent with past practice and prudent business practice prevailing in
the
industry or made any purchase commitments in excess of normal, ordinary and
usual for the business or at any price in excess of current market price
or
terms more onerous than customary in the industry or made any change in its
selling, pricing, advertising or personnel practices inconsistent with prior
practices and prudent business practices prevailing in the
industry;
(j) experienced
any labor organizational efforts, strikes or complaints other than grievance
procedures in the ordinary course of business or entered into any collective
bargaining agreements with any union;
(k) made
any
single capital expenditure which exceeded $2,000 or made aggregate capital
expenditures which exceeded $10,000;
(l) permitted
or allowed any of the Seller's Assets (real, personal or mixed, tangible
or
intangible) to be subjected to any mortgage, pledge, lien, security interest,
encumbrance, restriction or charge of any kind;
(m) written
down the value of any of the Seller's Assets, or written off as uncollectible
any notes or accounts receivable;
(n) paid,
discharged or satisfied any claims, liabilities or obligations (absolute,
accrued, contingent or otherwise) other than in the usual and ordinary course
of
business;
(o) canceled
any debts or waived any claims or rights whether or not in the usual and
ordinary course of business;
(p) paid,
lent or advanced any amount to, or sold, transferred or leased any properties
or
assets (real, personal or mixed, tangible or intangible) to, or entered into
any
agreement or arrangement with, Seller or any of the officers or directors
of
Seller or of any "affiliate" or "associate" of any of their officers or
directors (as such terms are defined in the rules and regulations of the
Securities and Exchange Commission under the Securities Act of 1933, as
amended), except for reimbursement of ordinary and reasonable business expenses
related to the business of Seller and compensation to officers at rates not
exceeding the rates of compensation at the Balance Sheet Date;
-7-
(q) amended,
terminated or otherwise altered (whether by action or inaction) any contract,
agreement or license to which Seller is a party, or received any notice of
termination or violation of the same;
(r) entered
into a material transaction other than in the ordinary course of business
or
made any change in any method of accounting or accounting practice;
(s) canceled,
or failed to continue, insurance coverages; or
(t) agreed,
whether in writing or otherwise, to take any action described in this
§ 2.7.
2.8 Title
to Properties.
(a) The
Seller has good and valid title to, or, in the case of leased properties
and
assets, valid leasehold interests in, all of its properties and assets, real,
personal and mixed, used or held for use in its business, free and clear
of any
Liens, except: (i) as reflected in the Financials; (ii) Liens for Taxes not
yet
due and payable; and (iii) such imperfections of title and encumbrances,
if any,
which do not detract materially from the value of, or interfere materially
with
the present use of, the property subject thereto or affected
thereby.
(b) Exhibit
2.8
contains
an accurate and complete list and description of all real property owned
by the
Seller or in which the Seller has a leasehold or other interest or which
is used
by the Seller in connection with the operation of its business (the “Real
Property”), together with a description of each lease, sublease, license, or any
other instrument under which the Seller claims or holds such leasehold or
other
interest or right to the use thereof or pursuant to which the Seller has
assigned, sublet or granted any rights therein, identifying the parties thereto,
the rental or other payment terms, expiration date and cancellation and renewal
terms thereof, and all machinery, tools, equipment, motor vehicles, rolling
stock and other tangible personal property (other than inventory and supplies),
owned, leased or used by the Seller except for items having a value of less
than
$2,000 which do not, in the aggregate, have a total value of more than $10,000,
setting forth with respect to all such listed property a summary description
of
all leases, liens, claims, encumbrances, charges, restrictions, covenants
and
conditions relating thereto, identifying the parties thereto, the rental
or
other payment terms, expiration date and cancellation and renewal terms
thereof.
(c) The
Seller has not granted to any third party any right or license to use the
Seller's customer lists, customer contact information, customer correspondence
or customer licensing and purchasing histories relating to its current and
former customers.
2.9 Agreements,
Contracts and Commitments.
(a) Except
as
set forth on Exhibit
2.9
of the
Exhibit Volume, the Seller is not presently a party to or bound by:
(i) any
employment, consulting or sales agreement with any employee, consultant or
salesperson of the Seller;
-8-
(ii) any
agreement or plan relating to employee benefits or compensation, including
without limitation any option plan or purchase plan with respect to Equity
Interests of the Seller, any of the benefits of which will be increased,
or the
vesting of benefits of which will be accelerated, by the occurrence of any
of
the transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement;
(iii) any
fidelity or surety bond or completion bond;
(iv) any
lease
of personal property having an annual rental rate in excess of $2,000
individually or $15,000 in the aggregate;
(v) any
agreement, contract or commitment relating to capital expenditures and involving
future payments in excess of $2,000 individually or $10,000 in the
aggregate;
(vi) any
agreement, contract or commitment relating to the disposition or acquisition
of
assets or any interest in any business enterprise outside the ordinary course
of
the Seller's business;
(vii) any
payables, mortgages, indentures, guarantees, loans or credit agreements,
security agreements or other agreements or instruments relating to the borrowing
of money or extension of credit or evidencing any debt or any payable, debt
or
agreement which is secured by any assets of the Seller;
(viii) any
purchase order or contract for the purchase of materials or services involving
in excess of $2,000 individually or $10,000 in the aggregate;
(ix) any
construction contracts;
(x) any
dealer, distribution, joint marketing or development agreement or agreements
relating to territorial arrangements, sales representation, operating or
consulting agreements;
(xi) any
remarketer, reseller or other agreement for use or distribution of the Seller's
products, technology or services;
(xii) any
supplier or third party provider agreements;
(xiii) any
joint
venture, partnership or other management agreements;
-9-
(xiv) any
advertising, marketing, telemarketing or promotional agreements; yellow pages
ad
(xv) any
tax
sharing agreement with any other party;
(xvi) any
non-compete or other agreements restricting the business in any
way;
(xvii) any
independent agent or independent contractor agreements;
(xviii) any
agreements for the discount of the services or products offered by the Seller;
Wireless Services - City of Vicksburg; Culkin Water; Xxxxxxx Xxxxxxx; Domains
-
Xxx Xxxxxxxxxx
(xix) any
agreements pursuant to which the Seller is obligated to indemnify any
party;
(xx) any
agreements with any current or former officer, director, employee, consultant
or
equity holder or any partnership, corporation, joint venture or other entity
in
which any such person has an interest;
(xxi) any
irrevocable right of use or similar agreements;
(xxii) any
agreement providing for the purchase of telecommunications minutes, services
or
traffic; or
(xxiii) any
other
agreement, contract or commitment that involves $2,000 individually or $20,000
in the aggregate or more and is not cancelable without penalty within thirty
(30) calendar days.
(b) The
Seller is in compliance with and has not breached, violated or defaulted
under,
or received notice that it has breached, violated or defaulted under, any
of the
terms or conditions of any agreement, contract, lease, license or commitment
to
which it is a party or by which it is bound, including those included on
Exhibit
2.7
(collectively, the "Contracts"),
nor
does the Seller have knowledge of any event that would constitute such a
material breach, violation or default with the lapse of time, giving of notice
or both. Each Contract is in full force and effect and is not subject to
any
material default thereunder, nor, to the knowledge of the Seller, is any
party
obligated to the Seller pursuant thereto subject to any material default
thereunder.
(c) The
Seller has obtained, or will obtain prior to the Closing Date, all necessary
consents, waivers and approvals of parties to any Contract as are required
thereunder in connection with the Merger or for such Contracts to remain
in
effect without modification, limitation or alteration after the Closing Date.
Following the Closing Date, the Seller will be permitted to exercise all
of its
rights under the Contracts without the payment of any additional amounts
or
consideration other than amounts or consideration which the Seller would
otherwise be required to pay had the transactions contemplated by this Agreement
not occurred.
-10-
2.10 Burdensome
Agreements.
Except
as
is set forth in Exhibit
2.10
of the
Exhibit Volume, Seller is not a party to, nor are any of the properties or
assets of Seller subject to or bound or affected by, any provision of any
order
of any court or other agency of government or any indenture, agreement or
other
instrument or commitment which adversely affects the operations, earnings,
assets, properties, liabilities, business or prospects of Seller or Seller's
condition, financial or otherwise.
2.11 Related
Party Transactions.
Except
as set forth on Exhibit
2.11,
during
the past three years Seller has not, directly or indirectly, purchased, leased
from others or otherwise acquired any property or obtained any services from,
or
sold, leased to others or otherwise disposed of any property or furnished
any
services to, or otherwise dealt with (except with respect to remuneration
for
services rendered as a director, officer or employee of Seller), in the ordinary
course of business or otherwise, (i) any shareholder of Seller or (ii) any
person, firm or corporation which, directly or indirectly, alone or together
with others, controls, is controlled by or is under common control with Seller
or any shareholder of Seller. Seller does not owe any amount to, or have
any
contract with or commitment to, any of its shareholders, directors, officers,
employees or consultants (other than compensation for current services not
yet
due and payable and reimbursement of expenses arising in the ordinary course
of
business), and none of such persons owes any amount to Seller. No part of
the
property or assets of any Shareholder or any direct or indirect subsidiary
or
affiliate of any Shareholder is used by Seller.
2.12 Execution,
Delivery and Performance of Agreement; Authority.
Neither
the execution, delivery nor performance of this Agreement by Seller or
Shareholder will, with or without the giving of notice or the passage of
time,
or both, conflict with, result in a default, right to accelerate or loss
of
rights under, or result in the creation of any lien, charge or encumbrance
pursuant to, any provision of Seller's certificate of incorporation or bylaws
or
any franchise, mortgage, deed of trust, lease, license, agreement,
understanding, law, rule or regulation or any order, judgment or decree to
which
Seller or Shareholder is a party or by which any of them may be bound or
affected. Seller and Shareholder have the full power and authority to enter
into
this Agreement and to carry out the transactions contemplated hereby, all
proceedings required to be taken by each of them to authorize the execution,
delivery and performance of this Agreement and the agreements relating hereto
have been properly taken and this Agreement and each document to be executed
in
connection herewith constitutes a valid and binding obligation enforceable
in
accordance with its terms against Seller and Shareholder.
2.13 Customer
Contracts.
The
contracts, agreements, understandings and commitments set forth and described
in
Exhibit
2.13 (the
"Customer
Contracts") are
all
of the customer contracts, agreements, commitments or understandings (both
written and oral) relating to the business and operations thereof to which
the
Seller is a party. Separately described in Exhibit
2.13
of the
Exhibit Volume are all Customer Contracts of the Seller that have generated
$2,000 or more in revenue in any month since June 1, 2004 ("Significant
Customer Contracts").
The
Seller has not entered into any binding agreement with respect to any Customer
Contract that could adversely affect the Sellers' ability to enforce its
rights
under such Customer Contract. The Seller has delivered true and complete
copies
of all written Customer Contracts (and all amendments and modifications thereto)
to Parent and Subsidiary prior to the execution of this Agreement, and each
Customer Contract represents the entire agreement between the Seller and
any
other party to such Customer Contract.
Since
120
days prior to the date of this Agreement, (i) no customer (or group of related
customers) purchasing in the aggregate $2,000 in products and services over
the
past twelve (12) months-has terminated its relationship with the Seller,
and
(ii) the Seller has not received any written or oral communication from any
customer (or group of related customers) purchasing in the aggregate $2,000
in
products and services over the past twelve (12) months to the effect that
such
customer (or group of related customers) is experiencing financial difficulties
which reasonably could be expected to affect adversely full and timely payment
by such customer for services rendered by the Seller.
-11-
2.14 Equipment.
All
assets of Seller consisting of personal property, including furniture, fixtures
or equipment, whether reflected in the Seller Financial Statements or otherwise,
are well maintained and in good operating condition, except for reasonable
wear
and tear and except for items which have been written down in the Seller
Financial Statements to a realizable market value or for which adequate reserves
have been provided in the Seller Financial Statements. The present quantity
of
all such furniture, fixtures or equipment of Seller is reasonable and warranted
in the present course of the business conducted by Seller. The only transactions
related thereto since the Balance Sheet Date, have been additions thereto
in the
ordinary course of business.
2.15 Receivables.
All
receivables of Seller (including accounts receivable, loans receivable and
advances) which are reflected in the Balance Sheet, and all such receivables
which will have arisen since the date thereof, shall have arisen only from
bona
fide transactions in the ordinary course of Seller's business and shall be
(or
have been) fully collected when due, or in the case of each account receivable
within 90 days after it arose, without resort to litigation and without offset
or counterclaim, in the aggregate face amounts thereof except to the extent
of
the normal allowance for doubtful accounts with respect to accounts receivable
computed as a percentage of sales consistent with Seller's prior practices
as
reflected on the most recent annual Financial Statement.
2.16 Relationship
with Suppliers.
The
Seller or Shareholder do not know of any written or oral communication, fact,
event or action which exists or has occurred within 120 days prior to the
date
of this Agreement which would indicate that any current supplier to the Company
or its Subsidiaries of items or services essential to the conduct of the
business of the Company and its Subsidiaries may terminate or materially
reduce
its business with the Company.
2.17 Guarantees.
There
are
no guarantees, matters of suretyship and contingent liabilities of Seller
not
reflected in the Seller Financial Statements.
2.18 Permits
and Licenses.
Included
as Exhibit
2.18
in the
Exhibit Volume is a schedule of permits and licenses, listing and briefly
describing each permit, license or similar authorization from each governmental
authority issued with respect to the operation or ownership of properties
by
Seller together with the designation of the respective expiration dates of
each,
and also listing and briefly describing each association in which Seller
is a
member and each association or governmental authority by which Seller is
accredited or otherwise recognized. Seller is not required to obtain any
additional permits, licenses or similar authorizations from any governmental
authority for the proper conduct of its business other than those listed
on
Exhibit
2.18
in the
Exhibit Volume.
2.19 Assets
Necessary to Business.
Seller
presently has and at Closing will have and transfer to Purchaser title to
all
property and assets, real, personal and mixed, tangible and intangible, and
all
leases, licenses and other agreements, necessary to permit Purchaser to carry
on
the business of Seller.
2.20 Litigation.
Except
as set forth in Exhibit
2.20,
there
is no claim, legal action, suit, arbitration, governmental investigation
or
other legal or administrative proceeding, nor any order, decree or judgment
in
progress, pending or in effect, or to the knowledge of Seller or any Shareholder
threatened, against or relating to Seller, its officers, directors or employees,
its properties, assets or business or the transactions contemplated by this
Agreement, and neither Seller nor any Shareholder knows or has reason to
be
aware of any basis for the same.
-12-
2.21 Compliance
With Laws and Other Instruments.
Except
as set forth in Exhibit
2.21,
Seller
has complied with all existing laws, rules, regulations, ordinances, orders,
judgments and decrees now or hereafter applicable to its business, properties
or
operations as presently conducted. Neither the ownership nor use of Seller's
properties nor the conduct of its business conflicts with the rights of any
other person, firm or corporation or violates, or with or without the giving
of
notice or the passage of time, or both, will violate, conflict with or result
in
a default, right to accelerate or loss of rights under, any terms or provisions
of its certificate of incorporation or bylaws as presently in effect, or
any
lien, encumbrance, mortgage, deed of trust, lease, license, Agreement,
understanding, law, ordinance, rule or regulation, or any order, judgment
or
decree to which Seller is a party or by which it may be bound or affected.
Neither Seller nor any Shareholder is aware of any proposed laws, rules,
regulations, ordinances, orders, judgments, decrees, governmental takings,
condemnations or other proceedings which would be applicable to its business,
operations or properties and which might adversely affect its properties,
assets, liabilities, operations or prospects, either before or after
Closing.
2.22 Taxes.
All
taxes, including, without limitation, income, property, sales, use, franchise,
added value, employees' income, withholding and social security taxes imposed
by
the United States, or any foreign country or by any state, municipality,
subdivision or any other taxing authority, which are due and payable by Seller
and any interest or penalties thereon having been paid in full. All federal,
state and other tax returns of Seller and its subsidiaries required by law
to be
filed have been timely filed, and Seller and its subsidiaries have paid or
accrued on the balance sheets included in the Seller Financial Statements
(including taxes on properties, income, franchises, licenses, sales and
payrolls) which have become due pursuant to such returns or pursuant to any
assessment. All such tax returns have been prepared in compliance with all
applicable laws and regulations and are true and accurate in all respects.
The
amounts set up as provisions for taxes (including provision for deferred
income
taxes) on the Seller Financial Statements are sufficient for the payment
of all
unpaid federal, state, county and local taxes accrued for or applicable to
all
periods (or portions thereof) ending on or before the Closing Date. Except
as
disclosed in Exhibit
2.22-A
of the
Exhibit Volume, there are no tax liens on any of the property of Seller except
those with respect to taxes not yet due and payable. There are no pending
tax
examinations nor has Seller received a revenue agent's report asserting a
tax
deficiency. Seller does not expect any taxing authority to claim or assess
any
amount of additional taxes against it. No claim has ever been made by a taxing
authority in a jurisdiction where Seller does not file tax returns that Seller
or any of its subsidiaries is or may be subject to taxes assessed by such
jurisdiction. The Federal income tax liability of Seller and its subsidiaries
has been examined and reported on by the Internal Revenue Service (or closed
by
applicable statutes) and satisfied for all fiscal years prior to and including
the fiscal year ended December 31, 2001. Seller has never filed a consent
under § 341(f) of the Internal Revenue Code of 1986, as amended (the "Code"),
relating to collapsible corporations.
Copies
of
Seller's last three federal, state and local income tax returns are included
as
Exhibit
2.22-B
of the
Exhibit Volume. No waivers of any statute of limitations relating to the
payment
of taxes have been given by Seller and no waivers therefor have been requested
by the Internal Revenue Service from Seller. No extensions have been obtained
to
file any tax return which has not heretofore been filed. Seller and its
subsidiaries have withheld from each payment made to employees of Seller
and its
subsidiaries the amount of all taxes (including, but not limited to, federal,
state and local income taxes and Federal Insurance Contribution Act taxes)
required to be withheld therefrom and all amounts customarily withheld
therefrom, and have set aside all other employee contributions or payments
customarily set aside with respect to such wages and have paid or will pay
the
same to, or have deposited or will deposit such payment with, the proper
tax
receiving officers or other appropriate authorities.
-13-
2.23 Investment
Representation; Legends.
The
Seller acknowledges and agrees:
(a) The
Parent Common Stock and the Parent Stock Warrants to be issued pursuant to
the
terms of this Agreement have not been registered under the Securities Act
of
1933 as amended (the "Securities Act") and the Parent Common Stock and Parent
Stock Warrants are "restricted securities" as the term is defined in Rule
144
promulgated by the Securities and Exchange Commission (the "SEC") under the
Securities Act and the Seller shareholders cannot transfer any of such Parent
Common Stock and Parent Stock Warrants unless such shares are subsequently
registered under the Securities Act or in a transfer that, in the opinion
of
legal counsel to Parent, is exempt from such registration.
(b) Each
shareholder of the Seller has been advised that the Parent Common Stock and
the
Parent Stock Warrants issued hereunder have not been and are not being
registered under the Securities Act or under the Blue Sky laws of any
jurisdiction, and that Parent in issuing such shares is relying upon, among
other things, the representations and warranties of the Seller and Stockholders
contained in this Section including that such issuance is a "private offering"
and does not require compliance with the registration provisions of the
Securities Act
(c) The
Parent Common Stock and all the Parent Stock Warrants to be issued in the
Merger
shall be characterized as "restricted securities" for purposes of Rule 144
under
the Securities Act, and each certificate representing any of such shares
shall
bear a legend identical or similar in effect to the following legend (together
with any other legend or legends required by applicable state securities
laws or
otherwise):
THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT
OF 1933, AS AMENDED (THE "ACT"), OR UNDER ANY APPLICABLE STATE SECURITIES
LAWS,
AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED
OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT AND SUCH LAWS OR IN
COMPLIANCE WITH AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
2.24 Environmental
Matters.
Except
as disclosed on Exhibit
2.24:
(a) All
federal, state and local permits, licenses and authorizations required for
the
use and operation of the Seller's Assets or the Real Property have been obtained
and are presently in effect.
(b) None
of
the Seller's Assets or the Real Property has been used by Seller or by any
other
Person at any time to handle, treat, store or dispose of any hazardous or
toxic
waste or substance, nor are any of the Seller's Assets or the Real Property,
including all soils, groundwaters and surface waters located on, in or under
the
Seller's Assets or the Real Property, contaminated with pollutants or other
substances which contamination may give rise to a clean-up obligation under
any
federal, state or local law, rule, regulation or ordinance, including, but
not
limited to, the federal Comprehensive Environmental Response, Compensation
and
Liability Act, 42 USC 9601 et esq., and the common law.
(c) All
underground tanks located in, on or under any Real Property are in a state
of
good condition and repair and have not leaked nor are they presently lacking
any
of the contents which they have held or presently hold.
-14-
(d) There
are
no outstanding violations or any consent decrees entered against Seller
regarding environmental and land use matters, including, but not limited
to,
matters affecting the emission of air pollutants, the discharge of water
pollutants, the management of hazardous or toxic substances or wastes, or
noise.
(e) There
are
no claimed, threatened or alleged violations with respect to any federal,
state
or local environmental law, rule, regulation, ordinance, permit, license
or
authorization, and there are no present discussions with any federal, state
or
local governmental agency concerning any alleged violation of environmental
laws, rules, regulations, ordinances, permits, licenses or
authorizations.
(f) All
operations conducted by Seller on the Real Property have been and are in
compliance with all federal, state and local statutes, rules, regulations,
ordinances, permits, licenses and authorizations relating to environmental
compliance and control.
2.25 ERISA.
Except
as
listed in Exhibit
2.25
of the
Exhibit Volume, Seller has no "employee benefit plans", as such term is defined
under Section 3(3) of the Employee Retirement Income Security Act of 1974,
as
amended ("ERISA"), or any other plan or similar arrangement, written or
otherwise, which provides any type of pension or welfare benefit any of the
directors, employees, or former employees of their. No "prohibited transaction",
as such term is defined under Section 4975(c) of the Internal Revenue Code
or
under Section 406 of ERISA, and the respective regulations thereunder, has
occurred or is occurring with respect to any "employee benefit plan" maintained
by Seller or with respect to any trustee or administrator thereof. No “employee
benefit plan” as defined in Section 3(2) of ERISA has been terminated, nor has
there been any reportable event as defined in Section 4043 of ERISA. No
"unfunded accrued liability's, as such term is defined under Section 3(30)
of
ERISA, exists with respect to any "employee pension benefit plan" listed
in
Exhibit
2.25.
The
Seller retains liability with respect to any employee benefit plans and the
termination thereof after the Closing Date.
2.26 Employee
Matters.
(a)
Included
as Exhibit
2.27A
of the
Exhibit Volume is a list of all employees of Seller, together with their
annual
rates of compensation and a list of all people who were paid bonuses in the
last
twelve months plus the amount thereof. No written employment agreement to
which
Seller is a party requires longer than a two-week notice before termination
or
agreement to lend to or guarantee any loan to an employee or an agreement
relating to a bonus, severance pay or similar plan, agreement, arrangement
or
understanding.
(b) Purchaser
will not have any responsibility for continuing any person in the employ
(or
retaining any person as a consultant) of the Purchaser from and after the
Closing Date or have any liability for any severance payments to or similar
arrangements with any such person who shall cease to be an employee or
consultant of the Seller at or prior to the Closing Date.
2.27 Insurance.
Exhibit
2.28
of the
Exhibit Volume contains a list and brief description of all policies of fire,
general liability, product liability, environmental impairment liability,
worker's compensation, health and other forms of insurance policies or binders
currently in force insuring against risks of Seller. All insurance policies
or
binders of Seller are valid, outstanding and enforceable and will continue
to be
valid, binding and enforceable through Closing.
-15-
2.28 Labor
Matters.
There
are no collective bargaining agreements with any labor union to which Seller
is
a party or by which Seller is bound, and them are not currently negotiating
with
a labor union. No employees of Seller have ever petitioned for a representation
election. Seller is in compliance with all applicable laws respecting employment
and employment practices, terms and conditions of employment and wages and
hours, and are not engaged in any unfair labor practice. There is no unfair
labor practice complaint against Seller pending before the National Labor
Relations Board. There is no labor strike, dispute, slowdown or stoppage
actually pending or, to its knowledge, threatened against or affecting Seller.
Except as may be required by §4980B of the Code or applicable state health care
continuation coverage statutes, Seller has no liability under any plan or
arrangement which provides welfare benefits, including medical and life
insurance, to any current or future retiree or terminated employee.
2.29 Books
of Account; Reports; Bank Accounts.
The
books
of account of Seller are accurate and complete and fairly reflect the
transactions and the disposition of its assets. Seller has filed all reports
and
returns required by any law or regulation to be filed by it. Exhibit
2.29 of
the
Exhibit Volume contains a true and complete list of the names and locations
of
all financial institutions at which the Seller maintains a checking account,
deposit account, securities account, safety deposit box or other deposit
or
safekeeping arrangement, the number or other identification of all such accounts
and arrangements and the names of all persons authorized to draw against
any
funds therein.
2.30 Intellectual
Property.
Seller
owns or possesses the royalty free licenses or other rights to use all
copyrights, trademarks, service marks, service names, trade names, patents,
trade secrets and other proprietary rights necessary to conduct its business
as
it is presently operated. Seller is not infringing upon or otherwise acting
adversely to any copyrights, trademarks, trademark rights, service marks,
service names, trade names, patents, patent rights, licenses, trade secrets
or
other proprietary rights owned by any other person or persons, and there
is no
claim or action by any such person pending, or to the knowledge of Seller
or any
Shareholder threatened, with respect thereto.
2.31 No
Finders or Brokers.
Neither
Seller, Shareholder, nor any officer or director of Seller has engaged any
finder or broker in connection with the transactions contemplated
hereunder.
2.32 Restrictions
on Business Activities.
There is
no agreement (noncompete or otherwise), commitment, judgment, injunction,
order
or decree to which the Seller is a party or otherwise binding upon the Seller,
which has or may reasonably be expected to have the effect of prohibiting
or
impairing in any material respect any business practice, any acquisition
of
property, the conduct of business as currently conducted or otherwise materially
limiting the freedom of the Seller to engage in any line of business or to
compete with any person.
2.33 Disclosure.
No
representations and warranties by the Seller and Shareholder in this Agreement
and no statement in this Agreement or any document or certificate furnished
or
to be furnished to Purchaser pursuant hereto contains or will contain any
untrue
statement or omits or will omit to state a fact necessary in order to make
the
statements contained therein not misleading. Seller and Shareholder have
disclosed to Purchaser all facts known to any of them material to the assets,
liabilities, business, operation and property of Seller. There are no facts
known to the Seller or Shareholder not yet disclosed which would adversely
affect the Seller's Assets or future operations of the Seller's
business.
-16-
ARTICLE
3
REPRESENTATIONS
AND WARRANTIES OF PURCHASER
Purchaser
hereby represents and warrants as follows:
3.1 Organization
and Standing of Purchaser.
Purchaser
is a corporation duly organized, validly existing and in good standing under
the
laws of the state of Mississippi and has full corporate power and authority
to
conduct its business as now being conducted.
3.2 Authority;
Binding Effect.
Purchaser
has corporate power to execute and deliver this Agreement and consummate
the
transactions contemplated hereby and each has taken (or by the Closing Date
will
have taken) all action required by law, its Articles of Incorporation, by-laws
or otherwise to authorize such execution and delivery and the consummation
of
the transactions contemplated hereby. The execution, delivery, and performance
of this Agreement constitutes the valid and binding agreement of Purchaser
enforceable in accordance with its terms.
3.3 No
Finders or Brokers.
Neither
Purchaser nor any officer or director thereof has engaged any finder or broker
in connection with the transactions contemplated hereunder.
ARTICLE
4
COVENANTS
OF PURCHASER
Purchaser
hereby covenants and agrees as follows:
4.1 Corporate
Action.
Purchaser
will take all necessary corporate and other action and use its best efforts
to
obtain all consents or approvals required of it to carry out the transactions
contemplated by this Agreement and to satisfy the conditions specified
herein.
4.2 Handling
of Documents.
With
respect to information provided by Seller pursuant to this Agreement prior
to
the Closing, Purchaser agree to keep all such information confidential which
is
not in the public domain, except to the extent that such information (i)
becomes
generally available to the public other than as a result of a disclosure
directly or indirectly by Purchaser, (ii) was known by Purchaser on a
non-confidential basis prior to disclosure to Purchaser by Seller pursuant
to
this Agreement or (iii) becomes available to Purchaser on a non-confidential
basis from a source (other than Seller) which is entitled to disclose the
same,
and to exercise the same care in handling such information as it would exercise
with similar information of its own.
-17-
ARTICLE
5
COVENANTS
OF SELLER AND SHAREHOLDERS
Seller
hereby covenants and agrees as follows:
5.1 Access
and Information.
Between
the date of this Agreement and the Closing Date; Seller will: (i) provide
to
Purchaser and its officers, attorneys, accountants and other representatives,
during normal business hours, or otherwise if Purchaser deems necessary,
free
and full access to all of the properties, assets, agreements, commitments,
books, records, accounts, tax returns, and documents of Seller and permit
them
to make copies thereof; (ii) furnish Purchaser and its representatives with
all
information concerning the business, properties and affairs of Seller as
Purchaser requests and certified by the officers, if requested; (iii) cause
the
independent public accountants of Seller to make available to Purchaser and
its
representatives all financial information relating to Seller requested,
including all working papers pertaining to audits and reviews made heretofore
by
such auditors; (iv) furnish Purchaser true and complete copies of all financial
and operating statements of Seller; (v) permit access to Seller’s employees,
attorneys, customers and suppliers for consultation or verification of
information related to the Seller or the Business.
No
information or knowledge obtained in any investigation pursuant to this Section
5.1 shall affect or be deemed to modify: any representation or warranty
contained herein, the conditions to the obligations of the parties to consummate
the Merger in accordance with the terms and provisions hereof, or the
indemnification obligations of the Seller.
5.2 Conduct
of Business.
Between
the date hereof and the Closing Date, except as otherwise expressly approved
in
writing by Purchaser, Seller and Shareholders shall cause Seller to conduct
its
business only in the ordinary course thereof consistent with past practice
and
in such a manner that the representations and warranties contained in Article
2
of this Agreement shall be true and correct at and as of the Closing Date
(except for changes contemplated, permitted or required by this Agreement)
and
so that the conditions to be satisfied by Seller at the Closing shall have
been
satisfied. Seller and Shareholders shall cause Seller, consistent with
conducting its business in accordance with reasonable business judgment,
to
preserve the business of Seller intact; use their best efforts to keep available
to Purchaser the services of the present employees of Seller (except those
dismissed for cause or those who voluntarily discontinue their employment)
and
preserve for Purchaser the goodwill of the suppliers, customers and others
having business relations with Seller.
5.3 Best
Efforts to Secure Consents.
Seller
and Shareholder shall take, and shall cause Seller to take such actions and
use
their best efforts to secure before the Closing Date all necessary consents
and
approvals required to carry out the transactions contemplated by the Agreement
and to satisfy all other conditions precedent to the obligations of Purchaser
and Seller, including the Required Consents set out in Exhibit
5.3.
5.4 Unusual
Events.
Until
the
Closing Date, Seller and Shareholder shall supplement or amend all relevant
Exhibits in the Exhibit Volume with respect to any matter thereafter arising
or
discovered which, if existing or known at the date of this Agreement, would
have
been required to be set forth or described in such Exhibits; provided, however,
that for the purposes of the rights and obligations of the parties hereunder,
any such supplemental disclosure shall not be deemed to have been disclosed
as
of the date Seller delivers to Purchaser the Exhibit Volume or any other
date,
and shall not be deemed to amend or supplement any Exhibits or to prevent
or
cure any misrepresentation, breach of warranty or breach of covenant, unless
agreed to in writing by Purchaser.
5.5 Interim
Financial Statements.
Within
30
days after the end of each calendar month subsequent to the date of this
Agreement and prior to the Closing Date, Seller shall deliver to Purchaser
an
unaudited balance sheet of Seller as at the end of such calendar month together
with the related consolidated statement of operations.
-18-
ARTICLE
6
CONDITIONS
PRECEDENT TO THE OBLIGATIONS OF SELLER
All
obligations of Seller to consummate the transactions contemplated by this
Agreement are subject to the satisfaction, at or prior to the Closing, of
each
of the following conditions (unless expressly waived in writing by Seller
at any
time at or prior to the Closing):
6.1 Representations
and Warranties True.
All of
the representations and warranties made by Purchaser contained in Article
3 of
this Agreement shall be true as of the date of this Agreement and shall be
deemed to have been made again at and as of the date of Closing, and shall
be
true at and as of the date of Closing in all material respects; Purchaser
shall
have performed and complied in all material respects with all covenants and
conditions required by this Agreement to be performed or complied with by
them
prior to or at the Closing; and Seller shall have been furnished with a
certificate of the President or any Vice President of Purchaser, dated the
Closing Date, in such officer's capacity, certifying to the truth of such
representations and warranties as of the Closing and to the fulfillment of
such
covenants and conditions.
6.2 No
Obstructive Proceeding.
No
action or proceedings shall have been instituted and no order, decree or
judgment of any court, agency, commission or governmental authority shall
be
subsisting which questions the validity of this Agreement or seeks to restrain
the transactions contemplated hereby Also, no substantive legal objection
to the
transactions contemplated by this Agreement shall have been received from
or
threatened by any governmental department or agency.
6.3 Proceedings
and Documents Satisfactory.
All
proceedings in connection with the transactions contemplated hereby and all
certificates and documents delivered to Seller pursuant to this Agreement
shall
be satisfactory in form and substance to Seller and its counsel acting
reasonably and in good faith.
6.4 Shareholder
Approval.
The
shareholders of Seller shall have approved this Agreement as required by
the
corporation laws of Mississippi. The Seller shall immediately call a special
meeting for the purpose of approving this Agreement.
ARTICLE
7
CONDITIONS
PRECEDENT TO THE OBLIGATIONS OF PURCHASER
All
obligations of Purchaser to consummate the transactions by this Agreement
are
subject to the performance, at or prior to the Closing, of each of the following
conditions (unless expressly waived in writing by Purchaser at any time at
or
prior to the Closing):
7.1 Representations
and Warranties True.
All of
the representations and warranties of Seller and Shareholder contained in
Article 2 of this Agreement shall be true as of the date of this Agreement,
shall be deemed to have been made again at and as of the Closing, and shall
be
true at and as of the date of Closing in all material respects (without taking
into account any disclosures made by Seller to Purchaser pursuant to Article
5
hereof); Seller shall have performed or complied in all material respects
with
all covenants and conditions required by this Agreement to be performed or
complied with by it prior to or at the Closing; and Purchaser shall be furnished
with a certificate of the president or any vice president of Seller, dated
the
Closing Date certifying to the truth of such representations and warranties
as
of the time of the Closing and to the fulfillment of such covenants and
conditions.
-19-
7.2 No
Obstructive Proceeding.
No
action
or proceedings shall have been instituted and no order, decree or judgment
of
any court, agency, commission or governmental authority shall be subsisting
which questions the validity of this Agreement or seeks to restrain the
transactions contemplated hereby Also, no substantive legal objection to
the
transactions contemplated by this Agreement shall have been received from
or
threatened by any governmental department or agency.
7.3 Shareholder
Approval.
XFone,
Inc. as the sole shareholder of the Purchaser shall have approved the Agreement
and the transactions contemplated hereby.
7.4 Consents
and Approvals; Releases.
Each
of
the parties to any agreement or instrument under which the transactions
contemplated hereby would constitute or result in a default or acceleration
of
obligations shall have given such consent as may be necessary to permit the
consummation of the transactions contemplated hereby without constituting
or
resulting in a default or acceleration under such agreement or instrument,
and
any consents required from any public or regulatory agency or organization
having jurisdiction shall have been given, including, without limitation
the
Required Consents set forth in Exhibit
5.3
of the
Exhibit Volume.
7.5 Proceedings
and Documents Satisfactory.
All
proceedings in connection with the transactions contemplated hereby and all
certificates and documents delivered to Purchaser pursuant to this Agreement
shall be satisfactory in form and substance to Purchaser and its counsel
acting
reasonably and in good faith.
7.6 No
Adverse Change.
From
the
date of this Agreement until the Closing, the operations of Seller shall
have
been conducted in the ordinary course of business consistent with past practice
and from the date of the Seller Financial Statements until the Closing no
event
shall have occurred or have been threatened which has or would have a material
and adverse affect upon the financial condition, assets, liabilities,
operations, prospects or business of Seller; and Seller shall have not sustained
any loss or damage to their assets, whether or not insured, or union activity
that affects materially and adversely their ability to conduct their
businesses.
7.7 Federal
and State Approvals; Licensing.
Purchaser shall have received such licenses, and other regulatory approvals
as
are otherwise necessary to operate the businesses of Seller.
7.8 Due
Diligence.
Purchaser
shall be satisfied with the results of its legal, accounting, business,
environmental, architectural, engineering and other due diligence review
of
Seller.
-20-
ARTICLE
8
TERMINATION
8.1 Optional
Termination.
This
Agreement may be terminated and the transactions contemplated hereby abandoned
at any time prior to the Closing Date, notwithstanding Seller approval as
follows:
(a) By
the
mutual consent of Purchaser and Seller; or
(b) By
Seller, if any of the conditions set forth in Article 6 shall not have met
by
April 30, 2006; provided that Seller shall not be entitled to terminate this
Agreement pursuant to this § 8.1(b) if Seller's willful breach of this Agreement
has prevented the consummation of the transactions contemplated hereby;
or
(c) By
Purchaser, if any of the conditions provided in Article 7 hereof have not
been
met by April 30, 2006; provided that Purchaser shall not be entitled to
terminate this Agreement pursuant to this § 8.1(c) if Purchaser's willful breach
of this Agreement has prevented the consummation of the transactions
contemplated hereby.
8.2 Notice
of Abandonment.
In
the
event of such termination by either Purchaser or Seller pursuant to § 8.1 above,
written notice shall forthwith be given to the other party hereto.
8.3 Mandatory
Termination.
If
the
Closing has not occurred by June 30, 2006, this Agreement shall automatically
terminate and no longer be of any force or effect.
8.4 Termination.
In
the
event this Agreement is terminated as provided above, Purchaser shall deliver
to
Seller all documents (and copies thereof in its possession) concerning Seller
previously delivered by Seller to Purchaser; and none of the parties nor
any of
their respective partners, shareholders, directors, or officers shall have
any
liability to the other party for costs, expenses, loss of anticipated profits,
consequential damages, or otherwise, except for any breaches of any of the
provisions of this Agreement at or prior to the termination.
-21-
ARTICLE
9
INDEMNIFICATION
9.1 Grant
of Indemnity.
(a) Indemnification.
Seller
hereby indemnifies and agrees to hold Purchaser and its parent XFone, Inc.
and
their respective officers, directors, shareholders, employees or agents (each
a
“Purchaser Indemnified Party”) harmless from, against and in respect of (and
shall on demand reimburse Purchaser for) the following (each a “Loss” or
collectively the “Losses”):
(i) any
and
all loss, liability or damage suffered or incurred by any Purchaser Indemnified
Party by reason of any untrue representation, breach of warranty or
nonfulfillment of any covenant by Seller or Shareholder contained herein
or in
any certificate, document or instrument delivered to Purchaser pursuant hereto
or in connection herewith;
(ii) any
and
all loss, liability or damage suffered or incurred by any Purchaser Indemnified
Party in respect of or in connection with any liabilities of Seller not
specifically assumed by Purchaser pursuant to the terms of this
Agreement;
(iii) any
and
all debts, liabilities or obligations of Seller, direct or indirect, fixed,
contingent or otherwise, which exist at or as of the date of the Closing
hereunder or which arise after the Closing but which are based upon or arise
from any act, transaction, circumstance, sale of goods or services, state
of
facts or other condition which occurred or existed on or before the date
of the
Closing, whether or not then known, due or payable, except for the Assumed
Liabilities;
(iv) any
and
all actions, suits, proceedings, claims, demands, assessments, judgments,
costs
and expenses, including, without limitation, legal fees and expenses, incident
to any of the foregoing or incurred in investigating or attempting to avoid
the
same or to oppose the imposition thereof, or in enforcing this
indemnity.
(b) (i)Indemnification
Procedures.
All
claims for indemnification under Section 9.1(a) shall be asserted and resolved
as follows:
(ii) Non-Third
Party Claims.
In the
event a Purchaser Indemnified Party has a claim hereunder that does not involve
a claim being asserted against or sought to be collected by a third party,
the
Purchaser Indemnified Party shall with reasonable promptness send a claim
notice
with respect to such claim to the Seller. If the Seller does not notify the
Purchaser Indemnified Party within ten (10) calendar days from the date of
receipt of such claim notice that Seller disputes such claim, the amount
of such
claim shall be conclusively deemed a liability of the Seller hereunder. In
case
the Seller shall object in writing to any claim made in accordance with this
Section 9.1(b), the Purchaser Indemnified Party shall have fifteen (15) calendar
days to respond in a written statement to the objection of the Seller. If
after
such fifteen (15) calendar day period there remains a dispute as to any claim,
the parties shall attempt in good faith for sixty (60) calendar days to agree
upon the rights of the respective parties with respect to each of such claims.
If the parties should so agree, a memorandum setting forth such agreement
shall
be prepared and signed by all parties. In the event that the parties are
not
able to resolve such claim, the parties agree to submit the claim to arbitration
to be administered by the American Arbitration Association in accordance
with is
Commercial Arbitration Rules (“AAA”) and the decision of the arbitration shall
be binding and final and judgment on the award rendered may be entered in
any
court having jurisdiction thereof.
-22-
(c) Nature
and Survival of Representations and Warranties.
Each
statement, representation, warranty, indemnity, covenant and agreement made
by
Seller or Shareholder in this Agreement or in any document, certificate or
other
instrument delivered by or on behalf of Seller or Shareholder pursuant to
this
Agreement or in connection herewith shall be deemed the joint and several
statement, representation, warranty, indemnity, covenant and agreement of
Seller
and such Shareholder. All statements, representations, warranties, indemnities,
covenants and agreements made by each of the parties hereto shall survive
the
Closing.
(d) Third-Party
Claims.
In the
event any Purchaser Indemnified Party becomes aware of a third-party claim
that
such Purchaser Indemnified Party believes may result in a demand under Section
9.1, such Purchaser Indemnified Party shall notify the Seller of such claim,
and
the Seller shall be entitled, at its expense, to participate in, but not
to
determine or conduct, the defense of such claim. The Purchaser Indemnified
Party
shall have the right in its sole discretion to conduct the defense of and
settle
any such claim; provided, however, that except with the written consent of
the
Seller, no settlement of any such claim with third-party claimants shall
alone
be determinative of the amount of Losses relating to such matter.
ARTICLE
10
MISCELLANEOUS
10.1 Expenses/Taxes.
Except
as otherwise specifically provided in this Agreement, all expenses of the
preparation of this Agreement and of the transactions contemplated hereby,
including, without limitation, counsel fees, accounting fees, investment
adviser's fees and disbursements, shall be borne by the respective party
incurring such expense. The Seller shall pay any transfer taxes resulting
from
the transfer of the Seller’s Assets. The Seller acknowledges and agrees that the
Seller on its own behalf and on behalf of the shareholders of the Seller
has
relied on its advisors with respect to any tax consequences of the transactions
contemplated hereby and is relying on its own advisors with respect to such
matters.
10.2 Notices.
All
notices, demands and other communications hereunder shall be in writing and
shall be deemed to have been duly given if delivered in person or mailed
by
certified mail or registered mail (postage prepaid) or sent by reputable
overnight courier service (charges prepaid):
To
Seller
and Shareholder: Xxxxxxx.xxx,
Inc.
P.
O. Box
820744
0000
Xxxxxx Xxxxxx
Xxxxxxxxx,
XX 00000
Attn:
Xxxxxxx Xxxxxxx
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
Email:
xxxxxxxx@xxxxxxx.xxx
-23-
To
Purchaser: XFone
USA, Inc.
0000
Xxxxxxxx Xxxxx
Xxxxx
000
Xxxxxxx,
XX 00000
Attention:
Xxxx Xxxxxxx
Telephone:
000-000-0000
Facsimile:
000-000-0000
Email: xxxxxxxx@xxxxxxx.xxx
with
a
copy to:
Xxxxxxx
Xxxxxx Winter & Stennis, P.A.
000
Xxxxx
Xxxxx Xxxxxx (39202)
P.
O. Xxx
000
Xxxxxxx,
XX 00000-0000
Attention:
Xxxx X. Xxxxxx
Telephone:
000-000-0000
Facsimile:
601-949-4804
\Email: xxxxxxx@xxxxxxxxxxxxx.xxx
or
to
such other address as either Seller or Purchaser may designate by notice
to the
other.
10.3 Entire
Agreement.
This
Agreement and the Exhibits, schedules and documents delivered pursuant hereto
constitute the entire contract between the parties hereto pertaining to the
subject matter hereof and supersede all prior and contemporaneous agreements,
understandings, negotiations and discussions, whether written or oral, of
the
parties, and there are no representations, warranties or other agreements
between the parties in connection with the subject matter hereof, except
as
specifically set forth herein. No supplement, modification or waiver of this
Agreement shall be binding unless executed in writing by the parties to be
bound
thereby.
10.4 Governing
Law.
THE
VALIDITY AND CONSTRUCTION OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS
OF THE
STATE OF MISSISSIPPI.
-24-
10.5 WAIVER
OF TRIAL BY JURY.
TO
THE
EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY HEREBY IRREVOCABLY WAIVES
ALL
RIGHT OF JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
IN
CONNECTION WITH THIS AGREEMENT OR ANY MATTER ARISING HEREUNDER.
10.6 Legal
Fees and Costs.
In
the
event either party elects to incur legal expenses to enforce or interpret
any
provision of this Agreement, the prevailing party will be entitled to recover
such legal expenses, including, without limitation, reasonable attorneys'
fees,
costs and necessary disbursements, in addition to any other relief to which
such
party shall be entitled.
10.7 Time.
Time
is
of the essence for purposes of each and every provision of this
Agreement.
10.8 Section
Headings.
The
Section headings are for reference only and shall not limit or control the
meaning of any provision of this Agreement.
10.9 Waiver.
No
delay
or omission on the part of any party hereto in exercising any right hereunder
shall operate as a waiver of such right or any other right under this
Agreement.
10.10 Exhibits.
All
Exhibits, Appendices, schedules and documents referred to in or attached
to this
Agreement are integral parts of this Agreement as if fully set forth herein
and
all statements appearing therein shall be deemed to be representations. All
items disclosed hereunder shall be deemed disclosed only in connection with
the
specific representation to which they are explicitly referenced.
10.11 Set-off
Rights.
Notwithstanding
anything in this Agreement to the contrary, Purchaser shall be entitled to
set-off against its payment obligations to Seller or any other agreement
with
Seller with respect to the items set forth in § 9.1. Such right of set-off shall
be cumulative of rights to indemnity under Article 9 hereof and all other
rights
provided by applicable law.
10.12 Assignment.
No
party
hereto shall assign this Agreement without first obtaining the written consent
of the other party, except Purchaser shall have the right to assign this
Agreement to an affiliated company, and Purchaser or such affiliated company
shall have the right to collaterally assign the rights of Purchaser respecting
remedies in the event of breaches of Seller's and Shareholder's representations,
warranties and covenants and rights of indemnification hereunder to any
financial institution which finances its transaction.
-25-
10.13 Binding
on Successors and Assigns.
This
Agreement shall inure to the benefit of and bind the respective heirs,
administrators, successors and assigns of the parties hereto. Nothing expressed
or referred to in this Agreement is intended or shall be construed to give
any
person other than the parties to this Agreement or their respective successors
or permitted assigns any legal or equitable right, remedy or claim under
or in
respect of this Agreement or any provision contained herein, it being the
intention of the parties to this Agreement that this Agreement shall be for
the
sole and exclusive benefit of such parties or such successors and assigns
and
not for the benefit of any other person.
10.14 Parties
in Interest.
Nothing
in this Agreement is intended to confer any right on any person other than
the
parties to it and their respective successors and assigns, nor is anything
in
this Agreement intended to modify or discharge the obligation or liability
of
any third person to any party to this Agreement, nor shall any provision
give
any third person any right of subrogation or action over against any party
to
this Agreement.
10.15 Amendments.
This
Agreement may be amended, but only in writing, signed by the parties
hereto.
10.16 Drafting
Party.
The
provisions of this Agreement, and the documents and instruments referred
to
herein, have been examined, negotiated, drafted and revised by counsel for
each
party hereto and no implication shall be drawn nor made against any party
hereto
by virtue of the drafting of this Agreement.
10.17 Counterparts.
This
Agreement may be executed in any number of counterparts, each of which shall
be
an original, but all of which together shall comprise one and the same
instrument.
10.18 Reproduction
of Documents.
This
Agreement and all documents relating thereto, including without limitation,
consents, waivers and modifications which may hereafter be executed, the
Exhibits and documents delivered at the Closing, and financial statements,
certificates and other information previously or hereafter furnished to
Purchaser may be reproduced by Purchaser by any photographic, photostatic,
microfilm, microcard, miniature photographic or other similar process and
Purchaser may destroy any original documents so reproduced. Seller agrees
and
stipulates that any such reproduction shall be admissible in evidence as
the
original itself in any judicial or administrative proceeding (whether or
not the
original is in existence and whether or not such reproduction was made by
Purchaser in the regular course of business) and that any enlargement, facsimile
or further reproduction of such reproduction shall likewise be admissible
in
evidence.
10.19 Public
Disclosure.
The
parties hereto agree that prior to the Closing Date, none of them will make
or
engage in any press release, publicity or other public disclosure of the
matters
which are the subject of this Agreement without the prior written consent
of the
Purchaser and Seller, unless such party believes in good faith upon consultation
with counsel that such press release, publicity or other public disclosure
is
required by law or legal process, in which event such party will give the
Purchaser and Seller as much advance notice thereof as is practicable under
the
circumstances and will give good faith consideration to any comments made
with
respect thereto by the other parties hereto prior to the time when such press
release, publicity or other public disclosure is made.
-26-
10.20 Access
to Records After Closing.
Seller
will and will cause its counsel and certified public accountants to afford
to
the representatives of Purchaser, including their counsel and accountants,
reasonable access to, and copies of, any records not transferred to Purchaser,
including, but not limited to, all audit and tax work papers. Purchaser will
afford to the representatives of Seller reasonable access to, and copies
of, the
records transferred to Purchaser at the Closing during normal business hours
after the Closing Date. Copies furnished to the party gaining such access
shall
be furnished at the cost to the recipient.
10.21 Non-Competition
and Non-Solicitation.
(a) As
a
material inducement to Purchaser to enter into and perform its obligations
under
this Agreement, and in order to preserve and protect the trade secrets and
proprietary, confidential information of the Purchaser and XFone, Inc. and
its
subsidiaries and affiliates (collectively for purposes of this Section 10.21
the
“Purchaser”), for a period of the later of (i) two (2) years following the
Closing Date or (ii) two (2) years from the date that Xxxxxxx Xxxxxxx
discontinues as an agent for the Purchaser (the "Noncompetition
Period"),
Xxxxxxx Xxxxxxx will not directly or indirectly, either for himself or for
any
partnership, limited liability company, individual, corporation, joint venture
or any other entity "participate in" (as defined below) any business (including,
without limitation, any division, group or franchise of a larger organization)
which engages in the "Telecommunications Business" in the States of Mississippi,
Alabama, Georgia, Tennessee, Florida, Kentucky, Louisiana, North Carolina
or
South Carolina (the "Restricted Area"). For purposes of this Agreement,
"Telecommunications
Business"
shall
mean the business of providing any type of telecommunication services or
internet access services to any person or customer within the Restricted
Area,
including, without limitation, local, long distance, broadband, dial up data
services, wireless, DSL, Voice-over-Internet Protocol (VoIP) and any other
service or product being offered or provided by the Purchaser or any of its
affiliates. For purposes of this Agreement, the term "participate in" shall
include, without limitation, having any direct or indirect interest in any
corporation, partnership, limited liability company, joint venture or other
entity, whether as a sole proprietor, owner, shareholder, partner, member,
manager, joint venturer, creditor or otherwise, or rendering any direct or
indirect service or assistance to any individual corporation, partnership,
limited liability company, joint venture and other business entity (whether
as a
director, officer, manager, supervisor, employee, agent, consultant or
otherwise). Notwithstanding the foregoing, nothing in this Section 10.21
shall
prohibit Xxxxxxx Xxxxxxx from owning not more than five percent (5%) of the
debt
or equity securities of a publicly traded corporation which may compete with
Purchaser or from continuing to own and operate its existing computer sales
and
service business as such business is currently operating as of the Closing
Date.
(b) During
the Noncompetition Period, and in order to preserve and protect the trade
secrets and proprietary, confidential information of Purchaser after the
Closing
Date, Xxxxxxx Xxxxxxx shall not (i) induce or attempt to induce any employee
of
the Purchaser to leave the employ of Purchaser, or in any way interfere with
the
relationship between the Purchaser and any employee thereof, (ii) hire directly
or through another entity any individual employed by Purchaser who was
previously employed by the Seller, or (iii) induce or attempt to induce any
customer, supplier, licensee, distributor or other business relation of the
Purchaser to cease doing business with the Purchaser, or in any way interfere
with the relationship between any such customer, supplier, licensee, distributor
or business relation and the Purchaser (including, without limitation, making
any negative statements or communications concerning the
Purchaser).
-27-
(c) If,
at
the time of enforcement of this Section 10.21, a court shall hold that the
duration, scope or area restrictions stated herein are unreasonable under
circumstances then existing, the parties hereto agree that the maximum duration,
scope or area reasonable under such circumstances shall be substituted for
the
stated duration, scope or area and that the court shall be allowed to revise
the
restrictions contained herein to cover the maximum period, scope and area
permitted by law. Xxxxxxx Xxxxxxx agrees that the restrictions contained
in this
Section 10.21 are reasonable.
IN
WITNESS WHEREOF,
the
parties hereto have duly executed this Agreement as of the day and year first
above written.
SELLER:
XXXXXXX.XXX,
Inc.
By:/s/
Xxxxxxx Xxxxxxx
Xxxxxxx
Xxxxxxx, President
SHAREHOLDER:
/s/
Xxxxxxx Xxxxxxx
Xxxxxxx
Xxxxxxx
PURCHASER:
XFONE
USA, INC.
By:/s/
Xxxx Xxxxxxx
Xxxx
Xxxxxxx, President
-28-
List
of Exhibits
Contained
in Exhibit Volume
Exhibit
2.1 - Organizational Document
Exhibit
2.2 - Capitalization
Exhibit
2.4 - Financial Statements
Exhibit
2.6 - Letters of Credit
Exhibit
2.7 - Absence of Certain Recent Changes
Exhibit
2.8 - Title to Properties
Exhibit
2.9 - Agreements, Contracts and Commitments
Exhibit
2.10 - Burdensome Agreements
Exhibits
2.11 - Related Party Transactions
Exhibits
2.13 - Customer Contracts
Exhibit
2.18 - Permits and Licenses
Exhibit
2.20 - Litigation
Exhibit
2.21 - Compliance With Laws and Other Instruments
Exhibit
2.22A - Taxes
Exhibit
2.22B - Taxes
Exhibit
2.24 - Environmental Matters
Exhibit
2.25 - ERISA
Exhibit
2.27A - Employee Matters
Exhibit
2.8 - Insurance (DD Book)
Exhibit
2.29 - Books of Account; Reports; Bank Accounts
Exhibit
5.3 - Consents and Approvals; Releases
-29-
List
of Schedules
1.
Xxxx
of
Sale
2. Assumed
Liabilities
3. Transferred
Customer Revenues for December
-30-
Schedule
l to Asset Purchase Agreement
XXXX
OF SALE
Xxxxxxx.xxx,
Inc., a Mississippi corporation (hereinafter called "Assignor"), for One
Dollar
($1.00) and other valuable consideration to it in hand paid, receipt of which
is
hereby acknowledged, by these presents does sell, assign, transfer and convey
unto XFone, USA, Inc., a Mississippi corporation (hereinafter called
"Assignee"), its successors and assigns, the following described
property:
All
property of every kind and description and wherever situated, tangible and
intangible, owned by Assignor or to which Assignor has any right, title or
interest on the date hereof, excepting only those properties of Assignor
listed
on Exhibit "A" annexed hereto (the "Excluded Assets"), and including, without
limitation, all of "Seller's Assets" as defined in a certain Agreement of
Purchase and Sale of Assets, dated effective January 1, 2006, between Assignor,
as Seller and Assignee, as Purchaser (the "Agreement"), including, without
limitations, the following:
|
(i)
|
The
rights to use the Seller’s corporate name and all variations thereof other
than the internet domain names of xxxxxxx.xxx and xxxxxxx.xxx which
is
owned by Xxxxxxx Aviation;
|
|
(ii)
|
All
customers of the Assignor as listed in Exhibit “B” hereto and all customer
lists and records and all information related to the customers
in any form
whatsoever (the “Transferred Customers”) and all deposits for the
Transferred Customers as set forth on Exhibit “B” and all service
contracts with any of the Transferred Customers for services provided
by
the Seller to the Transferred
Customers;
|
|
(iii)
|
All
cash, accounts receivable, loans receivable, marketable securities
and
investments;
|
|
(iv)
|
All
merchandise and all inventories and other supplies and supply inventories,
prepaid insurance, prepaid interest and other prepaid items and
deposits,
chooses in action and causes of action, claims and rights of recovery
or
setoff of every kind or character arising out of transactions or
events
occurring on or prior to the date hereof irrespective of the date
on which
any such cause of action, claim or right may arise or accrue;
|
|
(v)
|
All
real property owned by the
Assignor;
|
|
(vi)
|
All
personal property of the Seller, including all furniture, fixtures,
machinery, equipment, vehicles, leaseholds and leasehold improvements,
fixtures, tools and all other tangible assets owned, leased or
otherwise
held by Seller and which are used or useful to the Business, including
those set forth on Exhibit “C”
hereto;
|
|
(vi)
|
All
inventions, patents, licenses, permits and franchises, trademarks,
trade
names, service marks, service names, copyrights, or know-how;
|
-31-
|
(vii)
|
All
goodwill of Seller as a going
concern;
|
|
(viii)
|
The
contracts as listed in Exhibit “D” hereto;
and
|
|
(ix)
|
All
books and records of Assignor, excepting only its minute books,
corporate
seal and stock ledger records.
|
Assignor
hereby authorizes and grants its power of attorney to Assignee and appoints
Assignee and its officers as Assignor's attorney-in-fact to take any appropriate
action in connection with any of said rights, claims, causes of action and
property, in the name of Assignor or in its own or any other name but at
its own
expense, it being understood that this authorization and power of attorney
are
coupled with an interest and irrevocable.
TO
HAVE
AND TO HOLD said rights, claims, causes of action, property, assets, business
and goodwill, as a going concern, unto the said Assignee, its successors
and
assigns, to and for its use forever.
AND,
Assignor does hereby warrant, covenant and agree that it:
(a) Has
good
and marketable title to the properties and assets hereby sold, assigned,
transferred, conveyed and delivered, free and clear of any liens, claims
or
encumbrances; and
(b)
Will
warrant and defend the sale of said properties and assets against all and
every
person or persons whomsoever claiming or to claim against any or all of the
same;
(c) All
of
the representations and warranties with respect to the Seller, Seller’s Assets
and the Business made by Assignor in the Purchase Agreement are incorporated
herein by this reference and are hereby confirmed and ratified as true, complete
and accurate as of the date hereof.
IN
WITNESS WHEREOF, Assignor has caused this instrument to be duly executed
this
______ day of January, 2006 to be effective as of January 1, 2006.
| Assignor: Xxxxxxx.xxx, Inc. | ||
| |
|
|
| By: | ||
|
Xxxxxxx Xxxxxxx |
||
| President | ||
|
Agreed
to and Accepted:
Assignee: XFONE USA, INC.
|
||
| |
|
|
| By: | ||
|
Xxxx Xxxxxxx |
||
| President | ||
-32-
Exhibit
“A” to Xxxx of Sale
Excluded
Assets
None
-33-
Exhibit
“B” to Xxxx of Sale
Customer
List and Customer Deposits
See
attached Customer List as of December 31, 2005
-34-
Exhibit
“C” to Xxxx of Sale
Personal
Property
See
attached Asset List.
-35-
Exhibit
“D” to Xxxx of Sale
Assigned
Contracts (other than Customer Service Contracts)
1. Culkin
Water District dated ________________.
2. City
of
Vicksburg dated February 10, 2005.
-36-
Schedule
2 to Asset Purchase Agreement
Assumed
Liabilities
1.Those
agreed upon liabilities/payables directly attributed to the underlying services
for providing the services to the Canufly customers beginning with January
1,
2006 billing cycles, until the transaction is closed.
0.Xxxx
with
B&K Bank, not to exceed $275,000, which will be paid at closing.
As
of
1/8/06 from Xxxxxxx Xxxxxxx, the on-line balance is $254,758.32. This is
the
balance after the January 2006 monthly payment was made by Canufly. Per diem
interest is $46.84. Will contact Xxxxx Xxx at B&K Bank to confirm final
payoff at date of closing.
NOTE:
XFone is not assuming any other liabilities. The liabilities listed under
current liabilities on the Balance Sheet, with the exception of the Advanced
Payments category, which has been zeroed out between the parties, is the
responsibility of Canufly.
-37-
Schedule
3
Transferred
Customers for December
-38-
