EXHIBIT 5.1
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is entered into as of August ___, 2002 by and among TTC
ACQUISITION COMPANY, an Indiana corporation (the "Purchaser"), TELECOM
TECHNOLOGY CORP., an Indiana corporation (the "Seller") and XXXXXXX XXXXXX
("Xxxxxx").
WITNESSETH:
WHEREAS, subject to the terms and conditions hereof, Purchaser desires
to purchase and Seller desires to sell all of the assets, properties and rights
relating to or used or useful in connection with Seller's business of selling or
installing low-voltage wiring (the "Business");
NOW, THEREFORE, in order to consummate said purchase and sale and in
consideration of the mutual agreements set forth herein, the Parties hereto
agree as follows:
SECTION 1
PURCHASE AND SALE OF ASSETS
1.1 Sale of Assets. Subject to the provisions of this Agreement, Seller
agrees to sell and Purchaser agrees to purchase, on such date (the "Closing
Date"), all of Seller's right, title and interest in and to all of its
properties, assets and operations of every kind and description, tangible and
intangible, personal or mixed, and wherever located, and all of Seller's
goodwill, backlog, customer lists, customer deposits, telephone numbers, trade
and product names (including but not limited to all rights to the name "Telecom
Technology Corp."), proprietary property and products except in each case
Excluded Assets. All of the assets described or referred to in this Section 1.1
(except Excluded Assets) are hereinafter referred to as the "Subject Assets" and
include, without limitation, those assets set forth below:
(a) All work-in-process, software and related assets, all fixed
assets, equipment and machinery, computer hardware and fixtures of Seller
including without limitation those set forth in Schedule 1.1(a) attached hereto
and made a part hereof;
(b) A complete customer list of the Seller's customers current
as of the Closing Date;
(c) All Intellectual Property (as defined in Section 2.6);
(d) To the extent permitted by the terms of each Assumed
Contract (as defined below) and applicable law, all outstanding sales proposals,
purchase orders, agreements or contracts to provide or receive goods and/or
services, all customer agreements, vendor agreements, commitments, agreements
and licenses relating to the Intellectual Property, as set forth in Schedule
1.1(d) attached hereto and made a part hereof (the "Assumed Contracts");
(e) All inventory (the "Inventory"), all accounts receivable
(the "Accounts Receivable") and all intangible assets each of which is set forth
in Schedule 1.1(e) attached hereto and made a part hereof;
(f) All prepaid expenses; and
(g) All cash and cash equivalents as set forth in Schedule
1.1(g).
1.2 Excluded Assets. Purchaser and Seller agree and acknowledge that
notwithstanding anything to the contrary set forth in Section 1.1, Seller is not
transferring to Purchaser and Purchaser is not purchasing any of the following
property (hereinafter referred to as the "Excluded Assets"):
(a) Seller's organizational records and business, tax, and
financial records, stationery and business cards.
1.3 Assumption of Liabilities It is expressly understood and agreed
that Purchaser is not assuming or becoming liable for any liabilities of Seller
of any kind or nature at any time existing or asserted, whether known or
unknown, fixed, contingent or otherwise not specifically assumed herein by
Purchaser. Notwithstanding the foregoing, upon the sale and purchase of the
Subject Assets, Purchaser shall accept and assume and, as the case may be, pay,
discharge, perform and observe in the ordinary course, the following, and only
the following liabilities, duties and obligations (the "Assumed Liabilities"):
(a) All of Seller's rights and executory obligations under the Assumed
Contracts to be performed after the Closing Date (excluding any obligations or
liabilities of Seller under any Assumed Contract that were to have been
performed, fulfilled or satisfied on or prior to the Closing Date).
(b) From and after the Closing Date, Purchaser may employ for the operation
of the Business those employees of Seller as listed in Schedule 1.3(b) attached
hereto and made a part hereof, and shall be responsible for the payment of all
wages and expenses of such personnel hired by it, (excluding any obligations or
liabilities of Seller that were to have been performed, fulfilled or satisfied
on or prior to the Closing Date).
(c) All of Seller's accounts payable listed in Schedule 1.3(c) in an amount
not to exceed $45,000.00.
1.4 Excluded Liabilities. The liabilities and obligations of Seller,
whether fixed, contingent, known or unknown and whether existing as of the
Closing Date or arising thereafter which are not specifically assumed by
Purchaser under Section 1.3 of this Agreement are hereinafter referred to as the
"Excluded Liabilities." Seller hereby acknowledges and agrees that, except for
the Assumed Liabilities, Purchaser is not assuming or becoming liable for, and
Seller shall remain exclusively liable for, all of the Excluded Liabilities.
1.5 Purchase Price. In consideration of the sale by Seller to Purchaser of
the Subject Assets, and subject to the other terms and conditions contained
herein, Purchaser agrees to pay, subject to the adjustments described below, the
sum of One Hundred Twenty-Five Thousand Nine Hundred Fifty-Two Dollars
($125,952.00) (the "Purchase Price") to Seller. In addition, Purchaser shall
cause to be issued to Xxxxxx within fifteen (15) days of the date of Closing,
four hundred fifty thousand (450,000) shares of Fortune Diversified Industries,
Inc. ("FDVI") common stock. Of the 450,000 shares, 200,000 shares shall be
immediately vested in Xxxxxx and the balance (250,000) of the shares shall be
unvested and subject to the following conditions:
i) If Xxxxxx is employed by Purchaser on February 28, 2003 and Purchaser
has attained a positive cumulative EBITDA during the period September 1, 2002 to
February 28, 2003, Xxxxxx shall become immediately vested in 50,000 shares of
the FDVI common stock.
ii) If Xxxxxx fails to become vested in the 50,000 shares of stock pursuant
to Section 1.5(i) above, and Xxxxxx is employed by Purchaser on August 31, 2004
and Purchaser has attained a positive cumulative EBITDA during the period
September 1, 2002 to August 31, 2004, Xxxxxx shall become immediately vested in
50,000 shares of the FDVI common stock.
iii) In addition to Section 1.5(ii) above, if Xxxxxx is employed by
Purchaser on August 31, 2004 and Purchaser has attained a positive cumulative
EBITDA during the period September 1, 2002 to August 31, 2004, Xxxxxx shall
become immediately vested in one (1) share of FDVI common stock for each $1.00
of cumulative EBITDA up to a maximum of 200,000 shares (cumulative EBITDA of at
least $200,000.00).
iv) EBITDA shall be defined as Purchaser's accrued earnings before any
interest, income taxes, depreciation or amortization. EBITDA shall be calculated
by Purchaser's outside accountant, which calculation shall be final and binding
on Purchaser and Xxxxxx. Each calculation shall be completed within ninety (90)
days after the end of the applicable period.
v) If Xxxxxx'x employment with Purchaser is, for any reason, terminated
prior to August 31, 2004, any unvested shares shall immediately, without any
further action by Xxxxxx or Purchaser, revert back to Fortune Diversified
Industries, Inc. Fortune Diversified Industries, Inc. shall promptly cancel said
shares upon their reversion.
vi) Prior to vesting, all of the unvested shares shall be retained in a
Xxxxxxx Xxxxx brokerage account in care of Xxxx Xxxxxxx. Promptly upon vesting,
all of the newly vested shares shall be delivered to Xxxxxx.
(a) At Closing, Purchaser will pay the Purchase Price in full to or for the
account of Seller by certified or cashier's check, or wire transfer, as directed
by Seller. Purchaser and Seller hereby agree to allocate the Purchase Price, as
set forth on Schedule 1.5(a) attached hereto and made a part hereof, among the
classes of Subject Assets and to file its federal income tax returns and its
other tax returns reflecting such allocation, including Form 8594 and any other
reports required by Section 1060 of the Internal Revenue Code of 1986, as
amended ("Code"); and
(b) As of the Closing Date, the Accounts Receivable acquired by Purchaser
are assumed to be one hundred percent (100%) collectible (subject to a $5,000.00
allowance for doubtful accounts). Upon acquisition of the Accounts Receivable,
Purchaser shall for a period of one hundred (100) days after the Date of Closing
("Collection Period") make reasonable efforts, in the ordinary course of
business, to collect the Accounts Receivable. Promptly after completion of the
Collection Period, Purchaser shall reassign to Seller or its designee any
Accounts Receivable (including all relevant records) that it has been unable to
collect during the Collection Period. The amount of Accounts Receivable
reassigned to Seller shall decrease the Purchase Price on a dollar-for-dollar
basis and Seller shall pay such decreased amount promptly to Purchaser.
1.6. Transfer of Subject Assets. On the Closing Date, Seller shall deliver
or cause to be delivered to Purchaser good and sufficient instruments of
transfer, transferring to Purchaser title to all of the Subject Assets. Such
instruments of transfer (a) shall be in the form and will contain the
warranties, covenants and other provisions (not inconsistent with the provisions
hereof) which are usual and customary for transferring the type of property
involved under the laws of the jurisdictions applicable to such transfers, (b)
shall be in form and substance reasonably satisfactory to Purchaser and its
counsel, and (c) except as otherwise provided in this Agreement, shall
effectively vest in Purchaser good and marketable title to all the Subject
Assets free and clear of all licenses, liens, encumbrances, mortgages and
security interests whatsoever (collectively "Liens") other than Assumed
Liabilities. To the extent allowed under each Assumed Contract and to the extent
allowed by law, on the Closing Date, Seller shall also deliver or cause to be
delivered to Purchaser all of the Assumed Contracts and such assignments thereof
as are necessary to assure Purchaser their full and useful benefit.
Notwithstanding the foregoing, however, the parties acknowledge that Seller
shall have no obligation at or after Closing to
obtain or deliver to Purchaser any consents required under the Assumed Contracts
in connection with the transactions described in this Agreement. Seller and
Purchaser shall at and subsequent to the Closing Date cooperate in the
transition of the Business and the Assumed Contracts to Purchaser, including any
commercially reasonable efforts to maintain the goodwill and business of
customers of the Business.
1.7 Related Agreements. On the Closing Date, Purchaser and Seller shall
have entered into: (a) the Xxxx of Sale made by Seller in favor of Purchaser (b)
any other agreements necessary to the consummation of this Agreement and the
operation of the Business, which collectively are referred to herein as the
"Related Agreements."
SECTION 2
SELLER'S AND XXXXXX'X REPRESENTATIONS AND WARRANTIES
As a material inducement to Purchaser to enter into this Agreement and
consummate the transactions contemplated hereby, Seller and Xxxxxx hereby
jointly and severally make to Purchaser the representations, warranties and
covenants contained in this Section 2 as of the date of this Agreement.
2.1 Organization of Seller. Seller is a corporation duly organized, validly
existing and in good standing under the laws of Indiana, with full power and
authority to own or lease its properties and to conduct the Business in the
manner and in the places where such properties are owned or leased or such
business is currently conducted. Seller is duly qualified to conduct the
Business in all states in which the failure to so qualify would have a material
adverse effect on the Business.
2.2 Authority of Seller. Seller and Xxxxxx have the full right, authority
and power to enter into this Agreement and each agreement, document and
instrument to be executed and delivered by or on behalf of Seller or Xxxxxx
pursuant to this Agreement (the "Seller Documents") and to carry out the
transactions contemplated hereby and thereby. The execution, delivery and
performance by Seller of this Agreement and Seller Documents have been duly
authorized by all necessary action of Seller and no other action on the part of
Seller is required in connection therewith. This Agreement and Seller Documents
executed and delivered by Seller and Xxxxxx pursuant to this Agreement
constitute, or when executed and delivered will constitute, valid and binding
obligations of Seller and Xxxxxx enforceable in accordance with their respective
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency or other similar laws affecting creditors' rights. The execution,
delivery and performance by Seller of this Agreement, Seller Documents and the
consummation of the transactions contemplated hereby or thereby:
(a) Does not and will not violate any provision of the Articles of
Incorporation or Bylaws of Seller, in each case as amended to date;
(b) Does not and will not violate any laws of the United States, or any
state or other jurisdiction applicable to Seller or require Seller to obtain any
approval, consent or waiver of, or make any filing with, any person or entity
(governmental or otherwise) that has not been obtained or made;
(c) Does not and will not result in a breach of, constitute a default
under, accelerate any obligation under, or give rise to a right of termination
of any indenture, loan or credit agreement or any other agreement, contract
instrument mortgage, lien, lease, permit authorization, order, writ, judgment,
injunction, decree, determination or arbitration award to which Seller is a
party or by which any of the property of Seller is bound or affected, or result
in the creation or imposition of any Lien (except for Assumed Liabilities) on
any of the Subject Assets. The officers or agents of Seller who execute this
Agreement and Seller Documents contemplated hereby on behalf of Seller have and
shall have all requisite power to do so in the name of and on behalf of Seller.
2.3 Absence of Restrictions. Seller has made no other agreement with any
other party with respect to the sale or any other disposition or encumbrance of
the Business or the Subject Assets.
2.4 Title to Assets. Seller has good, marketable and indefeasible title to
all of the Subject Assets, free and clear of all claims, liabilities,
restrictions and Liens. Upon the sale, assignment, transfer and delivery of the
Subject Assets to Purchaser under and in accordance with this Agreement and
Seller Documents, there will be vested in Purchaser good, marketable and
indefeasible title to the Subject Assets, free and clear of all Liens. The
Subject Assets: (i) include all assets and properties used or held for use by
Seller to conduct the Business as currently conducted; and (ii) include all
assets and properties necessary for Purchaser to operate the Business in the
same manner as Seller.
2.5 Seller's Business Operations. Seller has no liabilities of any nature,
whether accrued, absolute, contingent or otherwise, asserted or unasserted,
known or unknown (including without limitation liabilities as guarantor or
otherwise with respect to obligations of others, or liabilities for taxes due or
then accrued or to become due or contingent or potential liabilities relating to
activities of the Business or the conduct of the Business) which will materially
and adversely affect the conduct of the Business subsequent to Closing.
2.6 Intellectual Property.
(a) Seller has exclusive ownership of, or valid license or authority to
use, all copyrights, trade secrets, know how, computer software, licenses,
trademarks, service marks, trade or product names, company names, logos,
customer lists, mailing lists, sales and advertising material, engineering
information, technology, development rights, drawings and designs, customer
specifications, supplier information, systems, data compilations, research
results or other proprietary rights, other than Excluded Assets and subject to
any existing rights of third parties (collectively, "Intellectual Property")
used in
the Business as presently conducted, including but not limited to those set
forth in Schedule 2.6(a) attached hereto and made a part hereof. The
Intellectual Property is freely transferable to Purchaser and constitutes all of
the technology, proprietary rights and intellectual property necessary in order
for Purchaser to operate the Business in the ordinary course as presently
conducted and perform the Assumed Contracts in accordance with their terms.
Seller has the non-exclusive right to use, free and clear of claims or rights of
other persons, all of the Intellectual Property without payments to or consents
from any other party.
(b) All licenses or other agreements (if any) under which Seller is granted
rights in any of the Intellectual Property are in full force and effect and
there is no material default by any party thereto. The licensors under said
licenses and other agreements (if any) have and had all requisite power and
authority to grant the rights purported to be conferred thereby. True and
complete copies of all such licenses or other agreements, and any amendments
thereto (if any) have been provided on Schedule 2.6(b) attached hereto.
(c) To the knowledge of Seller, Seller's use of any Intellectual Property
does not infringe any rights of any other person. Seller is not to Seller's
knowledge making unauthorized use of any confidential information or trade
secrets of any person, including without limitation any former employer or any
past or present employee of Seller.
2.7 Assumed Contracts. All of the Assumed Contracts have been entered into
in the ordinary course of business, are in full force and effect and have not
been amended, extended or otherwise modified (whether orally or in writing),
except for amendments, extensions, and modifications made in the ordinary course
of business consistent with past practices. Neither Seller nor any other party
thereto is in default under any such Assumed Contracts (a "default" being
defined for purposes hereof as an actual default, other than late payment of an
Account Receivable, or any set of facts which would, upon receipt of notice or
passage of time or both, constitute a default, other than late payment of an
Account Receivable). Seller is not a party to or subject to any contract or
agreement that will impose any material obligations on Purchaser (except for the
obligations to be performed under the Assumed Contracts in the ordinary course
of business) or otherwise materially impair the value of the Subject Assets
after the Closing Date. All of the terms of each Assumed Contract as amended,
are set forth in writing and true and complete written copies of all of the
Assumed Contracts have been provided to Purchaser.
2.8 No Litigation; Compliance. There is no litigation or governmental or
administrative proceeding or investigation pending or, to Seller's knowledge,
threatened against Seller or any of its affiliates which may have an adverse
effect on the Business or the Subject Assets subsequent to Closing, or which
would prevent the consummation of the transactions contemplated by this
Agreement or the Related Agreements. Seller has not received notice of any
violation or alleged violation of any applicable statute, ordinance, order, rule
or regulation.
2.9 Taxes. Seller has paid or caused to be paid any and all federal, state,
local, foreign and other taxes, and all deficiencies, or other additions to tax,
interest, fines and penalties that are due and payable by Seller through the
Closing Date, whether disputed or not. Seller has, in accordance with all
applicable law, filed all federal, state, local, foreign and other tax returns
required to be filed by Seller through the Closing Date, and all such returns
correctly and accurately set forth the amount of any taxes relating to the
applicable period. There is no unassessed tax deficiency proposed or threatened
against Seller. None of the Subject Assets are or will be subject to any lien or
encumbrance for taxes which are past due or which became payable or accrued on
or prior to the Closing Date.
2.10 Insurance. The liability and casualty insurance policies pertaining to
Seller are in full force and effect. All premiums due to the date hereto have
been paid in full and such policies will remain in effect through the Closing
Date. All such policies have been issued by reputable insurance companies which
are actively engaged in the insurance business and authorized to issue policies
in Seller's jurisdiction(s) of business operation.
2.11 Warranty or Other Claims. There are no existing or threatened errors
or omissions, warranty or other similar claims against Seller or any Subject
Asset. Seller shall be responsible for any errors or omissions claims, warranty
claims or any other claims relating to products or services that it sold or
provided prior to the Closing Date.
2.12 Environmental Matters.
(a) (i) Seller has no liability under, nor has it violated, any
Environmental Law; (ii) any property owned, operated, leased, or used by Seller,
and any facilities and operations thereon, are presently in compliance with all
applicable Environmental Laws; (iii) Seller has never entered into or been
subject to any judgment, consent decree, compliance order, or administrative
order with respect to any environmental or health and safety matter or received
any request for information, notice, demand letter, administrative inquiry, or
formal or informal complaint or claim with respect to any environmental or
health and safety matter or the enforcement of any Environmental Law; and (iv)
none of the items enumerated in clause (iii) of this subsection will to the
knowledge of Seller be forthcoming.
(b) Schedule 2.12(b) attached hereto and made a part hereof sets forth
copies of all documents, records and information available to Seller concerning
any environmental or health and safety matter relevant to Seller, whether
generated by Seller or others, including without limitation environmental
audits, environmental risk assessments, site assessments, documentation
regarding off-site disposal of Hazardous Materials, spill control plans and
reports, correspondence, permits, licenses, approvals, consents and other
authorizations related to environmental or health and safety matters issued by
any governmental agency.
(c) For purposes of this Section, (i) "Hazardous Material" shall mean and
include any hazardous waste, hazardous material, hazardous substance, petroleum
product, oil, toxic substance, pollutant, contaminant or other substance which
may pose a threat to the environment or to human health or safety, as defined or
regulated under any Environmental Law; (ii) "Hazardous Waste", shall mean and
include any hazardous waste as defined or regulated under any Environmental Law;
(iii) "Environmental Law" shall mean any environmental or health and
safety-related law, regulation, rule, ordinance, or by-law at the foreign,
federal, state, or local level, whether existing as of the date hereof,
previously enforced, or subsequently enacted; and (iv) "Seller" shall mean and
include Seller and all other entities for whose conduct Seller is or may be held
responsible under any Environmental Law.
2.13 Permits, Consents.
(a) Schedule 2.13(a) attached hereto and made a part hereof lists all
permits, registrations, licenses, franchises, authorizations, certifications and
other approvals (collectively, the "Approvals") that are necessary for the
conduct of the Business. Seller has obtained all such Approvals, which are valid
and in full force and effect and is operating in compliance therewith. Such
Approvals include but are not limited to those required under federal, state or
local statutes, ordinances, orders, requirements, rules, regulations or laws
pertaining to environmental protection, public health and safety, worker health
and safety, buildings, highways or zoning. To the extent allowed by applicable
law, all such Approvals will be available and assigned to Purchaser and remain
in full force and effect upon Purchaser's acquisition of the Subject Assets, and
no further Approvals will be required in order for Purchaser to conduct the
Business subsequent to the Closing Date.
(b) Except for consents of third parties under the Assumed Contracts, no
approval, consent, authorization, notification or exemption from or filing with
any person or entity not a party to this Agreement (collectively, the
"Consents") is required to be obtained or made by Seller in connection with the
execution and delivery of this Agreement and Seller Documents or the
consummation of the transactions contemplated hereby and thereby, including,
without limitation, any Consent necessary to permit Purchaser's continuation of
the Business or any Consent necessary for Seller's effective transfer of each of
the Subject Assets, or assignment of each of the Assumed Contracts (without
triggering a breach, default, termination or other modification in any such
Assumed Contract) to Purchaser.
2.14 Finder's Fee. Purchaser shall not become liable for any broker's
commission or finder's fee relating to or in connection with the transaction
contemplated by this Agreement or the Related Agreements.
2.15 Transactions with Interested Persons. Neither Seller nor any
principal, officer, supervisory employee or director of Seller or any of their
respective spouses or family members owns directly or indirectly, on an
individual or joint basis, any material interest in, or serves as an officer or
director or in another similar capacity of, any competitor or supplier of
Seller, or any organization which has a material contract or arrangement with
Seller.
2.16 Collectibility of Accounts Receivable. All of the Accounts Receivable
of Seller are bona fide, valid and enforceable claims not subject to any setoffs
or counterclaims and will be collectible (subject to the $5,000.00 allowance for
doubtful accounts) in accordance with their terms within 100 days of the Date of
Closing. Seller has no accounts or loans receivable from any person, firm or
corporation which is affiliated with Seller or from any director, officer or
employee of Seller, or from any of their respective spouses or family members
(excluding travel advances).
2.17 Inventory. Schedule 1.1(e) includes a correct and complete list of all
inventory of Seller as of August 20, 2002. Seller values its inventory for
accounting purposes at Seller's cost. Seller's inventory does not contain any
obsolete (held for more than 180 days) or damaged items.
2.18 Investment Representations and Covenants.
(i) Seller and Xxxxxx understands that as of the Closing Date the FDVI
Stock will not be registered under the Securities Act of 1933, as amended (the
"Securities Act"), or any state securities laws on the grounds that the issuance
of the FDVI Stock is exempt from registration pursuant to Section 4(2) of the
Securities Act or Regulation D promulgated under the Securities Act and
applicable state securities laws, and that the reliance of FDVI on such
exemptions is predicated in part on Xxxxxx'x representations, warranties,
covenants and acknowledgments set forth in this Section 2.18.
(ii) Xxxxxx represents and warrants that he is an "accredited investor" as
defined in Rule 501 promulgated as part of Regulation D under the Securities
Act.
(iii) Xxxxxx represents and warrants that the FDVI Stock to be acquired by
him upon consummation of the transactions contemplated herein will be acquired
by him for his own account, not as a nominee or agent, and without a view to
resale or other distribution within the meaning of the Securities Act and the
rules and regulations thereunder, and that he will not distribute all or any
portion of the FDVI Stock in violation of the Securities Act.
(iv) Xxxxxx acknowledges that the shares of FDVI Stock are characterized as
"restricted securities" under the federal securities laws inasmuch as they are
being acquired in a transaction not involving a public offering and that under
such laws and applicable regulations such securities may be resold without
registration under the Securities Act, only in certain limited circumstances.
(v) Xxxxxx represents and warrants that he has such knowledge and
experience in financial and business matters such that he is capable of
evaluating the merits and risks of his investment in the FDVI Stock.
(vi) Xxxxxx is in a financial position to afford to hold the FDVI Stock
indefinitely, Xxxxxx'x financial condition being such that he is not presently
under (and does not contemplate any future) necessity or constraint to dispose
of the FDVI Stock to satisfy any existing or contemplated debt or undertaking.
Xxxxxx recognizes that it may not be possible for him to liquidate his
investment in the FDVI Stock and, accordingly, he may have to hold the FDVI
Stock, and bear the economic risk of this investment, indefinitely.
(vii) Xxxxxx understands that neither the Securities and Exchange
Commission nor any other federal or state agency has recommended, approved or
endorsed the purchase of the FDVI Stock as an investment.
(viii) Xxxxxx confirms that the FDVI Stock was not offered to Xxxxxx by any
means of general solicitation or general advertising, and that Xxxxxx has
received no representations, warranties or written communications with respect
to the FDVI Stock other than those contained or described in this Agreement.
(ix) Xxxxxx acknowledges that he has been provided or that FDVI has made
available to him copies of FDVI's most recent Form 10-KSB, Form 10-QSB and any
Form 8-KS and Form 4s filed since the most recent Form 10-QSB was filed.
(x) Xxxxxx acknowledges that FDVI has given him a reasonable opportunity to
ask questions and receive answers concerning his receipt of FDVI Stock and to
obtain any additional information which FDVI possesses or can acquire without
unreasonable effort or expense that is necessary to verify the accuracy of
information.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF PURCHASER
As a material inducement to Seller to enter into this Agreement and
consummate the transactions contemplated hereby, Purchaser hereby makes the
representations and warranties to Seller contained in this Section 3 as of the
date of this Agreement.
3.1 Organization of Purchaser. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Indiana
with full corporate power to own or lease its properties and to conduct its
business in the manner and in the places where such properties are owned or
leased or such business is conducted.
3.2 Authority of Purchaser. Purchaser has full right, authority and power
to enter into this Agreement and each agreement, document and instrument to be
executed and delivered by Purchaser pursuant to this Agreement (the "Purchaser
Documents") and to carry out the transactions contemplated hereby and thereby.
The execution, delivery and performance by Purchaser of this Agreement and
Purchaser Documents have been duly authorized by all necessary action of
Purchaser and no other action on the part of Purchaser is required in connection
therewith. This Agreement and Purchaser Documents executed and delivered by
Purchaser pursuant to this Agreement constitute, or when executed and delivered
will constitute, valid and binding obligations of Purchaser enforceable in
accordance with their terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency or other similar laws affecting creditor's
rights. The execution, delivery and performance by Purchaser of this Agreement
and Purchaser Documents and the consummation of the transactions contemplated
hereby or thereby:
(a) does not and will not violate any provision of the Articles of
Incorporation or By-laws of Purchaser, in each case as amended to date;
(b) does not and will not violate any laws of the United States, or any
state or other jurisdiction applicable to Purchaser or require Purchaser to
obtain any material approval, consent or waiver of, or make any filing with, any
person or entity (governmental or otherwise) that has not been obtained or made;
and
(c) does not and will not result in a breach of, constitute a default
under, accelerate any obligation under, or give rise to a right of termination
of any indenture or loan or credit agreement or any other agreement, contract,
instrument, mortgage, lien, lease, permit, authorization, order, writ, judgment,
injunction decree, determination or arbitration award to which Purchaser is a
party and which is material to the business and financial condition of
Purchaser.
The officers or agents who execute this Agreement and the Related Agreements on
behalf of Purchaser have and shall have all requisite power to do so in the name
of and on behalf of Purchaser.
3.3 No Litigation. There is no litigation or governmental or administrative
proceeding or investigation pending or, to Purchaser's knowledge, threatened
against Purchaser or any of his affiliates which may have a material adverse
effect on business of Purchaser in the aggregate, or which would prevent or
hinder the consummation of the transactions contemplated by this Agreement or
the Related Agreements.
SECTION 4
RIGHTS AND OBLIGATIONS SUBSEQUENT TO CLOSING DATE
4.1 Further Assurances. Subject to the provisions of Section 1.3, Seller,
from time to time after the Closing Date at the request of Purchaser and without
further consideration, shall execute and deliver further instruments of transfer
and assignment and take such other action as Purchaser may reasonably require to
more effectively transfer and assign to, and invest in, Purchaser each of the
Subject Assets. Nothing herein shall be deemed a waiver by Purchaser of its
right to receive on the Closing Date an effective assignment of each of the
Assumed Contracts, subject to the provisions of Section 1.3.
4.2 Collection of Assets. Subsequent to the Closing Date, Purchaser shall
have the right and authority to collect all Accounts Receivable and other items
transferred and assigned to it by Seller and Seller agree hereunder to endorse
with the name of Seller any checks received on account of such receivables or
other items, and Seller agrees that it will promptly transfer or deliver to
Purchaser from time to time any property that Seller may receive with respect to
any claims, contracts, licenses, leases, commitments, sales orders, purchase
orders, or any other items included in the Subject Assets.
4.3 Names and Marks. Subsequent to the Closing Date, Seller shall not use
any names or marks containing the words "Telecom Technology" and shall not use
any other corporate, business or assumed name, or name or xxxx containing the
words "Telecom Technology" without the prior written consent of Purchaser.
4.4 Rights of First Refusal. Subject to the terms and conditions specified
in this Section, Purchaser hereby grants to Xxxxxx a right of first refusal with
respect to future sales of Purchaser. In the event that Purchaser or any
Affiliate thereof desires to sell or otherwise transfer all or substantially all
of the assets of Purchaser including all or substantially all of the stock or
other equity interest in Purchaser, in a single transaction or a series of
transactions, and whether through the sale or other transfer of assets, merger,
consolidation, sale of stock or otherwise, Purchaser shall first obtain a bona
fide, arms-length written offer (a "Third Party Offer") from the proposed
purchaser describing in detail the assets to be transferred, the proposed
structure of the transfer transaction, the purchase price and the other terms
upon which the proposed purchaser proposes to purchase Purchaser. Purchaser
shall deliver a written notice to Xxxxxx (a) stating its bona fide intention to
sell Purchaser, and (b) describing in detail the terms of the Third Party Offer.
By written notice delivered to Purchaser, within 30 calendar days after receipt
of the written notice, Xxxxxx may elect to purchase or obtain Purchaser, at the
price and upon substantially the same terms as those specified in the Third
Party Offer and the Purchaser's written notice. If Xxxxxx does not elect to
purchase Purchaser within this 30 day period, Purchaser or any Affiliate may,
during the following 60 day period, sell Purchaser to the original third party
proposed purchaser on the terms provided in the written notice. If Purchaser or
any Affiliate does not enter into an agreement for the sale of Purchaser within
such period, or if such agreement is not consummated within 180 days of the
execution thereof, the right provided hereunder shall be deemed to be revived
and Purchaser shall not be offered unless first reoffered to Xxxxxx in
accordance herewith.
SECTION 5
CLOSING
5.1 Time. The Closing hereunder shall occur on or before August 31, 2002,
and be effective as of 12:01 a.m. on September 1, 2002.
5.2 Deliveries.
(a) At the Closing, Purchaser shall receive all of the following, in form
and substance reasonably satisfactory to Purchaser (it being agreed by Purchaser
that the documents attached hereto as exhibits are satisfactory in form to
Purchaser):
(i) a xxxx of sale and assignment for the Personal Property in the form of
Exhibit A (the "Xxxx of Sale"), executed by Seller;
(ii) An Employment Agreement in the form of Exhibit B executed by Xxxxxx;
(iii) a certified copy of resolutions of the Board of Directors of Seller
authorizing the execution, delivery and performance of this Agreement and the
Related Agreements to which Seller is a party;
(iv) the Related Agreements identified in Section 1.7; and
(v) releases of any security interests in the Subject Assets (including but
not limited to Union Federal Bank of Indianapolis).
(b) Seller shall have received from Purchaser all of the following, in form
and substance reasonably satisfactory to Seller (it being agreed by Seller that
the documents attached hereto as exhibits are satisfactory in form to Seller):
(i) payment of the Purchase Price;
(ii) certificates representing the FDVI Stock, duly and validly issued in
the name of Xxxxxx (within fifteen (15) days of the date of Closing;
(iii) an Employment Agreement in the form of Exhibit B executed by
Purchaser;
(iv) a certified copy of resolutions of the Board of Directors of Purchaser
authorizing the execution, delivery and performance of this Agreement and the
Related Agreements to which Purchaser is a party; and
(v) the Related Agreements identified in Section 1.7.
SECTION 6
INDEMNIFICATION
6.1 Indemnification by Seller and Xxxxxx. In addition to and in no way
limiting any other provisions of this Agreement:
(a) Seller and Xxxxxx hereby jointly and severally agree subsequent to the
Closing Date to indemnify and hold Purchaser and persons serving as
shareholders, officers, directors, employees or agents thereof (individually a
"Purchaser Indemnified Party" and collectively, the "Purchaser Indemnified
Parties") harmless from, and against any damages, liabilities, losses, taxes,
fines, penalties, costs, and expenses (including, without limitation, reasonable
fees of counsel) (collectively, "Purchaser Indemnified Losses") of any kind or
nature whatsoever (whether or not arising out of third party claims and
including all amounts paid in investigation, defense or settlement of the
foregoing) which may be sustained or suffered by any of them arising out of or
based upon any of the following matters:
(i) fraud or intentional misrepresentation by Seller or Xxxxxx in or of any
of its/his representations, warranties or covenants under this Agreement or
any Related Agreement or in any certificate, schedule, exhibit or financial
statement delivered pursuant hereto or thereto;
(ii) any other breach of any representation, warranty or covenant of Seller
or Xxxxxx under this Agreement or any Related Agreement or in any
certificate, schedule, exhibit or financial statement delivered pursuant
hereto or thereto, or by reason of any claim, action or proceedings
asserted or instituted growing out of any matter or thing constituting a
breach of such representations or warranties or covenants or any conduct by
Seller or Xxxxxx or performance by Seller or Xxxxxx under any Assumed
Contract prior to closing; and
(iii) any liability obligation of Seller or Xxxxxx relating to any Excluded
Liabilities.
6.2 Indemnification by Purchaser.
(a) Purchaser agrees subsequent to the Closing Date to indemnify and hold
Seller and persons serving as shareholders, officers, directors, employees or
agents thereof (individually a "Seller Indemnified Party" and collectively the
"Seller Indemnified Parties") harmless from and against any damages,
liabilities, losses, taxes, fines, penalties, costs and expenses (including
without limitation, reasonable fees of counsel) ("Seller Indemnified Losses") of
any kind or nature whatsoever (whether or not arising out of third party claims
and including all amounts paid in investigation, defense or settlement of the
foregoing) which may be sustained or suffered by any of them arising out of or
based upon any of the following matters:
(i) fraud or intentional misrepresentation by Purchaser in or of any of its
representations, warranties or covenants under this Agreement or any
Related Agreements or in any certificate, schedule, exhibit or financial
statement delivered pursuant hereto or thereto; and
(ii) any other breach of any representation, warranty or covenant of
Purchaser under this Agreement or any Related Agreements or in any
certificate, schedule, exhibit or financial statement delivered pursuant
hereto, or by reason of any claim, action or proceeding asserted or
instituted growing out of any matter or thing constituting a breach of such
representations, warranties or covenants, or any conduct by Purchaser or
any affiliate of the Business or performance by Purchaser or any affiliate
under any Assumed Contract subsequent to Closing.
6.3 Notice: Defense of Claims. If indemnification is sought for a claim or
liability asserted by a third party, the indemnified party shall give written
notice thereof to the indemnifying party within ten (10) days after it receives
notice of the claim or liability being asserted, but the failure to do so shall
not relieve the indemnifying party from any liability except to the extent that
it is prejudiced by the failure or delay in giving such notice. Such notice
shall summarize the basis for the claim for indemnification and any claim or
liability being asserted by the third party. Within ten (10) days after
receiving such notice, the indemnifying party shall give written notice to the
indemnified party stating whether it will defend against any third party claim
or liability at its own cost and expense. If the indemnifying party gives notice
to the indemnified party of its intent to defend such claim within such ten (10)
day period, the indemnifying party shall be entitled to direct the defense
against the third party claim or liability with counsel selected by it (subject
to the consent of the indemnified party, which consent shall not be unreasonably
withheld) as long as the indemnifying party is conducting a good faith defense.
The indemnified party shall at all times have the right to fully participate in
the defense of a third party claim or liability at its own expense directly or
through counsel; provided however, that if the named parties to the action or
proceeding include both the indemnifying party and the indemnified party and the
indemnified party is advised by its counsel that representation of both parties
by the same
counsel would be inappropriate under applicable standards of professional
conduct, the indemnified party may engage separate counsel at the expense of the
indemnifying party. If no such notice of intent to defend a third party claim or
liability is given by the indemnifying party, or if such good faith defense is
not being or ceases to be conducted by the indemnifying party, the indemnified
party shall have the right, at the expense of the indemnifying party, to
undertake the defense of such claim or liability (with counsel selected by the
indemnified party). If the third party claim or liability is one that by its
nature cannot be defended solely by the indemnifying party, then the indemnified
party shall make available such information and assistance as the indemnifying
party may reasonably request and shall cooperate with the indemnifying party in
such defense at the expense of the indemnifying party. Neither the indemnifying
party nor the indemnified party shall settle any third party claim without the
consent of the other (which consent shall not be unreasonably withheld.)
SECTION 7
MISCELLANEOUS
7.1 Fees and Expenses. Each of the parties will bear its own expenses in
connection with the negotiation and the consummation of the transactions
contemplated by this Agreement, including but not limited to fees for attorneys,
accountants and other advisers.
7.2 Governing Law. This Agreement and the Related Agreements and all
disputes, whether equitable or legal in nature, that arise under this Agreement
that relate in any way to the rights or duties of the parties hereto or thereto,
shall be governed by the internal laws of the State of Indiana, without regard
to the conflict or choice of laws provisions thereof.
7.3 Entire Agreement. This Agreement and the schedules and exhibits
referred to herein are complete and reflect the entire agreement of the parties
with respect to their subject matter and supersede all previous written or oral
negotiations, commitments and writings. No promises, representations,
understandings, warranties and agreements have been made by either of the
parties except as referred to in this Agreement or in such schedules or exhibits
or Related Agreements, and all inducements to the making of this Agreement
relied upon by either party hereto have been expressed therein or herein or in
such schedules or exhibits or Related Agreements.
7.4 Assignability; Binding Effect. This Agreement shall be assignable by
Purchaser to a creditworthy corporation, partnership or entity, within its
control group provided that such assignment shall not release Purchaser of its
obligations hereunder prior to the assignment. This Agreement shall be binding
upon and enforceable by, and shall inure to the benefit of, the parties hereto
and their respective successors and permitted assigns. The rights, but not the
obligations of Seller, may be assigned by Seller to any person or entity upon
written notice to Purchaser.
7.5 Captions and Gender. The captions in this Agreement are for convenience
only and shall not affect the construction on or interpretation of any term or
provision hereof. The use in this Agreement of the masculine pronoun in
reference to a party hereto shall be deemed to include the feminine or neuter
pronoun, as the context may require.
7.6 Execution in Counterparts. For the convenience of the parties and to
facilitate execution, this Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document.
7.7 Amendments. This Agreement may not be amended or modified, nor may
compliance with any condition or covenant set forth herein be waived, except by
a writing duly and validly executed by each party hereto, or in the case of a
waiver, the party waiving compliance.
7.8 Severability. In the event that any provision or any portion of any
provision of this Agreement shall be held to be void or unenforceable, then the
remaining provisions of this Agreement (and the remaining portion of any
provision held to be void or unenforceable in part only) shall continue in full
force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date set forth above.
TELECOM TECHNOLOGY CORP.
By:
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Xxxxxxx Xxxxxx, President
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Xxxxxxx Xxxxxx
TTC ACQUISITION COMPANY
By:
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