===============================================================================
EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
XXXX XXXXXXX
DIAL-THRU INTERNATIONAL CORPORATION,
A CALIFORNIA CORPORATION,
XXXXX TELECOM & TECHNOLOGIES, INC.
AND
DIAL-THRU INTERNATIONAL CORPORATION,
A DELAWARE CORPORATION
DATED AS OF NOVEMBER 2, 1999
===============================================================================
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "AGREEMENT") is made as of
November 2, 1999 by and among Xxxx Xxxxxxx, a California resident
("SHAREHOLDER"), Dial-Thru International Corporation, a California
corporation ("SELLER"), XXXXX Telecom & Technologies, Inc., a Delaware
corporation ("PARENT"), and Dial-Thru International Corporation, a Delaware
corporation and wholly-owned subsidiary of Parent ("PURCHASER").
RECITALS:
A. The respective Boards of Directors of Parent, Purchaser and
Seller have determined that it is advisable and in the best interests of the
respective corporations and their shareholders that Seller sell and assign to
Purchaser, and that Purchaser acquire and assume from Seller certain assets
and liabilities of Seller upon the terms and subject to the conditions set
forth in this Agreement;
B. The parties desire to effect a tax-tree reorganization under
Section 368(a)(1)(C) of the Code and, in connection therewith, Seller intends
to adopt a plan of dissolution within one year following the Closing Date
pursuant to which the shares of Parent Common Stock issuable hereunder and
any other assets of Seller will be distributed to Shareholder, subject to any
arrangements providing for the payment of, or reserving for, contingent or
other liabilities of Seller (other than the Assumed Liabilities); and
C. Shareholder, Parent, Purchaser and Seller desire to make
certain representations, warranties, covenants and agreements in connection
with, and establish various conditions precedent to, the transactions
contemplated hereby upon the terms contained herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, and on the terms and subject to
the conditions herein set forth, the parties hereto covenant and agree as
follows:
1. DEFINITIONS
1.1 GENERAL DEFINITIONS. Unless otherwise stated in this
Agreement, the following terms shall have the following meanings:
"ACCELERATION EVENTS": As defined in SECTION 2.4 hereof.
"ACCOUNTS": As defined in SECTION 2.1(g) hereof.
"AFFILIATE": Any Person that, directly or indirectly, controls, or
is controlled by, or under common control with, another Person. For the
purposes of this definition, "control" (including the terms "controlled by"
and "under common control with"), as used with respect to any Person, means
the power to direct or cause the direction of the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities or by contract or otherwise.
"AGREEMENT": As defined in the introduction hereto.
"ASSETS": As defined in SECTION 2.1 hereof.
"ASSUMED OBLIGATIONS": As defined in SECTION 2.5(a) hereof.
"ASSUMPTION AGREEMENT": The Assumption Agreement in the form of
EXHIBIT A attached hereto.
"BALANCE SHEETS": Each of the balance sheets comprising a part of
the Financial Statements.
"BANK ACCOUNTS": As defined in SECTION 2.1(i) hereof.
-------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT - PAGE 1
"XXXX OF SALE": The Xxxx of Sale in the form of EXHIBIT B attached
hereto.
"BUSINESS": Means the business of Seller, involving generally the
provision of international long distance services routed through Seller's
switching facilities and/or equipment currently located in Los Angeles,
California for calls either terminating in the United States routed through
the United States and terminating in a foreign country other than the country
in which the call originated.
"CLOSING": As defined in SECTION 7.1 hereof.
"CLOSING DATE": As defined in SECTION 7.1 hereof.
"CLOSING DEFICIENCY": As of the Closing Date, the positive
difference, if any, between the amount of Seller's accounts payable and
Seller's Accounts.
"CLOSING VALUE ": As defined in SECTION 8.5 hereof.
"CODE": The Internal Revenue Code of 1986, as amended.
"CONTINGENT PAYMENTS": Collectively, the First Contingent Payment
and the Second Contingent Payment.
"CUSTOMER DATA": All of Seller's customer lists, lists of potential
customers, sales records, telephone numbers and other customer data
(including credit data) relating to the Business.
"DAMAGES": As defined in SECTION 8.2 hereof.
"DEBT": All obligations for borrowed money.
"DEFICIENCY AMOUNT": As defined in SECTION 8.2 hereof.
"DISCLOSURE SCHEDULE": The package of disclosure schedules to this
Agreement delivered by Seller to Purchaser contemporaneously herewith (or as
amended pursuant hereto) and incorporated by reference to the Section of this
Agreement to which each such schedule relates.
"EBIT": Earnings before interest and taxes.
"EBITDA": Earnings before interest, taxes, depreciation and
amortization.
"EMPLOYMENT AGREEMENTS": The Employment Agreement between
Shareholder and Purchaser in the form attached hereto as EXHIBIT D.
"EQUIPMENT": As defined in SECTION 2.1(a) hereof.
"ERISA": Employee Retirement Income Security Act of 1974, as amended.
"EXCLUDED ASSETS": As defined in SECTION 2.2 hereof.
"FINANCIAL STATEMENTS": As defined in SECTION 3.6(a) hereof.
"FIRST CONTINGENT PAYMENT": As defined in SECTION 2.4 hereof.
"FIRST TARGET LEVELS": As defined in SECTION 2.4 hereof.
"GAAP": As defined in SECTION 1.2 hereof.
-------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT - PAGE 2
"GOVERNMENTAL BODY": Any court or any federal, state, municipal or
other governmental department, commission, board, bureau, agency, authority or
instrumentality, domestic or foreign.
"INDEMNIFICATION CLAIM": As defined in SECTION 8.4 hereof.
"INDEMNIFICATION NOTICE": As defined in SECTION 8.4 hereof.
"INDEMNITOR": As defined in SECTION 8.4 hereof.
"INFORMATION": As defined in SECTION 5.5 hereof.
"INITIAL AMOUNT": As defined in SECTION 2.3(a) hereof.
"INTANGIBLE ASSETS": As defined in SECTION 2.1(e) hereof.
"INVENTORY": As defined in SECTION 2.1(b) hereof.
"KNOWLEDGE" or "KNOWLEDGE". (a) with respect to an individual,
"knowledge" of a particular factor of the matter if such individual is
actually aware or has reason to know, after due inquiry, of such factor or
other matter; and (b) with respect to a Person (other than an individual),
"knowledge" of such particular fact or other matter if any individual who is
serving as a director or officer of such Person has "knowledge" of such fact
or other matter.
"LATEST BALANCE SHEET": The Balance Sheet comprising a part of the
Financial Statements and dated as of the Most Recent Fiscal Month End.
"LEGAL REQUIREMENT": Any law, rule, regulation, order or ordinance of
any Governmental Body as now or hereinafter in effect.
"LIEN": All mortgages, deeds of trust, claims, liens, security
interests, pledges, leases, conditional sale contracts, rights of first
refusal, options, charges, liabilities, obligations, agreements, easements,
rights-of-way, powers of attorney, limitations, reservations, restrictions
and other encumbrances of any kind.
"MATERIAL ADVERSE EFFECT": With respect to any Person, any change
(individually or in the aggregate) in the general affairs, management,
business, goodwill, results of operations, condition (financial or
otherwise), assets, liabilities or prospects (whether or not the result
thereof would be covered by insurance) of such Person that will or can
reasonably be expected to result in a cost, expense, charge, liability, loss
of revenue or diminution in value equal to or greater than $25,000.
"MOST RECENT FINANCIAL STATEMENTS": As defined in SECTION 3.6(a)
hereof.
"MOST RECENT FISCAL MONTH END": As defined in SECTION 3.6(a) hereof.
"MOST RECENT FISCAL YEAR END": As defined in SECTION 3.6(a) hereof.
"OPERATIVE DOCUMENTS": This Agreement, the Assumption Agreement, the
Xxxx of Sale, the Employment Agreement, and all other agreements, instruments,
documents, schedules and certificates executed and delivered by or on behalf of
Seller or Purchaser at or before the Closing pursuant to this Agreement.
"ORDER": Any order, writ, injunction, decree, judgment, award or
determination of any Governmental Body.
"PARENT": As defined in the introduction hereto.
"PARENT COMMON STOCK": The common stock, $.001 par value per share, of
Parent.
-------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT - PAGE 3
"PARENT REPORTS": As defined in SECTION 4.5 hereof.
"PAYABLE AMOUNTS": As defined in SECTION 2.6 hereof.
"PERMITS": All permits, authorizations, certificates, approvals,
registrations, variances, exemptions, rights-of-way, franchises, privileges,
immunities, grants, ordinances, licenses and other rights of every kind and
character (a) under any (i) federal, state, local or foreign statute, ordinance
or regulation, (ii) Order or (iii) contract with any Governmental Body or (b)
granted by any Governmental Body.
"PERMITTED ENCUMBRANCES": Liens for Taxes and assessments not yet
delinquent, covenants, easements and restrictions of record, minor
encroachment and other title and survey matters which do not individually or
in the aggregate detract in any material respect from the value or current
use of the property subject thereto.
"PERSON": An individual, partnership, joint venture, corporation,
company, limited liability company, bank, trust, unincorporated organization,
Governmental Body or other entity or group.
"PLAN": As defined in SECTION 3.25 hereof.
"PREMISES": All business locations of Seller.
"PROCEEDING": Any action, order, claim, suit, proceeding, litigation,
investigation, inquiry, review or notice.
"PROPRIETARY RIGHTS": As defined in SECTION 3.13 hereof.
"PURCHASE PRICE": As defined in SECTION 2.3 hereof.
"PURCHASER": As defined in the Introduction hereto.
"PURCHASER INDEMNITEES": As defined in SECTION 8.2(a) hereof.
"QUALIFYING REVENUES ": As defined in SECTION 2.4 hereof.
"RECEIVABLE AMOUNTS": As defined in SECTION 2.6 hereof.
"SCHEDULED CONTRACTS": As defined in SECTION 2.1(d) hereof.
"SECOND CONTINGENT PAYMENT ": As defined in SECTION 2.4 hereof.
"SECOND TARGET LEVELS ": As defined in SECTION 2.4 hereof.
"SELLER": As defined in the Introduction hereto.
"SHAREHOLDER": As defined in the Introduction hereto.
"SUBSIDIARY" or "SUBSIDIARIES" with respect to any corporation shall
mean any other corporation of which at least a majority of the securities
having by their terms ordinary voting power to elect a majority of the Board
of Directors of such other corporation is at the time directly or indirectly
owned or controlled by such first corporation, or by such first corporation
and one or more of its Subsidiaries.
"SUPPLIER DATA": All of Seller's supplier and vendor lists,
telephone numbers and publications and marketing material relating to the
purchase of goods or the provision of services to Seller in connection with
the Business.
-------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT - PAGE 4
"TAXES": Any federal, state or local income, sales, use, excise,
real or personal property or other taxes, assessments, fees, levies, imposts,
duties, deductions or other charges of any nature whatsoever (including,
without limitation, interest and penalties), domestic or foreign, imposed by
any law, rule or regulation.
"TAX OBLIGATIONS": Any Taxes which are attributable or related to
the assets or the Business of Seller for any periods ending on or before the
Closing Date or which may be applicable because of the Transactions.
"TAX REPORTS": As defined in SECTION 3.12 hereof.
"THIRD PARTY CONSENTS": As defined in SECTION 5.7 hereof.
"THREATENED": Any matter or thing will be deemed to have been
Threatened when iused herein with respect to any party if that party (or
anyone in such party's organization) has received notice, in writing or
otherwise, from the Person to whom the threat is attributable, or such
Person's agents, which makes reference to and identifies the matter or thing
being threatened.
"TRANSACTION" OR "TRANSACTIONS": The acquisition of the Assets, the
assumption of the Assumed Obligations and the performance of the other
covenants and transactions described in this Agreement.
"TRANSACTION EXPENSES": The expenses incurred in connection with the
preparation, negotiation, execution and performance of this Agreement and the
Transactions, including all fees and expenses of counsel and representatives.
"YEAR-END FINANCIAL STATEMENTS": As defined in SECTION 3.6(a) hereof.
Other terms shall have the meanings ascribed to elsewhere herein.
1.2 ACCOUNTING TERMS AND DEFINITIONS. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial
statements required to be delivered hereunder shall be prepared, in
accordance with generally accepted accounting principles as in effect from
time to time, applied on a consistent basis ("GAAP").
2. SALE OF ASSETS; ASSUMPTION OF CERTAIN LIABILITIES
2.1. AGREEMENT TO PURCHASE AND SELL. Subject to the applicable
terms and conditions of this Agreement, at the Closing, Seller shall sell,
transfer, assign, convey and deliver to Purchaser, and Purchaser shall
purchase, the assets, other than the Excluded Assets, owned by Seller or used
in connection with the Business (such assets being collectively referred to
as the "ASSETS") free and clear of all Liens, other than the Permitted
Encumbrances. The Assets include, but are not limited to:
(a) EQUIPMENT. All furniture, equipment, machinery,
apparatus, tools, appliances, transmission facilities or lines,
telecommunications switches or platforms, computers and computer
components (including hardware, software, modems and appurtenances
thereto), samples, implements, spare parts, supplies and all other
tangible personal property of every kind and description located
either on the Premises or elsewhere insofar as any of the foregoing
relate to the Business (the "EQUIPMENT"). The Equipment includes,
without limitation, all of the items listed in SCHEDULE 2.1(a)
hereto.
(b) INVENTORY. All inventories, if any, located either
on the Premises or elsewhere insofar as any of the foregoing relates
to the Business (the "INVENTORY").
(c) CASH. All cash on deposit and uncleared deposits (in
any bank account whatsoever, including the Bank Accounts), the xxxxx
cash of Seller, all temporary cash investments and instruments
-------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT - PAGE 5
representing the same (including without limitation marketable
securities), and all other cash and cash equivalents of Seller
existing at the Closing.
(d) SCHEDULED CONTRACTS. All agreements, contracts,
leases (including, without limitation, capital leases) and
agreements described in SCHEDULE 2.1(d) hereto (the "SCHEDULED
CONTRACTS") and all rights (including rights of refund and offset),
privileges, deposits, sums of money due, claims, causes of action
and options relating or pertaining thereto.
(e) INTANGIBLE ASSETS. All copyrights, trademarks, trade
secrets, trade names, know-how, data, computer software (including
all source code and object code) service marks, licenses,
franchises, distributorships, labels, logos, covenants by others not
to compete, rights, privileges and any registrations or applications
for registrations of the foregoing held or owned by Seller or used
in the Business, and any right to recovery for infringement thereof
(including past infringement) and any and all goodwill associated
therewith or connected with the use thereof and symbolized thereby
(the "INTANGIBLE ASSETS").
(f) GOODWILL. The goodwill of the Business or associated
with Seller's interest in the Intangible Assets.
(g) ACCOUNTS RECEIVABLE. All accounts receivable of
Seller and other rights of Seller to payment for goods and products
sold or leased or for services rendered, including, without
limitation, those which are not evidenced by instruments or chattel
paper, or whether or not they have been earned by performance or
have been written off or reserved against as a bad debt or doubtful
account in any financial statement, together with all instruments
and all documents of title representing any of the foregoing, all
rights to any merchandise or goods which any of the same represent,
and all rights, title, security (including security deposits) and
guaranties in favor of Seller with respect to any of the foregoing,
including, without limitation, any right of stoppage in transit (the
"ACCOUNTS").
(h) RESERVED.
(i) BANK ACCOUNTS. Each of the accounts is listed on
SCHEDULE 2.1(i) (the "BANK ACCOUNTS").
(j) CUSTOMER DATA AND SUPPLIER DATA. All of the Customer
Data and Supplier Data.
(k) PREPAID EXPENSES AND CURRENT ASSETS. All prepaid
rentals, leases, real estate taxes, other prepaid expenses, bonds,
deposits and financial assurance requirements, and other current
assets relating to any of the Assets or the Business.
(l) BOOKS AND RECORDS. All of Seller's books, records,
papers, files and instruments of whatever nature and wherever
located that relate to the Business or the Assets or which are
required or necessary in order for Purchaser to conduct the Business
from and after the Closing in the manner in which it is presently
being conducted, including, without limitation, graphic materials,
specifications, source codes, surveys, building and machinery
diagrams, accounting and financial records, maintenance and
production records, personnel and labor relations records,
environmental records and reports, sales and marketing literature,
brochures or other sales aids, sales and property Tax records and
returns, but specifically excluding income Tax records, returns and
corporate minute book and stock records and personnel and labor
relations records of persons whom Purchaser does not employ
following Closing.
(m) PERMITS. All of Seller's Permits relating to the
Business or all or any part of the Assets.
(n) NAME. The name "Dial Thru International Corporation"
and all other names used in connection with the Business and all
derivatives of any of same.
-------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT - PAGE 6
(o) INSURANCE PROCEEDS, WARRANTY RIGHTS. All insurance
proceeds and insurance claims of Seller relating to all or any part of
the Assets and, to the extent transferable, the benefit of and the
right to enforce the covenants and warranties, if any, that Seller is
entitled to enforce with respect to the Assets against Seller's
predecessors in title to the Assets.
(p) OTHER INTANGIBLES. All right, title and interest of
Seller in, to and under all customer relationships, agreements and
contracts (other than Scheduled Contracts), business arrangements
and relationships, rights, privileges, claims, causes of action and
options relating or pertaining to the Business or the foregoing
Assets.
(q) DEPOSITS. All right, title and interest of Seller
into and under all customer deposits or similar prepaid customer
accounts.
(r) OTHER PROPERTY. All other or additional privileges,
rights, interests, properties and assets of Seller of every kind and
description and wherever located, that are used or intended for use in
connection with, or that are necessary to the continued conduct of,
the Business as presently being conducted.
2.2. EXCLUDED ASSETS. Notwithstanding the foregoing, the Assets
shall not include any tax refunds receivable by Seller (collectively, the
"EXCLUDED ASSETS").
2.3. PURCHASE PRICE.
(a) CONSIDERATION. The aggregate consideration for the
Assets (the "PURCHASE PRICE") shall consist of (i) 1,000,000 shares
of Parent Common Stock (the "INITIAL AMOUNT"), to be issued to
Seller at Closing; PLUS (ii) the Contingent Payments to be issued as
provided in SECTIONS 2.4 below plus (iii) the assumption of the
Assumed Liabilities pursuant to SECTION 2.5 below.
(b) TAX ALLOCATIONS. The Purchase Price shall be
allocated among the Assets as set forth on EXHIBIT D attached hereto.
Seller and Purchaser agree that they will not take any position on
their income tax returns or on any other document that is inconsistent
with such allocation, and the parties shall duly prepare and timely
file such returns under the Code to report such allocation.
(c) STOCK CERTIFICATES. Each stock certificate issued
representing the Initial Amount, the First Contingent Payment or the
Second Contingent Payment shall bear the restrictive legends set forth
in EXHIBIT E attached hereto.
2.4. CONTINGENT PAYMENTS. Parent shall issue to Seller shares of
Parent Common Stock representing the Contingent Payments, in accordance with
the provisions of this SECTION 2.4.
(a) FIRST CONTINGENT PAYMENT. If during any three
consecutive months ending on or before October 31, 2001, the
Business produces both (a) average monthly Qualifying Revenues in
excess of $1.9 million and (b) average monthly EBITDA on such
Qualifying Revenues in excess of $235,000 (collectively, the "FIRST
TARGET LEVELS"), Parent shall issue to Seller an additional 500,000
shares of Parent Common Stock (the "FIRST CONTINGENT PAYMENT"). The
shares of Parent Common Stock representing the First Contingent
Payment shall be issued within fifteen (15) days following
Purchaser's confirmation that the First Target Levels have been
achieved. As used herein, the term "QUALIFYING REVENUES" means one
hundred percent (100%) of the gross revenues derived from the
Business, unless another percentage is agreed to in writing by
Purchaser and Seller with regard to any particular Qualifying
Revenues.
(b) SECOND CONTINGENT PAYMENT. If during any three
consecutive months ending on or before October 31, 2001, the Business
produces both (a) average monthly Qualifying Revenues in excess of $3.8
million AND (b) average monthly EBITDA on such Qualifying Revenues in
excess of $470,000 (the "SECOND TARGET LEVELS"), Parent shall issue to
Seller an additional 500,000 shares of Parent Common Stock (the
-------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT - PAGE 7
"SECOND CONTINGENT PAYMENT"). The shares of Parent Common Stock
representing the Second Contingent Payment shall be issued within
fifteen (15) days following Purchaser's confirmation that the Second
Target Levels have been achieved.
(c) OTHER FACTORS. At the discretion of Purchaser or
Parent (without any obligation to do so), after consideration of the
benefits actually received by Purchaser or Parent (compared to the
benefits anticipated to be provided to Purchaser and Parent from the
achievement of the First Target Levels or Second Target Levels) from
the Business and Assets acquired pursuant to the terms of this
Agreement, Parent may issue to Seller all or any portion of the
Contingent Payments whether or not the First Target Levels or Second
Target Levels have been achieved.
(d) RESTRUCTURING OF BUSINESS. Purchaser and Seller
acknowledge and agree that the First Target Levels and Second Target
Levels have been established based upon the historic operations of
the Business, and agree that to the extent that any operating
activities historically associated with the Business are
consolidated with the historic business operations of Purchaser, or
to the extent that any Purchaser's historic business operations are
consolidated in Seller, that the parties will negotiate in good
faith to appropriately allocate any direct cost increases or
decreases associated with any such consolidations so that the
determinations EBITDA with regard to the Business will reflect the
proper allocation of expenses associated with the Business.
(e) ACCELERATION EVENTS. If any of the following events
occur without the prior written consent of Seller or Shareholder,
Parent shall issue any then unissued Contingent Shares to Seller,
whether or not the Business has achieved the First Target Levels or
the Second Target Levels:
(i) The disposition or sale by Purchaser or
Parent of all or substantially all of its assets.
(ii) Upon the consummation of any transaction by
which any Person and their Affiliates (or group of Persons
or their Affiliates acting in concert) acquire in excess of
fifty percent (50%) of the outstanding shares of capital
stock of either Parent or Purchaser, whether as is a result
of a merger, consolidation, business combination, stock
sale, tender offer or otherwise.
(iii) Parent or Purchaser's failure to comply
with its obligations pursuant to SECTION 5.19.
(iv) Upon any termination of the Employment
Agreement between Shareholder and Purchaser on or before
October 31, 2001 either (a) by Purchaser or Parent "without
cause" (as defined in the Employment Agreement) or (b) by
Shareholder for "good reason" (as defined in the Employment
Agreement).
2.5. ASSUMPTION OF LIABILITIES.
(a) ASSUMED OBLIGATIONS. Subject to and upon all of the
terms and conditions of this Agreement, at the Closing, Purchaser
shall assume and agree to pay, perform and discharge the following
obligations and liabilities of Seller (the "ASSUMED OBLIGATIONS"):
(i) the obligations of Seller to perform the
Scheduled Contracts specifically set forth on, and attached
to, SCHEDULE 2.1(d) to the extent that the Scheduled
Contracts have not been performed at the time of the
Closing, are not in default and have been duly transferred,
assigned or consented to, as the case may be, if necessary;
(ii) Purchaser's portion of any ad valorem or
similar Taxes to be prorated pursuant to SECTION 2.5(c);
-------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT - PAGE 8
(iii) the liabilities of Seller, if any,
represented by customer deposits or similar prepaid
customer accounts, in each case, only to the extent that
such items are (i) reflected in the Most Recent Financial
Statements or (ii) incurred in the ordinary course of
business between the Most Recent Fiscal Month End and the
Closing;
(iv) the obligation of Seller under the Amended
and Restated Promissory Note dated as of October 1, 1999,
payable by Seller to the order of Shareholder;
(v) the accounts payable of Seller at the
Closing Date, to the extent that such accounts payable are
(i) reflected in the Most Recent Financial Statements or (ii)
incurred in the ordinary course of business between the Most
Recent Fiscal Month End and the Closing; and
(vi) the liabilities of Seller, if any,
represented by accrued expenses for utilities, professional
fees (other than the Transaction Expenses), wages and bonuses
and employee health insurance, in each case, only to the
extent that such accrued expense items are (i) reflected in
the Most Recent Financial Statements or (ii) incurred in the
ordinary course of business between the Most Recent Fiscal
Month End and the Closing.
(b) EXCLUDED LIABILITIES. Except as specifically
provided in SECTIONS 2.5(a) and 2.5(c), Purchaser does not assume or
agree to pay, perform or discharge, and shall not be responsible
for, any other liabilities or obligations of Seller, whether
accrued, absolute, contingent or otherwise, including without
limitation, liabilities or obligations based on, arising out of, or
in connection with:
(i) the Transaction Expenses incurred by
Seller;
(ii) any failure by Seller to perform any
Scheduled Contract occurring prior to the Closing Date;
(iii) any Tax Obligations, except to the extent
prorated at the Closing;
(iv) any lease obligations or indebtedness of
Seller not constituting Scheduled Contracts;
(v) any claims by any of Seller's directors,
officers, employees or shareholders relating to this
Agreement or its performance or consummation, or any claims
by any of them relating to or arising out of (A) their
employment (including without limitation any modification
or termination thereof) by Seller, (B) any employment
contract, or (C) any pensions or other benefit liabilities
of Seller;
(vi) any claims or conditions arising under or
relating to environmental laws or similar legal requirements
attributable or relating to the Assets (including, without
limitation, the operation thereof) or the Business of Seller;
(vii) any unlicensed or other unauthorized use by
Seller of any patented or unpatented invention, trade secret,
copyright, trade xxxx or other intellectual property rights,
including, without limitation, the Intangible Assets;
(viii) any dividend or other distribution declared
or otherwise payable by Seller;
(ix) any liability or obligation arising from or
related to any failure of Seller or any of its Affiliates to
comply with any Legal Requirement or to obtain any Permit
necessary for the operation of the Business;
-------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT - PAGE 9
(x) any note, Debt or other obligation to any
Person or any outstanding drafts, checks, transfers in
progress or similar financial instruments, except to the
extent expressly assumed herein; and
(xi) any liability or obligation arising from or
related to any Plan.
(c) PRORATIONS. Seller and Purchaser shall each pay its
respective pro rata portion of all 1999 ad valorem or similar taxes
due with respect to the Assets. Seller shall pay to Purchaser at the
Closing estimated ad valorem or similar Taxes for the current year
(based on the prior year's Taxes) prorated to the date of the Closing;
Seller shall make available to Purchaser copies of all statements and
assessments reflecting such prior year's Taxes. Purchaser shall pay
such sums to the appropriate taxing authorities when due, prior to
becoming delinquent.
2.6. CERTAIN ADJUSTMENTS. Seller and Shareholder, jointly and
severally, hereby represent and warrant that (a) the proceeds received by
Purchaser during the Collection Period from collections on Accounts of Seller
existing as of the Closing Date (the "RECEIVABLE AMOUNTS") will exceed (b) an
amount equal to (i) all amounts paid by Purchaser during the Collection
Period with regard to accounts payable assumed by Purchaser as of the Closing
Date, plus (ii) any accounts payable assumed by Purchaser that were in
existence as of the Closing Date and remain outstanding at the end of the
Collection Period, minus (iii) any Closing Deficiency (collectively, the
"PAYABLE AMOUNTS"). As used herein, the term "COLLECTION PERIOD" means the
period ending six (6) months following the Closing Date; provided that Seller
shall have the right to extend the Collection Period for an additional thirty
(30) days upon the delivery of written notice to Purchaser on or before the
sixth month following the Closing Date.
2.7. FURTHER ASSURANCES. At the Closing, and at all times
thereafter as may be reasonably necessary, Seller shall execute and deliver
to Purchaser such instruments of transfer as shall be reasonably necessary or
appropriate to vest in Purchaser title of the type specified herein to the
Assets and to otherwise comply with the terms, purposes and intent of this
Agreement.
3. REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDER
Seller and Shareholder, jointly and severally, hereby represent and
warrant to Purchaser and Parent that the following are true and correct as of
the date of this Agreement and will be true and correct (without limitation)
through the Closing Date, regardless of what investigations, if any,
Purchaser shall have made prior hereto or prior to the Closing:
3.1. ORGANIZATION; QUALIFICATION. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State
of California. Seller has full corporate power and authority to own and lease
all of the properties and assets it now owns and leases and to carry on its
business as now being conducted. Seller is duly qualified as a foreign
corporation and is in good standing to do business in each jurisdiction in
which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary, except where the
failure to so qualify would not have a Material Adverse Effect on Seller.
3.2. AUTHORITY RELATIVE TO THIS AGREEMENT. Seller has full power
and authority (corporate and otherwise) to execute, deliver and perform this
Agreement (including, without limitation, execution, delivery and performance
of the Operative Documents to which it is a party) and to consummate the
Transactions. The execution and delivery by Seller of this Agreement, and the
consummation of the Transactions, have been duly and validly authorized by
the Board of Directors of Seller and the shareholders of Seller and no other
corporate proceedings on the part of Seller are necessary with respect
thereto. This Agreement has been duly and validly executed and delivered by
Seller, and constitutes a legal, valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms. Seller will take all
corporate action that is necessary for Seller to complete the Transactions to
be completed by Seller pursuant to this Agreement. Shareholder is the sole
owner and holder of all outstanding securities of Seller and, to the extent
required by applicable law, has ratified this Agreement and the transactions
contemplated thereby.
-------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT - PAGE 10
3.3. OTHER BUSINESSES; AFFILIATE TRANSACTIONS. The Business is the
only business activity conducted by Seller. Except as described on SCHEDULE 3.3
of the Disclosure Schedule, Seller does not have any Subsidiaries and does not
own, directly or indirectly, any equity, profit sharing, participation or other
interest in any Person. All of the business transactions conducted by Seller
with third parties have been conducted on an arms-length basis and in accordance
with applicable law. Except as disclosed on SCHEDULE 3.3, Seller is not a party
to any contract, agreement or understanding with any Affiliate of Seller or
Shareholder.
3.4. GOVERNMENT CONSENTS AND APPROVALS; PERMITS. Except as set
forth in or otherwise required by this Agreement or the Operative Documents,
neither the execution, delivery or performance by Seller or Shareholder of this
Agreement nor the consummation of the Transactions by it (a) requires any
consent, approval, order or authorization of, action by or in respect of, or
registration or filing with, any Governmental Body, other than those which have
previously been obtained or (b) will result in the loss of any material benefit
or entitlement under any Permit or will require any additional action or waivers
for Purchaser to continue to receive the full benefits or entitlements arising
from any Permit. Seller has obtained all Permits necessary to the conduct of
Seller's business or to the ownership of its properties. SCHEDULE 3.4 of the
Disclosure Schedule lists and includes copies of all Permits.
3.5. NO VIOLATIONS. Neither the execution, delivery or performance
of this Agreement by Seller, the consummation by Seller of the Transactions nor
compliance by Seller with any of the provisions hereof will (a) conflict with or
result in any breach or violation of any provision of the Articles of
Incorporation or Bylaws of Seller, (b) result in a default, or give rise to any
right of termination, cancellation or acceleration or loss of any material
benefit or require the consent, approval, waiver or other action of any Person
under the provisions of any note, bond, mortgage, indenture, license, trust,
agreement, lease or other instrument or obligation to which Seller is a party or
by which Seller may be bound, (c) result in the creation or imposition of any
Lien on any of the Assets, (d) violate any Order, statute, rule or regulation
applicable to Seller or (e) violate any territorial restriction on the business
of Seller or any noncompetition or similar arrangement.
3.6. FINANCIAL STATEMENTS, ETC.
(a) Seller has attached to the Disclosure Schedule the
balance sheets of Seller dated as of December 31, 1998 (the "MOST
RECENT FISCAL YEAR END") and the related statements of operations for
the fiscal year then ended, together with all notes, additional or
supplemental information supplied therewith (collectively, the
"YEAR-END FINANCIAL STATEMENTS"). Further, Seller has attached to the
Disclosure Schedule the balance sheet of Seller dated as of June 30,
1999 (the "MOST RECENT FISCAL MONTH END") and the related statement of
operations, for the six months then ended (and as of the corresponding
date and for the corresponding period in the preceding fiscal year),
together with the notes, additional or supplemental information
supplied therewith (the "MOST RECENT FINANCIAL STATEMENTS" and
collectively with the Year and financial statements, the "FINANCIAL
STATEMENTS").
(b) The Financial Statements have been prepared from, and
are in accordance with, the books and records of Seller and fairly
present, in all material respects, the financial position of Seller as
of the date thereof and the statements of operations, and changes in
financial position therefor for the period then ended, in each case, in
conformity with GAAP (subject to the absence of footnotes and to
normal, recurring year-end adjustments, which do not, and will not,
have a Material Adverse Effect on Seller). The Financial Statements are
true, complete and correct in all material respects.
(c) The trade accounts and other receivables of Seller
which are classified as current assets on the Balance Sheets are or
were bona fide receivables, were acquired in the ordinary course of
business, are stated in accordance with GAAP and, subject to the
reserve for doubtful accounts, are good and collectible. Adequate
provision has been made in the Financial Statements for doubtful
accounts and other receivables. There are no receivables of Seller owed
by Affiliates of Seller which are not disclosed in the Financial
Statements.
(d) Seller has no liabilities (contingent or otherwise)
other than:
-------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT - PAGE 11
(i) those set forth or reserved against in the
Latest Balance Sheet, and
(ii) those incurred since the Most Recent Fiscal
Month End in the ordinary course of business, consistent with
past practices and listed in the Disclosure Schedule.
(e) Seller has no Debt other than as disclosed in the
Financial Statements and the Disclosure Schedule.
(f) Seller's books of account have been accurately kept
in the ordinary course of business, the transactions entered therein
represent bona fide transactions, and the revenues, expenses, assets
and liabilities of Seller have been properly recorded in all material
respects in such books.
(g) The aggregate fair market value (on a going concern
basis) of the Equipment is at least equal to the aggregate net book
value thereof as set forth on the Latest Balance Sheet.
(h) Since the Most Recent Fiscal Year End, there has been
no change in accounting principles applicable to, or methods of
accounting utilized by, Seller.
3.7. TITLE TO AND CONDITION OF ASSETS AND PROPERTY.
(a) Except as specifically set forth in SCHEDULE 3.7(a)
of the Disclosure Schedule, Seller has good and marketable title (in
fee simple) to all of the Assets and such Assets are free and clear of
all Liens, except for the Permitted Encumbrances. Since the Most Recent
Fiscal Month End, Seller has not sold, transferred, leased, distributed
or otherwise disposed of any of its assets, or agreed to do so except
for the disposition of immaterial assets in the ordinary course of
business or which in the reasonable judgment of management are not
necessary or advisable to the efficient operations of the Business.
Upon consummation of the Transactions, Purchaser will own the Assets
free and clear of all Liens except for Permitted Encumbrances. The
Assets constitute all assets and properties, real, personal, tangible
and intangible that are necessary in the conduct of the Business as
presently being conducted.
(b) All material tangible Assets (i) are in good repair
and in good operating condition, ordinary wear and tear excepted, (ii)
are suitable for the use to which the same are customarily put, (iii)
are free from defects other than minor defects that do not interfere
with or detract from the use or value thereof, (iv) are of a quality
and quantity presently usable in the ordinary course of the operation
of the Business, (v) conform in all material respects with all
applicable legal requirements, and (vi) have been maintained in
accordance with industry practice. All of the material fixed assets
reflected in the Financial Statements are stated at cost less aggregate
allowances for depreciation and amortization, which have been provided
for based upon the estimated useful lives of the assets currently used
in the operation of the Business.
(c) Except as set forth on SCHEDULE 3.7(c) to the
Disclosure Schedule, all computer software constituting part of the
Assets which is licensed or otherwise provided to third parties will
operate in accordance with the functional specifications therefor, when
utilized in connection with a properly functioning computer, after
December 31, 1999 and will at all times properly, to the extent
required in connection with its intended functionality, recognize and
utilize dates in the year 2000 and thereafter.
3.8. RESERVED.
3.9. INVESTIGATION OR LITIGATION; COMPLIANCE WITH LAWS. Except as
set forth on SCHEDULE 3.9 of the Disclosure Schedule, there is no material
Proceeding pending or Threatened against, relating to or affecting the Assets.
Seller is not subject to any currently existing Proceeding by any Governmental
Body. To Seller's and Shareholder's knowledge, there is no basis for the
assertion of any Proceeding by any Governmental Body or any Person regarding any
violation of the environmental laws, federal or state securities laws or any
other Legal Requirement which, if
-------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT - PAGE 12
determined adversely to Seller, could have a Material Adverse Effect on
Seller. Seller has complied with all applicable Legal Requirements (including
with respect to its business, assets, business practices, products and
services).
3.10. ABSENCE OF CHANGES. Since the Most Recent Fiscal Year End, the
Business has been operated in the ordinary course consistent with past practice.
Since the Most Recent Fiscal Year End, Seller has not (a) suffered or permitted
to have occurred any event which had or could have had a Material Adverse Effect
on the Business; (b) incurred any Lien obligation or liability, absolute,
accrued, contingent or otherwise, whether due or to become due, except current
liabilities for trade or business obligations incurred in connection with the
purchase of goods or services in the ordinary course of business consistent with
prior practice, none of which Liens or liabilities, in any case or in the
aggregate could have a Material Adverse Effect on the Business; (c) sold,
transferred, leased to others or otherwise disposed of any of its assets, except
for inventory sold in the ordinary course of business, or cancelled or
compromised any Debt or claim, or waived or released any right of substantial
value; (d) received any notice of termination of any contract, lease or other
agreement or suffered any damage, destruction or loss (whether or not covered by
insurance) which, in any case or in the aggregate, has had or could have had a
Material Adverse Effect on the Business; (e) made any material change in the
rate of compensation, commission, bonus or other direct or indirect remuneration
payable, or paid or agreed or orally promised to pay, conditionally or
otherwise, any bonus, incentive, retention or other compensation, retirement,
welfare, fringe or severance benefit or vacation pay, to or in respect of any of
its directors, officers, employees, salesmen, distributors or agents; (f) made
any capital expenditures or capital additions or improvements in excess of an
aggregate of $10,000; (g) lost or terminated any key employees or lost or
terminated any customers or suppliers that has had or could have had any
Material Adverse Effect on the Business; (h) materially amended, modified or
terminated, or agreed to amend, modify or terminate, any existing (or entered or
committed to enter into any new) material contract, agreement, plan, lease,
license, Permit or franchise; or (i) taken any action or admitted to take any
action that would result in the occurrence of any of the foregoing.
3.11. LABOR AND EMPLOYEE MATTERS. Except as set forth in SCHEDULE
3.11 of the Disclosure Schedule, Seller does not have any obligations,
contingent or otherwise, under any employment, commission, royalty or consulting
agreement or similar arrangement. SCHEDULE 3.11 of the Disclosure Schedule sets
forth a true and correct list of each employee, independent contractor,
consultant or similar person with which Seller has a relationship, and
identifies (i) such Person's current place of residence and the countries in
which such person performs services on behalf of Seller; (ii) to the extent not
disclosed on SCHEDULE 3.11, a summary of the compensation arrangement between
Seller and such person and the services performed by such person for or on
behalf of Seller; (iii) the period of time in which such person has performed
services for or on behalf of Seller; and (iv) any entitlements this person has
to receive benefits from Seller or any other employee benefit or severance
obligations to such person. Seller is in compliance with all Legal Requirements
regarding employment and employment practices, terms and conditions of
employment and wages and hours, and has not and is not engaged in any unfair
labor practice. No employee of Seller is in violation of any term of any
employment contract, or any other contract or agreement with, or any restrictive
covenant or any other common law obligation to, a former employer relating to
the right of any such employee to be employed by Seller because of the nature of
the business conducted or to be conducted by Seller or to use the trade secrets
or proprietary information of others, and the employment of its employees does
not subject Seller to liability in connection with any such covenants or
agreements. There are no pending petitions for recognition of a labor union or
association as the bargaining agent for any employees of Seller and there are
not presently any organizing efforts by any union or other group seeking to
represent any presently unorganized employees of Seller as their bargaining
agent. There are no labor strikes, work stoppages or other employment troubles,
other than routine grievance matters, now pending or Threatened against Seller.
3.12. TAXES. All Taxes that are due and payable by Seller, other
than those presently payable without penalty or interest, have been timely paid,
and Seller has timely filed (and, through the Closing Date, will timely file)
all Tax reports and returns (collectively, "TAX REPORTS") required by law to be
filed by it. All such Tax Reports are true, complete and correct in all respects
with regard to Seller for the periods covered thereby. Seller is not delinquent
in the payment of any Tax. There is no Tax deficiency asserted against Seller,
and there is no unpaid assessment, proposal for additional Taxes, deficiency or
delinquency in the payment of any of the Taxes of Seller or any violation of any
Tax law that could be asserted by any taxing authority. There are no Liens with
respect to Taxes upon any properties or assets of Seller nor has notice been
given of any event which could lead to any such Lien. No foreign, Internal
-------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT - PAGE 13
Revenue Service, state or local, audit, investigation or Proceeding of Seller is
pending or Threatened, and the results of any completed audits are properly
reflected in the Financial Statements. Seller has not granted any extension to
any taxing authority of the limitation period during which any Tax liability may
be asserted. Seller has not committed any violation of any Tax laws. All monies
required for the payment of Taxes not yet due and payable with respect to the
operations of Seller through and including the Closing Date have been approved,
reserved against and entered upon the books and Financial Statements. All monies
required to be withheld by Seller from employees, if any, independent
contractors, or others or collected from customers for income taxes, social
security and unemployment insurance taxes and sales, excise and use taxes, and
the portion of any such taxes to be paid by Seller to governmental agencies or
set aside in accounts for such purpose have been approved, reserved against and
entered upon the books and Financial Statements. Consummation of the
Transactions will not result in any Tax Obligations on the Assets.
3.13. PROPRIETARY RIGHTS. Seller owns or validly licenses the right
to use all technology, proprietary information, know-how, ideas (patented or
unpatented), data, licenses, customer lists, processes, formulas, trade secrets,
telephone numbers, computer software, computer programs, designs, inventions,
trademarks, trademark registrations and applications therefor, registered and
common law copyrights, and registered copyright applications, trade names
(whether or not registered or registrable), service marks, service xxxx
registrations and applications therefor (collectively, the "PROPRIETARY RIGHTS")
necessary to conduct the business of Seller as the business is presently being
conducted. SCHEDULE 3.13 of the Disclosure Schedule sets forth a complete and
correct list (including, where applicable, registration numbers and dates of
filing, renewal and termination) of all material Proprietary Rights. Except as
reflected on SCHEDULE 3.13, no consent or approval of any third party will be
required for the use of the Proprietary Rights by Purchaser after the
consummation of the Transactions contemplated hereby and the Transactions
hereunder will not result in any breach of any agreement relating to any
Proprietary Rights. The Proprietary Rights owned by Seller are owned free and
clear of all Liens. Purchaser's use of the Proprietary Rights will not, and the
conduct of the business as presently conducted does not, infringe on or violate
the rights of any other Person. No Proceedings have been instituted, are pending
or are, to the knowledge of the Company, Threatened that challenge or oppose the
rights of Seller with respect to any of the Proprietary Rights. Seller has
received no notice or inquiry from any Person of any alleged infringement by
either of them of any intellectual property right. Set forth on SCHEDULE 3.13 is
a true and correct list of all confidentiality agreements and all other
contracts, royalty agreements, licenses or other understandings or arrangements
entered into relating to the Proprietary Rights and all such contracts are in
full force and effect.
3.14. NO BROKERS. Seller has not employed any broker, agent or
finder or incurred any liability for any brokerage fees, commissions or finders'
fees in connection with the Transactions.
3.15. ACCOUNTS RECEIVABLES. SCHEDULE 3.15 of the Disclosure Schedule
contains a complete and accurate list of all Seller's receivables (including
aged accounts receivables, outsourcing receivables, consulting receivables, loan
receivables and advances) as of June 30, 1999, showing the name of each account
debtor and the amount due from each by invoice number and date. All of such
accounts receivables have arisen in the ordinary course of business for products
delivered or services rendered. Except as set forth on the Disclosure Schedule,
Seller is not aware of any event or condition with respect to a specific
customer that causes it to believe that any such receivable will not be
collected in full in due course without resort to litigation and will not be
subject to counterclaim or setoff.
3.16. ACCOUNTS PAYABLE AND CURRENT LIABILITIES. SCHEDULE 3.16 of the
Disclosure Schedule contains a complete and accurate list of all of Seller's
accounts payable and current liabilities as of June 30, 1999, showing the name
of each account creditor and the amount due to each by invoice number and date.
Seller is not aware of any event or condition with respect to a specific vendor
or creditor that causes it to believe that the terms of payment to such vendor
or creditor are likely to change in any material respect from the terms enjoyed
by Seller historically.
3.17. INSURANCE. All the insurance policies maintained by Seller are
in full force and effect, all insurance premiums have been timely paid to date,
and no such policy will be cancelled prior to Closing. A description of each of
Seller's insurance policies (including, without limitation, insurance providing
benefits for employees) is attached to the Disclosure Schedule as SCHEDULE 3.17.
To Seller's and Shareholder's knowledge, the insurance policies set forth in the
Disclosure Schedule provide adequate coverage, less deductibles, against the
risks involved in the Business and operation of the Assets.
-------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT - PAGE 14
3.18. PRODUCT AND SERVICE WARRANTIES. There exists no pending or
Threatened claim against Seller on account of product or service warranties or
with respect to the manufacture, sale or lease of products or performance of
services, and there is no basis for any such claim on account of products
heretofore manufactured, sold or leased or services performed.
3.19. CONTRACTS; ORAL COMMITMENTS; DEFAULTS. SCHEDULE 3.19 of the
Disclosure Schedule sets forth a true and correct list of all contracts of
Seller (or summaries of all oral commitments) that (a) are material to the
business of the Company or (b) either (i) grant Seller any exclusive rights,
(ii) obligate Seller to purchase products or services from a specific source,
(iii) restrict the ability of Seller to compete in any territory or do business
with any Person or (iv) involve the payment or receipt of more than $25,000
during the remaining term thereof. There exists no breach or default under any
of such contracts. Each of the contracts listed on SCHEDULE 3.19 has been
included on SCHEDULE 2.1(d) and, as such, also constitutes a Scheduled Contract.
Except as separately identified on SCHEDULE 3.19 of the Disclosure Schedule, no
approval or consent of any Person is needed in order that the contracts listed
on SCHEDULE 3.19 continue in full force and effect immediately following the
consummation of the Transactions.
3.20. INVESTMENTS IN COMPETITORS. Except as set forth in SCHEDULE
3.20, neither Seller nor Shareholder either (a) directly or indirectly owns in
excess of a five percent (5%) interest in any Person or (b) actively
participates in the management of any Person, in each case, that is a competitor
or potential competitor of, or which otherwise directly or indirectly does
business with, Seller.
3.21. SOLVENCY. Seller is not now insolvent, nor will Seller be
rendered insolvent by the consummation of the Transactions. In addition,
immediately after giving effect to the Transactions, (a) Seller will be able to
pay its debts as they become due, (b) Seller will not have unreasonably small
capital and will not have insufficient capital with which to conduct its present
or proposed business and (c) taking into account pending and Threatened
litigation, final judgments against Seller in actions for money damages are not
reasonably anticipated to be rendered at a time when, or in amounts such that,
Seller will be unable to satisfy any such judgments promptly in accordance with
their terms (taking into account the maximum probable amount of such judgments
in any such actions and the earliest reasonable time at which such judgments
might be rendered). The cash available to Seller and value of the other
consideration to be received by Seller pursuant to this Agreement, after taking
into account all other anticipated uses of the cash of Seller, will be
sufficient to pay all such judgments promptly in accordance with their terms. As
used in this Section only, (x) "INSOLVENT" means, for any Person, that the sum
of the present fair saleable value of its assets does not and/or will not exceed
its debts and other probable liabilities, and (y) the term "DEBTS" includes any
legal liability, whether matured or unmatured, liquidated or unliquidated,
absolute, fixed or contingent, disputed or undisputed or secured or unsecured.
3.22. RESERVED.
3.23. CUSTOMERS. SCHEDULE 3.23 to the Disclosure Schedules sets
forth a true and correct list of (i) the ten (10) largest customers of Seller in
terms of sales during the Most Recent Fiscal Year End and (ii) the ten (10)
largest customers of Seller in terms of sales during the six month period ended
on the Most Recent Fiscal Month End showing the approximate total sales to each
such customer during each of such periods. Except as set forth on SCHEDULE 3.23,
there has not been any material adverse change in the business relationship of
Seller with any customer so named in the Disclosure Schedule. No customer of
Seller has canceled or otherwise terminated, or Threatened to cancel or
otherwise terminate, its relationship with Seller for any reason, including the
consummation of the transaction contemplated hereby. Seller has no knowledge
that any customer intends to cancel or otherwise terminate its relationship with
Seller.
3.24. SUPPLIERS. SCHEDULE 3.24 to the Disclosure Schedule sets forth
a true and correct list of (i) the ten (10) largest suppliers of Seller in terms
of purchases during the Most Recent Fiscal Year End and (ii) the ten (10)
largest suppliers of Seller in terms of purchases during the six (6) month
period ended on the Most Recent Fiscal Month End showing the approximate total
of purchases from each supplier during such periods. Except as set forth on
SCHEDULE 3.24, there has not been any material adverse change in the business
relationship of Seller with any supplier so named in the Disclosure Schedule. No
supplier of Seller has canceled or otherwise terminated, or Threatened to cancel
or otherwise terminate, its relationship with Seller for any reason, including
the consummation of the transaction
-------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT - PAGE 15
contemplated hereby. Seller has no knowledge that any supplier intends to
cancel or otherwise terminate its relationship with Seller.
3.25. PENSION MATTERS. SCHEDULE 3.25 to the Disclosure Schedule
contains a list of all employee benefit plans applying to one or more employees
of Seller or one or more persons providing services to the Business and with
respect to which Seller has or may incur any future or contingent obligations,
including without limitation, all plans, agreements or arrangements relating to
deferred compensation, pensions, profit sharing, retirement income or other
benefits, stock purchase and stock option plans, bonuses, severance agreements,
health benefits, insurance benefits and all other employee benefits or fringe
benefits (collectively, the "PLANS"). No Plan or practices of Seller will be or
become binding upon Purchaser nor will Purchaser become liable for any amounts
with regard thereto as a result of its acquisition of the Assets or completion
of any other transactions contemplated hereby. Full payment has been made or
accrued (in a manner consistent with past practice) or will be made out of the
proceeds to Seller at the Closing of all amounts that Seller was or will be
required to pay or contribute under the terms of any Plan on or before the
Closing Date, and, except for the amount of such anticipated payment, if any, no
accumulated funding deficiencies (as defined in Section 302 of ERISA and Section
4012 of the Code), whether or not waived, will exist as of the Closing with
respect to any such Plan and any required contributions or distributions of
securities shall have been consummated. Except for Seller's noncontributory
defined benefit plan, no Plan is subject to Title IV of ERISA. No Plan is a
multi-employer plan within the meaning of Section 3(37) of ERISA.
3.26. BANK ACCOUNTS. SCHEDULE 3.26 to the Disclosure Schedule
contains a complete list of all persons authorized to draw or sign checks or
drafts upon the Bank Accounts. The Disclosure Schedule also contains a complete
list of the names and locations of any institutions in which Seller may have
safe deposit boxes and the names of the persons having access thereto.
3.27. DEPOSIT ACCOUNTS; PREPAID CUSTOMER REVENUES. SCHEDULE 3.27 to
the Disclosure Schedule contains a complete list of all accounts into which
Customer have made deposits or prepaid for services to be provided in connection
with the Business.
3.28. CERTAIN PAYMENTS. The Business has at all times been conducted
in a legal and ethical manner. In particular, neither Seller nor any of its
Affiliates has (a) offered, promised or paid any money, gift or any other thing
of value to any person for the purpose of influencing official actions or
decisions effecting Seller or this Agreement while knowing or having reason to
know that any portion of the money, gift or thing would, directly or indirectly,
be given, offered or promised to (i) an employee, officer or other person acting
in an official capacity for any government or its agencies or instrumentalities,
or (ii) any political party, party official or candidate for political office;
or (b) committed any other act in violation of the U.S. Foreign Corrupt
Practices Act.
3.29. DEDICATED TRANSMISSION LINES OR FACILITIES. SCHEDULE 3.29 to
the Disclosure Schedule contains a complete and correct list of each location
and country in which Seller owns, operates or has rights to use any dedicated
telecommunication lines or transmission facilities, including both the
origination and termination points for such lines or facilities.
-------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT - PAGE 16
3.30. DISCLOSURE.
(a) Seller has delivered or made available to Purchaser
complete and accurate copies of all documents listed on the schedules
delivered as a part hereof and all other information requested for
deciding whether to consummate the Transactions hereby. No
representation or warranty of Seller contained in this Agreement or
statement in the schedules hereto contains any untrue statement. No
representation or warranty of Seller contained in this Agreement or
statement in the schedules hereto omits to state a material fact
necessary in order to make the statements herein or therein, in light
of the circumstances under which they were made, not misleading.
(b) There is no fact known to Seller which has specific
application to Purchaser and which could have a Material Adverse Effect
on Seller but which has not been set forth in this Agreement or the
Disclosure Schedule.
(c) The disclosures in the Disclosure Schedule shall
relate only to the representations and warranties in the Section of
this Agreement to which they expressly relate except to the extent that
any such disclosure is reasonably apparent on its face as being
applicable to representations and warranties in other sections of this
Agreement.
(d) In the event of any inconsistency between the
statements in the body of this Agreement and those in the Disclosure
Schedule (other than an exception expressly set forth as such in the
schedules in relation to a specifically identified representation or
warranty), those in this Agreement shall control.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER AND PARENT
Purchaser and Parent, jointly and severally, hereby represent and
warrant to Seller that the following are true and correct as of the date of this
Agreement and will be true and correct (without limitation) through the Closing
Date, regardless of what investigations, if any, Seller shall have made prior
hereto or prior to the Closing:
4.1. ORGANIZATION. Parent is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Purchaser
is a corporation duly organized, validly existing, and in good standing under
the laws of the State of Delaware.
4.2. AUTHORITY RELATIVE TO THIS AGREEMENT. Parent and Purchaser
each has full power and authority (corporate and otherwise) to execute, deliver
and perform this Agreement (including, without limitation, execution, delivery
and performance of the Operative Documents to which it is a party) and to
consummate the Transactions. The execution and delivery by Parent and Purchaser
of this Agreement, and the consummation of the Transactions, have been duly and
validly authorized by the Board of Directors of Parent and Purchaser and no
other corporate proceedings on the part of Parent or Purchaser are necessary
with respect thereto.
4.3. CONSENTS AND APPROVALS. Except as set forth in or otherwise
required by this Agreement or the Operative Documents, the execution, delivery
and performance by Parent or Purchaser of this Agreement and the consummation of
the Transactions by it requires no consent, approval, order or authorization of,
action by or in respect of, or registration or filing with, any Governmental
Body or other Person.
4.4. NO BROKERS. Neither Parent nor Purchaser has employed any
broker, agent or finder or incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the Transactions.
4.5. PARENT; FINANCIAL STATEMENTS. Purchaser has made available to
Seller and Shareholder (i) the Parent's annual report on Form 10-K for the
fiscal year ended October 31, 1998 and the Parent's Quarterly Reports on Form
10-Q for the fiscal quarters ended January 31, 1999, April 30, 1999 and July 31,
1999, respectively (ii) Parents Proxy Statement for its 1999 Annual Meeting of
Stockholders, and (iii) each of Parent's Current Reports on Form 8-K relating to
an event or transaction occurring since July 31, 1999, each in the form filed
with the U.S. Securities and
-------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT - PAGE 17
Exchange Commission (collectively, the "PARENT REPORTS"). Each of the
consolidated balance sheets included in or incorporated by reference into the
Parent Reports (including the related notes and schedules) fairly presents,
in all material respects, the consolidated financial position of Parent and
its subsidiaries as of its date, and each of the consolidated statements of
income and of cash flows included in or incorporated by reference into the
Parent Reports (including any related notes and schedules) fairly presents,
in all material respects, the results of operations, retained earnings and
cash flows, as the case may be, of Parent and its subsidiaries for the period
set forth therein (subject, in the case of unaudited statements to normal
year-end audit adjustments) in each case in accordance with GAAP. The Parent
Reports, together with the other information concerning Parent provided to
Seller and Shareholder pursuant hereto will, as a whole, not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
4.6. PARENT SHARES. The Parent Shares to be issued to Seller in
connection with the consummation of the Transaction will be validly issued and
outstanding, fully paid and nonassessable. The Parent Shares so issued will be
"restricted securities" (as such term is defined in Rule 144 promulgated under
the Securities Act) and will not be registered with the U.S. Securities and
Exchange Commission under the Securities Act.
5. ADDITIONAL AGREEMENTS
5.1. CONDUCT OF BUSINESS OF SELLER. Seller covenants that after the
date hereof and prior to the Closing Date, Seller shall conduct its operations
only according to its normal course of business to preserve its business
organization, keep available the services of its officers and employees,
maintain satisfactory relationships with licensors, suppliers, dealers,
customers and all others having business relationships with it and continue to
service and maintain all of its respective assets in a manner consistent with
past practice. All risk of loss arising out of fire and casualty and all
liability to third parties arising out of the operations of the Business prior
to the Closing Date shall be that of Seller, and Purchaser shall have no
obligation or liability in connection therewith.
5.2. FORBEARANCES BY SELLER. Seller covenants that except as
contemplated by this Agreement, Seller shall not, after the date hereof and
prior to the Closing, without the prior written consent of Purchaser:
(a) sell any assets not in the ordinary course of
business;
(b) mortgage, pledge or otherwise encumber any of its
properties or assets;
(c) make any commitments for capital expenditures or
other commitment or transaction other than in the ordinary course of
business or, in any event, in excess of $25,000;
(d) enter into or modify the terms of any existing
employment, consulting, brokerage or commission agreement or
arrangement with any Affiliate thereof, or other than in the ordinary
course of business consistent with past practice with any other Person;
(e) take any action, or fail to take any action, the
result of which can reasonably be expected to be a termination of or
material default under any Scheduled Contract or any Vehicle Lease;
(f) materially amend, modify or terminate, or agree to
materially amend, modify or terminate any Scheduled Contract or any
Vehicle Lease;
(g) fail to maintain the confidential treatment or
otherwise fail to preserve any of its Proprietary Rights;
(h) enter into any agreement to do any of the things
described in clauses (a) through (g) above.
-------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT - PAGE 18
5.3. NO SOLICITATION. Each of Shareholder and Seller covenant and
agree that they will not, and will not permit any of their respective
Affiliates, agents or representatives (including, without limitation, investment
bankers, attorneys and accountants) to, directly or indirectly (a) solicit,
initiate or encourage submission of proposals or offers by, or (b) furnish any
information with respect to or otherwise cooperate in any way with, or
participate in any discussions or negotiations with, any Person with respect to
any proposal regarding the acquisition or purchase of all or a material portion
of the Assets of, or any equity interest in Seller or any business combination
with Seller.
5.4. INVESTIGATION OF BUSINESS AND PROPERTIES. Purchaser may make
or cause to be made such investigation of the Business and Assets of Seller and
of its financial and legal condition as appropriate or advisable to familiarize
itself therewith. Seller agrees to furnish Purchaser and its employees,
officers, agents, investment bankers, accountants, counsel and other
representatives with all financial, operating and other data and information
concerning Seller and commitments of Seller as Purchaser shall from time to time
reasonably request and will afford Purchaser and its employees, officers,
accountants, attorneys, agents, investment bankers and other authorized
representatives access to Seller's offices (including access during normal
business hours) to review such documents and their books and records and will be
given opportunity to ask questions of, and receive answers from, representatives
of Seller with respect to such matters. No investigations by Purchaser or its
employees, representatives or agents shall reduce or otherwise affect the
obligation or liability of Seller with respect to any representations,
warranties, covenants or agreements made herein or in an exhibit, schedule or
other certificate, instrument, agreement or document (including the Disclosure
Schedule), executed or delivered in connection with this Agreement.
5.5. CONFIDENTIALITY. Each party hereto agrees with respect to all
technical, commercial and other information that is furnished or disclosed by
the other parties, including, but not limited to, information regarding such
party's (and its Affiliates') organization, personnel, business activities,
customers, policies, assets, finances, costs, sales, revenues, technology,
rights, obligations, liabilities and strategies (the "INFORMATION"), that (a)
such Information is confidential and/or proprietary to the furnishing/disclosing
party and entitled to and shall receive treatment as such by the receiving
party; (b) the receiving party will hold in confidence and not disclose or use
(except in respect of the Transactions) any such Information, treating such
Information with the same degree of care and confidentiality as it accords its
own confidential and proprietary information; PROVIDED, HOWEVER, that the
receiving party shall not have any restrictive obligation with respect to any
Information that (i) is contained in a printed publication available to the
general public, (ii) is or becomes publicly known through no wrongful act or
omission of the receiving party, or (iii) is known by the receiving party
without any proprietary restrictions by the furnishing/disclosing party at the
time of receipt of such Information; and (c) all such Information furnished to a
party by another, unless otherwise specified in writing, shall remain the
property of the furnishing/disclosing party unless acquired as an Asset in
accordance herewith and, in the event this Agreement is terminated, shall be
returned to it, together with any and all copies made thereof, upon request for
such return by it (except for documents submitted to a Governmental Body with
the consent of the furnishing/disclosing party or upon subpoena and that cannot
be retrieved with reasonable effort), and each party shall confirm in writing to
the others compliance with any such request. Each party hereto acknowledges that
the remedy at law for any breach by a party of its obligations under this
Section is inadequate and that the other parties shall be entitled to equitable
remedies, including injunctive relief, in the event of breach by any other
party.
5.6. AGREEMENT TO CONSUMMATE. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use all reasonable efforts
to do all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective, as soon as reasonably practicable,
the Transactions contemplated by the Operative Documents, including, but not
limited to, the obtaining of all consents, authorizations, orders and approvals
of any Governmental Body required in connection therewith and initiating or
defending any legal action that is necessary or appropriate to permit the
Transactions to be consummated. At any time after the Closing Date, if any
further action is necessary, proper or advisable to carry out the purposes of
this Agreement, then, as soon as is reasonably practicable, each party to this
Agreement shall take, or cause its proper officers to take, such action. Each of
the parties hereto further agree that it will cooperate with the other after the
consummation of the Transactions for the purpose of providing Purchaser with the
information and access to information necessary to ensure Purchaser with a
reasonably smooth transition into the ownership of the Business. No party to
this Agreement shall take or cause to be taken any action that would cause the
representations or warranties expressed herein to be untrue or incorrect on the
Closing Date.
-------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT - PAGE 19
5.7. APPROVAL OF THIRD PARTIES. As soon as practicable after the
execution of this Agreement, Seller will use its best efforts to obtain all
necessary approvals and consents of all third parties required on the part of
Seller for the consummation of the Transactions (the "THIRD PARTY CONSENTS").
Purchaser will reasonably cooperate with Seller in securing any necessary
consents from, or in making any filings with or giving any notice to any third
parties necessary for Seller to comply with this SECTION 5.7. Notwithstanding
any other provision of this Agreement, to the extent that the assignment by
Seller of any Asset to be assigned hereunder shall require the consent or
approval of another party thereto, the consummation of the Transactions shall
not constitute an assignment or attempt at an assignment thereof if such
assignment or attempted assignment would constitute a breach thereof. If any
Third Party Consent with respect to any one or more Asset is not obtained at or
prior to Closing, each party hereto agrees to take whatever action may be
necessary to provide Purchaser with the uninhibited benefits of such Asset,
subject to the assumption by Purchaser of Seller's obligations thereunder.
5.8. AGREEMENT REGARDING BROKERS. Each party agrees that it will
pay or dispute, and hold the other party harmless from, any claims of brokers or
others for finder's or brokerage fees asserted as a result of representations by
such party to such brokers or others, regardless of whether the existence of
such brokers or others are disclosed herein.
5.9. NOTICE. Seller shall promptly give notice to Purchaser upon
becoming aware of the occurrence or failure to occur, or the impending or
threatened occurrence or failure to occur, of any event that would cause or
constitute (or could reasonably be deemed to cause or constitute), any of their
representations or warranties being or becoming untrue.
5.10. ANNOUNCEMENTS. The parties agree to consult with each other
prior to making any public announcement or other public disclosure concerning
the Transactions contemplated by this Agreement. Except as otherwise required by
law or regulations (including, without limitation, those laws and regulations
promulgated by or for the Securities and Exchange Commission), neither party may
make a public announcement regarding the Transactions contemplated by this
Agreement without the prior written consent of the other party.
5.11. INFORMATION FOR TAX RETURNS. Seller and Purchaser each agree
to cooperate with the other after the Closing by providing the other, without
any additional consideration, promptly upon request, such records and other
information regarding the Assets and/or the Business as may reasonably be
requested from time to time by Purchaser in connection with the preparation or
audit of its federal, state and local income and other Tax Returns, and audits,
disputes, refund claims or litigation relating thereto. In such connection, each
of Seller and Purchaser will afford the other's representatives, including
independent tax advisers and others, access to books and records or relating to
the Assets.
5.12. PAYMENT OF LIABILITIES, DEFERRAL OF DIVIDENDS. Following the
Closing, Seller shall promptly pay, satisfy or otherwise provide for all claims
or liabilities relating to or arising from the Assets or the Business, other
than the Assumed Obligations, including, but not limited to, any liability,
including contingent liabilities, arising from or with respect to any Plan. The
provisions of this SECTION 5.12 shall not be deemed to relieve Seller of any
obligations under SECTION 8 hereof or to constitute a waiver by Purchaser or any
Purchaser Indemnitee of any of its rights thereunder.
5.13. EMPLOYEES. Each of the parties hereto agrees that the success
of Seller has been dependent upon the quality and commitment of its employees
generally, and to the special skills of Seller's employees. Following the date
hereof and through the Closing Date, Seller will provide reasonable assistance
and advice to Purchaser in connection with its efforts to interview and offer
employment to Seller's employees. Any of Seller's employees becoming employees
of Purchaser on the Closing Date or immediately thereafter shall, with respect
to each employee benefit plan available to employees of Purchaser generally, be
entitled to past service credit equal to such employee's respective service with
Seller. Except as provided with respect to such employee benefit plans,
employees of Seller hired by Purchaser shall be deemed "newly hired" and except
with regard to the Assumed Liabilities, Purchaser shall not be liable with
respect to any matter relating to such persons' employment by Seller prior to
the Closing Date.
-------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT - PAGE 20
5.14. CHANGE OF SELLER'S NAME. In order to prevent confusion between
Seller and the Business to be operated by Purchaser under such name, immediately
following the Closing, Seller shall cease to use the name "Dial Thru
International, Inc." or any similar name and within ten (10) days thereafter
shall file with the office of the Secretary of State of the State of California
all documents necessary to change the name of Seller to a name reasonably
satisfactory to Purchaser. Seller shall promptly provide reasonable evidence to
Purchaser indicating the effectiveness of its name change.
5.15. NOTICE TO CUSTOMERS. At Purchaser's request, Seller and
Purchaser shall send a joint notice on Seller's letterhead to the customers of
Seller informing them of the consummation of the Transactions and such other
matters as Purchaser shall reasonably require.
5.16. MAIL. Purchaser and Seller each agree to promptly deliver to
the other the original of any mail or other communication received by such party
after the Closing Date which should properly be the property of the other.
Purchaser and Seller each further agree from and after the Closing Date to
promptly deliver to the other any monies, checks or other instruments of payment
to which the other party is entitled hereunder, together with a reasonable
accounting therefor.
5.17. ACCESS. After the Closing, Purchaser shall provide access to
Seller during normal business hours to its books and records and personnel
requested by Seller in connection with any dispute between Seller and any Person
arising out of this Agreement or the transactions contemplated hereby.
5.18. NON-COMPETITION. Seller and Shareholder agree that if the
transactions contemplated by this Agreement are consummated, Seller and
Shareholder shall not, for a period of five (5) after the Closing Date, directly
or indirectly, alone or with others, Engage in any Competing Business, other
than on behalf of an for the benefit of Purchaser or Parent. For purposes of
this SECTION 5.18, (a) "ENGAGE" means that Seller or Shareholder is or becomes,
directly or indirectly, an owner or operator, a shareholder, lender, borrower,
consultant, partner, joint venturer or other participant in any other capacity
in any business enterprise; provided, however, that Seller or Shareholder may
own up to five percent (5%) of the voting securities of any company engaged in a
Competing Business solely as a passive investor; and (b) a "COMPETING BUSINESS"
means any business enterprise which is engaged in the Business. Seller and
Shareholder acknowledge and agree that the Business is currently conducted
throughout the world and that the restrictions imposed by this restrictive
covenant shall apply throughout the world.
5.19. CAPITAL COMMITMENTS. During the period following the Closing
and expiring upon the earlier of the payment of the Contingent Payments to
Seller or October 31, 2001, Purchaser shall make available to the Business
Seller capital resources of not less than (a) fifty percent (50%) of accumulated
EBIT from the Business minus (b) by any Deficiency Amount, for the purpose of
acquiring approved capital assets or making approved capital expenditures for
the Business. Any allocations of capital reserves of Purchaser or Parent in
excess of the minimum agreed amounts will be determined by Purchaser or Parent
consistent with Parent's capital budgeting procedures for Parent's other direct
or indirect business operations.
6. CONDITIONS PRECEDENT TO CLOSING
6.1. GENERAL CONDITIONS. Consummation of the Transactions shall be
subject to the fulfillment at the Closing Date of each of the following
conditions:
(a) NO INJUNCTION. No court having jurisdiction shall
have issued, to the knowledge of Purchaser or Seller, an injunction
preventing the consummation of the Transactions that shall not have
been stayed or dissolved at the Closing Date.
(b) PROCEEDINGS. All proceedings taken or to be taken in
connection with the Transactions, and all documents incident thereto
shall be reasonably satisfactory in form and substance to the parties
and their counsel, and the parties and their counsel shall have
received all such counterpart originals or certified or other copies of
such documents as the parties or their counsel may reasonably request.
-------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT - PAGE 21
6.2. CONDITIONS TO CLOSING IN FAVOR OF SELLER. Consummation of the
Transactions shall be subject to the fulfillment, to the reasonable satisfaction
of Seller, or its written waiver, at or before the Closing Date, of each of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES OF PURCHASER AND
PARENT. The representations, warranties and statements of Purchaser and
Parent contained in this Agreement and the exhibits hereto shall be
complete and accurate as of the date of this Agreement and shall also
be complete and accurate at and as of the Closing Date, except for
changes contemplated by this Agreement, as if made on the Closing Date;
and Purchaser and Parent shall have performed or complied with all
agreements and covenants required by this Agreement to be performed or
complied with by it at or prior to the Closing Date.
(b) CLOSING CERTIFICATE. Purchaser and Parent shall have
delivered to Seller a Closing Certificate, dated the Closing Date, of
an executive officer of Purchaser and Parent to the effect that (a) he
or she is familiar with the provisions of this Agreement and (b) the
conditions specified in SECTION 6.1 and in paragraph (a) of this
SECTION 6.2 have been satisfied in all material respects.
(c) OFFICERS' CERTIFICATE. Purchaser and Parent shall
have delivered to Seller an Officers' Certificate, dated the Closing
Date, of the President and Secretary of Purchaser and Parent certifying
to (a) the due adoption by the Board of Directors of the attached
resolutions approving the execution and delivery of this Agreement, and
the consummation of the Transactions and (b) the incumbency of the
President, Secretary and other officers of Purchaser and Parent
executing any of the Operative Documents.
(d) GOVERNMENTAL CONSENTS, AUTHORIZATIONS, ETC. All
material consents, authorizations, orders or approvals of, and filings
or registrations with, and any permits, licenses or other
authorizations required by, any applicable Governmental Body that are
required for, or in connection with, the execution and delivery of this
Agreement by Purchaser and the consummation by Purchaser of the
Transactions shall have been obtained or made.
(e) ASSUMPTION AGREEMENT. Purchaser shall have delivered
to Seller an Assumption Agreement, in the form of EXHIBIT A hereto,
pursuant to which Purchaser shall evidence its agreement to assume and
discharge the Assumed Obligations.
(f) EMPLOYMENT AGREEMENT. Purchaser shall have executed a
counterpart of the Employment Agreement.
(g) INITIAL AMOUNT. Purchaser shall have delivered to
Seller a stock certificate representing the Initial Amount bearing the
legend set forth in EXHIBIT E.
6.3. CONDITIONS TO CLOSING IN FAVOR OF PURCHASER. Consummation of
the Transactions shall be subject to the fulfillment, to the reasonable
satisfaction of Purchaser, or its written waiver, at or before the Closing Date
of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES OF SELLER AND
SHAREHOLDER. The representations, warranties and statements of Seller
and Shareholder contained in this Agreement, the exhibits hereto and
the Disclosure Schedule shall be complete and accurate as of the date
of this Agreement and shall also be complete and accurate at and as of
the Closing Date, except for changes contemplated by this Agreement, as
if made at and as of the Closing Date; and Seller shall have performed
or complied with all agreements and covenants required by this
Agreement to be performed or complied with by them at or prior to the
Closing Date.
(b) CLOSING CERTIFICATE. Seller and Shareholder shall
have delivered to Purchaser a Closing Certificate, dated the Closing
Date, executed by Shareholder and the President of Seller to the effect
that (a) he
-------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT - PAGE 22
is familiar with the provisions of this Agreement and (b) the
conditions specified in SECTION 6.1 and in paragraph (a) of this
SECTION 6.3 have been satisfied in all material respects.
(c) OFFICERS' CERTIFICATE. Seller shall have delivered to
Purchaser an Officers' Certificate, dated the Closing Date, of the
President and Secretary of Seller certifying to (a) the Articles of
Incorporation of Seller (as certified to by an appropriate officer of
the State issuing same), (b) the Bylaws of Seller, (c) the due adoption
by the Board of Directors and shareholders of Seller of the attached
resolutions approving the execution and delivery of this Agreement, and
the consummation of the Transactions and (d) the incumbency of the
President, Secretary and other officers of Seller executing any of the
Operative Documents.
(d) GOVERNMENTAL CONSENTS, AUTHORIZATIONS, ETC. All
material consents, authorizations, orders or approvals of, and filings
or registrations with, and any permits, licenses or other
authorizations required by, any applicable Governmental Body that are
required for or in connection with, the execution and delivery of this
Agreement by Seller and the consummation by Seller of the Transactions
shall have been obtained or made.
(e) EMPLOYMENT AGREEMENT. Shareholder shall have executed
a counterpart of the Employment Agreement.
(f) LEGISLATION. No law or legally binding regulation
shall have been enacted that does or would prohibit, restrict or delay
consummation of the Transactions or any of the conditions to the
consummation of the Transactions or that does or would have a Material
Adverse Effect on Seller.
(g) LITIGATION. There shall be no effective Order of any
nature (including any temporary restraining order) issued by a court or
Governmental Body of competent jurisdiction restraining or prohibiting
consummation or altering the terms of any of the Transactions, or
actions seeking damages based upon the foregoing which Purchaser
reasonably deems material. Seller shall not have become subject to any
litigation, which, if adversely determined, could, in the opinion of
Purchaser, have a Material Adverse Effect on the Business or Assets.
(h) NO ADVERSE CHANGE. There shall have occurred no
adverse change (whether or not covered by insurance) in the Assets or
Business since the Most Recent Fiscal Month End.
(i) DELIVERY OF DOCUMENTS/ACCEPTANCE OF SCHEDULES. Seller
has timely delivered (i) any and all amendments and/or supplements to
the Disclosure Schedules, (ii) the Xxxx of Sale, and (iii) all other
documents, instruments, schedules and financial statements required
hereunder to Purchaser. The Disclosure Schedules, as amended and
supplemented, shall be acceptable in form and substance to Purchaser,
in its absolute discretion.
(j) THIRD PARTY CONSENTS. Seller shall have delivered
copies of all Third Party Consents and all necessary action shall have
been taken to assign to Purchaser the Scheduled Contracts, the Vehicle
Leases and any other material agreements between Seller and its
suppliers, customers and third parties.
(k) OTHER MATTERS. Seller shall have delivered to
Purchaser, in form and substance reasonably satisfactory to counsel for
Purchaser, such certificates and other evidence as Purchaser may
reasonably request as to the satisfaction of the conditions contained
in this SECTION 6.3.
7. CLOSING AND TERMINATION
7.1. CLOSING DATE. Subject to the right of Purchaser and Seller to
terminate this Agreement pursuant to SECTION 7.2 hereof, the closing for the
consummation of the Transactions contemplated by this Agreement (the "CLOSING")
shall, unless another date or place is agreed to in writing by Seller and
Purchaser, take place at the Dallas, Texas offices of Xxxxx & Xxxxxx LLP at
10:00 a.m. on November 1, 1999 (the "CLOSING DATE"), or such other place
-------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT - PAGE 23
and date as the parties may agree upon in writing. Purchaser shall, at its
option, have the right, but not the obligation to extend the Closing Date by
not more than forty-five (45) days by giving written notice thereof to Seller
at least three (3) business days prior to the Closing Date referred to in the
preceding sentence. If Purchaser exercises its option hereunder to extend the
Closing Date, the term Closing Date as used herein shall mean and refer to
such Closing Date as extended.
7.2. TERMINATION. This Agreement may be terminated at any time
prior to the Closing Date:
(a) by mutual consent of the Boards of Directors of
Purchaser and Seller;
(b) by Seller if any representation or warranty of
Purchaser, or Purchaser if any representation or warranty of Seller,
contained herein shall have been incorrect or breached in any material
respect, as to which notice shall have been given to the breaching
party, and shall not have been cured or otherwise resolved to the
reasonable satisfaction of the other party on or before the Closing
Date, or by either Purchaser or Seller if any condition to the
consummation of the Transactions contemplated hereunder that must be
fulfilled to its satisfaction has (in the good faith judgment of a
majority of the appropriate Board of Directors of such Person) become
impractical of fulfillment;
(c) by either Purchaser or Seller if any permanent
injunction or other order of a court or other competent authority
preventing the consummation of the Transactions shall have become final
and non-appealable; or
(d) by either Purchaser or Seller if the Closing has not
occurred by December 15, 1999; provided, however, that such date may be
extended by written agreement among the parties and provided, further,
that no party shall be permitted to terminate hereunder if such party
is in violation of this Agreement.
7.3. EFFECT OF TERMINATION. In the event of the termination of this
Agreement as provided herein, this Agreement shall become wholly void and have
no further force and effect except as hereinafter expressly provided; and there
shall be no liability on the part of Seller or Purchaser (or their respective
officers of directors) except to pay the fees and expenses as apportioned in
SECTION 9.2 and except as otherwise provided herein. Nothing contained herein
shall relieve any party from liability for its breach of this Agreement.
7.4. EXTENSION; WAIVER. At any time prior to the Closing Date, any
party hereto that is entitled to the benefits hereof (with respect to any such
corporate party by action taken by its Board of Directors or a duly authorized
officer), may (a) extend the time for the performance of any of the obligations
or other acts of any of the other parties hereto, (b) in whole or in part, waive
any inaccuracy in the representations and warranties of any of the other parties
hereto contained herein or in any exhibit or schedule hereto or in any document
delivered pursuant hereto, and (c) in whole or in part, waive compliance with
any of the agreements of any of the other parties hereto or conditions contained
herein. Any agreement on the part of any party hereto to any such extension or
waiver shall be valid as set forth in an instrument in writing signed and
delivered on behalf of such party.
8. SURVIVAL AND INDEMNIFICATION
8.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Parent, Purchaser, Shareholder and Seller
shall survive the Closing for a period of two years from the Closing Date. All
agreements contained in this Agreement shall survive the Closing without
limitation.
8.2. INDEMNITY.
(a) GENERAL. Seller and Shareholder, jointly and
severally, agree to indemnify and hold Purchaser, Parent, their
respective direct and indirect subsidiary corporations and each of
their respective officers, directors, agents, attorneys and accountants
("PURCHASER INDEMNITEES") harmless from any and all damages, losses
(which shall include any diminution in value), liabilities (joint or
several), payments,
-------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT - PAGE 24
obligations, penalties, claims, litigation, demands, defenses,
judgments, suits, proceedings, costs, disbursements or expenses
(including without limitation, reasonable fees, disbursements and
expenses of attorneys, accountants and other professional advisors
and of expert witnesses and costs of investigation and preparation)
of any kind or nature whatsoever (collectively "DAMAGES"), directly
or indirectly resulting from, relating to or arising out of:
(i) any breach or nonperformance (partial or
total) of or inaccuracy in any representation or warranty or
covenant or agreement of any of Seller or Shareholder
contained in any Operative Document;
(ii) any liability or obligation of Seller or any
liability or obligation arising out of Seller's business
operation other than the Assumed Obligations;
(iii) any losses associated with or costs of
defending against any claims which may be made against any
Purchaser Indemnitee by any Person claiming violations by
Seller of any local, state, or federal laws relating to the
employment relationship, including, but not limited to, wages,
hours, concerted activity, nondiscrimination, occupational
health and safety and the payment and withholding of Taxes;
(iv) Seller's failure to comply with the laws of
any jurisdiction with respect to the bulk sales laws that may
be applicable to the sale of the Assets to Purchaser as
contemplated hereby;
(v) the Transaction Expenses incurred by Seller;
and
(vi) the amount by which the Payable Amounts
exceed the Receivable Amounts pursuant to SECTION 2.6 (such
positive excess, if any, being referred to as the "DEFICIENCY
AMOUNT");
provided that no Purchaser Indemnitee may make any claims hereunder
until the aggregate of all such claims exceeds $25,000.
(b) TAXES. Seller and Shareholder shall retain joint
liability, and shall indemnify Purchaser, for the payment of any Tax
liabilities of Seller with respect to its assets and the conduct of its
business or the consummation of the transactions contemplated by this
Agreement.
(c) NO LIMITATION. The foregoing agreement to indemnify
shall be in addition to any liability any Indemnitor (as hereinafter
defined) may otherwise have, including liabilities arising under this
Agreement.
8.3. NO THIRD PARTY BENEFICIARIES. The foregoing indemnification is
given solely for the purpose of protecting Purchaser Indemnitees and shall not
be deemed extended to, or interpreted in a manner to confer any benefit, right
or cause of action upon, any other Person.
8.4. INDEMNIFICATION NOTICE. If a Purchaser Indemnitee intends to
exercise its right to indemnification provided in this Article 8, such Purchaser
Indemnitee shall provide the party or parties from whom the indemnification will
be sought (the "INDEMNITOR") at least fifteen (15) days prior written notice
(the "INDEMNIFICATION NOTICE") of such Purchaser Indemnitee's intention to do so
and the facts or circumstances giving rise to the claim ("INDEMNIFICATION
CLAIM"); provided that any Indemnification Notice must be delivered (if at all)
to Seller or Shareholder within two (2) years following the Closing Date.
Nothing contained herein shall preclude Purchaser Indemnitee from taking any
actions deemed reasonably necessary or appropriate in response to any third
party claims during such interim period. An Indemnification Claim may, at the
option of Purchaser Indemnitee, be asserted as soon as any situation, event or
occurrence has been noticed by Purchaser Indemnitee regardless whether actual
harm has been suffered or out-of-pocket expenses incurred. During such fifteen
(15) day period, the Indemnitor shall be entitled to cure the defect or
situation giving rise to the Indemnification Claim to the satisfaction of
Purchaser Indemnitee. If the Indemnitor is unwilling or unable to cure the
defect giving rise to the Indemnification Claim during such fifteen (15) period,
-------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT - PAGE 25
Purchaser Indemnitee may, on the sixteenth (16th) day after the Indemnification
Notice, seek indemnification as provided in this Article 8.
8.5. PAYMENT OF INDEMNITY CLAIMS BY SELLER OR SHAREHOLDER. If
Seller or Shareholder is responsible for any claims for indemnification brought
by Purchaser or Parent pursuant to this Article 8, then Seller or Shareholder
(as applicable) may satisfy the indemnity obligations by paying the amount of
the indemnity claim either (i) in cash, (ii) shares of Parent Common Stock
having a Closing Value (as defined below) equal to the amount of such claims, or
(iii) any combination thereof. As used herein, the term "CLOSING VALUE" means
the average closing price of the Parent Common Stock on the OTC Bulletin Board
or other exchange or quotation system on which the Parent Common Stock is
traded, listed or quoted over the ten (10) trading days preceding (but not
including) the Closing Date.
8.6. INDEMNIFICATION BY PURCHASER. Purchaser shall indemnify and
hold harmless Seller, and shall reimburse Seller for, any Damages arising from
or in connection with (a) any inaccuracy in any of the representations and
warranties of Purchaser in this Agreement or in any certificate delivered by
Purchaser pursuant to this Agreement, or any actions, omissions or state of
facts inconsistent with any such representation or warranty, (b) any failure by
Purchaser to perform or comply with any agreement in this Agreement, (c) any
liability arising from Purchaser's conduct of the Business after the Closing, or
(d) any claim by any Person for brokerage or finder's fees or commissions or
similar payments based upon any agreement or understanding alleged to have been
made by such Person with Purchaser (or any Person acting on its behalf) in
connection with any of the Transactions; provided that any claim for
indemnification against Purchaser hereunder shall be made (if at all) within two
(2) years following the Closing Date.
8.7. PROCEDURE FOR INDEMNIFICATION. Promptly after receipt by an
indemnified party under Article 8 of notice of the commencement of any action,
such indemnified party shall, if a claim in respect thereof is to be made
against an indemnifying party under this Article 8, give notice to the
indemnifying party of the commencement thereof, but the failure so to notify the
indemnifying party shall not relieve it of any liability that it may have to any
indemnified party except to the extent the indemnifying party demonstrates that
the defense of such action is prejudiced thereby. In case any such action shall
be brought against an indemnified party and it shall give notice to the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and to the extent that it shall wish, to assume
the defense thereof with counsel satisfactory to such indemnified party. After
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party under such Section for any fees of other counsel or any
other expenses, in each case subsequently incurred by such indemnified party in
connection with the defense thereof, other than reasonable costs of
investigation. If an indemnifying party assumes the defense of such an action,
(a) no compromise or settlement thereof may be effected by the indemnifying
party without the indemnified party's consent (which shall not be unreasonably
withheld) unless (i) there is no finding or admission of any violation of law or
any violation of the rights of any Person and no effect on any other claims that
may be made against the indemnified party and (ii) the sole relief provided is
monetary damages that are paid in full by the indemnifying party and (b) the
indemnifying party shall have no liability with respect to any compromise or
settlement thereof effected without its consent (which shall not be unreasonably
withheld). If notice is given to an indemnifying party of the commencement of
any action and it does not, within ten days after the indemnified party's notice
is given, give notice to the indemnified party of its election to assume the
defense thereof, the indemnifying party shall be bound by any determination made
in such action or any compromise or settlement thereof effected by the
indemnified party. Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that an action
may adversely affect it or its affiliates other than as a result of monetary
damages, such indemnified party may, by notice to the indemnifying party, assume
the exclusive right to defend, compromise or settle such action, but the
indemnifying party shall not be bound by any determination of an action so
defended or any compromise or settlement thereof effected without its consent
(which shall not be unreasonably withheld).
9. GENERAL PROVISIONS AND OTHER AGREEMENTS
9.1. NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed given if and when delivered personally,
transmitted by telecopy (receipt confirmed) or sent by a recognized next
-------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT - PAGE 26
business day courier to the following persons at the following addresses (or at
such other address for a party as shall be specified by like notice):
(a) If to Purchaser or Parent:
c/o RDST, Inc.
0000 Xxxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Chief Executive Officer
Phone: 000-000-0000 x.000
Fax: 000-000-0000
with a copy to:
Xxxxx & Xxxxxx LLP
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Phone: 000-000-0000
Fax: 000-000-0000
(b) If to Seller or Shareholder:
Dial-Thru International Corporation
000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
Phone: 000-000-0000
Fax: 000-000-0000
with a copy to:
Bay Venture Counsel, LLP
Lake Xxxxxxx Plaza Building
0000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxx, Esq.
Phone: 000-000-0000
Fax: 000-000-0000
9.2. FEES AND EXPENSES. Seller and Purchaser shall each pay all of
its own fees, costs and expenses (including without limitation, those of
accountants and appraisers) incurred in connection with or related to the
preparation, negotiation, execution, delivery, satisfaction, compliance and
consummation of this Agreement and the Transactions contemplated hereby and the
closing conditions hereunder. Seller shall pay any Tax Obligations as a result
of the consummation of the transactions contemplated by this Agreement.
9.3. INTERPRETATION. The headings contained in this Agreement are
for reference purposes only and shall not affect the meaning or interpretation
of this Agreement. Terms such as "herein," "hereof," "hereinafter" refer to this
Agreement as a whole and not to the particular sentence or paragraph where they
appear, unless the context otherwise requires. Terms used in the plural include
the singular, and vice versa, unless the context otherwise requires.
9.4. COUNTERPARTS. This Agreement may be executed by facsimile in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
-------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT - PAGE 27
9.5. ASSIGNMENT. Neither this Agreement nor the rights and
obligations hereunder may be as signed by either party without the prior written
consent of the other; provided that Parent or Purchaser may assign its rights
and obligations under this Agreement without the consent of Seller or
Shareholder to any entity that acquires substantially all of the assets or
business of Parent or Purchaser (whether through purchase, merger or otherwise);
provided further that Purchaser may assign its rights and obligations under this
Agreement without the consent of Seller or Shareholder prior to the Closing Date
to a wholly-owned subsidiary of Parent formed solely to acquire the Assets and
assume the Assumed Obligations so long as such assignment does not adversely
affect the parties ability to effect a tax-free reorganization under Section
368(a)(l)(c) of the Code.
9.6. MISCELLANEOUS. This Agreement (a) constitutes the entire
agreement and supersedes all other prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof; (b) is not intended to and shall not confer upon any other person
any rights or remedies hereunder or otherwise with respect to the subject matter
hereof, except for rights that may expressly arise as a consequence of the
Transactions; (c) has been drafted by all of the parties to this Agreement and
should not be construed against any of the parties hereto; and (d) shall be
governed in all respects, including validity, interpretation and effect by the
substantive laws of the State of Texas without regard to conflict of law
provisions.
[SIGNATURE PAGE FOLLOWS]
-------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT - PAGE 28
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers.
/s/ Xxxx Xxxxxxx
------------------------------------------
XXXX XXXXXXX
DIAL-THRU INTERNATIONAL CORPORATION,
a California Corporation
By: /s/ Xxxx Xxxxxxx
---------------------------------------
Xxxx Xxxxxxx, President
DIAL-THRU INTERNATIONAL CORPORATION,
a Delaware Corporation
By: /s/ Xxxxx X. Xxxxxx
---------------------------------------
Xxxxx X. Xxxxxx,
Chairman
XXXXX TELECOM & TECHNOLOGIES, INC.
By: /s/ Xxxxx X. Xxxxxx
---------------------------------------
Xxxxx X. Xxxxxx,
President and Chief Executive Officer
-------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT - PAGE 29
TABLE OF CONTENTS
ARTICLE 1. DEFINITIONS ............................................................................... 1
Section 1.1 General Definitions............................................................... 1
Section 1.2 Accounting Terms and Definitions.................................................. 5
ARTICLE 2. SALE OF ASSETS; ASSUMPTION OF CERTAIN LIABILITIES.......................................... 5
Section 2.1 Agreement to Purchase and Sell.................................................... 5
Section 2.2 Excluded Assets................................................................... 7
Section 2.3 Purchase Price.................................................................... 7
Section 2.4 Contingent Payments............................................................... 7
Section 2.5 Assumption of Liabilities......................................................... 8
Section 2.6 Certain Adjustments............................................................... 10
Section 2.7 Further Assurances................................................................ 10
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF
SELLER AND SHAREHOLDER.................................................................. 10
Section 3.1 Organization; Qualification....................................................... 10
Section 3.2 Authority Relative to this Agreement.............................................. 10
Section 3.3 Other Businesses; Affiliate Transactions.......................................... 10
Section 3.4 Government Consents and Approvals; Permits........................................ 10
Section 3.5 No Violations..................................................................... 11
Section 3.6 Financial Statements, Etc......................................................... 11
Section 3.7 Title to and Condition of Assets and Property..................................... 12
Section 3.8 Reserved.......................................................................... 12
Section 3.9 Investigation or Litigation; Compliance with Laws................................. 12
Section 3.10 Absence of Changes................................................................ 12
Section 3.11 Labor and Employee Matters........................................................ 13
Section 3.12 Taxes............................................................................. 13
Section 3.13 Proprietary Rights................................................................ 13
Section 3.14 No Brokers........................................................................ 14
Section 3.15 Accounts Receivables.............................................................. 14
Section 3.16 Accounts Payable and Current Liabilities.......................................... 14
Section 3.17 Insurance......................................................................... 14
Section 3.18 Product and Service Warranties.................................................... 14
Section 3.19 Contracts; Oral Commitments; Defaults............................................. 14
Section 3.20 Investments in Competitors........................................................ 14
Section 3.21 Solvency.......................................................................... 14
Section 3.22 Reserved.......................................................................... 15
Section 3.23 Customers......................................................................... 15
Section 3.24 Suppliers......................................................................... 15
Section 3.25 Pension Matters................................................................... 15
Section 3.26 Bank Accounts..................................................................... 15
Section 3.27 Deposit Accounts; Prepaid Customer Revenues....................................... 15
Section 3.28 Certain Payments.................................................................. 16
Section 3.29 Dedicated Transmission Lines or Facilities........................................ 16
Section 3.30 Disclosure........................................................................ 16
ARTICLE 4. REPRESENTATIONS AND WARRANTIES
OF PURCHASER AND PARENT................................................................. 16
Section 4.1 Organization...................................................................... 16
Section 4.2 Authority Relative to this Agreement.............................................. 16
Section 4.3 Consents and Approvals............................................................ 16
Section 4.4 No Brokers........................................................................ 17
-------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT - PAGE 30
Section 4.5 Parent; Financial Statements...................................................... 17
Section 4.6 Parent Shares..................................................................... 17
ARTICLE 5. ADDITIONAL AGREEMENTS...................................................................... 17
Section 5.1 Conduct of Business of Seller..................................................... 17
Section 5.2 Forbearances by Seller............................................................ 17
Section 5.3 No Solicitation................................................................... 18
Section 5.4 Investigation of Business and Properties.......................................... 18
Section 5.5 Confidentiality................................................................... 18
Section 5.6 Agreement to Consummate........................................................... 18
Section 5.7 Approval of Third Parties......................................................... 19
Section 5.8 Agreement Regarding Brokers....................................................... 19
Section 5.9 Notice............................................................................ 19
Section 5.10 Announcements..................................................................... 19
Section 5.11 Information for Tax Returns....................................................... 19
Section 5.12 Payment of Liabilities, Deferral of Dividends..................................... 19
Section 5.13 Employees......................................................................... 19
Section 5.14 Change of Seller's Name........................................................... 20
Section 5.15 Notice to Customers............................................................... 20
Section 5.16 Mail.............................................................................. 20
Section 5.17 Access............................................................................ 20
Section 5.18 Non-Competition................................................................... 20
Section 5.19 Capital Commitments............................................................... 20
ARTICLE 6. CONDITIONS PRECEDENT TO CLOSING............................................................ 20
Section 6.1 General Conditions................................................................ 20
Section 6.2 Conditions to Closing in Favor of Seller.......................................... 21
Section 6.3 Conditions to Closing in Favor of Purchaser....................................... 21
ARTICLE 7. CLOSING AND TERMINATION.................................................................... 22
Section 7.1 Closing Date...................................................................... 22
Section 7.2 Termination....................................................................... 23
Section 7.3 Effect of Termination............................................................. 23
Section 7.4 Extension; Waiver................................................................. 23
ARTICLE 8. SURVIVAL AND INDEMNIFICATION............................................................... 23
Section 8.1 Survival of Representations and Warranties........................................ 23
Section 8.2 Indemnity......................................................................... 23
Section 8.3 No Third Party Beneficiaries...................................................... 24
Section 8.4 Indemnification Notice............................................................ 24
Section 8.5 Payment of Indemnity Claims by Seller or Shareholder.............................. 25
Section 8.6 Indemnification by Purchaser...................................................... 25
Section 8.7 Procedure for Indemnification..................................................... 25
ARTICLE 9. GENERAL PROVISIONS AND OTHER AGREEMENTS.................................................... 25
Section 9.1 Notices........................................................................... 25
Section 9.2 Fees and Expenses................................................................. 26
Section 9.3 Interpretation.................................................................... 26
Section 9.4 Counterparts...................................................................... 26
Section 9.5 Assignment........................................................................ 26
Section 9.6 Miscellaneous..................................................................... 27
-------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT - PAGE 31
LIST OF EXHIBITS
EXHIBIT A - Form of Assumption Agreement
EXHIBIT B - Form of Xxxx of Sale
EXHIBIT C - Form of Employment Agreement
EXHIBIT D - Purchase Price Allocation
EXHIBIT E - Legend
LIST OF SCHEDULES
2.1(a) Equipment
2.1(d) Schedule Contacts
2.1(i) Bank Accounts
3.3 Subsidiaries; Other Interests; Affiliates
3.4 Permits
3.7(a) Title to Assets
3.7(c) Year 2000 Compliance
3.9 Proceedings
3.11(a) Employees, Customers and Consultants; Description of
Employment Contracts, Commission Obligations or other
Arrangements
3.13 Proprietary Rights
3.15 Accounts Receivable as of June 30, 1999
3.16 Accounts Payable as of June 30, 1999
3.17 Insurance Policies
3.19 Material Contracts
3.20 Investments in Competitors
3.23 Customers
3.24 Suppliers
3.25 Benefit Plans
3.26 Authorized Persons on Bank Accounts
3.27 Deposit Accounts; Prepaid Customer Revenues
3.29 Dedicated Lines or Facilities
-------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT - PAGE 32
