Exhibit 10.1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made as of the 30th day of June, 2006,
by and between Farmstead Telephone Group, Inc. a Delaware corporation, with
offices at 00 Xxxxxxxx Xxxx Xxxxxx, Xxxx Xxxxxxxx, XX 00000 ("Buyer"), Xxxxx
Communications, Inc., a Delaware corporation, with offices at 00 Xxxxxx Xxxx,
Xxxx 0000, Xxxx Xxxxx, XX 00000 ("Seller"), Xxxxx Capital Corporation with
offices at 00 Xxxxxx Xxxx, Xxxx 0000, Xxxx Xxxxx, XX 00000 ("RCC") and Xx.
Xxxxx Xxxxxxx an individual with a residence at 00 Xxxxx Xxxx, Xxxxxxx, XX
00000 ("Founder").
In consideration of the mutual covenants, conditions and agreements set
forth in this Agreement and for other good and valuable consideration, the
receipt and sufficiency of which are acknowledged, the parties agree as
follows:
I. Definitions
Certain terms when used in this Agreement shall be defined as follows:
1.1 "Affiliate" shall mean, with respect to any party, any entity, that
directly or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with that party.
1.2 "Agreement" shall mean this Asset Purchase Agreement.
1.3 "Assumed Liabilities" shall mean (i) all liabilities and obligations of
Seller under each Maintenance Contract arising from and after the effective
date of the assignment of that Maintenance Contract to Buyer (ii) all
obligations and liabilities of Seller under the Lease arising from and after
the effective date of the assignment of the Lease and (iii) all obligations and
liabilities of Seller under the Vehicle Financing Agreements from and after the
effective date of the assignment of the Vehicles.
1.4 "Books and Records" shall mean all true and complete copies of all books,
records, files, data and information of Seller relating to the Purchased
Assets, including copies of all Maintenance Contracts, applicable financial and
accounting records, and applicable service histories.
1.5 "Business" shall mean Seller's business relating to the sale, installation,
maintenance and repair of Avaya and other telecommunications systems and
equipment.
1.6 "Closing" shall mean the closing of the transactions contemplated by this
Agreement.
1.7 "Closing Conditions" shall mean the conditions described in Section 2.1.
1.8 "Closing Date" shall mean the date for the Closing specified in Section
2.2.
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1.9 "Excluded Assets" shall mean all assets of the Business that are not
Purchased Assets.
1.10 "Fixed Assets" shall mean the fixed assets that are identified in Schedule
1.10.
1.11 "Lease" shall mean that certain lease dated April 28, 2006 relating to
Seller's Premises a copy of which is attached as Schedule 1.11.
1.12 "Landlord" shall mean the party from whom the Seller leases the Sellers
Premises under the Lease.
1.13 "Maintenance Contracts" shall mean those contracts relating to the
provision by Seller of post warranty maintenance and repair services to end
user customers and which are identified in Schedule 1.13.
1.14 "Monthly Maintenance Contracts" shall mean those Maintenance Contracts
under which the customer is billed by Seller and pays Seller for the applicable
maintenance and repair services in advance on a monthly basis and which are
identified as Monthly Maintenance Contracts on Schedule 1.13.
1.15 "Quarterly Maintenance Contracts" shall mean those Maintenance Contracts
under which the customer is billed Seller and prepays Seller for the applicable
maintenance and repair services in advance on a calendar quarterly basis and
which are identified as Annual Maintenance Contracts on Schedule 1.13.
1.16 "Annual Maintenance Contracts" shall mean those Maintenance Contracts
under which the customer is billed Seller and pays Seller for the applicable
maintenance and repair services in advance on an annual basis and which are
identified as Annual Maintenance Contracts on Schedule 1.13.
1.17 "Purchased Assets" shall mean the Maintenance Contracts, Vehicles, Fixed
Assets and the Lease.
1.18 "Purchase Price" shall mean the consideration for the Purchased Assets as
set forth in Section 2.6.
1.19 "Security Deposit" shall mean the security deposit posted by Seller under
the Lease.
1.20 "Seller's Maintenance Obligations" shall mean all obligations under the
Maintenance Contracts during the remaining portion of any coverage period that
continues after the Closing Date for which Seller has received a prepayment
from the customer prior to the Closing Date as indicated in Schedule 1.13.
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1.21 "Seller's Obligations" shall mean all other debts, liabilities,
commitments and other obligations of Seller, RCC and Founder, of every kind or
character, (whether accrued absolute, liquidated or unliquidated, express or
implied, or fixed or contingent, known or unknown, due or to become due) other
than the Assumed Liabilities, including without limitation, the Seller's Taxes,
Seller's Maintenance Obligations,
1.22 "Seller's Premises" shall mean the office and warehouse space at 00 Xxxxxx
Xxxx, Xxxx 0000, Xxxx Xxxxx, XX 00000.
1.23 "Vehicles" shall mean the Vehicles identified in Schedule 1.23.
1.24 "Vehicle Financing Agreements" shall mean the agreements between RCC and
its lenders concerning the purchase financing of the Vehicles and which are
identified in Schedule 1.23.
1.25 "Seller's Taxes shall mean any and all federal, state, local and other net
income, gross income, gross receipts, sales, use ad valorem, transfer,
franchise, profits, license, lease, service, withholding, payroll, employment,
excise, severance, stamp, occupation, property, customs, duties, or other fees,
taxes, assessments or similar charges of any kind or nature whatsoever, imposed
on Seller's Business by any governmental authority, together with any interest
or penalties due thereon
1.26 "Trademarks" shall mean the registered and unregistered trademarks of
Seller relating to the Maintenance Contracts.
II. Closing, Sale of Purchased Assets, and Assumption of Assumed Liabilities
2.1 Closing Conditions. The Closing is subject to and conditioned upon (i) the
Landlord having consented in writing to the assignment of the Lease to Buyer
upon terms and conditions reasonably satisfactory to Buyer; (ii) Buyer's
receipt of a written certification from the Landlord that, as of the date of
the certification there are no environmental, nuisance, hazardous substance or
other similar issues or liabilities pertaining to the Seller's Premises; and
(iii) Buyer entering into employment agreements with Xx. Xxxxx Xxxxxxx upon
terms and conditions reasonably satisfactory to Buyer. Regardless of anything
to the contrary elsewhere in this Agreement, either party freely may terminate
this Agreement immediately upon written notice and without any further
liability to the other party whatsoever in the event that the Closing
Conditions are not satisfied on or before July 15, 2006.
2.2 Closing. The Closing shall take place on the later to occur of (i) July 1,
2006 (ii) the next business day following the satisfaction of the Closing
Conditions or (iii) such other date as may be mutually agreed to by the
parties, and Seller and Buyer shall have a right of specific performance upon
satisfaction of those Closing Conditions. Subject to
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Section 2.3 below, the Closing shall be effective at 12:01 AM on the Closing
Date (the "Effective Time").
2.3 Sale of Purchased Assets. At the Closing, Seller and RCC, with respect to
the Vehicles, shall sell, convey, transfer, assign and deliver to Buyer the
Purchased Assets, free and clear of all liens, claims, mortgages or
encumbrances, except those encumbrances under the Vehicle Financing Agreements
as set forth in Schedule 1.23; provided that it is understood and agreed that
the transfer and assignment to Buyer of a Monthly Maintenance Contract,
Quarterly Maintenance Contract or Annual Maintenance Contract, as the case may
be, shall not relieve Seller from fulfilling all remaining Seller's Maintenance
Obligations under those Contracts.
2.4 Closing Documents. At the Closing, Seller shall execute and deliver to
Buyer a Xxxx of Sale for the Purchased Assets in the form attached as Schedule
2.4A and Seller and Buyer shall execute an Assignment and Assumption Agreement
with respect to the Lease, Maintenance Contracts and Vehicle Financing
Agreements which is in the form attached as Schedule 2.4B
2.5 Excluded Assets and Seller's Obligations. Regardless of anything to the
contrary elsewhere in this Agreement, Buyer shall not purchase nor acquire any
right, title or interest in or to any Excluded Assets and Buyer shall neither
assume nor be responsible for any of the Seller's Obligations.
2.6 Purchase Price. (a) In consideration for the Purchased Assets acquired by
Buyer under this Agreement, Buyer shall: (i) assume the Assumed Liabilities;
(ii) issue to Seller within thirty (30) days following the Closing Fifty
Thousand (50,000) restricted shares of Buyer's common stock (the "Securities")
and (iii) pay Seller at the Closing the sum of Fifteen Thousand Dollars
($15,000.00).
(b) Removal of Legend and Transfer Restrictions relating to the Securities.
Seller understands that the Securities shall not be registered and Buyer shall
not pledge, convey, sell, assign or transfer such Securities except in
accordance with all applicable federal and state laws and regulations,
including without limitation the Securities Act of 1933 as amended (the
"Securities Act"). Any legend endorsed on a certificate for the Securities and
the stop transfer instructions with respect to such Securities shall be removed
and the Buyer shall issue a certificate without such legend to the holder
thereof (i) if such Securities are registered under the Securities Act and a
prospectus meeting the requirements of Section 10 of the Securities Act is
available, (ii) if such legend may be properly removed under the terms of Rule
144 promulgated under the Securities Act, or (iii) if such holder provides the
Company with an opinion of counsel for such holder, reasonably satisfactory to
legal counsel for the Buyer, to the effect that a sale, transfer or assignment
of such Securities may be made without registration.
(c) It is understood and agreed that Buyer shall have no obligations whatsoever
to remit any portion of the Purchase Price to RCC in connection with the
Vehicles. Seller shall be solely and
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exclusively responsible for payment of that portion of the Purchase Price due
RCC in connection with the Vehicles, if any, and RCC shall look solely and
exclusively to Seller for payment of that portion of the Purchase Price, if
any, to which they might be entitled in connection with the Vehicles.
2.7 Allocation of Purchase Price. As soon as reasonably practicable after the
Closing Date, Buyer's and Seller's independent auditors shall determine and
agree upon an allocation of the Purchase Price and other considersideration
paid by pursuant to this Agreement, and based upon such allocation, Buyer and
Seller shall prepare and make such tax filings as may be required under Section
1060 of the Internal Revenue Code and regulations promulgated thereunder and
under the appicable laws and regulations of any other relevant jurisdications
relating to the allocation of the Purchase Price. Regardless of the foregoing
it is understood and agreed that the $15,000.00 payment by Buyer to Seller
shall be allocated to the purcahse of the Fixed Assets.
2.8 Transfer or Sales Taxes. Buyer will pay all sales, stamp, recordation,
transfer and similar taxes arising out of, or related to, the transactions
contemplated by this Agreement.
2.9 Bulk Sales. To the extent applicable, if at all, Buyer and Seller waive
compliance with the provisions of any so-called "bulk sales" laws of any
jurisdiction in connection with the sale, assignment and transfer of the
Purchased Assets.
III. Covenants and Other Agreements
3.1 Fixed Assets and Seller's Inventory. (a) From and after the Closing Date,
Seller shall have reasonable access to and be entitled to use the Fixed Assets
to the extent necessary to discharge Seller's Maintenance Obligations at no
charge. Seller shall be entitled to store its inventory at Seller's Premises at
no charge from and after the assignment of the Lease to Buyer and thereafter
for so long as Buyer continues to occupy the Seller's Premises under the Lease,
provided that Seller shall bear the risk of any loss or damage to such
inventory, except to the extent such loss or damage is caused by Buyer's gross
negligence or willful misconduct. Seller shall be solely responsible for all
costs and expenses of insuring the inventory.
(b) Immediately following the Closing Date, Seller shall transfer all telephone
numbers used by Seller in connection with the Maintenance Contracts to Buyer
and shall take any and all steps as may be necessary to effect that transfer.
3.2 Trademarks. Seller and Founder hereby grant Buyer the right to use the
Trademarks for a period of six (6) months following the Closing Date in order
to facilitate the orderly transfer of the Purcahsed Assets and Buyer's
assumption of the Assummed Liabilities. For a period of three (3) years
following the Closing Date, neither Seller nor Founder shall sell or license
the Trademarks to any third person or entity nor shall they otherwise grant any
third person or entity the right to use the Trademarks without Buyer's prior
written consent.
3.3 The Assumed Liabilities; Seller's Obligations. (a) Buyer shall satisfy,
fulfill and discharge the Assumed Liabilities at Buyer's sole cost, risk and
expense.
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(b) Seller shall satisfy, fulfill and discharge the Seller's Obligations as and
when they arise at Seller's sole cost, risk and expense.
(c) Without limiting the generality of subsection 3.3(b), Seller shall promptly
satisfy, fulfill and discharge all Seller's Maintenance Obligations at Seller's
sole cost, risk and expense. In the event that Seller fails to fulfill its
Seller's Maintenance Obligations as and when required, Buyer shall have the
right but not the obligation to fulfill those obligations. In the event that
Buyer furnishes any labor, materials and/or other services in connection with
the Seller's Maintenance Obligations, either under the preceding sentence or at
Seller's request, Buyer shall invoice Seller and Seller shall pay Buyer an
amount that is equal to Buyer's then current labor and material rates for the
services in question. Seller shall remit payment of each of Buyer's invoices
within thirty (30) days following receipt.
(d) Seller shall be solely responsible for the cost and expense of repairing
any damage to or alteration of the Seller's Premises that occurred prior to the
effective date of the assignment of the Lease to Buyer. Buyer shall be solely
responsible for the cost and expense of repairing any damage to or alteration
of the Seller's Premises that occurs on or after the effective date of the
assignment of the Lease to Buyer. Following the assignment of the Lease to
Buyer, Buyer shall reimburse Seller for an amount equal to the Security Deposit
less any costs that are incurred by the Buyer in connection with the repairs
for which either Seller is responsible under this Section.
(e) Buyer shall be responsible for paying the costs and expenses associated
with the operation of the Seller's Premises that arise from and after the
effective date of the assignment of the Lease to Buyer, including but not
limited to utilities, telephone, fax and data charges and office supplies.
Seller shall be responsible paying all such such charges that arise prior the
effective date of the assignment of the Lease to Buyer.
3.4 Seller's Employees. The parties acknowledge that it is Seller's intention
to terminate all employees of the Business as of the Closing Date, and Seller
shall be solely responsible for the payment of any and all salaries,
commissions, bonuses, vacation pay, sick pay, 401K, retirement and other
benefits due and owed to those employees through the date of their termination
as well as any severance or termination benefits, if any, to which they may be
entitled (collectively the "Termination Benefits"). Buyer may but shall not be
obliged to offer employment to any employee that is terminated by Seller;
provided that neither an offer of employment by Buyer nor an acceptance of that
offer by a terminated employee shall relieve Seller of its obligations for the
Termination Benefits. Regardless of the foregoing, Buyer shall either pay
directly or reimburse Seller for the costs of providing continuing health
insurance coverage under COBRA for (1) month for each of Seller's employees
that Buyer employs within thirty (30) days following the Closing.
3.5 Third Party Consents. Seller shall, with the reasonable cooperation of
Buyer, obtain as soon as practicable after the Closing Date any and all
consents that may be necessary for the valid and binding assignment of the
Lease, Vehicle Financing
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Agreements and the Maintenance Contracts to the Buyer. Each consent shall be in
writing and in form and substance reasonably satisfactory to Buyer.
3.6 Maintenance Contract Xxxxxxxx and Collections. Buyer shall be entitled to
xxxx and collect for its own account all fees and charges due under or with
respect to the Maintenance Contracts from and after the Closing Date. From and
after the Closing Date, Seller shall promptly forward to Buyer all payments
that Seller receives of any fees and charges to which Buyer is entitled under
the Maintenance Contracts, together with all requisite check endorsements.
3.7 Further Assurances. From time to time, each party shall execute and deliver
or cause to be delivered such further instruments of transfer, assignment,
conveyance or assumption and perform other acts as may be reasonably requested
by the other party to in order to more effectively carry out the transactions
contemplated by this Agreement.
3.8 Publicity. Neither party shall at any time make any public disclosure of
the terms and conditions of this Agreement, of any transaction or the fact that
discussions for an acquisition are taking place, except to the extent that such
disclosure (i) is required by law or the rules and regulations of the
Securities and Exchange Commission or (ii) has been agreed to by the other
party. In any event, the parties will work together to ensure that any
disclosure is accurate and in the best interests of both parties.
IV. Representations and Warranties of Seller RCC and Founder
Seller, RCC and Founder hereby jointly and severally represent and warrant to
Buyer and as an inducement to Buyer to enter into this Agreement that on and as
of the Effective Date and on and as of the Closing Date:
4.1 Corporate. (a) Good Standing. Seller and RCC is each a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
(b) Power and Authority. Seller and RCC each has the complete and unrestricted
authority to conduct the Business and to consummate the transactions
contemplated by this Agreement.
(c) Authorization; Execution and Enforceability. (1) The execution, delivery
and performance by Seller and RCC of this Agreement and all other instruments
and agreements between and among the parties and the consummation of the
transactions contemplated by this Agreement have been duly and validly
authorized by all necessary corporate action of Seller and RCC, respectively.
(2) No other actions or proceedings on the part of Seller, RCC or Founder are
necessary to authorize the execution, delivery and performance of this
Agreement or any of the other instruments and agreements between the parties
provided for in this Agreement.
(3) The execution, delivery and performance by Seller, RCC and Founder of this
Agreement and the instruments and agreements between and among the parties and
the
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consummation of the transactions contemplated by this Agreement: (i) will not
require the consent, approval or authorization of any person, organization,
court or federal, state or local governmental authority; (ii) will not give
rise to any lien, security interest, claim, encumbrance or restriction on any
Purchased Assets; and (iii) will not require any notice or filing under any
federal or state statutes or regulations or under the provisions of any order
issued by any court or tribunal of competent jurisdiction; except for the
Landlord's consent to assign the Lease and the third party consents required to
assign the Maintenance Contracts and Vehicle Financing Agreements.
(4) This Agreement, and the instruments provided for in this Agreement,
constitute or will constitute when executed a valid and binding obligation
enforceable against Seller, RCC and Founder in accordance with their terms.
4.2 Title. Seller has good, valid and marketable title to each of the
Purchased Assets free and clear of any liens, security interests, claims or
encumbrances of any kind whatsoever. RCC has good, valid and marketable title
to each of the Vehicles, except for the liens, security interests, claims or
encumbrances arising under the Vehicle Financing Agreements as described in
Schedule 1.23. On the Closing Date, Buyer shall receive good and marketable
title to the Purchased Assets free and clear of any liens, security interests,
claims or encumbrances of any kind, whatsoever except for the liens, security
interests, claims or encumbrances arising under the Vehicle Financing
Agreements as described in Schedule 1.23.
4.3. Maintenance Contracts, Lease and Vehicle Financing Agreements. A true,
correct and complete list of all Maintenance Contracts is set forth in Schedule
1.13. Seller is in compliance with and not in default of any provisions of any
Maintenance Contract. Except as indicated in Schedule 1.13, neither Seller nor
Founder has received notice or has any reason to believe that any customer of a
Maintenance Contract intends to terminate its Maintenance Contract. A true,
correct and complete and correct copy of the Lease is attached as Schedule
1.11. Seller is in compliance with and not in default of any provisions of the
Lease. A true, correct and complete list of all Vehicle Financing Agreements is
set forth in Schedule 1.23. Seller is in compliance with and not in default of
any provisions of any Vehicle Financing Agreement.
4.4 Fixed Assets. A true, correct and complete list of the Fixed Assets is set
forth in Schedule 1.10.
4.5 Seller's Maintenance Obligations. True, correct and complete descriptions
of all coverage periods following the Closing Date for which Seller has
received a prepayment from the customer under the Maintenance Contracts prior
to the Closing Date are set forth in Schedule 1.12.
4.6 Maintenance Contract Revenue. A true, correct and complete list of the
amounts paid by Seller's customers for their respective Maintenance Contracts
as of the Closing Date is set forth in Schedule 1.13.
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4.7 INTENTIONALLY LEFT BLANK
4.8 Seller's Taxes. All of Seller's Taxes have been fully paid and discharged
through the Effective Date and Seller has not received nor is in possession of
any delinquency, past due or other similar notices of nonperformance from any
federal, state or local taxing authorities.
4.9 Pending Claims, Litigation and Governmental Proceedings. Except as
disclosed in Schedule 4.9, there is no claim, complaint, suit, action,
arbitration, or regulatory, administrative, or governmental proceeding or any
other proceeding pending or threatened against Seller that: (i) might
individually or in the aggregate materially adversely affect the Purchased
Assets or (ii) is likely to result in the restraint of, prohibition of or the
obtaining of substantial damages or other relief in connection with this
Agreement or the consummation of this Agreement.
4.10 Undisclosed Liabilities. Except as disclosed in Schedule 4.10, there are
no material liabilities or obligations, whether accrued, absolute, contingent
or pending, of any nature, including without limitation any tax liability,
which now or hereafter could attach to any of the Purchased Assets.
4.11 Compliance with Law. Neither Seller nor RCC is in violation of any statute
or law or any judgment order, decree, regulation or rule of any court or
governmental authority.
4.12 No Broker's Fees. No person other than Founder, Seller and RCC and their
affiliated companies (and their respective directors, officers, employees and
outside accountant's and attorneys) has arranged or participated in arranging,
on behalf of them the transactions contemplated by this Agreement. There are no
broker's or finder's fees to be paid by Founder Seller, or RCC and neither of
them has any knowledge of any claim by any person claiming through Founder,
Seller or RCC for a broker's or finder's fee to be paid by Buyer in connection
with the consummation of the transactions contemplated by this Agreement.
4.14. Disclosure. No representation or warranty made by Seller, RCC or Founder
in this Agreement, nor any statement, certificate exhibit or Schedule furnished
or to be furnished by Seller under this Agreement or in connection with the
transactions contemplated by this Agreement contains or will contain any untrue
statement of material fact or omits or shall omit to state a material fact
necessary to make the statements contained therein not misleading.
V. Representations and Warranties of Buyer
Buyer represents and warrants to Seller that on and as of the Closing Date:
5.1 Corporate. (a) Good Standing. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
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(b) Power and Authority to Enter Into Agreement. Buyer has the complete and
unrestricted authority to consummate the transactions contemplated by this
Agreement.
(c) Due Execution and Enforceability. (1) The execution, delivery and
performance by Buyer of this Agreement and all other instruments and agreements
between and among the parties and the consummation of the transactions
contemplated by this Agreement have been duly and validly authorized by all
necessary corporate action of Buyer.
(2) No other actions or proceedings on the part of Buyer are necessary to
authorize the execution, delivery and performance of this Agreement or any of
the other instruments and agreements between the parties provided for in this
Agreement.
(3) The execution, delivery and performance of this Agreement and the
instruments and agreements between and among the parties and the consummation
of the transactions contemplated by this Agreement: (i) will not require the
consent approval or authorization of any person, organization, court or
federal, state or local governmental authority and (ii) will not require any
notice or filing under any federal or state statutes or regulations or under
the provisions of any order issued by any court or tribunal of competent
jurisdiction.
(4) This Agreement, and the instruments provided for in this Agreement,
constitute or will constitute when executed a valid and binding obligation
enforceable against Buyer in accordance with its terms.
5.2 No Breach of Statute or Contract. The execution, delivery and performance
of this Agreement and the instruments and agreements between and among the
parties and the consummation of the transactions contemplated by this Agreement
on the part of Buyer will not breach or violate: (i) any statute, law,
ordinance, rule or regulation of any governmental authority, domestic or
foreign; (ii) any of the terms, conditions or provisions of the articles of
incorporation, by-laws, shareholder agreements or any other documents or
agreements relating to Buyer's corporate governance; or (iii) any judgment,
order, injunction, decree, contract, agreement or other instrument to which
Buyer is a party or by which Buyer or any of its properties, rights or assets
is bound.
5.3 No Broker's Fees. No person other than Buyer and its affiliated companies
(and their respective directors, officers, employees and outside accountant's
and attorneys) has arranged or participated in arranging, on behalf of Buyer
the transactions contemplated by this Agreement. There are no broker's or
finder's fees to be paid by Buyer, and Buyer has no knowledge of any claim by
any person claiming through Buyer for a broker's or finder's fee to be paid by
Seller in connection with the consummation of the transactions contemplated by
this Agreement.
VI Indemnification
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6.1 Indemnification by Seller and Founder. Seller and Founder shall defend,
indemnify and hold harmless Buyer and its Affiliates (and their respective
shareholders, directors, officers and employees) from and against any
liability, loss, damage, cost or expense (including without limitation
reasonable attorney's fees) arising out of or relating to:
(i) any misrepresentation or breach by Seller, RCC and/or Founder of any of the
representations and warranties set forth in this Agreement; provided that
Buyer's claim for indemnification arises and is submitted within twelve (12)
months following the Closing Date;
(ii) any breach by Seller, RCC or Founder of any of its covenants, agreements
and obligations under this Agreement other than those subject to subsection 6.1
(i) above;
(iii) any failure by Seller to discharge and satisfy the Seller's Obligations
or the Termination Benefits; or
(iv) Seller's performance under or in connection with the Maintenance
Contracts, Lease and Vehicle Financing Agreements prior to the Closing Date.
6.2 Indemnification by Buyer. Buyer shall defend, indemnify and hold harmless
the Seller and Founder (and all of shareholders, directors, officers and
employees of Seller) from and against any liability, loss, damage, cost or
expense (including without limitation reasonable attorney's fees) arising out
of or relating to:
(i) any misrepresentation or breach by Buyer of any its representations and
warranties set forth in this agreement; provided that Seller's or Founder's
claim for indemnification arises and is submitted within twelve (12) months
following the Closing Date;
(ii) any breach by Buyer of any of its covenants, agreements and obligations
under this Agreement other than those subject to item subsection 6.2 (i) above;
or
(iii) the Assumed Liabilities on or after the Closing Date; or
6.3 Claims For Reimbursement. In the event that a party suffers any liability,
loss, damage, cost or expense for which it is entitled to be indemnified under
this Article 6, that party (the "Indemnified Party") shall give the other
party(ies) (individually or collectively, as the case may be, the "Indemnifying
Party") prompt written notice of the nature of the claim and its amount, if
known. The Indemnifying Party shall have thirty (30) days from the date of its
receipt of the written notice to investigate and dispute the nature, validity
or amount of the claim. During the thirty (30) day period, the Indemnifying
Party shall have reasonable access during normal business hours to all books,
records and other information of the Indemnified Party that is pertinent to its
claim. The Indemnifying Party shall notify the Indemnified Party in writing of
any dispute with the claim on or before the conclusion of the thirty (30) day
period. In the absence of a dispute, the Indemnifying Party shall reimburse the
Indemnified Party for
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the full amount or the undisputed amount of the claim within sixty (60) days
following its receipt of the written notice of the claim.
6.4 Third Party Claims. (a) Upon notice of any claim, action, suit or
proceeding by a third party giving rise to a claim for indemnification under
Section 6.1 or 6.2 ( a "Third Party Claim"), the Indemnifying Party shall be
granted by the Indemnified Party sole control and authority over the defense
and/or settlement of the Third Party Claim.
(b) In the event of a Third Party Claim, the Indemnified Party may engage its
own legal counsel to participate in the third Party Claim; provided that the
Indemnified Party shall bear all costs and expenses for its counsel unless the
Indemnifying has failed to defend the Third Party Claim or the Third Party
Claim creates a conflict of interest between the parties that prohibits or
substantially impairs a joint defense agreement between the parties.
(c) Regardless of anything to the contrary, the Indemnifying Party shall not,
without the prior written consent of the Indemnified Party, enter into any
agreement or consent to any order that compromises or settles a Third Party
Claim unless that agreement and or order includes an unconditional release of
the Indemnified Party by the claimant from any and all liability with respect
to the Third Party Claim.
6.5 Limitation on Indemnity Liability. In no event shall Buyer have any further
liability to the Seller or Founder under this Article 6 after the aggregate
amount paid by Buyer to or expended by Buyer on behalf of Seller and/or Founder
under this Article 6 equals One Hundred Thousand Dollars ($100,000.00). In no
event shall Seller or Founder have any further liability to the Seller or
Founder under this Article 6 after the aggregate amount paid by Seller and/or
Founder or expended by Seller and/or Founder on behalf of Buyer under this
Article 6 equals One Hundred Thousand Dollars ($100,000.00).
VII Covenant Not To Compete
7.1 Restrictive Covenant. The Seller, RCC and Founder covenant and agree that
for a period of three (3) years following Closing Date neither Seller, RCC nor
Founder shall, anywhere in the Restricted Area, either directly or indirectly,
Compete with, own, have an interest in, manage, engage in or be employed by,
connected with or work for, any person, corporation, partnership or other
entity that competes with the post warranty maintenance business of the Buyer
or its successors or assigns, or which is owned by, affiliated with, or the
owner of any such competitor of the Buyer, without the written consent of the
Buyer.
7.2 Definitions. Certain terms used in this shall have the following meanings:
(a) "Compete" shall mean engaging, participating, or being involved in any
respect or in any capacity in the business of furnishing any aid, assistance or
service of any kind to any person or entity in connection with the trading,
leasing, buying, selling, exchanging, lending to, borrowing from, marketing,
merchandising, importing, exporting, distributing
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or producing of any product or service similar in either design or function, or
both, to any product or service of the Buyer's post warranty maintenance
business.
(b) "Restricted Area" shall mean any state in which a covered customer under a
Maintenance Contract is located.
7.3 "Blue-Pencil" Rule. The parties desire that the provisions of this Article
VII be enforced to the fullest extent permissible under the laws and public
policies in each jurisdiction in which enforcement is sought. If a court of
competent jurisdiction, however, determines that any restrictions imposed on
the Seller or Founder in this Article VII are unreasonable or unenforceable
because of the duration, area of restriction, or otherwise, the parties agree
and intend that the court shall enforce this Article VII to whatever extent the
court deems reasonable. The parties intend that the court shall have the right
to strike or change any provision of Article VII and substitute different
provisions to effect the intent of this Section 7.3.
VIII Miscellaneous
8.1 Costs and Expenses. Each party shall bear its respective costs and expenses
in connection with the negotiation, execution and performance of this
Agreement.
8.2 Amendment. This Agreement may not be amended, modified or supplemented,
except in a written document signed by the authorized representatives of both
parties.
8.3 Notices. All communications, notices and disclosures required or permitted
by this Agreement shall be in writing and shall be deemed to have been given
when received (a) personally or by messenger, (b) by overnight delivery
service, (c) by United States mail, certified or registered mail, postage
prepaid, return receipt requested, or (d) by facsimile, in all cases addressed
to the party for whom it is intended at the address and to the attention of the
individual(s) identified below, unless and until either of the parties notifies
the other in writing of a change of address:
If to Seller: If to Founder:
------------ -------------
Xxxxx Communications, Inc. Xx. Xxxxx Xxxxxxx
00 Xxxxxx Xxxx, Xxxx 0000 00 Xxxxx Xxxx
Xxxx Xxxxx, XX 00000 Xxxxxxxx, XX 00000
Attention: Xx. Xxxxx Xxxxxxx, President Facsimile:
Facsimile: 000-000-0000
If to RCC
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Xxxxx Capital Corporation
00 Xxxxxx Xxxx, Xxxx 0000
Xxxx Xxxxx, XX 00000
Attention: Xx. Xxxxx Xxxxxxx
Facsimile: 000-000-0000
If to Buyer:
Farmstead Telephone Group
00 Xxxxxxxx Xxxx Xxxxxx
Xxxx Xxxxxxxx, XX 00000
Attention: Chief Executive Officer
Facsimile: (000) 000-0000
8.4 Assignment. This Agreement may not be assigned by either party without the
other party's prior written consent, except that after the Closing Date, Buyer
may assign this Agreement to an Affiliate or to an acquirer of substantially
all of the assets of that portion of its business to which this Agreement
relates. This Agreement shall be binding upon and inure to the benefit of the
parties and their successors and permitted assigns. Any attempted assignment in
contravention of this Section shall be null and void.
8.5 Counterparts; Headings. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but such counterparts
shall together constitute but one and the same Agreement. Article and Section
headings in this Agreement are provided for convenience of reference only; they
do not constitute a part of this Agreement nor shall they be referred to in or
have any bearing upon the construction or interpretation of this Agreement.
8.6 Waiver. No waiver of any breach of any provision of this Agreement shall be
held to be a waiver of any other provision or a waiver of any subsequent breach
of the same provision, and the failure of a party to enforce at any time any
provision of this Agreement shall not be deemed a waiver of any right of that
party to subsequently enforce that provision or any other provision.
8.7 Governing Law, Disputes and Jurisdiction. This Agreement shall be governed
by and construed in accordance with the laws of the State of Connecticut,
without regard to any conflict of law principles or rules. Prior to filing any
lawsuit, the parties shall endeavor to resolve a dispute first by negotiation,
and if unsuccessful, through non-binding mediation under the auspices of a
recognized professional mediator acceptable to both parties. Any lawsuit
arising out of or relating to this Agreement shall be filed in a federal or
state court situated in the State of Connecticut, and each party irrevocably
submit itself to the jurisdiction of those courts.
8.8 Severability. If any provision, clause or part of this Agreement, or its
application under certain circumstances, is held invalid, the remainder of this
Agreement, or the
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application of the pertinent provision, clause or part under other
circumstances, shall not be affected by that holding.
8.9 Entire Agreement. This Agreement, including the attached Schedules, sets
forth the entire agreement and understanding between the parties with respect
to this subject matter and supersedes all prior and contemporaneous
negotiations, discussions, agreements and understandings between the parties
concerning those matters.
IX Founder Guaranty
9.1 In consideration of and as an inducement to Buyer entering into this
Agreement, the Founder hereby unconditionally and absolutely guarantees the
prompt and complete performance of all of Seller's obligations under this
Agreement. Founder specifically agrees that Buyer may proceed against Founder
to enforce any and all of Seller's obligations under this Agreement without
first proceeding against Seller and regardless of whether Seller (i) becomes
insolvent; (ii) has a receiver or liquidator appointed for its business or
assets; (iii) has an assignment made for the benefit of its creditors; (iv)
files or has filed against it a petition for winding up its affairs; (v) files
or has filed against it a petition under any applicable bankruptcy statutes or
regulations; (vi) or (vii) ceases operations.
9.2 The provisions of this Article IX shall be binding upon the Founder and his
heirs, successors and permitted assigns.
SIGNATURES OF THE PARTIES APPEAR ON THE FOLLOWING PAGE
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IN WITNESS WHEREOF, each party has caused this Agreement to be executed in its
name by its duly authorized officer as of the day and year first written above.
Buyer: Farmstead Telephone Group, Inc.
By: /s/ Xxxxxxx X. Xxxxxxx
Name: Xxxxxxx X. Xxxxxxx
Title: Evp
Seller: Xxxxx Communications, Inc.
By: /s/ Xxxxx Xxxxxxx
Name: Xxxxx Xxxxxxx
Title: President
RCC: Xxxxx Capital Corporation
By: /s/ Xxxxx Xxxxxxx
Name: Xxxxx Xxxxxxx
Title: President
Founder Xxxxx Xxxxxxx
/x/ Xxxxx Xxxxxxx
00
