Exhibit 10.20
PURCHASE AND SALE AGREEMENT
This PURCHASE AND SALE AGREEMENT (this "Agreement") is made and entered
into as of the 10th day of October, by and between ITXC CORP., a Delaware
corporation having its principal place of business at 000 Xxxxxxx Xxxx Xxxx,
Xxxxxxxxx, Xxx Xxxxxx 00000 ("ITXC"), ITXC, INC., an Oregon corporation, having
its principal place of business at 00000 XX Xxxxxxxxxx Xxxxxxx, Xxxxxxxxx,
Xxxxxx 00000 (the "Subsidiary," and together with ITXC, the "Sellers"), and
ESTARA, INC., a Maryland corporation having its principal place of business at
00000 Xxxxxxxxx Xxxx., Xxxxxx, Xxxxxxxx 00000 ("eStara").
RECITALS:
WHEREAS, Sellers presently conduct the business and operations of
establishing eCommerce related voice communication by enabling users to click on
an icon or other link as a means to initiate a voice call from the Internet
directed to a business application or call center ("ITXC's eCommerce Business");
WHEREAS, Sellers desire to convey, and eStara desires to acquire or
obtain a license to use, certain assets associated with ITXC's eCommerce
Business, and eStara has agreed to assume the Assumed Liabilities, all upon the
terms and subject to the conditions hereinafter set forth;
WHEREAS, upon consummation of the Closing, ITXC and eStara will enter
into (i) a patent license agreement under which each party would license certain
intellectual property to the other, (ii) a network agreement pursuant to which
ITXC would serve as the exclusive world-wide provider to eStara of network
services for termination of all voice traffic associated with eStara's eCommerce
business, and (iii) certain related agreements collectively providing for the
provision of certain transitional services and for certain other arrangements
between the parties hereto;
WHEREAS, ITXC desires to acquire, and eStara desires to issue and sell
to ITXC, certain shares of eStara' Series D Convertible Preferred Stock, par
value $.01 per share (the "Preferred Stock"), which shares, on an as converted
basis, would represent 19.9% of the Common Stock Deemed Outstanding;
WHEREAS, eStara is willing to provide ITXC with certain information and
registration rights associated with ITXC's ownership of the Preferred Stock,
such rights to be reflected in the Registration Rights Agreement described
herein, and eStara's principal stockholders have agreed to execute such
Registration Rights Agreement at the Closing; and
WHEREAS, for ease of reference, the parties have defined certain terms
in Article XI of this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements herein contained, the parties hereto
agree as follows:
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I. PURCHASE OF ASSETS
1.1 Purchase and Sale of Assets. On the terms and subject to the
conditions hereof and subject to Sections 1.2 and 1.3, at the Closing, Sellers
will sell, transfer, convey, assign and deliver to eStara, and eStara will
acquire from Sellers, all right, title and interest of Sellers in and to the
following assets owned by Sellers to the extent that such assets are primarily
used by Sellers in support of ITXC's eCommerce Business, as the same may exist
on the Closing Date, wherever located (collectively, the "Assets"), free and
clear of all liens, security interests, encumbrances, mortgages, pledges and
similar restrictions ("Liens"), except Permitted Liens:
(a) Cash. Three hundred thousand dollars ($300,000) minus the
Negative Cash Adjustment, if any, and plus the Positive Cash Adjustment, if any.
(b) Contract Rights. Subject to Sections 1.2(c) and 1.3, all
rights of Sellers, arising after the Closing Date, under the customer, partner,
reseller, channel and service agreements described in Schedule 1.1(b) annexed
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hereto (the "Conveyed Contracts"), together with (x) the right to receive goods
and services purchased thereunder, provided that eStara pays, or reimburses
Sellers for, any amounts paid or payable for such goods and services, and (y)
the right to take other rightful actions in respect of breaches, defaults and
other violations of such Conveyed Contracts occurring after the Closing Date.
(c) Technology and Software. Subject to the provisions of the
license agreement described in Section 3.2, all right, title and interest of
Sellers in and to the Push-to-Talk product and application technology and
Software described in Schedule 1.1(c) annexed hereto, subject to a worldwide
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fully paid license back to ITXC to use any routines, subroutines or other
elements of such intellectual property provided that the purpose of such use is
not to create products directly competing with Push-to Talk.
(d) Certain Intangibles. All rights of Sellers in and to the
universal resource locators, domain names, trademarks, trademark application,
service marks, service xxxx applications, brand names, registration names,
copyrights and copyrighted materials owned by Sellers and pertaining to ITXC's
eCommerce Business, but only to the extent described in Schedule 1.1(d) annexed
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hereto and provided that there shall be excluded therefrom any part of any xxxx,
name or brand which consists of or includes "ITXC".
(e) Equipment. The engineering and test equipment owned by
Sellers, used in ITXC's eCommerce Business and described in Schedule 1.1(e)
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annexed hereto.
(f) Books and Records. Except for the assets described in
Section 1.2 and only to the extent and in the manner permitted by law, (i) all
the books, records, manuals and related written materials of Sellers primarily
utilized by Sellers in connection with ITXC's eCommerce Business, including
without limitation all books and records relating to employees of ITXC's
eCommerce Business who are hired by eStara, the purchase of services, financial,
accounting and operations matters, product engineering, research and
development, manufacture and sale of products and sales and promotional
materials, (ii) all customer and vendor lists relating primarily to the
operation of ITXC's eCommerce Business and (iii) all files and documents
(including credit information) relating primarily to customers and vendors of
ITXC's eCommerce Business.
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(f) Guarantees. All guarantees, warranties, indemnities and
similar rights in favor of the Sellers with respect to any Asset.
1.2 Excluded Assets. Notwithstanding anything contained in this
Agreement to the contrary, except as set forth in the License Agreement, Sellers
will retain and not transfer, and eStara shall not purchase or acquire, the
following rights, properties and assets of Sellers:
(a) Assets Not Primarily Used in ITXC's eCommerce Business.
Assets which are not primarily used in ITXC's eCommerce Business.
(b) Intellectual Property Rights Covered by the License
Agreement. Intellectual Property Rights to be licensed to eStara pursuant to the
License Agreement.
(c) Corporate Documents. The corporate seal, minute books,
charter documents, corporate stock record books of Sellers and such other books
and records as pertain to the organization, existence or share capitalization of
Sellers, any other records or materials relating to (i) any asset excluded
pursuant to any other sub-paragraph of this Section 1.2, (ii) any Retained
Liabilities or (iii) Sellers generally (provided that such records and materials
do not involve or relate to the Assets or the operation or operations of ITXC's
eCommerce Business) and duplicate copies of (A) such other records as Sellers
shall reasonably require in order to satisfy its tax, accounting, securities and
other applicable regulatory requirements and (B) books and records pertaining to
Intellectual Property Rights covered by the license agreement described in
Section 3.2(f).
(d) Benefit Plans. Any and all employee benefit plans (and
assets held thereunder) maintained or otherwise sponsored, in whole or in part,
by Sellers for their employees.
(e) Corporate Name. The name and xxxx "ITXC" and any name or
xxxx derived from or including "ITXC".
(f) Other Assets. Any (1) right, property or asset which is
described in Schedule 1.2(f) annexed hereto, (2) agreement which (a) cannot be
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assigned hereunder and (b) the financial and business benefits of which cannot
be transferred to eStara pursuant to Section 1.3(c) and (3) any agreement which
is dependent on another agreement which latter agreement (a) cannot be assigned
hereunder and (b) the financial and business benefits of which cannot be
transferred to eStara pursuant to Section 1.3(c).
1.3 Nonassignable Agreements.
(a) Nonassignability. To the extent that any Conveyed Contract
(other than any Conveyed Contract identified on Schedule 7.2(d) annexed hereto)
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is not capable of being assigned without Consent, nothing in this Agreement will
constitute an assignment or require the assignment thereof except to the extent
provided in this Section 1.3, nothing in this Agreement will afford eStara the
right to terminate this Agreement or the right to refuse to perform its
obligations at Closing by virtue of the inability to obtain any such Consent
(provided that Sellers performs Sellers' obligations under this Section 1.3) and
nothing in this Agreement will subject
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Sellers to any liability by virtue of the failure to obtain any Consent
(provided that Sellers perform their obligations under this Section 1.3).
(b) ITXC to Use Reasonable Commercial Efforts. Notwithstanding
anything contained in this Agreement to the contrary, Sellers will not be
obligated to assign to eStara any of Sellers' rights and obligations in and to
any of the Conveyed Contracts without first having obtained all Consents
necessary for such assignment; provided, however, that Sellers shall, at
Sellers' expense, use reasonable commercial efforts to obtain all such Consents
prior to and, if the Closing occurs, after the Closing Date. Such reasonable
commercial efforts shall not include the payment of any consideration by Sellers
to obtain any such Consents, unless such payment is made in satisfaction of
obligations of Sellers arising under the Conveyed Contracts prior to the Closing
Date.
(c) If Consents Cannot Be Obtained. To the extent that the
Consents referred to in Section 1.3(a) are not obtained by Sellers, Sellers
shall use their reasonable commercial efforts (subject to the limitation set
forth in the last sentence of Section 1.3(b)) to (i) provide to eStara the
financial and business benefits of any Conveyed Contract referred to in Section
1.3(a) and (ii) enforce, at the request and expense of eStara, for the account
of eStara, any rights of Sellers arising from any such Conveyed Contract
(including without limitation the right to elect to terminate such Conveyed
Contract in accordance with the terms thereof upon the advice, and at the
expense, of eStara), provided, however, that Sellers shall not be required to
take any action which would constitute a breach of any such Conveyed Contract.
With respect to Conveyed Contracts for which such Consents cannot be obtained
but as to which Sellers are able to pass on the financial and business to
eStara, eStara shall assume the obligations of Sellers thereunder. With respect
to Conveyed Contracts for which such Consents cannot be obtained and as to which
Sellers are unable to pass on the financial and business to eStara, Sellers
shall retain (or cause their subsidiaries to retain) their obligations
thereunder.
II. ASSUMPTION OF LIABILITIES BY ESTARA
2.1 Assumed Liabilities. As of the Closing, eStara will assume and
thereafter in due course pay and fully satisfy when due the following
liabilities and obligations of Sellers existing at or arising on or after the
Closing Date (the "Assumed Liabilities") and no other liabilities or
obligations:
(a) those liabilities of Sellers as of the Closing Date in
respect of paid time off accrued by the employees of Sellers who accept offers
of employment from eStara prior to October 15, 2001 in respect of vacation, sick
time, personal leave and family leave;
(b) the obligations of Sellers arising after the Closing in
respect of the Conveyed Contracts, subject to Section 1.3(c);
(c) the obligations of Sellers under any written or oral
purchase order or sale order outstanding on the Closing Date and relating to
ITXC's eCommerce Business, provided that (a) such purchase order or sale order
was given in the ordinary course of business consistent with past practice and
(b) if such purchase order or sale order is dated prior to the date hereof and
provides for a purchase price or sale price involving more than $10,000 such
purchase order or sale order is listed in Schedule 2.1(c) annexed hereto;
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(d) the liabilities of ITXC's eCommerce Business relating
to Taxes, attributable to periods (or portions thereof) ending subsequent to
the Closing Date or to the post-Closing portion of any period that includes but
does not start on the Closing Date (allocable to such post-Closing portion of a
period by closing the books of ITXC's eCommerce Business at the close of
business on the Closing Date or, where not susceptible to such allocation, pro
rata on the basis of the number of days elapsed in the period); and
(e) the obligations described in Schedule 2.1(e) annexed
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hereto.
2.2 Retained Liabilities. Notwithstanding anything contained in this
Agreement or any Schedule or Exhibit hereto to the contrary and regardless of
any disclosure to eStara, eStara does not assume or agree to pay, satisfy,
discharge or perform, and will not be deemed by virtue of the execution and
delivery of this Agreement or any document delivered at the Closing pursuant to
this Agreement, or as a result of the consummation of the transactions
contemplated by this Agreement, to have assumed, or to have agreed to pay,
satisfy, discharge or perform, any liability, obligation or indebtedness of
Sellers, whether primary or secondary, direct or indirect, absolute, contingent
or otherwise, existing or incurred on or prior to the Closing Date or arising
out of any transaction or event occurring prior to the Closing Date other than
the Assumed Liabilities (such liabilities and obligations retained by Sellers
being referred to herein as the "Retained Liabilities"). It is specifically
agreed that such Retained Liabilities shall include, without limitation, all
liabilities and obligations of Sellers relating to Taxes, whether applicable to
ITXC's eCommerce Business or otherwise, attributable to periods (or portions
thereof) ending on or prior to the Closing Date or to the pre-Closing portion of
any period that includes but does not end on the Closing Date (allocable to such
pre-Closing portion of a period by closing the books of ITXC's eCommerce
Business at the close of business on the Closing Date or, where not susceptible
to such allocation, pro rata on the basis of the number of days elapsed in the
period).
III. ISSUANCE OF STOCK; LICENSE AGREEMENT; EXCLUSIVE NETWORK AGREEMENT;
REGISTRATION RIGHTS AGREEMENT
3.1 Issuance of Stock.
(a) Prior to the Closing, eStara shall file with the
Department of Assessments and Taxation of the State of Maryland, Articles
Supplementary designating the Preferred Stock, which shall be in the form and
substance of the Articles Supplementary annexed hereto as Exhibit 3.1(a) (the
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"Articles Supplementary").
(b) At the Closing, eStara shall deliver to ITXC a stock
certificate for such number of shares of Preferred Stock as shall constitute
19.9% of the Common Stock Deemed Outstanding. Such certificate shall bear the
following restrictive legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY OTHER SECURITIES
LAWS. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A
VIEW TO
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DISTRIBUTION OR RESALE.SUCH SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, DELIVERED AFTER SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE
OF (1) AN EFFECTIVE REGISTRATION STATEMENT COVERING SUCH SECURITIES UNDER THE
SECURITIES ACT OF 1933 AND ANY OTHER APPLICABLE SECURITIES LAWS, OR (2) AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED."
3.2 License Agreement. At the Closing, eStara and ITXC shall enter into
a license agreement in the form and substance of the license agreement annexed
hereto as Exhibit 3.2 (the "License Agreement").
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3.3 Exclusive Network Agreement. At the Closing, eStara and ITXC shall
enter into an exclusive network agreement in the form and substance of the
exclusive network agreement annexed hereto as Exhibit 3.3 (the "Network
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Agreement").
3.4 Registration Rights Agreement. At the Closing, eStara and ITXC
shall enter into an amendment to its Second Amended and Restated Registration
Rights Agreement in the form and substance of the amendment annexed hereto as
Exhibit 3.4 (the "Registration Rights Agreement").
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3.5 Joinder to Stockholders Agreement. At the Closing, ITXC shall enter
into a joinder to the Second Amended and Restated Stockholders Agreement dated
July 27, 2001 by and among eStara and its stockholders in the form and substance
of the joinder annexed hereto as Exhibit 3.5 (the "Joinder").
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3.6 Escrow Agreement. At the Closing, ITXC and eStara shall enter into
an Escrow Agreement in form and substance of Exhibit 3.6 attached hereto (the
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"Escrow Agreement").
IV. REPRESENTATIONS AND WARRANTIES OF ITXC
Each Seller, jointly and severally, makes the following representations
and warranties to eStara:
4.1. Authorization; No Conflict. The execution and delivery by Sellers
of the Transaction Documents and the performance by Sellers of Sellers'
obligations thereunder have been duly authorized by all requisite corporate
action, will not violate in any material respect any provision of Applicable Law
or any order of any court or other agency of government binding on Sellers or to
which Sellers' assets or property are subject, will not violate the charter or
by-laws of Sellers, and will not violate in any material respect any provision
of any indenture, agreement or other instrument to which Sellers, any of
Sellers' subsidiaries or any of their respective properties or assets is bound
or conflict with in any material respect, result in a material breach of or
constitute (with due notice or lapse of time or both) a material default under
any such indenture, agreement or other instrument, or result in the creation or
imposition of any lien, charge, restriction, claim or encumbrance of any nature
whatsoever upon any of the properties or assets of Sellers or Sellers'
subsidiaries.
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4.2 Validity. This Agreement has been duly executed and delivered by
Sellers and constitutes, and, upon Sellers' execution and delivery of the other
Transaction Documents at Closing, the other Transaction Documents will each
constitute, the legal, valid and binding obligation of Sellers, enforceable in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
4.3 Organization, Qualifications and Corporate Power. Each of the
Sellers is a corporation duly incorporated, validly existing and in good
standing under the laws of the state in which it was organized and is duly
licensed or qualified to transact business as a foreign corporation and is in
good standing in each jurisdiction in which the nature of the business
transacted by it or the character of the properties owned or leased by it
requires such licensing or qualification, except where the failure to be so
licensed or qualified would not have, either individually or in the aggregate, a
material adverse effect on the business, results of operations, financial
condition, assets, prospects, liabilities or contractual rights of ITXC's
eCommerce Business (an "ITXC Material Adverse Effect"). Sellers have the
corporate power and authority to own and hold the properties used in ITXC's
eCommerce Business, to carry on ITXC's eCommerce Business as now conducted and
to execute, deliver and perform the Transaction Documents.
4.4 Litigation; Compliance with Law. Except as set forth in Section 4.4
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of a disclosure schedule provided by Sellers to eStara contemporaneous with the
execution of this Agreement (the "ITXC Disclosure Schedule"), there is no (i)
action, suit, claim, proceeding or investigation relating to ITXC's eCommerce
Business pending or, to the knowledge of Sellers, threatened against Sellers or
Sellers' subsidiaries, at law or in equity, or before or by Governmental
Authority; (ii) arbitration proceeding relating to ITXC's eCommerce Business
pending under collective bargaining agreements or otherwise or (iii)
governmental inquiry relating to ITXC's eCommerce Business pending or, to the
knowledge of Sellers, threatened against Sellers or Sellers' subsidiaries.
Sellers are not in default with respect to any order, writ, injunction or decree
relating to ITXC's eCommerce Business known to or served upon Sellers of any
Governmental Authority. Except as set forth in Section 4.4 of the ITXC
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Disclosure Schedule, there is no action or suit by Sellers relating to ITXC's
eCommerce Business that is pending, threatened or contemplated against others.
ITXC's eCommerce Business has complied in all material respects with all laws,
rules, regulations and orders applicable to its business, operations,
properties, assets, products and services. ITXC's eCommerce Business has all
necessary permits, licenses, Governmental Approvals and other authorizations
required to conduct its business as presently conducted ("Permits"), and ITXC's
eCommerce Business has been operated pursuant to and in compliance with the
terms of all such Permits, except where the failure to obtain or comply with
such Permits would not have an ITXC Material Adverse Effect. There is no
Applicable Law which would prohibit or materially restrict Sellers from
conducting ITXC's eCommerce Business in any jurisdiction in which ITXC's
eCommerce Business is now conducting business.
4.5 Proprietary Information of Third Parties. To the knowledge of
Sellers, no third party has claimed or has reason to claim that any person
employed by or affiliated with ITXC's eCommerce Business has (a) violated or may
be violating in any material respect any of the terms or conditions of his
employment, non-competition or non-disclosure agreement with such third party,
(b) disclosed or may be disclosing or utilized or may be utilizing any trade
secret or proprietary information or documentation of such third party or (c)
interfered or may be
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interfering in the employment relationship between such third party and any of
its present or former employees. No third party has made a written request for
information from Sellers which suggests that such a claim might be contemplated.
To the knowledge of Sellers, no person employed by or affiliated with ITXC's
eCommerce Business has employed any trade secret or any information or
documentation proprietary to any former employer, and, to the knowledge of
Sellers, no person employed by or affiliated with ITXC's eCommerce Business has
violated in any material respect any confidential relationship which such person
may have had with any third party, in connection with the development or sale of
any service of ITXC's eCommerce Business. To the knowledge of Sellers, none of
the execution or delivery of this Agreement, or the carrying on of ITXC's
eCommerce Business as officers, employees or agents by any officer, director or
key employee or the conduct or proposed conduct of the business of ITXC's
eCommerce Business, will conflict with or result in a material breach of the
terms, conditions or provisions of or constitute a default under any contract,
covenant or instrument under which any such person is obligated.
4.6 Copyrights, Trademarks, Etc.
(a) Set forth in Section 1.1(d) of the ITXC Disclosure Schedule is
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a list of all domestic and foreign trademarks, trademark applications, service
marks, service xxxx applications, trade names and copyrights, and all
applications for such, which are primarily used in connection with ITXC's
eCommerce Business. To ITXC's knowledge, ITXC or its Subsidiary has a valid
right to use the Intellectual Property Rights being used to conduct ITXC's
eCommerce Business as now conducted (the "eCommerce Intellectual Property
Rights"). Except as set forth in Section 4.6(a) of the ITXC Disclosure Schedule
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and except for licenses generally available to the public on reasonable
commercial terms, to ITXC's knowledge, ITXC has no obligation to compensate any
Person for the use of any eCommerce Intellectual Property Rights and ITXC and
its Subsidiary have not granted to or assigned to any Person any license or
other right to use any of the eCommerce Intellectual Property Rights or
otherwise licensed from others, for use in ITXC's eCommerce Business, the
Intellectual Property Rights of third parties. Except as set forth in Section
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4.6(a) of the ITXC Disclosure Schedule, to ITXC's knowledge, (i) no Person or
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entity is infringing, violating or misappropriating any of the eCommerce
Intellectual Property Rights and (ii) none of the activities or business
conducted by ITXC's eCommerce Business infringes, violates or constitutes a
misappropriation of any Intellectual Property Rights of any other person or
entity and ITXC has not received notice of any such claim. To the knowledge of
ITXC, none of the employees or consultants of ITXC's eCommerce Business is
obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with his or her
obligations to promote the interests of ITXC's eCommerce Business.
(b) With respect to all Software licensed to Sellers for use
primarily in ITXC's eCommerce Business (other than Software that is generally
available to the public on reasonable commercial terms), Sellers possess
documentation describing such Software in detail sufficient to permit a person
of reasonable skill and experience in the relevant art to operate, maintain and
modify such Software. With respect to such Software, Section 4.6(b) of the ITXC
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Disclosure Schedule describes where all of the related source and object code is
located if physical possession of such source and object code is not being
transferred to eStara hereunder. Except for the use of consultants to complete
the development of Software under work-for-hire agreements or comparable
agreements assigning ownership to Sellers , Sellers have not relied
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upon the services of consultants to develop any of Sellers' proprietary Software
which is used primarily in ITXC's eCommerce Business.
(c) Except as set forth in Section 4.6(c) of the ITXC Disclosure
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Schedule, no claim or demand of any Person has been made against Sellers, nor is
there any proceeding that is pending, or to the knowledge of the Sellers,
threatened which (i) challenges the rights of the Sellers in respect of any
eCommerce Intellectual Property or (ii) asserts that either of the Sellers is
infringing any eCommerce Intellectual Property. None of the eCommerce
Intellectual Property is subject to any outstanding order, ruling, decree,
judgment or stipulation by or with any Governmental Authority.
4.7 Conveyed Contracts. Section 4.7 of the ITXC Disclosure Schedule
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contains a complete list of all written Conveyed Contracts, copies of which
(including all amendments thereto) have been furnished to eStara. There does not
exist under any Conveyed Contract any event of default or event or condition
that, after notice or lapse of time or both, would constitute a violation,
breach or event of default thereunder on the part of either of the Sellers
except for such events or conditions that, individually and in the aggregate,
(i) have not had or resulted in, and are not reasonably likely to have or result
in, an ITXC Material Adverse Effect and (ii) have not and will not materially
impair the ability of either of the Sellers to perform their respective
obligations under the Transaction Documents.
4.8 Assets. Subject to the terms of any lease or license to which any
of the Assets are subject and subject to any Permitted Liens, Sellers have good
and marketable title to the Assets free and clear of all Liens. The Assets are
in reasonably good repair and operating condition (subject to normal wear and
tear). The Assets do not constitute all or substantially all of the assets of
ITXC.
4.9 Leasehold Interests. To Sellers' knowledge, each of the leases to
which any of the Assets is subject under which either of the Sellers is a lessee
(collectively, the "Leases") is a valid and subsisting agreement, duly
authorized and entered into by Sellers, without any material default of Sellers
thereunder (the "Leases"). Section 4.9 of the ITXC Disclosure Schedule contains
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a true and complete list of all Leases, and Sellers have delivered to eStara
complete and correct copies of all written Leases, together with all amendments
thereto. No event has occurred and is continuing which, with due notice or lapse
of time or both, would constitute a material default or event of material
default by Sellers under any Lease.
4.10 Governmental Approvals. No registration or filing with,
Governmental Approval of or other action by any Governmental Authority is or
will be necessary for the valid execution, delivery and performance by ITXC of
the Transaction Documents.
4.11 Books and Records. The books of account, ledgers, order books,
records and documents of ITXC's eCommerce Business accurately and completely
reflect all material information relating to ITXC's eCommerce Business, the
nature, acquisition, maintenance, location and collection of the assets of
ITXC's eCommerce Business, and the nature of all transactions giving rise to the
obligations or accounts receivable of ITXC's eCommerce Business.
4.12 Brokers. Sellers have no contract, arrangement or understanding
with any broker, finder or similar agent with respect to the transactions
contemplated by the Transaction Documents.
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4.13 Employees. Section 4.13 of the ITXC Disclosure Schedule lists: (i)
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the names of all employees of Sellers primarily engaged in the conduct of ITXC's
eCommerce Business, together with their respective rates of total compensation;
(ii) all employment contracts between either of the Sellers and any of the
persons named in such Section 4.13; and (iii) and all pension, bonus, profit
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sharing, stock option or other agreements or arrangements, including vacation
and sick pay policies, in which any of such persons participate. ITXC's
eCommerce Business has complied in all material respects with all applicable
laws relating to the employment of labor, including provisions relating to
wages, hours, equal opportunity, collective bargaining and the payment of Social
Security and other Taxes. With respect to the employees and former employees of
ITXC's eCommerce Business, there are no employee post-retirement medical or
health plans in effect, except as required by Section 4980B of the Code. Except
as described in Section 4.13 of the ITXC Disclosure Schedule, no employee of
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ITXC's eCommerce Business will become entitled to any bonus, retirement,
severance or similar benefit or enhanced benefit solely as a result of the
transactions contemplated hereby.
4.14 Territorial Restrictions. Sellers are not restricted by any
written agreement or understanding with any other Person from carrying on ITXC's
eCommerce Business anywhere in the world.
4.15 Confidentiality. Sellers have taken reasonable steps to preserve
the confidential nature of any material confidential information (including,
without limitation, any proprietary information) relating to ITXC's eCommerce
Business.
4.16 Environmental Protection. ITXC's eCommerce Business, the operation
of its business, and any real property that ITXC's eCommerce Business leases or
otherwise occupies or uses (the "eCommerce Premises") are in compliance in all
material respects with all applicable Environmental Laws and orders or
directives of any governmental authorities having jurisdiction under such
Environmental Laws. Sellers have not received any citation, directive, letter or
other written communication, or any notice of any proceeding, claim or lawsuit
pursuant to such Environmental Laws, from any person arising out of the use or
occupation of any of the eCommerce Premises, or the conduct of the operations of
ITXC's eCommerce Business. ITXC has obtained and is maintaining in full force
and effect all necessary permits, licenses and approvals, if any, required by
all Environmental Laws applicable to ITXC's eCommerce Business and is in
compliance with all such permits, licenses and approvals.
4.17 Operation of ITXC's eCommerce Business. Sellers have conducted
ITXC's eCommerce Business only through ITXC and the Subsidiary and not through
any other divisions or any direct or indirect subsidiary or affiliate of Sellers
and (b) no part of ITXC's eCommerce Business is operated by Sellers through any
entity other than ITXC and the Subsidiary.
4.18 Investment Representations. ITXC is acquiring the Preferred Shares
for its own account for the purpose of investment and not with a view to
distribution or resale thereof in violation of the Securities Act. ITXC
understands that none of the Preferred Shares and none of the Conversion Shares
have been registered under the Securities Act or any other applicable securities
laws, and, therefore, cannot be resold unless they are subsequently registered
under the Securities Act and other applicable securities laws or unless an
exemption from such registration is available. ITXC agrees not to resell or
otherwise dispose of all or any part of the Preferred Shares purchased by it or
the Conversion Shares except as permitted by law, including, without
10
limitation, any regulations under the Securities Act and other applicable
securities laws. ITXC understands that eStara does not have any present
intention and is under no obligation to register the Preferred Shares or
Conversion Shares under the Securities Act and other applicable securities laws,
except as provided in the Registration Rights Agreement. ITXC further represents
that it understands and agrees that all certificates evidencing any of the
Preferred Shares or Conversion Shares, whether upon initial issuance or upon any
transfer thereof, shall bear a legend, prominently stamped or printed thereon,
reading substantially as set forth in Section 3.1. ITXC acknowledges that during
the course of the transactions contemplated hereby and prior to the purchase of
any Preferred Shares, it has had the opportunity to ask questions of and receive
answers from representatives of eStara concerning the terms and conditions of
the offering of the Preferred Shares, and to obtain additional information,
documents, records and books relative to eStara, its business, and an investment
in eStara. ITXC is an "accredited investor" as that term is defined in Rule 501
of Regulation D promulgated under the Securities Act. ITXC is able to bear the
economic risk of its acquisition of the Preferred Shares, including a complete
loss of the investment.
4.19 Significant Customers. Except as set forth in Section 4.19 of the
ITXC Disclosure Schedule, since June 30, 2001 no Significant Customers of ITXC's
eCommerce Business have given written notice of their intent to cancel or
terminate any material agreement with Seller or terminate their business
relationship with Seller. For purposes of this Section 4.19, Significant
Customers means those customers generating $25,000 or more of annual revenue for
the ITXC eCommerce business for the year ended June 30, 2001. Sellers have made
available to eStara all historical billing and A/R records for existing
customers of the ITXC eCommerce Business.
4.20 Disclosure. Neither this Agreement nor any Schedule or Exhibit to
this Agreement nor any other Transaction Document contains an untrue statement
by Sellers of a material fact or omits a material fact necessary to make the
statements by Sellers contained herein or therein not misleading in any material
respect.
V. REPRESENTATIONS AND WARRANTIES OF ESTARA
eStara hereby makes the following representations and warranties to
Sellers:
5.1. Authorization; No Conflict. The execution and delivery by eStara
of the Transaction Documents, the performance by eStara of its obligations
thereunder, the issuance, sale and delivery of the Preferred Stock to ITXC and
the issuance and delivery of the Conversion Shares have been duly authorized by
all requisite corporate action and will not violate in any material respect any
provision of Applicable Law or any order of any court or other agency of
government binding on eStara or to which eStara's assets or property are
subject, will not violate the Second Articles of Amendment and Restatement, as
amended ("eStara's Charter") or the by-laws, as amended, of eStara, and will
not violate in any material respect any provision of any indenture, agreement or
other instrument to which eStara, any of its subsidiaries or any of their
respective properties or assets is bound or conflict with in any material
respect, result in a material breach of or constitute (with due notice or lapse
of time or both) a material default under any such indenture, agreement or other
instrument, or result in the creation or imposition of any lien, charge,
restriction, claim or encumbrance of any nature whatsoever upon any of the
properties or assets of eStara or any of its subsidiaries.
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5.2 Validity. This Agreement has been duly executed and delivered by
eStara and constitutes, and, upon eStara's execution and delivery of the other
Transaction Documents at Closing, the other Transaction Documents will
constitute, the legal, valid and binding obligation of eStara, enforceable in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
5.3 Organization, Qualifications and Corporate Power; Authorization
(a) eStara is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Maryland. eStara is
duly licensed or qualified to transact business as a foreign corporation and is
in good standing in each jurisdiction in which the nature of the business
transacted by it or the character of the properties owned or leased by it
requires such licensing or qualification, except where the failure to be so
licensed or qualified would not have, either individually or in the aggregate, a
material adverse effect on the business, results of operations, financial
condition, assets, prospects, liabilities or contractual rights of eStara (an
"eStara Material Adverse Effect"). eStara has the corporate power and authority
to own and hold its properties and to carry on its business as now conducted.
eStara has the corporate power and authority to execute, deliver and perform the
Transaction Documents, to issue, sell and deliver the Preferred Stock in
accordance with the provisions of this Agreement and to issue and deliver the
Conversion Shares in accordance with the terms of eStara's Charter.
(b) eStara does not have any subsidiaries. eStara does not (i)
own of record or beneficially, directly or indirectly, (A) any shares of capital
stock or securities convertible into capital stock of any other corporation or
(B) any participating interest in any partnership, joint venture, limited
liability company or other non-corporate business enterprise or (ii) control,
directly or indirectly, any other entity.
(c) The shares of Preferred Stock issuable to ITXC hereunder
(the "Preferred Shares") have been duly authorized and, when issued in
accordance with this Agreement, will be validly issued, fully paid and
nonassessable shares of Preferred Stock with no personal liability attaching to
the ownership thereof and will be free and clear of all liens, charges,
restrictions, claims and encumbrances imposed by or through eStara except as set
forth in this Agreement. The Conversion Shares have been duly reserved for
issuance upon due conversion of the Preferred Shares and, when so issued, will
be duly authorized, validly issued, fully paid and nonassessable shares of
Common Stock with no personal liability attaching to the ownership thereof and
will be free and clear of all liens, charges, restrictions, claims and
encumbrances imposed by or through the eStara except as set forth in this
Agreement. Except as set forth in Section 5.3(c) of the disclosure schedule
--------------
provided by eStara to Sellers contemporaneous with the execution of this
Agreement (the "eStara Disclosure Schedule"), neither the issuance, sale or
delivery of the Preferred Shares nor the issuance or delivery of the Conversion
Shares is subject to any preemptive right of shareholders of eStara or to any
right of first refusal or other right in favor of any person, except such rights
that have been effectively waived.
(d) Section 5.3(d) of the eStara Disclosure Schedule contains
--------------
copies of eStara's Charter and By-Laws, as amended, and copies of any benefit
plan (excluding stock option agreements relating to stock options granted
outside of the stock option plan referenced in such Section 5.3(d)) pursuant to
which any Person may receive any equity security of eStara.
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5.4 Authorized Capital Stock. Prior to filing the Articles
Supplementary, the authorized capital stock of eStara consists solely of (i)
10,000,000 shares of preferred stock, par value $0.10 per share, of which
213,440 shares have been designated as Series A Convertible Preferred Stock;
1,409,595 shares have been designated as Series B-1 Convertible Preferred Stock;
542,914 shares have been designated as Series B-2 Convertible Preferred Stock;
1,373,191 shares have been designated as Series C-1 Convertible Preferred Stock;
and 2,023,097 shares have been designated as Series C-2 Convertible Preferred
Stock, and (ii) 50,000,000 shares of Common Stock. As of the date hereof,
without giving effect to the transactions contemplated hereby, 3,948,250 shares
of Common Stock and 3,609,722 shares of preferred stock (consisting of 213,440
shares of Series A Convertible Preferred Stock, 1,373,191 shares of Series C-1
Convertible Preferred Stock and 2,023,091 shares of Series C-2 Convertible
Preferred Stock) are outstanding, all of which shares have been validly issued
and are fully paid and nonassessable, with no personal liability attaching to
the ownership thereof. The shareholders of record and holders of subscriptions,
warrants, options, convertible securities, and other rights (contingent or
other) to purchase or otherwise acquire equity securities of eStara, and the
number of shares of stock and the number of such subscriptions, warrants,
options, convertible securities, and other such rights held by each, are as set
forth in Section 5.4 of the eStara Disclosure Schedule. The designations,
-----------
powers, preferences, rights, qualifications, limitations and restrictions in
respect of each class and series of authorized capital stock of eStara are as
set forth in eStara's Charter, and all such designations, powers, preferences,
rights, qualifications, limitations and restrictions are valid, binding and
enforceable and in accordance with all Applicable Laws, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
equity principles. Except as set forth in Section 5.4 of the eStara Disclosure
-----------
Schedule, (i) no person owns of record or is known to eStara to own beneficially
any share of eStara's capital stock, (ii) no subscription, warrant, option,
convertible security, or other right (contingent or other) to purchase or
otherwise acquire equity securities of eStara is authorized or outstanding and
(iii) there is no obligation by eStara to issue shares, subscriptions, warrants,
options, convertible securities, or other such rights or to distribute to
holders of any of its equity securities any evidence of indebtedness or asset.
Except as set forth in eStara's Charter or in Section 5.4 of the eStara
Disclosure Schedule, eStara has no obligation (contingent or other) to purchase,
redeem or otherwise acquire any of its equity securities or any interest therein
or to pay any dividend or make any other distribution in respect thereof. Except
for the Registration Rights Agreement, to the knowledge of eStara, there are no
voting trusts or agreements, shareholders' agreements, pledge agreements,
buy-sell agreements, rights of first refusal, preemptive rights or proxies
relating to any securities of eStara (whether or not eStara is a party thereto).
All of the outstanding securities of eStara were issued in compliance with all
applicable Federal and state securities laws.
5.5 Financial Statements. eStara has furnished to ITXC the
unaudited balance sheet of eStara as of August 31, 2001 (the "eStara Balance
Sheet") and the related unaudited statements of operations, changes in
stockholders' equity and cash flows of eStara for the eight months ended August
31, 2001 (the "eStara Financial Statements"), copies of which are set forth in
Section 5.5 of the eStara Disclosure Schedule Except as set forth in Section 5.5
----------- -----------
of the eStara Disclosure Schedule, the eStara Financial Statements have been
prepared in accordance with United States generally accepted accounting
principles consistently applied (except that the eStara Financial Statements do
not contain all of the required footnotes or year-end adjustments) and fairly
present the financial position of eStara as of the date of the eStara Balance
Sheet, and the consolidated results of eStara's operations and cash flows for
the eight months ended August
13
31, 2001. Except as set forth in Section 5.5 of the eStara Disclosure Schedule,
-----------
since the date of the eStara Balance Sheet, (i) there has been no change in the
assets, liabilities or financial condition of eStara from that reflected in the
eStara Balance Sheet except for changes in the ordinary course of business which
in the aggregate have not resulted in an eStara Material Adverse Effect and (ii)
there has not occurred an eStara Material Adverse Effect.
5.6 Events Subsequent to the Date of the eStara Balance Sheet. Except
as set forth in Section 5.6 of the eStara Disclosure Schedule, since the date of
-----------
the eStara Balance Sheet, eStara has not (i) issued any stock, bond or other
corporate security, (ii) borrowed any amount or incurred or become subject to
any liability (absolute, accrued or contingent) for borrowed money, except
current liabilities incurred and liabilities under contracts entered into in the
ordinary course of business, (iii) discharged or satisfied any lien or
encumbrance or incurred or paid any obligation or liability (absolute, accrued
or contingent) other than current liabilities shown on the eStara Balance Sheet,
current liabilities incurred since the date of the eStara Balance Sheet in the
ordinary course of business, (iv) declared or made any payment or distribution
to shareholders or purchased or redeemed any shares of its capital stock or
other security, (v) mortgaged, pledged, encumbered or subjected to lien any of
its assets, tangible or intangible, other than Permitted Liens, (vi) sold,
assigned or transferred a material amount of its tangible assets except in the
ordinary course of business, or canceled any material debt or claim owed to
eStara, (vii) sold, assigned, transferred or granted any exclusive license with
respect to any patent, trademark, trade name, service xxxx, copyright, trade
secret or other intangible asset, (viii) suffered any material loss of property
or waived any material right of substantial value whether or not in the ordinary
course of business, (ix) entered into any transaction except in the ordinary
course of business or (xii) entered into any commitment (contingent or
otherwise) to do any of the foregoing.
5.7 Litigation; Compliance with Law. Except as set forth in Section 5.7
-----------
of the eStara Disclosure Schedule, there is no (i) action, suit, claim,
proceeding or investigation pending or, to the knowledge of eStara, threatened
against eStara, at law or in equity, or before or by any Governmental Authority,
(ii) arbitration proceeding relating to eStara pending under collective
bargaining agreements or otherwise or (iii) governmental inquiry pending or, to
the knowledge of eStara, threatened against eStara. eStara not in default with
respect to any order, writ, injunction or decree known to or served upon eStara
of any Governmental Authority. Except as set forth in Section 5.7 of the eStara
-----------
Disclosure Schedule, there is no action or suit by eStara pending, threatened or
contemplated against others, other than in the ordinary course of business.
eStara has complied in all material respects with all Applicable Laws applicable
to its business, operations, properties, assets, products and services. eStara
has all necessary permits, licenses and other authorizations required to conduct
its business as conducted, and eStara has been operating its business pursuant
to and in compliance with the terms of all such permits, licenses and other
authorizations, except where the failure to obtain or comply with such permits,
licenses or authorizations would not have an eStara Material Adverse Effect.
There is no existing Applicable Law which would prohibit or materially restrict
eStara from, or otherwise materially adversely affect eStara in, conducting its
business in any jurisdiction in which it is now conducting business, or that
would reasonably be expected to have an eStara Material Adverse Effect.
5.8 Proprietary Information of Third Parties. To the knowledge of
eStara, no third party has claimed or has reason to claim that any person
employed by or affiliated with eStara has (a) violated or may be violating in
any material respect any of the terms or conditions of his
14
employment, non-competition or non-disclosure agreement with such third party,
(b) disclosed or may be disclosing or utilized or may be utilizing any trade
secret or proprietary information or documentation of such third party or (c)
interfered or may be interfering in the employment relationship between such
third party and any of its present or former employees. No third party has made
a written request for information from eStara which suggests that such a claim
might be contemplated. To the knowledge of eStara, no person employed by or
affiliated with eStara has employed any trade secret or any information or
documentation proprietary to any former employer, and, to the knowledge of
eStara, no person employed by or affiliated with eStara has violated in any
material respect any confidential relationship which such person may have had
with any third party, in connection with the development or sale of any service
of eStara. To the knowledge of eStara, none of the execution or delivery of this
Agreement, or the carrying on of the business of eStara as officers, employees
or agents by any officer, director or key employee of eStara, or the conduct or
proposed conduct of the business of eStara, will conflict with or result in a
material breach of the terms, conditions or provisions of or constitute a
default under any contract, covenant or instrument under which any such person
is obligated.
5.9 Intellectual Property Rights
(a) To eStara's knowledge, eStara has a valid right to use its
Intellectual Property Rights. Except as set forth in Section 5.9(a) of the
--------------
eStara Disclosure Schedule and except for licenses generally available to the
public on reasonable commercial terms, to eStara's knowledge, eStara has no
obligation to compensate any Person for the use of any of its Intellectual
Property Rights and eStara has not granted to or assigned to any Person any
license or other right to use any of its Intellectual Property Rights or
otherwise licensed from others the Intellectual Property Rights of third
parties. Except as set forth in Section 5.9(a) of the eStara Disclosure
--------------
Schedule, to eStara's knowledge, (i) no Person or entity is infringing,
violating or misappropriating any of eStara's Intellectual Property Rights and
(ii) none of the activities or business conducted by eStara infringes, violates
or constitutes a misappropriation of any Intellectual Property Rights of any
other person or entity and eStara has not received notice of any such claim. To
the knowledge of eStara, none of its employees or consultants is obligated under
any contract (including licenses, covenants or commitments of any nature) or
other agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with his or her obligations to
promote the interests of eStara's business.
5.10 Taxes. Except where failure to file would not reasonably be
expected to have an eStara Material Adverse Effect, eStara has filed all Tax
Returns required to be filed by it, and eStara has paid all Taxes shown to be
due by such Tax Returns as well as all other Taxes, assessments and governmental
charges which have become due or payable, including without limitation all Taxes
which eStara is obligated to withhold from amounts owing to employees, creditors
and third parties. eStara has established adequate reserves for all Taxes
accrued but not yet payable as of the date of the eStara Balance Sheet. No
income Tax Returns of eStara has been audited by the Internal Revenue Service or
any other Governmental Authority. No deficiency assessment with respect to or
proposed adjustment of eStara's Taxes is pending or, to the knowledge of eStara,
threatened. eStara has never been an S corporation within the meaning of Section
1361(a) of the Internal Revenue Code of 1986, as amended (the "Code").
5.11 Governmental Approvals. Subject to the accuracy of the
representations and warranties of Sellers set forth herein, no registration or
filing with, or consent or approval of or other action by, any Governmental
Authority is or will be necessary for the valid execution,
15
delivery and performance by eStara of the Transaction Documents, the issuance,
sale and delivery of the Preferred Shares or, upon due conversion thereof, the
issuance and delivery of the Conversion Shares, other than (i) filings pursuant
to Federal and state securities laws (all of which filings have been made by
eStara, other than those which are permitted to be made after the Closing and
which will be duly made on a timely basis as necessary) in connection with the
sale of the Preferred Shares and (ii) with respect to the Registration Rights
Agreement, the registration of the shares covered thereby with the Securities
and Exchange Commission (the "Commission").
5.12 Books and Records. eStara's books of account, ledgers, order
books, records and documents accurately and completely reflect all material
information relating to eStara's business, the nature, acquisition, maintenance,
location and collection of eStara's assets, and the nature of all transactions
giving rise to the obligations or accounts receivable of eStara.
5.13 Brokers. eStara has no contract, arrangement or understanding with
any broker, finder or similar agent with respect to the transactions
contemplated by the Transaction Documents.
5.14 Employees. eStara has complied in all material respects with all
Applicable Laws relating to the employment of labor, including provisions
relating to wages, hours, equal opportunity, collective bargaining and the
payment of Social Security and other Taxes. With respect to the employees and
former employees of eStara, there are no employee post-retirement medical or
health plans of eStara in effect, except as required by Section 4980B of the
Code.
5.15 Environmental Protection. eStara, the operation of its business,
and any real property that eStara leases or otherwise occupies or uses (the
"eStara Premises") are in compliance in all material respects with all
applicable Environmental Laws and orders or directives of any governmental
authorities having jurisdiction under such Environmental Laws. eStara has not
received any citation, directive, letter or other written communication, or any
notice of any proceeding, claim or lawsuit pursuant to such Environmental Laws,
from any Person arising out of the use or occupation of any of the eStara
Premises, or the conduct of the operations of eStara's business. eStara has
obtained and is maintaining in full force and effect all necessary permits,
licenses and approvals, if any, required by all Environmental Laws applicable to
its business and is in compliance with all such permits, licenses and approvals.
5.16 ERISA. With respect to eStara:
(a) No Employee Plan is a Multiemployer Plan and no Employee
Plan is subject to Title IV of ERISA. eStara and its ERISA Affiliates have not
incurred, nor do they expect to incur, any liability under Title IV of ERISA
arising in connection with the termination of any plan covered or previously
covered by Title IV of ERISA.
(b) No "prohibited transaction," within the meaning of Section
406 of ERISA or Section 4975 of the Code, has occurred with respect to any
Employee Plan which would subject eStara to any Taxes, penalties or other
liabilities under ERISA Sections 406 or 502(i) or under Code Section 4975.
16
(c) Each Employee Plan has been maintained and administered in
substantial compliance with its terms and with the requirements prescribed by
any and all statutes, orders, rules and regulations which are applicable to it.
(d) Other than routine claims for benefits under the Employee
Plans, there are no pending, or, to the knowledge of eStara, threatened, actions
or proceedings involving the Employee Plans, or the fiduciaries, administrators,
or trustees of any of the Employee Plans, or eStara or any of its ERISA
Affiliates (in each case, in actions or proceedings respecting the Employee
Plans), with the Internal Revenue Service, the United States Department of
Labor, any participant or beneficiary of any of the Employee Plans or any other
Person whomsoever.
(e) Each Employee Plan that is intended to be tax-qualified
under Section 401(a) of the Code has received from the Internal Revenue Service
a determination letter that such Employee Plan is so qualified, which letter has
not been revoked, and, to the knowledge of eStara, no event has occurred and no
condition exists that could adversely affect such Plan's tax-qualified status.
5.17. Disclosure. Neither this Agreement nor any Schedule or Exhibit to
this Agreement nor any other Transaction Document contains an untrue statement
by eStara of a material fact or omits a material fact necessary to make the
statements by eStara contained herein or therein not misleading in any material
respect.
VI. PRE-CLOSING COVENANTS
6.1 No Inconsistent Action. Neither eStara nor Sellers shall (a) take
any action which is materially inconsistent with their respective obligations
under this Agreement or which shall render any of their representations herein
inaccurate in any material respect (or, with respect to representations
qualified as to materiality, in any respect), other than representations made as
of a particular date, or (b) agree, in writing or otherwise, to do any of the
foregoing.
6.2 Injunctions. If any United States, state or foreign court having
jurisdiction over any party issues or otherwise promulgates any order which
prohibits the consummation of the transactions contemplated hereby, the parties
will use their respective reasonable efforts to have such injunction dissolved
or otherwise eliminated as promptly as possible and to pursue the underlying
litigation diligently and in good faith.
6.3 Governmental Actions. eStara and Sellers shall as promptly as
practicable comply with any laws which are applicable to any of the transactions
contemplated hereby and pursuant to which any Governmental Approval in
connection with the transactions contemplated hereby is necessary. eStara and
Sellers shall furnish to the other such necessary information and reasonable
assistance as the other may reasonably request in connection with its
preparation of any filing, registration, or declaration which is necessary under
any Applicable Law.
6.4 Third Party Consents. eStara and Sellers will cooperate and use
their respective reasonable efforts to obtain or cause to be obtained prior to
Closing, or as promptly as practicable thereafter, all Consents (other than
Consents relating to Conveyed Contracts, which Consents are governed by Section
1.3), in a manner that will avoid any default, conflict, or termination of
rights in respect thereof.
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6.5 Access.
(a) Except as otherwise required by the confidentiality
obligations of Sellers, prior to the Closing, upon reasonable notice from eStara
to ITXC, Sellers will afford to the officers, employees, attorneys, accountants,
or other authorized representatives (including, without limitation,
environmental consultants) of eStara reasonable access during normal business
hours to the employees, Assets, facilities, and books and records of ITXC's
eCommerce Business so as to afford eStara a full opportunity to make such
review, examination, and investigation of ITXC's eCommerce Business as eStara
may desire to make. Except as otherwise required by the confidentiality
obligations of ITXC, eStara will be permitted to make such extracts from or to
make such copies of such books and records as may be reasonably necessary in
connection therewith. Except as otherwise required by the confidentiality
obligations of ITXC, prior to the Closing, Sellers will promptly furnish or
cause to be furnished to eStara such financial and operating data and other
information of ITXC's eCommerce Business as eStara shall reasonably request
pursuant to this Section 6.5.
(b) Except as otherwise required by the confidentiality
obligations of eStara, prior to the Closing, upon reasonable notice from Sellers
to eStara, eStara will afford to the officers, employees, attorneys,
accountants, or other authorized representatives (including, without limitation,
environmental consultants) of Sellers reasonable access during normal business
hours to the employees, assets, facilities, and books and records of eStara so
as to afford Sellers a full opportunity to make such review, examination, and
investigation of eStara as Sellers may desire to make. Except as otherwise
required by the confidentiality obligations of eStara, ITXC will be permitted to
make such extracts from or to make such copies of such books and records as may
be reasonably necessary in connection therewith. Except as otherwise required by
the confidentiality obligations of eStara, prior to the Closing, eStara will
promptly furnish or cause to be furnished to Sellers such financial and
operating data and other information regarding eStara as Sellers shall
reasonably request pursuant to this Section 6.5.
6.6 Conduct Prior to Closing.
(a) During the period between the date hereof and the Closing,
Sellers shall:
(i) use reasonable efforts to conduct ITXC's
eCommerce Business in the ordinary course of business
consistent with past practice;
(ii) pay and discharge the liabilities of ITXC's
eCommerce Business in the ordinary course of business in
accordance and consistent with the previous practices of
ITXC, except those contested in good faith by ITXC;
(iii) except for pay or benefit increases, advances
or bonuses made in the ordinary course of business consistent
with past practices, not increase the compensation or benefits
of or make any advance (excluding advances for ordinary and
necessary business expenses) or loan to any employee employed
in the operation of ITXC's eCommerce Business;
(iv) not sell, assign, or transfer any of the Assets,
except for the replacement or betterment of obsolete or worn
out equipment and sales in the
18
ordinary course of business consistent with past practice,
and not permit any of the Assets to be subjected to any Lien
(other than Permitted Liens);
(v) not materially amend, materially modify or
terminate any of the agreements listed on Schedule 6.6(a)(v)
-----------------
annexed hereto, enter into any agreements by which Sellers
propose to license or otherwise provide access to any source
code included in the Assets or enter into any material
agreement relating to ITXC's eCommerce Business;
(vi) not enter into any transaction outside of the
ordinary course of business with respect to ITXC's eCommerce
Business;
(vii) not take any action with respect to ITXC's
eCommerce Business or omit to take any action with respect to
ITXC's eCommerce Business which action or omission would
result in a breach of any of the representations and
warranties set forth in Article IV, other than a breach
which, together with any other such breaches, would not
constitute an ITXC Material Adverse Effect; and
(viii) not agree, in writing or otherwise, to do any
of the foregoing.
(b) Each of the Sellers shall use its reasonable efforts to
preserve intact ITXC's eCommerce Business and carry on ITXC's eCommerce
Business, keep available to ITXC's eCommerce Business the services of the
present employees of ITXC's eCommerce Business, preserve and protect the
eCommerce Intellectual Property Rights and the value thereof, and promote and
preserve the goodwill of suppliers, customers, creditors and others having
business relations with ITXC's eCommerce Business.
(c) During the period between the date hereof and the
Closing, eStara shall not:
(i) amend eStara's Charter, other than as
contemplated herein, or submit any such amendment to the
shareholders of eStara;
(ii) amend its by-laws;
(iii) adopt or amend any benefit plan pursuant to
which any Person may acquire any equity securities of eStara;
(iv) issue any shares of its capital stock, other
than upon the exercise or conversion of any stock options,
warrants or convertible securities described in Section 5.4
-----------
of the eStara Disclosure Schedule and except as contemplated
hereby;
(v) grant any options, warrants or other rights to
acquire equity securities of eStara other than pursuant to
benefit plans described in Section 5.3(d) of the eStara
-------------
Disclosure Schedule;
(vi) pay any dividend or other distribution with
respect to any equity securities of eStara;
19
(vii) redeem or otherwise purchase any equity
securities of eStara;
(viii) enter into any transaction outside the
ordinary course of eStara's business or enter into any new
line of business except as contemplated hereby; or
(ix) agree, in writing or otherwise, to do any of
the foregoing.
6.7 Notification.
(a) Sellers shall provide prompt written notice to eStara,
and eStara shall provide prompt written notice to Sellers (in each case within
five (5) business days), of any litigation, arbitration, or administrative
proceeding pending or, to such Person's knowledge, threatened against Sellers,
on the one hand, or eStara, on the other hand, which challenges the transactions
contemplated hereby.
(b) Sellers will provide prompt written notice to eStara (in
any event within five (5) business days) of any development or information
causing or which constitutes or would at the Closing constitute a material
breach of any of their representations, warranties or covenants contained
herein, in the ITXC Disclosure Schedule or any of the Exhibits or Schedules
referred to herein or attached hereto and shall promptly furnish any information
which eStara may reasonably request in relation to such development or
information; provided, however, that such notice shall not operate to cure any
--------- --------
breach of the representations and warranties made herein, in the ITXC Disclosure
Schedule or any of the Exhibits or Schedules referred to herein or attached
hereto.
(c) eStara will provide prompt written notice to ITXC (in any
event within five (5) business days) of any development or information causing
or which constitutes or would at the Closing constitute a material breach of any
of its representations, warranties or covenants contained herein, in the eStara
Disclosure Schedule or any of the Exhibits or Schedules referred to herein or
attached hereto and shall promptly furnish any information which ITXC may
reasonably request in relation to such development or information; provided,
---------
however, that such notice shall not operate to cure any breach of the
--------
representations and warranties made herein, in the eStara Disclosure Schedule or
any of the Exhibits or Schedules referred to herein or attached hereto.
(d) At all times prior to the consummation of the Closing,
Sellers shall promptly notify eStara in writing, and eStara shall promptly
notify ITXC in writing, of any fact, condition, event or occurrence that will or
may result in the failure of any of the conditions contained in Sections 7.1,
7.2 or 7.3.
(e) Notwithstanding the above, Sellers may notify their
employees that a transaction may be pending and that they cannot assure them of
continued employment.
6.8 Publicity. Prior to the Closing, neither party will issue or cause
the publication of any press release or other public announcement with respect
to this Agreement or the transactions contemplated hereby without the prior
consent of the other party, which consent will
20
not be unreasonably withheld; provided, however, that nothing herein will
--------- --------
prohibit either party from issuing or causing publication of any such press
release or public announcement to the extent that such party determines such
action to be required by law or the rules of any national stock exchange or
self-regulatory organization applicable to it or its Affiliates, in which event
the party making such determination will, if practicable in the circumstances,
use reasonable efforts to allow the other party reasonable time to comment on
such release or announcement in advance of its issuance. Notwithstanding the
above, Sellers may notify their employees that a transaction may be pending and
that they cannot assure them of continued employment.
6.9 Satisfaction of Conditions. Without limiting the generality or
effect of any provision of Article VI, prior to the Closing, each of the parties
will use reasonable commercial efforts with due diligence and in good faith to
satisfy promptly all conditions required hereby to be satisfied by such party in
order to expedite the consummation of the transactions contemplated hereby.
6.10 Sellers' Employees. eStara shall have the right to interview and
offer employment, such employment to commence immediately after the Closing, to
all persons employed in ITXC's eCommerce Business as of the date hereof. It is
understood that eStara is under no obligation to hire any of such employees. To
the extent that eStara hires any of such employees in its sole discretion (the
"Hired Employees"), (i) such employment shall be on an at-will basis, (ii)
eStara shall provide such Hired Employees with benefits pursuant to eStara's
benefit plans and policies, which benefits shall commence effective as of the
Closing Date or the date of hire, and (iii) eStara shall require such Hired
Employees, as a condition of employment, to acknowledge in writing to Sellers
that such Hired Employees are not entitled to any severance from Sellers or
eStara. With respect to employee pension, welfare and fringe benefits provided
by eStara to Hired Employees, and subject to any terms, conditions or
restrictions in eStara's benefit plans which prohibit such actions, (i) service
with Sellers credited as service for purposes of the Sellers' plans, policies,
programs, and arrangements shall be recognized for purposes of participation,
eligibility, vesting and benefit accrual under eStara's plans, policies,
programs, and arrangements and (ii) eStara shall waive all waiting periods and
pre-existing condition requirements under any plans that have any such
requirements or restrictions. Sellers shall terminate all Hired Employees on or
prior to the Closing Date. Sellers shall deliver employment records and files
for all Hired Employees to eStara to the extent permitted by law. For a period
of two years from the Closing Date, Sellers will not solicit any Hired Employee
or other employee employed by or otherwise engaged to perform services for
eStara in connection with the operation of ITXC's eCommerce Business; provided
that nothing herein shall preclude Sellers from making general solicitations or
soliciting any Person who has been dismissed as an employee of eStara.
Notwithstanding any provision herein to the contrary, except for the Assumed
Liabilities and as otherwise set forth in this Section, Sellers are solely
responsible for defending, and for any liabilities for, any claims arising out
of the employment or termination of employment of the Sellers' employees by
Sellers and for any salary, wages, overtime, bonuses, incentives, health care
insurance and benefits, retirement benefits, pension benefits or similar
employment-related payments or benefits of the Sellers' employees accruing or
arising prior to the consummation of the Closing. eStara shall assume liability
and have sole responsibility for all claims arising out of eStara's employment
of the Hired Employees after the first date of employment with eStara and for
all vacation, benefits, salary, wages, overtime, bonuses, incentives, health
care insurance and benefits, retirement benefits, pension benefits and other
similar employment-related payments or benefits of the Hired Employees accruing
or arising
21
from the Hired Employees' employment with eStara after the first date
of employment with eStara
6.11 Further Assurances. Following the Closing, each of Sellers and
eStara shall, from time to time, execute and deliver such additional
instruments, documents, conveyances or assurances and take such other actions as
shall be necessary, or otherwise reasonably requested by the other party, to
confirm and assure the rights and obligations provided for in this Agreement and
the other Transaction Documents and to render effective the consummation of the
transactions contemplated hereby.
6.12 Certificates of Tax Authorities. On or before the Closing Date,
Sellers shall provide to eStara copies of certificates from the appropriate
taxing authority stating that no Taxes are due to any State or other taxing
authority for which eStara could have liability to withhold or pay Taxes with
respect to the transfer of the Assets or ITXC's eCommerce Business, provided
--------
that any failure to provide such certificates to eStara which failure is not the
fault of the Sellers shall not relieve eStara of its obligations to consummate
the Closing.
6.13 Sellers Non-Compete.
(a) The following terms when used in this Section 6.13 shall have the
following meanings:
"Competitive Business" means the business of providing Push to Talk
services; provided, however, that providing communications service to a
competitor of eStara shall not be deemed to constitute a "Competitive
Business".
"Directly or Indirectly" means as an individual, partner, shareholder,
director, officer, principal, agent or employee.
"Push to Talk" means a process or application by or through which voice
communication is established by an initiating party ("Calling Party") clicking
on a button or icon on a computer screen associated with a fixed number, which
fixed number is predetermined prior to the Calling Party seeing the button or
icon and in which no choice of number is made available to the Calling Party, as
a means to immediately initiate a voice call from the Internet in which the
non-initiating party ("Called Party") is a call center, and in which the
communication is not paid for by the Calling Party. Notwithstanding the above,
if the Called Party charges the Calling Party for content, and the charge for
communications is included in the content charge and paid by the Called Party,
as in the adult entertainment or astrology industries, this shall not be deemed
to disqualify the call from the definition of Push to Talk.Push to Talk,
however, excludes such a process or application where (a) the Called Party is
using the button or icon to provide voice telephone service other than to the
Called Party, or (b) where the use of the icon or link is for configuration or
provisioning of a communications path which may then be used for a plurality of
voice calls. As used in this paragraph, "call center" means any collection of
one or more agents of a business reached through a single PSTN number who
primarily handle telephone inquiries or telephone transactions.
"Restricted Territory" means the world.
22
(b) Neither of the Sellers nor any subsidiary of the Sellers
shall, for a period of three years after the date hereof, directly or
indirectly, engage in a Competitive Business in the Restricted Territory;
provided, however, that the Sellers shall not be deemed to have violated this
Section 6.13(b) in the event that Sellers or their subsidiaries acquire (or
merge with) and thereafter own and operate a Person (a "Target") which operates
a Competitive Business if (i) such Competitive Business, on the date on which
the applicable acquisition agreement is signed, represents less than one third
of the consolidated assets of the Target and its subsidiaries or (ii) such
Competitive Business, during the most recent twelve calendar months preceding
the calendar month in which such acquisition agreement is signed, represents
less than one third of the consolidated revenues of the Target and its
subsidiaries.
(c) Sellers acknowledge that in view of the nature of ITXC's
eCommerce Business and the business objectives of eStara in acquiring the
Assets, the foregoing territorial and time limitations are reasonable and
properly required for the adequate protection of eStara and that in the event
that any such territorial or time limitation is deemed to be unreasonable and is
then reduced by a court of competent jurisdiction, then, as reduced, the
territorial and/or time limitation shall be enforced.
(d) Sellers further acknowledge that the foregoing territorial
and time restrictions are essential to protect the goodwill and going concern
value of ITXC's eCommerce Business, and comprise an essential portion of the
consideration received by eStara under this Agreement. Sellers acknowledge that
the remedy at law for any breach by Sellers of the agreements contained in this
Section 6.13 will be inadequate and that eStara will be entitled to seek
injunctive relief without being required to prove actual damages or post bond.
Sellers and eStara acknowledge that if any or all of the provisions of this
Section 6.13 are held to be unenforceable for any reason whatsoever, it will not
in any way invalidate or affect the remainder of this Agreement which will
remain in full force and effect.
6.16 Domain Names. Sellers covenant and agree to take such steps as may
be necessary in order that the registrar of each of the domain names conveyed by
Sellers pursuant to Section1.1(d) hereof (the "Domain Names") may effectuate the
transfer of the Domain Names as expeditiously as possible after the Closing,
including but not limited to executing any and all necessary documents as eStara
may reasonably request in order to effect such transfer.
VII. CLOSING CONDITIONS
7.1 Conditions to Obligations of Both of the Parties. The obligation of
each party to effect the transactions contemplated hereby (the "Transaction")
and to consummate the Closing shall be subject to the fulfillment, at or prior
to the Closing Date, of the following conditions:
(a) No third party shall have instituted any suit or
proceeding to restrain, enjoin or otherwise prevent the consummation of the
Transaction which suit or proceeding has not been dismissed.
(b) No order shall have been issued by any court or
administrative body to restrain, enjoin or otherwise prevent consummation of the
Transaction.
23
7.2 Conditions to the Obligations of eStara. The obligations of eStara
to effect the Transaction and to consummate the Closing are subject to the
satisfaction, on or prior to the Closing Date, of all the following conditions,
compliance with which or the occurrence of which may be waived in whole or in
part by eStara in writing:
(a) Representations and Warranties True at the Closing Date. Except for
(i) changes expressly contemplated by this Agreement, (ii) misrepresentations
which individually or in the aggregate do not, or could not reasonably be
expected to, have an ITXC Material Adverse Effect and (iii) representations made
as of a particular date, the representations and warranties of Sellers contained
in Article IV of this Agreement (A) shall be true and correct in all material
respects (except for representations and warranties which are qualified as to
materiality, which representations and warranties shall be true in all respects)
at and as of the date hereof, and (B) shall be repeated and shall be true and
correct in all material respects (except for representations and warranties
which are qualified as to materiality, which representations and warranties
shall be true in all respects) on and as of the Closing Date with the same
effect as though made on and as of the Closing Date. At the Closing, Sellers
shall have delivered to eStara a certificate to the foregoing effect signed by
an executive officer of ITXC and dated the Closing Date.
(b) Sellers' Performance. Each of the obligations, agreements and
conditions of Sellers required to be performed or complied with by Sellers on or
before the Closing Date pursuant to the terms of this Agreement and the other
Transaction Documents shall have been duly performed or complied with in all
material respects as of the Closing Date. At the Closing Date, Sellers shall
have delivered to eStara a certificate to the foregoing effect signed by an
executive officer of ITXC and dated the Closing Date.
(c) Documents. ITXC shall have furnished eStara with each of the
documents contemplated by Section 9.2
(d) Consents to Assignment. Sellers shall have obtained and shall have
delivered to eStara copies of (i) all Governmental Approvals required to be
obtained by Sellers in connection with the execution and delivery of the
Transaction Documents and the consummation of the Transaction, and (ii) all
Consents listed on Schedule 7.2(d) annexed hereto. Notwithstanding any provision
---------------
herein to the contrary, provided that Sellers comply with their obligations
under Section 1.3 and obtain each of the Consents listed on Schedule 7.2(d)
annexed hereto, eStara's obligations herein shall not be conditioned on the
receipt of any Consent.
(e) Corporate Proceedings. All corporate and other proceedings of the
Sellers in connection with the Transaction Documents and the Transaction, and
all documents and instruments incident thereto, shall be reasonably satisfactory
in substance and form to eStara and its counsel, and eStara and its counsel
shall have received all such documents and instruments, or copies thereof
certified if requested, as may be reasonably requested.
(f) Stockholder Consents and Waivers. All shareholders of eStara having
any preemptive, first refusal or other rights with respect to the issuance of
the Preferred Shares or the Conversion Shares shall have irrevocably waived the
same in writing; and all shareholders of eStara having any right to consent to
the Transaction shall have consented thereto in writing.
(g) Funding of Escrow. Sellers shall have delivered $300,000 (the
"Escrow Amount") to the Escrow Agent (as defined in the Escrow Agreement).
24
7.3 Conditions to the Obligations of ITXC. The obligations of Sellers to
effect the Transaction and to consummate the Closing are subject to the
satisfaction, on or prior to the Closing Date, of all the following conditions,
compliance with which or the occurrence of which may be waived in whole or in
part by ITXC in writing:
(a) Representations and Warranties True at the Closing Date. Except for
(i) changes expressly contemplated by this Agreement, (ii) misrepresentations
which individually or in the aggregate do not, or could not reasonably be
expected to, have an eStara Material Adverse Effect and (iii) representations
made as of a particular date, the representations and warranties of eStara
contained in Article V of this Agreement (A) shall be true and correct in all
material respects (except for representations and warranties which are qualified
as to materiality, which representations and warranties shall be true in all
respects) at and as of the date hereof, and (B) shall be repeated and shall be
true and correct in all material respects (except for representations and
warranties which are qualified as to materiality, which representations and
warranties shall be true in all respects) on and as of the Closing Date with the
same effect as though made on and as of the Closing Date. At the Closing, eStara
shall have delivered to ITXC a certificate to the foregoing effect signed by an
executive officer of eStara and dated the Closing Date.
(b) eStara's Performance. Each of the obligations, agreements and
conditions of eStara required to be performed or complied with by it on or
before the Closing Date pursuant to the terms of this Agreement and the other
Transaction Documents shall have been duly performed or complied with in all
material respects as of the Closing Date. At the Closing Date, eStara shall have
delivered to Sellers a certificate to the foregoing effect signed by an
executive officer of eStara and dated the Closing Date.
(c) Documents. eStara shall have furnished ITXC with each of the
documents contemplated by Section 9.3.
(d) Consents and Approvals. Sellers shall have obtained the Consents
described in Schedule 7.3(d) annexed hereto.
(e) Percentage Ownership. As of the Closing, after giving effect to the
Transaction, the Conversion Shares shall represent 19.9% of the Common Stock
Deemed Outstanding.
(f) Corporate Proceedings. All corporate and other proceedings of eStara
in connection with the Transaction Documents and the Transaction, and all
documents and instruments incident thereto, shall be reasonably satisfactory in
substance and form to Sellers and their counsel, and Sellers and their counsel
shall have received all such documents and instruments, or copies thereof
certified if requested, as may be reasonably requested.
(g) Stockholder Consents and Waivers. All shareholders of eStara having
any preemptive, first refusal or other rights with respect to the issuance of
the Preferred Shares or the Conversion Shares shall have irrevocably waived the
same in writing (and copies of such waivers shall have been delivered to
Sellers); and all shareholders of eStara having any right to consent to the
Transaction shall have consented thereto in writing.
25
VIII. TERMINATION
8.1 Right to Terminate. This Agreement may be terminated at any time until
completion of the Closing as follows:
(a) by mutual consent of eStara and Sellers;
(b) by eStara or Sellers if the Closing shall not have occurred on or
before October 19, 2001 (the "Outside Date"), but no party shall be entitled to
terminate pursuant to this Section 8.1(b) if its own acts or failures to act
should delay the Closing beyond the Outside Date or if all conditions to its
obligation to consummate the Closing shall have been satisfied at least five
business days prior to the Outside Date;
(c) by eStara or either of the Sellers, respectively, if it shall have
discovered that (x) any representation or warranty made herein for its benefit,
or in any certificate, schedule or document furnished to it pursuant to this
Agreement, is untrue in any respect, provided that such untruth, individually or
in the aggregate, constitutes an ITXC Material Adverse Effect (with respect to
representations made for eStara's benefit) or an eStara Material Adverse Effect
(with respect to representations made for Sellers' benefit), or (y) Sellers (in
the case of a termination by eStara) or eStara (in the case of a termination by
either of the Sellers) shall have defaulted in the performance of any material
obligation under this Agreement; provided, however, that in order to terminate
this Agreement under this Section 8.1(c), the party seeking to terminate this
Agreement shall give written notice of such breach or default to the other party
and the other party shall fail to cure the breach or default by the earlier of
ten (10) days after receipt of such notice or the Outside Date; or
(d) by eStara or Sellers if it shall have reasonably determined that a
condition to its obligation to consummate the Closing cannot be satisfied.
8.2 Liability on Termination. Upon any termination of this Agreement
pursuant to Section 8.1, the provisions of this Agreement shall become void and
have no further effect (except that the provisions of this Section 8.2 and
Sections 13.2, 13.9, 13.18 and 13.19 of this Agreement shall remain in full
force and effect), without any liability to any person or entity in respect
hereof or of the transactions contemplated hereby on the part of any party
hereto, or any of its directors, officers, employees, agents, consultants,
representatives, advisers, stockholders or Affiliates, except that in the event
of a termination of this Agreement pursuant to Sections 8.1(b), 8.1(c) or 8.1(d)
involving intentional misconduct which materially injures a party hereto, the
breaching party hereunder, if any, shall be liable to any party damaged by such
breach for such damages as shall be permitted by law. Notwithstanding the
foregoing, all arrangements among the parties relating to the subject of
confidentiality shall remain in full force and effect.
8.3 Specific Enforcement. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that, in addition to any other remedy to which they are
entitled at law or in equity, the parties hereto will be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction over the parties, subject to the forum
selection provisions set forth in Section 13.18.
26
IX. CLOSING ARRANGEMENTS
9.1 The Closing. The consummation of the purchase and sale of the Assets
contemplated hereby (the "Closing") shall take place (i) at 10:00 New York City
time on the third business day after all conditions to Closing have been
satisfied or waived, or (ii) on such other date and at such time as shall be
mutually acceptable to Sellers and eStara, at the offices of Xxxxxxxxxx Xxxxxxx
PC, 00 Xxxxxxxxxx Xxxxxx, Xxxxxxxx, Xxx Xxxxxx 00000 (or at such other place as
shall be acceptable to Sellers and eStara). The date on which the Closing is
consummated is referred to in this Agreement as the "Closing Date." Closing
shall be deemed to be effective as of 12:01 a.m. (New York City time) on the
date on which the Closing is consummated (the "Effective Time"). At the Closing,
the parties shall execute and deliver the documents referred to in this Article
IX.
9.2 Documents to be Delivered by Sellers. At the Closing, Sellers will
execute and deliver, or will cause to be executed and delivered, to eStara the
following, in proper form for recording when appropriate:
(a) a xxxx of sale, assignment and general conveyance, covering all of
the Assets, in the form and substance of the xxxx of sale annexed hereto as
Exhibit 9.2(a) (the "Xxxx of Sale");
(b) an assignment and assumption agreement, covering the Conveyed
Contracts, in the form and substance of the agreement annexed hereto as Exhibit
9.2(b) (the "Assignment and Assumption Agreement");
(c) standard and customary assignments of eCommerce Intellectual
Property Rights in form and substance reasonably acceptable to eStara;
(d) the Registration Rights Agreement;
(e) the License Agreement;
(f) the Network Agreement;
(g) the Joinder;
(h) the Escrow Agreement;
(i) Certified Resolutions. Certified resolutions of the Boards of
Directors (or committees thereof) of Sellers approving the execution and
delivery of this Agreement and each of the other documents delivered by Sellers
pursuant hereto and authorizing the consummation of the transactions
contemplated hereby and thereby.
(j) Transition Services Agreement. A transition services agreement,
dated the Closing Date, between eStara and ITXC, in the form and substance of
the agreement annexed hereto as Exhibit 9.2(i) (the "Transition Services
Agreement").
27
9.3 Documents to be Delivered by eStara. At the Closing, eStara will
execute and deliver, or cause to be executed and delivered, to Sellers:
(a) Stock Certificate. A stock certificate, registered in ITXC's name,
representing such number of Preferred Shares as constitutes 19.9% of the Common
Stock Deemed Outstanding;
(b) Good Standing Certificates. A certificate of the Secretary of State
of the State of Maryland showing that eStara is duly incorporated and in good
standing, certified as of a recent date;
(c) the Xxxx of Sale;
(d) the Assignment and Assumption Agreement;
(e) the Registration Rights Agreement;
(f) the License Agreement;
(g) the Network Agreement;
(h) the Transition Services Agreement;
(i) the Escrow Agreement;
(j) Certified Resolutions. Certified resolutions of the Board of
Directors (or committees thereof) of eStara approving the execution and delivery
of this Agreement and each of the other documents delivered by eStara pursuant
hereto and authorizing the consummation of the transactions contemplated hereby
and thereby; and
(k) Waivers. Copies of the written waivers delivered by eStara's
stockholders waiving preemptive, first refusal or other rights with respect to
the issuance of the Preferred Shares or the Conversion Shares.
9.4 Post Closing Cash Adjustment. On or before October 15, 2001, eStara
and Sellers shall mutually agree upon the Negative Cash Adjustment and Positive
Cash Adjustment and shall give joint instructions to the Escrow Agent to
disburse the Escrow Amount to the parties consistent with the terms of Section
1.1(a). To the extent the Escrow Amount is insufficient to satisfy Seller's
obligation to eStara pursurant to Section 1.1(a), Sellers shall deliver any such
deficiency amount to eStara by wire transfer no later than October 17, 2001.
X. POST-CLOSING COVENANTS
10.1 Assistance in Obtaining Additional Financing. For a period of one
year after the Closing, ITXC shall make commercially reasonable efforts to
assist eStara in obtaining additional funding from venture capital firms,
investment banking firms and other sources of capital. It is understood that the
intent of this Section 10.1 is for ITXC to introduce eStara to
28
sources of capital; neither this nor any other provision herein shall obligate
ITXC to provide such capital or to expend substantial amounts of executive time
pursuing such capital.
10.2 Endorsements. During the term of the Network Agreement, ITXC shall
make commercially reasonable efforts to endorse eStara's products and services,
provided that:
(a) such obligation shall exist only if and to the extent that ITXC, in
its sole discretion, determines that such products or services meet ITXC's
commercial and quality criteria;
(b) the form and substance of such endorsements shall be solely in
ITXC's discretion;
(c) this Section 10.2 shall not preclude ITXC from endorsing the
products of other vendors, including vendors of products or services that
compete with eStara; and
(d) ITXC shall have the right to suspend or discontinue such
endorsements at any time if, in ITXC's sole discretion, ITXC determines that
eStara's products or services cease to meet ITXC's commercial and quality
criteria.
At such time or times as ITXC is actually endorsing eStara's products and
services pursuant to this Section 10.2, ITXC shall make available to eStara
cooperative marketing assistance on commercially reasonable terms.
10.3 Confidentiality. Each of the Sellers agree that after the Closing it
will not disclose, reveal, divulge or communicate to any Person other than
authorized officers, directors and employees of eStara, or use or otherwise
exploit for its own benefit or for the benefit of anyone other than eStara, any
Confidential Information. However, Sellers shall not have any obligation to keep
confidential any Confidential Information if and to the extent disclosure
thereof is specifically required by law; provided, however, that in the event
disclosure is required by Applicable Law, Sellers shall, to the extent
reasonably possible, provide eStara with prompt notice of such requirement prior
to making any disclosure so that eStara may seek an appropriate protective
order. For purposes of this Section 10.3, "Confidential Information" shall mean
any confidential information with respect to the conduct or details of ITXC's
eCommerce Business or eStara's business, including, without limitation,
financial and accounting information, Intellectual Property Rights, methods of
operation, customers and customer lists, services, proposed services, former
services, proposed or pending acquisitions of any company, division, product
line or other business unit, prices, fees, costs, plans, designs, technology,
inventions, trade secrets, marketing methods, policies, plans, personnel,
suppliers, competitors, markets and other proprietary matters; provided,
however, that the term Confidential Information does not include, and there
shall be no obligation hereunder with respect to, information that (a) is
generally available to the public on the date of this Agreement, (b) becomes
generally available to the public thereafter other than as a result of a
disclosure by Sellers not otherwise permissible hereunder, (c) is independently
developed by Sellers as established by documentary evidence, or (d) Sellers
learn from other sources where such sources have not violated their
confidentiality obligation to eStara. Notwithstanding the foregoing, Persons
employed by Sellers may continue to use customer contact information. The
parties hereto specifically acknowledge and agree that the remedy at law for any
breach of the foregoing will be inadequate and that in the event of a breach by
Sellers, eStara, in addition to any other relief available to it, shall be
entitled to
29
temporary and permanent injunctive relief without the necessity of proving
actual damage or posting any bond whatsoever.
10.4 Discharge of Business Obligations. From and after the Closing Date,
Sellers shall pay and discharge, in accordance with past practice but not less
than on a timely basis, all Retained Liabilities in respect of ITXC's eCommerce
Business, its operations or the assets and properties used therein. From and
after the Closing Date, eStara shall pay and discharge, in the ordinary course
but not less than on a timely basis, the Assumed Liabilities.
10.5 Maintenance of Books and Records. Each of Sellers and eStara shall
preserve, from and after the Closing Date until the sixth anniversary of the
Closing Date, all records possessed or to be possessed by such party relating to
any of the assets, liabilities or business of ITXC's eCommerce Business prior to
the Closing Date. After the Closing Date, where there is a legitimate purpose,
such party shall provide the other party with access, upon prior reasonable
written request specifying the need therefor, during regular business hours, to
(i) the officers and employees of such party and (ii) the books of account and
records of such party, but, in each case, only to the extent relating to the
assets, liabilities or business of ITXC's eCommerce Business prior to the
Closing Date, and the other party and its representatives shall have the right
to make copies of such books and records; provided, however, that the foregoing
right of access shall not be exercisable in such a manner as to interfere
unreasonably with the normal operations and business of such party; and further
provided that, as to such portion of such information as constitutes trade
secrets or confidential business information of such party, the requesting party
and its officers, directors and representatives will use due care to not
disclose such information except (i) as required by law, (ii) with the prior
written consent of such party, which consent shall not be unreasonably withheld,
or (iii) where such information becomes available to the public generally, or
becomes generally known to competitors of such party, through sources other than
the requesting party, its Affiliates or its officers, directors or
representatives. Such records may nevertheless be destroyed by a party if such
party sends to the other parties written notice of its intent to destroy
records, specifying with particularity the contents of the records to be
destroyed. Such records may then be destroyed after the 30th day after such
notice is given unless such other party objects to the destruction, in which
case the party seeking to destroy the records shall deliver such records to the
objecting party.
10.6 Payments Received. Sellers and eStara each agree that after the
Closing they will hold and will promptly transfer and deliver to the other, from
time to time as and when received by them, any cash, checks with appropriate
endorsements (using their reasonable efforts not to convert such checks into
cash), or other property that they may receive on or after the Closing which
properly belongs to the other party, including without limitation any insurance
proceeds, and will account to the other for all such receipts.
10.7 Post-Closing Notifications. eStara and Sellers will comply with any
post-Closing notification or other requirements, to the extent then applicable
to such party, of any antitrust, trade competition, investment or control,
export or other law of any Governmental Authority having jurisdiction over
Sellers.
10.8 Certain Tax Matters. All sales, use, transfer, stamp, conveyance,
value added or other similar taxes, duties, excises or governmental charges
imposed by any taxing jurisdiction, domestic or foreign, and all recording or
filing fees, notarial fees and other similar costs of
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Closing with respect to the transfer of the Assets or otherwise on account of
this Agreement or the transactions contemplated hereby will be borne by eStara.
10.9 Insurance. With respect to any loss, liability or damage relating to,
resulting from or arising out of the conduct of ITXC's eCommerce Business on or
prior to the Closing Date for which Sellers would be entitled to assert a claim
for recovery under any policy of insurance maintained by or for the benefit of
Sellers in respect of ITXC's eCommerce Business or the Assets, at the request
and expense of Sellers, eStara will, after the Closing, use reasonable efforts
to assert, or to assist Sellers to assert, one or more claims under such
insurance covering such loss, liability or damage if Sellers are not themselves
entitled to assert such claim but eStara is so entitled.
10.10 Release of Liens. In the event that at Closing any of the Assets
remain subject to a lien or other encumbrance, Sellers hereby agree to either:
(i) promptly obtain a release of such lien, which release may require the
payment of fees to the lienholder by a Seller; or (ii) substitute such Asset
with an unencumbered Asset of the similar value and purpose.
VIII. SURVIVAL AND INDEMNIFICATION
11.1 Survival of Representations, Warranties and Covenants.
(a) Except as to (i) the representations and warranties contained in
Section 4.8 relating to title to the Assets, which shall survive the Closing and
remain in effect indefinitely, (ii) the representations and warranties contained
in Sections 4.16 and 5.15 relating to environmental matters and the
representations and warranties contained in Section 5.16 relating to employee
benefit plans, which shall survive the Closing until the expiration of the
statute of limitations applicable thereto, and (iii) the representations and
warranties contained in Section 5.10 relating to Taxes, which shall survive the
Closing until the expiration of the last day on which any Tax may be validly
assessed by the Internal Revenue Service or any other Governmental Authority,
the representations and warranties of Sellers and eStara contained in this
Agreement or in any other Transaction Document or in any certificate delivered
at Closing (y) shall be deemed to have been relied upon notwithstanding any
investigation heretofore or hereafter made or omitted by any party hereto and
(z) shall survive the Closing until the expiration of two years from the Closing
Date. Any claim for an Indemnifiable Loss asserted within such period of
survival as herein provided will be timely made for purposes hereof.
(b) Unless a specified period is set forth in this Agreement (in which
event such specified period will control), the covenants in this Agreement will
survive the Closing and remain in effect indefinitely.
11.2 Limitations on Liability.
(a) For purposes of this Agreement, (i) "Indemnity Payment" means any
amount of Indemnifiable Losses required to be paid pursuant to this Agreement,
(ii) "Indemnitee" means any person or entity entitled to indemnification under
this Agreement, (iii) "Indemnifying Party" means any person or entity required
to provide indemnification under this Agreement, (iv) "Indemnifiable Losses"
means any and all damages, losses, liabilities, obligations, costs and expenses,
and any and all claims, demands or suits (by any person or entity, including,
without limitation, any Governmental Authority), including, without limitation,
31
the costs and expenses of any and all actions, suits, proceedings, demands,
assessments, judgments, prejudgment and postjudgment interest, other actual
and/or punitive damages, settlements and compromises relating thereto and
including reasonable attorneys' fees and expenses in connection therewith and
(v) "Third Party Claim" means any claim, action or proceeding made or brought by
any person or entity who or which is not a party to this Agreement or an
Affiliate of a party to this Agreement.
(b) Notwithstanding any other provision hereof or of any Applicable Law,
(i) no Indemnitee will be entitled to make a claim against an Indemnifying Party
in respect of any breach of a representation or warranty under Sections
11.3(a)(i) or 11.3(b)(i) unless and until the aggregate amount of claims in
respect of breaches of representations and warranties asserted for Indemnifiable
Losses under Section 11.3(a)(i), with respect to claims by eStara, or Section
11.3(b)(i), with respect to claims by Sellers, exceeds $100,000 (the "Basket
Amount"), in which event the Indemnitee will be entitled to make a claim against
the Indemnifying Party to the extent the aggregate amount of Indemnifiable
Losses exceeds the Basket Amount; and (ii) no Indemnitee shall be liable for
Indemnity Payments in respect of breaches of representations or warranties
asserted for Indemnifiable Losses under Sections 11.3(a)(i) or 11.3(b)(i), as
applicable, to the extent such aggregate Indemnity Payments by such Indemnifying
Party exceeds $4,709,843.
(c) An Indemnity Payment shall subsequently be reduced by a payment by
the Indemnitee to the Indemnifying Party in an amount equal to any net reduction
in liability for Taxes that is actually realized or, at the Indemnitee's
election, could be realized by an Indemnitee with respect to the payment or
accrual of an Indemnifiable Loss and by any net proceeds of insurance claims
that are actually received by an Indemnitee with respect to the payment or
accrual of an Indemnifiable Loss; provided, however, that in the event a taxing
authority disallows in whole or in part such net reduction in liability for
Taxes, an Indemnifying Party shall promptly repay to the Indemnitee the amount
of such increase in Taxes.
(d) Notwithstanding any provision herein to the contrary, in the event
that Sellers are required to provide indemnification under this Article XI,
Sellers may, in their discretion, satisfy some or all of their indemnification
obligations under this Article XI by delivering to the applicable Indemnitee
some or all of the Preferred Shares issued to Sellers hereunder and/or some or
all of the Conversion Shares issuable to the holders of the Preferred Shares
upon conversion of the Preferred Shares. For purposes of determining the value
delivered by Sellers if they elect to utilize such securities in such manner,
(i) each Preferred Share shall be conclusively deemed to have a value of $2.4072
per share, and (ii) each Conversion Share shall be conclusively deemed to have a
value of $.8024, in each case regardless of the actual appreciation or
depreciation in the value of the Preferred Shares and the Conversion Shares
subsequent to the Closing.
11.3 Indemnification.
(a) Subject to Sections 11.1 and 11.2, from and after the Closing Date,
Sellers agrees to indemnify, defend and hold harmless eStara and its Affiliates
and their respective directors, officers, partners, employees, agents and
representatives from and against any and all Indemnifiable Losses to the extent
relating to, resulting from or arising out of:
32
(i) any misrepresentation or breach of warranty on the part of
Sellers under the terms of any Transaction Document;
(ii) any nonfulfillment of any agreement or covenant on the part of
Sellers under the terms of any Transaction Document;
(iii) any Retained Liabilities;
(iv) any failure to comply with any "bulk sales" laws applicable to
the transactions contemplated hereby;
(v) any severance obligations that Sellers may have with respect to
employees of ITXC's eCommerce Business who are not hired by eStara prior to
October 15, 2001;
(vi) Connectel v. ITXC pending in the Eastern District of
Pennsylvania under Docket No. 00-CV-0267 or any subsequent litigation arising
out of the facts, circumstances and patent underlying such case; and
(vii) any and all expenses incurred by Sellers in connection with the
negotiation and execution of the Transaction Documents.
(b) Subject to Sections 11.1 and 11.2, from and after the Closing Date,
eStara agrees to indemnify, defend and hold harmless ITXC and its Affiliates,
and their respective directors, officers, partners, employees, agents and
representatives from and against any and all Indemnifiable Losses to the extent
relating to, resulting from or arising out of:
(i) any misrepresentation or breach of warranty on the part of eStara
under the terms of any Transaction Document;
(ii) any nonfulfillment of any agreement or covenant on the part of
eStara under the terms of any Transaction Document;
(iii) any Assumed Liabilities;
(iv) any liability that may arise as a result of ITXC's delivering
employment records and files to eStara;
(v) any severance obligations that Sellers may have with respect to
employees of ITXC's eCommerce Business who are hired by eStara prior to October
15, 2001; and
(vi) any and all expenses incurred by eStara in connection with the
negotiation and execution of the Transaction Documents.
11.4 Defense of Claims.
(a) If any Indemnitee receives notice of assertion or commencement of
any Third Party Claim against such Indemnitee with respect to which an
Indemnifying Party is
33
obligated to provide indemnification under this Agreement, the Indemnitee will
give such Indemnifying Party reasonably prompt written notice thereof. Such
notice will describe the Third Party Claim in reasonable detail, will include
copies of all material written evidence thereof and will indicate the estimated
amount, if reasonably practicable, of the Indemnifiable Loss that has been or
may be sustained by the Indemnitee. The Indemnifying Party will have the right
to participate in or, by giving written notice to the Indemnitee, to assume the
defense of any Third Party Claim at such Indemnifying Party's own expense and by
such Indemnifying Party's own counsel (provided that such counsel is reasonably
satisfactory to the Indemnitee), and the Indemnitee will cooperate in good faith
in such defense.
(b) If, within 10 calendar days after giving notice of a Third Party
Claim to an Indemnifying Party pursuant to Section 11.4(a), an Indemnitee
receives written notice from the Indemnifying Party that the Indemnifying Party
has elected to assume the defense of such Third Party Claim as provided in the
last sentence of Section 11.4(a), the Indemnifying Party will not be liable for
any legal expenses subsequently incurred by the Indemnitee in connection with
the defense thereof; provided, however, that if the Indemnifying Party fails to
take reasonable steps necessary to defend diligently such Third Party Claim
within 10 calendar days after receiving written notice from the Indemnitee that
the Indemnitee believes the Indemnifying Party has failed to take such steps, or
if the Indemnifying Party has not undertaken fully to indemnify the Indemnitee
in respect of all Indemnifiable Losses relating to the matter, the Indemnitee
may assume its own defense, and the Indemnifying Party will be liable for all
reasonable costs or expenses paid or incurred in connection therewith. Without
the prior written consent of the Indemnitee, the Indemnifying Party will not
enter into any settlement of any Third Party Claim which would lead to liability
or create any financial or other obligation on the part of the Indemnitee for
which the Indemnitee is not entitled to indemnification hereunder. If a firm
offer is made to settle a Third Party Claim without leading to liability or the
creation of a financial or other obligation on the part of the Indemnitee for
which the Indemnitee is not entitled to indemnification hereunder and the
Indemnifying Party desires to accept and agree to such offer, the Indemnifying
Party will give written notice to the Indemnitee to that effect. If the
Indemnitee fails to consent to such firm offer within 10 calendar days after its
receipt of such notice, the Indemnitee may continue to contest or defend such
Third Party Claim and, in such event, the maximum liability of the Indemnifying
Party as to such Third Party Claim will not exceed the amount of such settlement
offer, plus costs and expenses paid or incurred by the Indemnitee through the
end of such 10 calendar day period.
(c) A failure to give timely notice or to include any specified
information in any notice as provided in Sections 11.4(a) or 11.4(b) will not
affect the rights or obligations of any party hereunder except and only to the
extent that, as a result of such failure, any party which was entitled to
receive such notice was deprived of its right to recover any payment under its
applicable insurance coverage or was otherwise damaged as a result of such
failure.
(d) The Indemnifying Party will have a period of 30 calendar days within
which to respond in writing to any claim by an Indemnitee on account of an
Indemnifiable Loss which does not result from a Third Party Claim. If the
Indemnifying Party does not so respond within such 30 calendar day period, the
Indemnifying Party will be deemed to have rejected such claim, in which event
the Indemnitee will be free to pursue such remedies as may be available to the
Indemnitee on the terms and subject to the provisions of this Article XI.
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(e) If the amount of any Indemnifiable Loss, at any time subsequent to
the making of an Indemnity Payment, is reduced by recovery, settlement or
otherwise under or pursuant to any insurance coverage, or pursuant to any claim,
recovery, settlement or payment by or against any other entity, the amount of
such reduction, less any costs, expenses, premiums or taxes incurred in
connection therewith (together with interest thereon from the date of payment
thereof at the annualized rate of interest equal to the "prime" or "reference"
rate of interest as publicly announced by Citibank Bank, N.A. and in effect from
time to time during the relevant period, calculated on the basis of the actual
number of days elapsed over 365) will promptly be repaid by the Indemnitee to
the Indemnifying Party. Upon making any Indemnity Payment the Indemnifying Party
will, to the extent of such Indemnity Payment, be subrogated to all rights of
the Indemnitee against any third party that is not an Affiliate of the
Indemnitee in respect of the Indemnifiable Loss to which the Indemnity Payment
related; provided, however, that (i) the Indemnifying Party shall then be in
compliance with its obligations under this Agreement in respect of such
Indemnifiable Loss, and (ii) until the Indemnitee recovers fully payment of its
Indemnifiable Loss, any and all claims of the Indemnifying Party against any
such third party on account of said Indemnity Payment will be subrogated and
subordinated in right of payment to the Indemnitee's rights against such third
party. Without limiting the generality or effect of any other provision hereof,
each such Indemnitee and Indemnifying Party will duly execute upon request all
instruments reasonably necessary to evidence and perfect the above described
subrogation and subordination rights.
XII. DEFINITIONS
12.1Defined Terms. The following terms shall have the following meanings:
"Affiliate" of any Person (the "First Person") shall mean any other Person
who controls, is controlled by or is under common control with such First
Person.
"Applicable Law(s)" when used in the singular, shall mean all applicable
provisions of all (i) constitutions, treaties, statutes, laws (including common
law), rules, regulations, ordinances, codes or orders of any Governmental
Authority, (ii) Governmental Approvals and (iii) orders, decisions, injunctions,
judgments, awards and decrees of or agreements with any Governmental Authority,
and, when used in the plural, shall mean all of the above.
"Common Stock shall mean eStara's common stock, par value $.01 per share.
"Common Stock Deemed Outstanding" shall mean all issued and outstanding
shares of Common Stock immediately after the issuance of the Preferred Shares
(assuming the conversion of all outstanding preferred stock and the exercise of
all outstanding options, warrants and other rights to acquire Common Stock).
"Consent" shall mean any consent, approval, authorization, waiver, permit,
grant, franchise, concession, agreement, license, exemption or order of,
registration, certificate, declaration or filing with, or report or notice to
any person or entity, including but not limited to any Governmental Authority.
"Conversion Shares" shall mean the shares of Common Stock issuable upon
conversion of the shares of Preferred Stock issued and delivered to ITXC
hereunder.
35
"Employee Plan" means each "employee benefit plan," as such term is defined
in Section 3(3) of ERISA, that (A)(i) is or has ever covered any past or current
employee of eStara or any of its ERISA Affiliates as a participant or otherwise,
(ii) is or has ever been subject to any provision of ERISA and (iii) is or has
ever been maintained or contributed to by eStara or any of its ERISA Affiliates,
or (B)(i) is or has ever been subject to any provision of Title IV of ERISA and
(ii) is or has ever been maintained or contributed to by any of eStara's ERISA
Affiliates.
"Environmental Laws" shall mean any foreign, Federal, state or local law or
ordinance or regulation pertaining to the protection of human health or the
environment, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Sections 9601, et seq., the
Emergency Planning and Community Right-to-Know Act, 42 U.S.C. Sections 11001, et
seq., and the Resource Conservation and Recovery Act, 42 U.S.C. Sections 6901,
et seq.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" of any entity means any other entity that, together with
such entity, would be treated as a single employer under Section 414 of the
Code.
"Governmental Approvals" means any Consent of, with or to any Governmental
Authority.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government, including, without limitation, any governmental
authority, agency, department, board, commission or instrumentality of the
United States, any State of the United States or any political subdivision
thereof, and any tribunal or arbitrator(s) of competent jurisdiction, and
any self-regulatory organization.
"Intellectual Property Rights" shall mean all rights with respect to all
(i) patents, patent rights and patent applications, (ii) copyrights,
copyright applications and registrations thereof, and copyrighted
materials; (iii) mask works and registrations and applications for
registration thereof, (iv) Software, (v) trade secrets and confidential
business information, whether patentable or unpatentable and whether or not
reduced to practice, know-how, manufacturing and production processes and
techniques, research and development information, copyrightable works,
financial, marketing and business data, pricing and cost information,
business and marketing plans and customer and supplier lists and
information, (vi) trademarks, trademark applications, service marks,
service xxxx applications, trade names, domain names and applications and
registrations therefor, (vii) franchises, licenses, inventions,
instructions, trade dress, logos and designs and (viii) other proprietary
rights relating to any of the foregoing, in each case (i.e., clauses (i)
through (viii)) as owned or licensed by the holder of such rights or any of
its subsidiaries.
"Multiemployer Plan" means each Employee Plan that is a multiemployer plan,
as defined in Section 3(37) of ERISA.
36
"Negative Cash Adjustment" shall mean (a) zero, if the number of ITXC
employees who are offered employment by eStara and who accept such employment
prior to October 15, 2001 is equal to eight (8), or (b) $37,500 times the
Negative Cash Adjustment Number, if the number of ITXC employees who are offered
employment by eStara and who accept such employment prior to October 15, 2001 is
less than eight (8).
"Negative Cash Adjustment Number" shall mean eight (8) minus the number of
ITXC employees who are offered employment by eStara and who accept such
employment prior to October 15, 2001.
"Permitted Liens" shall mean liens for Taxes, assessments or governmental
charges or claims which are either not delinquent or are being contested in good
faith by appropriate proceedings, statutory liens of landlords and liens of
carriers, warehousemen, mechanics, suppliers, materialmen, repairmen, and other
liens imposed by law and incurred in the ordinary course of business, liens
representing the retained interest of lessors and sellers under capitalized
leases and title retention arrangements entered into in the ordinary course of
business, and easements, rights-of-way, zoning restrictions and other similar
liens which do not materially and adversely affect the value or utility of the
assets affected thereby.
"Person" or "person" shall mean an individual, corporation, trust,
partnership, limited liability company, joint venture, unincorporated
organization, government agency or any agency or political subdivision thereof,
or other entity.
"Positive Cash Adjustment" shall mean (a) zero, if the number of ITXC
employees who are offered employment by eStara and who accept such employment
prior to October 15, 2001 is equal to eight (8), or (b) $30,000 times the
Positive Cash Adjustment Number, if the number of ITXC employees who are offered
employment by eStara and who accept such employment prior to October 15, 2001 is
greater than eight (8).
"Positive Cash Adjustment Number" shall mean (x) the number of ITXC
employees who are offered employment by eStara and who accept such employment
prior to October 15, 2001 minus (y) eight (8).
"Securities Act" shall mean the Securities Act of 1933, as amended, and any
similar or successor Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Software" shall mean the expression of an organized set of instructions in
a natural or coded language that is contained on a physical media of any nature
(e.g., written, electronic, magnetic, optical or otherwise) and that may be used
with a computer or other automated data processing equipment device of any
nature which is based on digital technology, to make such computer or other
device operate in a particular manner and for a certain purpose, as well as any
related documentation for such set of instructions and its subsystems and shall
include computer programs in source and object code, test or other significant
data libraries, user documentation for computer programs, and any of the
following that is contained on a physical media of any nature and that is used
in the design, development, modification, enhancement, testing, installation,
maintenance, diagnosis or assurance of the same: flow diagrams, masks, input and
output formats, file layouts, development tools, database formats, interfaces,
test programs,
37
installation and operating instructions, diagnostic and maintenance
instructions, and other similar materials and information.
"subsidiary" shall mean, as to any party hereto, at any date, any Person
(a) the accounts of which would be consolidated with those of such party in such
party's consolidated financial statements if such financial statements were
prepared in accordance with generally accepted accounting principles as of such
date; or (b) of which securities or other ownership interests representing more
than 50% of the equity or more than 50% of the ordinary voting power or, in the
case of a partnership, more than 50% of the general partnership interests or
more than 50% of the profits or losses of which are, as of such date, owned,
controlled or held by such party or one or more subsidiaries of such party.
"Tax" means any of the following, and "Taxes" means all of the following,
imposed by or payable to any governmental authority: any income, gross receipts,
license, payroll, employment, excise, severance, stamp, business, occupation,
premium, windfall profits, environmental (including taxes under section 59A of
the Internal Revenue Code of 1986, as amended), capital stock, franchise,
profits, withholding, social security (or similar), unemployment, disability,
real property, personal property, sales, use, transfer, registration, or value
added tax, any alternative or add-on minimum tax, any estimated tax, and any
levy, impost, duty, assessment or withholding, in each case including any
interest, penalty, or addition thereto, whether disputed or not.
"Tax Returns" means any returns, declarations, reports, claims for refund,
information returns or statements relating to Taxes, including any schedules or
attachments thereto, and any amendments thereof, to be filed (whether on a
mandatory or elective basis) with any governmental authority responsible for the
imposition or collection of Taxes.
"Transaction Documents" shall mean this Agreement (including the Schedules
and Exhibits thereto), the License Agreement, the Network Agreement, the
Transition Services Agreement and the Registration Rights Agreement
12.2 Other Defined Terms. The following terms are defined elsewhere in this
Agreement:
Agreement Opening paragraph
Articles Supplementary 3.1(a)
Assets 1.1
Assignment and Assumption Agreement 9.2(b)
Assumed Liabilities 2.1
Basket Amount 11.2(b)
Xxxx of Sale 9.2(a)
Called Party; Calling Party 6.13(a)
Closing 9.1
Closing Date 9.1
Code 5.10
Commission 5.11
Competing Business 6.13(a)
38
Confidential Information 10.3
Conveyed Contracts 1.1(b)
directly or indirectly 6.13(a)
Domain Names 6.16
eCommerce Intellectual Property Rights 4.6(a)
eCommerce Premises 4.18
Effective Time 9.1
eStara Opening paragraph
eStara Balance Sheet 5.5
eStara's Charter 5.1
eStara Disclosure Schedule 5.3(c)
eStara Financial Statements 5.5
eStara Material Adverse Effect 5.3(a)
eStara Premises 5.18
Excluded Employees 6.12
Hired Employees 6.10
Indemnifiable Losses 11.2(a)
Indemnifying Party 11.2(a)
Indemnitee 11.2(a)
Indemnity Payment 11.2(a)
ITXC Opening paragraph
ITXC Disclosure Schedule 4.4
ITXC Material Adverse Effect 4.3
ITXC's eCommerce Business First WHEREAS clause
Leases 4.9
License Agreement 3.2
Liens 1.1
Network Agreement 3.3
Outside Date 8.1(b)
Permits 4.4
Preferred Shares 5.3(c)
Preferred Stock Fourth WHEREAS clause
Push to Talk 6.13(a)
Registration Rights Agreement 3.4
Retained Liabilities 2.2
Third Party Claim 11.2(a)
Transaction 7.1
Transferred Employees 6.11(a)
Transition Services Agreement 9.2(i)
XIII. MISCELLANEOUS PROVISIONS
13.1 Notices. All notices, requests, consents and other communications
hereunder shall be in writing, shall be addressed to the receiving party's
address set forth below or to such other address as a party may designate by
notice hereunder, and shall be either (i) delivered
39
by hand, (ii) made by telecopy, facsimile or electronic transmission, (iii) sent
by overnight courier, or (iv) sent by certified mail, return receipt requested,
postage prepaid.
(a) If to Sellers, to:
ITXC Corporation
000 Xxxxxxx Xxxx Xxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxxxx X. Xxxxx, Esq.
Facsimile No.: 000-000-0000
with a copy (which shall not constitute notice) to:
Xxxxx X. Xxxxxxxxx, Esq.
Xxxxxxxxxx Xxxxxxx PC
00 Xxxxxxxxxx Xxxxxx
Xxxxxxxx, Xxx Xxxxxx 00000
Facsimile No.: 000-000-0000
(b) If to eStara, to:
00000 Xxxxxxxxx Xxxx.
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Facsimile No.: 000-000-0000
with a copy (which shall not constitute notice) to:
Xxxxx Xxxxxxx Xxxxxxx & Xxxxx LLP
0000 00xx Xxxxxx, X.X.
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Facsimile No.: 000-000-0000
or to such other address or addresses as any such party may from time to time
designate as to itself by like notice. All notices, requests, consents and other
communications hereunder shall be deemed to have been given (i) if by hand, at
the time of the delivery thereof to the receiving party at the address of such
party set forth above, (ii) if made by telecopy, facsimile or electronic
transmission, at the time that receipt thereof has been acknowledged by
electronic confirmation or otherwise, (iii) if sent by overnight courier, on the
next business day (or if sent overseas, on the second business day) following
the day such notice is delivered to the courier service, or (iv) if sent by
certified mail, on the fifth business day (or if sent overseas, on the tenth
business day) following the day such mailing is made.
13.2 Expenses. Except as otherwise expressly provided herein, each party
hereto will pay any expenses incurred by it incident to the Transaction
Documents and in preparing to consummate and consummating the transactions
provided for herein.
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13.3 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns, but shall not be assignable or delegable by any party without
the prior written consent of the other party; provided, however, that upon
--------- --------
notice to eStara, ITXC may assign or delegate any or all of its rights or
obligations under this Agreement to any Affiliate thereof (provided that ITXC
expressly agrees to remain liable hereunder on terms reasonably satisfactory to
eStara) or to any Person that directly or indirectly acquires, after the
Closing, all or substantially all of the assets or voting stock of ITXC
(provided that such Person expressly agrees to assume all of ITXC's obligations
hereunder on terms reasonably satisfactory to eStara).
13.4 Waiver. eStara may, by written notice to Sellers, and Sellers may, by
written notice to eStara, (a) extend the time for performance of any of the
obligations of the other party under this Agreement, (b) waive any inaccuracies
in the representations or warranties of the other party contained in this
Agreement, (c) waive compliance with any of the conditions or covenants of the
other party contained in this Agreement, or (d) waive or modify performance of
any of the obligations of the other party under this Agreement; provided,
however, that no such party may, without the prior written consent of the other
party, make or grant such extension of time, waiver of inaccuracies or
compliance or waiver or modification of performance with respect to its
representations, warranties, conditions or covenants hereunder. Except as
provided in the immediately preceding sentence, no action taken pursuant to this
Agreement shall be deemed to constitute a waiver of compliance with any
representations, warranties, conditions or covenants contained in this Agreement
and will not operate or be construed as a waiver of any subsequent breach,
whether of a similar or dissimilar nature.
13.5 Entire Agreement; Disclosure Schedules. This Agreement (which includes
the eStara Disclosure Schedule, the ITXC Disclosure Schedule, the Schedules
annexed hereto and the Exhibits annexed hereto), the other Transaction Documents
and the confidentiality agreement previously executed by the parties hereto and
any other side letter executed by ITXC and eStara as of the date hereof relating
to this Agreement supersede any other agreement, whether written or oral, that
may have been made or entered into by any party or any of their respective
Affiliates (or by any director, officer or representative thereof) relating to
the matters contemplated hereby and constitutes the entire agreement by and
among the parties hereto.
13.6 Amendments, Supplements, Etc. This Agreement may be amended or
supplemented at any time by additional written agreements as may mutually be
determined by eStara and ITXC to be necessary, desirable or expedient to further
the purposes of this Agreement or to clarify the intention of the parties.
13.7 Rights of the Parties. Nothing express or implied in this Agreement is
intended or will be construed to confer upon or give any Person other than the
parties hereto and their Affiliates any rights or remedies under or by reason of
this Agreement or any transaction contemplated hereby.
13.8 Further Assurances. From time to time after the Closing, as and when
requested by either party hereto, the other party will execute and deliver, or
cause to be executed and delivered, all such documents and instruments as may be
reasonably necessary to consummate the transactions contemplated by this
Agreement.
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13.9 Applicable Law This Agreement and the legal relations among the
parties hereto will be governed by and construed in accordance with the rules
and substantive laws of the State of Delaware without regard to conflicts of law
provisions thereof.
13.10 Counterparts; Facsimile. This Agreement may be executed in one or
more counterparts, and by different parties hereto on separate counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument. Execution and delivery of this Agreement
by facsimile transmission shall constitute execution and delivery of this
Agreement for all purposes, with the same force and effect as execution and
delivery of an original manually signed copy hereof.
13.11 Titles and Headings. Titles and headings to Sections and Articles
herein are inserted for convenience of reference only, and are not intended to
be a part of or to affect the meaning or interpretation of this Agreement.
13.12 Invalid Provisions. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under any present or future law, and if the
rights or obligations under this Agreement of Sellers on the one hand and eStara
on the other hand will not be materially and adversely affected thereby, (a)
such provision will be fully severable; (b) this Agreement will be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part hereof; (c) the remaining provisions of this Agreement will
remain in full force and effect and will not be affected by the illegal,
invalid, or unenforceable provision or by its severance from this Agreement; and
(d) in lieu of such illegal, invalid, or unenforceable provision, there will be
added automatically as a part of this Agreement a legal, valid, and enforceable
provision as similar in terms to such illegal, invalid, or unenforceable
provision as may be possible.
13.13 Bulk Sales. eStara waives compliance by Sellers with the provisions
of the so-called bulk sales laws of any jurisdiction; provided, however, that
Sellers will indemnify, defend and hold harmless eStara and its Affiliates in
respect of any Indemnifiable Loss relating to, resulting from or arising out of
Sellers' failure so to comply with such laws in connection with the transactions
contemplated by this Agreement.
13.14 Transfers. After the Closing, eStara and Sellers will cooperate and
take such action as may be reasonably requested by the other in order to effect
an orderly transfer of the Assets and ITXC's eCommerce Business with a minimum
of disruption to the operations and employees of eStara and Sellers.
13.15 Passage of Title and Risk of Loss. Legal title, equitable title and
risk of loss with respect to the Assets will not pass to eStara until such
Assets are transferred at the Closing, which transfer, once it has occurred,
will be deemed effective for tax, accounting and other computational purposes as
of the Effective Time.
13.16 Material Adverse Effect. For purposes of this Agreement, an event or
matter shall not be deemed to have an "ITXC Material Adverse Effect" or an
"eStara Material Adverse Effect" if (x) such event or matter is generally
applicable to the industry in which ITXC's eCommerce Business participates, (y)
such event or matter involves a loss of one or more customers as a result of the
fact that eStara and Sellers have executed this Agreement and plan to consummate
the transactions contemplated hereby or (z) employees resign due to knowledge of
a pending transaction.
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13.17 Knowledge.
(a) Sellers. Sellers shall be deemed to have "knowledge" of a matter or
event if, and only if, such matter or event is actually known, or should have
been known after reasonable inquiry under the circumstances (it being understood
that such inquiry shall not require any Person to access any information that
appears on a database that is not maintained by Sellers), by Xxx Xxxxxx, Xxxxxx
Xxxxxx, Xxxx Xxxxxxx, Xxxxxxxx Xxxxx (but, as to Xx. Xxxxx, only with respect to
matters that may be disclosed by Xx. Xxxxx without breaching any privilege or
confidentiality obligation owed by Xx. Xxxxx to ITXC or its Affiliates) or
Xxxxxxx Xxxxxx (but, as to Xx. Xxxxxx, only with respect to matters pertaining
to Intellectual Property Rights that may be disclosed by Xx. Xxxxxx without
breaching any privilege or confidentiality obligation owed by Xx. Xxxxxx to ITXC
or its Affiliates).
(b) eStara. eStara shall be deemed to have "knowledge" of a matter or
event if, and only if, such matter or event is actually known, or should have
been known after reasonable inquiry under the circumstances (it being understood
that such inquiry shall not require any Person to access any information that
appears on a database that is not maintained by eStara), by Xxxxxx Xxxxxxx,
Xxxxx Xxxxxx, Xxxxx Xxxxxxx and Xxxx Xxxxxxx.
13.18 Jurisdiction and Service of Process. Any action or proceeding with
respect to this Agreement shall be brought in the courts of the State of
Delaware or of the United States of America for the District of Delaware. By
execution and delivery of this Agreement, each of the parties hereto accepts for
itself and in respect of its property, generally and unconditionally, the
exclusive jurisdiction of the aforesaid courts. Each of the parties hereto
irrevocably consents to the service of any summons and complaint and any other
process in any action or proceeding relating to this Agreement, on behalf of
itself or its property, by the delivery of copies of such process to such party
in the same manner as notice is to be provided pursuant to Section 13.1. Nothing
in this Section 13.18 shall affect the right of any party hereto to serve legal
process in any other manner permitted by law.
13.19 No Jury Trial. Each party acknowledges and agrees that any
controversy which may arise under the Transaction Documents or any of the
agreements contemplated by the Transaction Documents is likely to involve
complicated and difficult issues, and therefore each such party hereby
irrevocably and unconditionally waives any right such party may have to a trial
by jury in respect to any litigation directly or indirectly arising out of or
relating to the Transaction Documents or the transactions contemplated by the
Transaction Documents. Each party certifies and acknowledges that (i) no
representative, agent or attorney of any other party has represented, expressly
or otherwise, that such other party would not, in the event of litigation, seek
to enforce the foregoing waiver, (ii) each such party understands and has
considered the implications of this waiver, (iii) each such party makes this
waiver voluntarily, and (iv) each such party has been induced to enter into this
Agreement by, among other things, the waivers and certifications in this Section
13.19.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
ITXC CORP.
By:______________________________
Name:
Title:
ITXC INC.
By:______________________________
Name:
Title:
eSTARA, INC.
By:______________________________
Name:
Title:
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Schedules
1.1(b) Conveyed Contracts
1.1(c) Software
1.1(d) Other Intangibles
1.1(e) Equipment
1.2(f) Other Excluded Assets
2.1(c) Certain Purchase Orders and Sales Orders
2.1(e) Other Assumed Liabilities
6.6(a)(v) Contracts Requiring eStara's Consent to Amend
7.2(d) Certain Conveyed Contracts
7.3(d) Certain eStara Contracts
EXHIBITS
3.1(a) Articles Supplementary
3.2(a) License Agreement
3.3 Network Agreement
3.4 Registration Rights Agreement
3.5 Tax Allocation
9.2(a) Xxxx of Sale
9.2(b) Assignment and Assumption Agreement
9.2(i) Transition Services Agreement
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