EXHIBIT 2.1
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") is made as of June 9, 2004, by
and between IPVoice Communications, Inc., a Nevada corporation ("Purchaser") and
the stockholder of NETSCO Inc., a North Carolina corporation, listed on the
signature page hereto (the "Stockholder").
RECITALS
WHEREAS, the Stockholder own all of the issued and outstanding stock (the
"Purchased Stock") of NETSCO Inc., as set forth for distribution on Exhibit A
hereto.
WHEREAS, the Stockholders desire to sell and the Purchaser desires to
purchase the Purchased Stock on the terms and subject to the conditions set
forth herein.
NOW, THEREFORE, in reliance upon the representations, warranties and
agreements made herein and in consideration of the premises herein and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree as
follows:
I. PURCHASE AND SALE
1.1. PURCHASE AND SALE. On the terms and subject to the conditions set
forth herein, at the Closing (as hereinafter defined), Stockholders will sell
and deliver the Purchased Stock to Purchaser, free and clear of all security
interests, liens, adverse claims, encumbrances, equities, proxies, options or
other agreement, instrument, arrangement, contract, obligation, commitment or
understanding of any character, whether written or oral, express or implied,
relating to the sale, assignment, encumbrance, conveyance, transfer of the
Purchased Stock (collectively, "Liens").
1.2. PURCHASE PRICE. Subject to adjustment pursuant to Section 1.3 hereof,
the purchase price (the "Purchase Price") for the Purchased Stock is U.S.
$3,000,000 (Three Million Dollars), which shall be paid in the form of 3000
shares of Series F Convertible Preferred Stock, $1,000 per share value of the
Purchaser (the "Preferred Stock"). The Purchase Price shall be paid at the
Closing by issuing to each Stockholder (and delivering to the Stockholders'
Representative) that number of shares of Preferred Stock, calculated to two
decimal places, equal to 3000 multiplied by such Stockholder's Overall Ownership
Percentage set forth opposite such Stockholder's name on Exhibit A.
Buyer will pay to Seller IPVoice Communications Inc. Preferred Stock
Certificates totaling U.S. $3,000,000 (Three Million Dollars). The underlying
Common Stock will not have registration rights. The sellers individually will be
restricted from converting into any amount of Common Stock that would represent
more than 4.9 % ownership of IPVoice Communications Inc. All share conversions
described in this agreement shall maintain the same dollar value equivalency of
the shares after conversion.
1.3. PURCHASE PRICE ADJUSTMENT.
(a) The original U.S. $3,000,000 (Three Million Dollars) sales price
will be reviewed on the one year anniversary date of the sale. If the one
year NETSCO Gross Revenues are greater than U.S. $1,000,000 (One Million
Dollars), then the original sales price will be adjusted upward to an
amount equal to the percent increase in Gross Revenues (provided all cash
from sales is received within 180 days of the sale and Net
Profits are break even or better) not to exceed an upward adjustment of 30%
(thirty percent) or U.S. $3,900,000 (Three Million Nine Hundred Thousand
Dollars). Likewise, in the event one year Gross Revenues are less than U.S.
$1,000,000 (One Million Dollars), then the sales price will be adjusted
downward to an amount equal to the percent decrease in Gross Revenues not
to exceed a downward adjustment of 30% (thirty percent) or U.S. $2,100,000
(Two Million One Hundred Thousand Dollars).
(b) Purchaser and the Stockholders shall attempt in good faith to
resolve any disagreements raised by the Stockholders with respect to the
Revenue Statement. If, at the end of such period, Purchaser and the
Stockholders do not resolve such disagreements, either Purchaser or the
Stockholders may submit the matter to a mutually acceptable independent
accounting firm to review the Revenue Statement and resolve any remaining
disagreements regarding the calculation of the First-year Revenue. In the
event Purchaser and the Stockholders cannot agree upon an accounting firm,
they shall choose an accounting firm by lot from a reasonable selected
group of accounting firms having no material relationship to Purchaser, the
Stockholders, Seller and their respective affiliates and having offices in
locations suitable to conduct such review (the "Accounting Firm"). The
determination by the Accounting Firm shall be final, binding and conclusive
on the parties, and judgment may be entered thereon in a court of competent
jurisdiction. The fees and expenses of the Accounting Firm shall be divided
equally among the Stockholders and Purchaser.
(c) To recognize NETSCO revenues for evaluation purpose, NETSCO
financials and balance sheets during the first year (or twelve months
following this IPVoice transaction) will be maintained separately even
after other possible future mergers and/or acquisitions) . In the event
that the First-year Revenue is greater than U.S. $1,000,000 (One Million
Dollars) then the Purchase Price shall be increased to U.S. $ 3,900,000
(Three Million Nine Hundred Thousand Dollars) and the Purchaser shall issue
a number of shares of Preferred Stock equal to increased revenue percentage
multiplied by $3,000,000 (Three Million Dollars) and multiplied by such
Stockholder's Overall Ownership Percentage. Purchaser shall promptly
deliver certificates representing such shares to the Stockholders'
Representative. For example: in the event that the First-year NETSCO
revenue is $1,100,000 the revenue increase is equal to ten percent (10%)
and the Purchaser shall issue $300,000 ($3,000,000 times 0.10) additional
shares and shall promptly deliver the certificates to the Stockholders
according to their overall ownership percentage listed in Exhibit A.
(d) In the event that the First-year Revenue is less than U.S.
$1,000,000 (One Million Dollars), then the Purchase Price shall be reduced
to U.S. $2,100,000 (Two Million One Hundred Dollars) and each Stockholder
shall return to Purchaser a number of shares of Preferred Stock equal to
the decreased revenue percentage multiplied by $3,000,000 (Three Million
Dollars) and multiplied by such Stockholder's Overall Ownership Percentage.
The Stockholders will deliver certificate(s) representing such
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shares (or shares of Common Stock issued upon conversion thereof) to
Purchaser, and, in the event that such certificate(s) represents more than
the number of shares required to be returned, Purchaser will issue new
certificate(s) for the difference. In the event that a Stockholder does not
so return such certificate(s), Purchaser shall nevertheless be entitled to
cancel such shares on its stock ledger and regard such shares as cancelled
for all purposes. For example: in the event that the First-year NETSCO
revenue is $900,000 the revenue decrease is equal to ten percent (10%) and
each Stockholder shall return to Purchaser a number of shares of Preferred
Stock equal to $300,000 ($3,000,000 times 0.10) multiplied by such
Stockholder's overall ownership percentage listed in Exhibit A.
II. CLOSING
2.1. CLOSING. The closing of the purchase and sale of the Stock II. CLOSING
("Closing"), will take place on or about August 2, 2004 (the "Closing Date") at
the offices of Xxxxxxx Xxxxxx & Xxxxxxx LLP, 000 X. Xxxxxx Xxxxx, Xxxxx 0000,
Xxxxxxx, Xxxxxxxx or at such other time and place mutually agreed to by the
parties.
2.2. PURCHASER CLOSING DELIVERIES. At the Closing, Purchaser shall deliver
(i) to the Stockholders, certificates representing the Preferred Stock, which
shall be deemed to have been fully paid for at the Closing, (ii) a pledge
agreement, substantially in the form attached hereto as Exhibit B, securing the
guaranty set forth in Section 6.5, (iii) to Xx. Xxxxx Xxxxxx, an employment
agreement, duly executed by Purchaser and Digital Computer Integration
Corporation (DCI), pursuant to which Xx. Xxxxx Xxxxxx will provide certain
services to Purchaser (the "Xxxxx Xxxxxx Employment Agreement" attached hereto
as Exhibit C), (iv) to Mr. Cem Gokay, a consulting agreement, duly executed by
Purchaser and Digital Computer Integration Corporation (DCI), pursuant to which
Xx. Xxxxx will provide certain consulting services to Purchaser (the " Cem Gokay
Consulting Agreement" attached hereto as Exhibit D), (v) Signed Purchaser
document with assumption of NETSCO long term and short term debt (removing Xxxxx
Xxxxxx'x personal guaranties) and funding next twelve (12) month NETSCO
operations (attached hereto as Exhibit F), and (vi) such other documents or
instruments as NETSCO may reasonably request in connection with the consummation
of the transactions contemplated by this Agreement.
2.3. STOCKHOLDER CLOSING DELIVERIES. At the Closing, the Stockholders shall
deliver to Purchaser (i) stock certificates evidencing the Purchased Stock,
endorsed in blank or accompanied by duly executed stock powers; (ii) the Xxxxx
Xxxxxx Employment Agreement, duly executed by Xx. Xxxxxx, (iii) the Cem Gokay
Consulting Agreement, duly executed by Xx. Xxxxx, (iv) a general release and
waiver for the benefit of NETSCO executed by each Stockholder, substantially in
the form attached hereto as Exhibit E, (v) NETSCO signed most current balance
sheet next twelve month NETSCO operations funding requirements document
(attached hereto as Exhibit F) and (vi) such other documents or instruments as
Purchaser or Seller may reasonably request in connection with the consummation
of the transactions contemplated by this Agreement.
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III. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
The Stockholders, jointly and severally, hereby represent and warrant to
Purchaser that, III. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS to the
best of their knowledge, without any independent inquiry:
3.1. ORGANIZATION AND GOOD STANDING; QUALIFICATION. NETSCO is a corporation
duly organized and validly existing under the laws of North Carolina, with all
requisite corporate power and authority to carry on the business in which it is
engaged, to own the properties it owns, to execute and deliver this Agreement
and to consummate the transactions contemplated hereby and is duly qualified and
licensed to do business and is in good standing in all jurisdictions where the
nature of its business makes such qualification necessary, except, in each case,
where the failure to have such power and authority or to be so qualified or
licensed would not, when taken together with all other such failures, reasonably
be expected to have material adverse effect on the condition (financial or
otherwise), operations, assets, liabilities, business or prospects of NETSCO (a
"Material Adverse Effect"). NETSCO does not have any assets, employees or
offices in any jurisdiction other than North Carolina.
3.2. CAPITALIZATION OF NETSCO. The authorized capital stock of NETSCO
consists of Ten Million Shares Authorized (10,000,000), of which One Hundred
Shares (100) are issued and outstanding and no shares of such capital stock are
held in the treasury of NETSCO. All of the issued and outstanding shares of
capital stock of NETSCO are duly authorized, validly issued, fully paid and non
assessable. There exist no options, warrants, subscriptions or other rights to
purchase, or securities convertible into or exchangeable for, the capital stock
of NETSCO. Except as set forth herein, neither Stockholder nor NETSCO is party
to or bound by, nor do they have any knowledge of, any agreement, instrument,
arrangement, contract, obligation, commitment or understanding of any character,
whether written or oral, express or implied, relating to the sale, assignment,
encumbrance, conveyance, transfer or delivery of any capital stock of NETSCO. No
shares of capital stock of NETSCO have been issued or disposed of in violation
of the preemptive rights of any of NETSCO shareholders. All accrued dividends on
the capital stock of NETSCO, whether or not declared, have been paid in full.
3.3. SUBSIDIARIES. NETSCO does not own, directly or indirectly, any of the
capital stock of any other corporation or any equity, profit sharing,
participation or other interest in any corporation, partnership, joint venture
or other entity.
3.4. NO VIOLATION. Neither the execution, delivery or performance of this
Agreement or the other agreements contemplated hereby nor the consummation of
the transactions contemplated hereby or thereby will (a) conflict with, or
result in a violation or breach of the terms, conditions or provisions of, or
constitute a default under, the Articles of Incorporation or Bylaws (or foreign
equivalent) of any Stockholder or NETSCO or any agreement, indenture or other
instrument under which NETSCO or any Stockholder is bound or to which the
Purchased Stock or any of the assets of NETSCO are subject, or result in the
creation or imposition of any security interest, lien, charge or encumbrance
upon the
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Purchased Stock or any of the assets of NETSCO, or (b) violate or conflict with
any judgment, decree, order, statute, rule or regulation of any court or any
public, governmental or regulatory agency or body having jurisdiction over
NETSCO, or the Purchased Stock.
3.5. CONSENTS. No consent, authorization, approval, permit or license of,
or filing with, any governmental or public body or authority, any lender or
lessor or any other person or entity is required to authorize, or is required in
connection with, the execution, delivery and performance of this Agreement or
the agreements contemplated hereby on the part of NETSCO or any Stockholder.
3.6. FINANCIAL STATEMENTS. NETSCO has furnished to Purchaser the
consolidated balance sheet and related consolidated statements of income,
retained earnings and cash flows for the Thirty Six-month periods ended December
31, 2001, 2002 and 2003, including the notes thereto (collectively, the
"Financial Statements"). The Financial Statements are in accordance with the
books and records of NETSCO, fairly present the financial condition and results
of operations of NETSCO as of the dates and for the periods indicated and have
been prepared in conformity with applicable accounting standards applied on a
consistent basis with prior periods.
3.7. LIABILITIES AND OBLIGATIONS. The Financial Statements reflect all
liabilities of NETSCO, accrued, contingent or otherwise arising out of
transactions effected or events occurring on or prior to the date hereof.
Additionally, Exhibit F defines next twelve (12) month NETSCO cash requirements
and most current NETSCO balance sheet including long and short term debt. Except
as set forth in the Financial Statements, NETSCO is not liable upon or with
respect to, or obligated in any other way to provide funds in respect of or to
guarantee or assume in any manner, any debt, obligation or dividend of any
person, corporation, association, partnership, joint venture, trust or other
entity, and NETSCO knows of no basis for the assertion of any other claims or
liabilities of any nature or in any amount.
3.8. EMPLOYEE MATTERS. Exhibit H contains a complete and accurate list of
the names, titles and cash compensation, including without limitation wages,
salaries, bonuses (discretionary and formula) and other cash compensation of all
employees of NETSCO. In addition, Exhibit H contains a complete and accurate
description of: (i) all increases in compensation of employees of NETSCO during
the current and immediately preceding fiscal years of NETSCO; and (ii) any
promised increases in compensation of employees of NETSCO that have not yet been
effected.
3.9. ABSENCE OF CERTAIN CHANGES. Except as set forth on Exhibit H, since
December 31, 2003, NETSCO has not: (a) suffered any material adverse change in
its condition (financial or otherwise), operations, assets, liabilities,
business or prospects; (b) contracted for the purchase of any capital assets
having a cost in excess of $50,000 or paid any capital expenditures in excess of
$50,000; (c) incurred any indebtedness for borrowed money or issued or sold any
debt securities; (d) incurred or discharged any liabilities or obligations
except in the ordinary course of business; (e) paid any amount on any
indebtedness prior to the due date, or forgiven or cancelled any debts or
claims; (f)
IPVOICE-NETSCO Page 5 of 18 6/10/2004
mortgaged, pledged or subjected to any security interest, lien, lease or other
charge or encumbrance any of its properties or assets; (g) suffered any damage
or destruction to or loss of any assets (whether or not covered by insurance)
that has materially and adversely affected, or could materially and adversely
affect, its business; (h) acquired or disposed of any assets except in the
ordinary course of business; (i) written up or written down the carrying value
of any of its assets; (j) changed the costing system or depreciation methods of
accounting for its assets; (k) lost or terminated any employee, customer or
supplier, the loss or termination of which has materially and adversely
affected, or could materially and adversely affect, its business or assets; (l)
increased the compensation of any director or officer; (m) increased the
compensation of any employee except in the ordinary course of business; or (n)
entered into any other commitment or transaction or experienced any other event
that is material to this Agreement or to any of the other agreements and
documents executed or to be executed pursuant to this Agreement or to the
transactions contemplated hereby or thereby, or that has had or could reasonably
be expected to have a Material Adverse Effect.
3.10. TITLE; LEASED ASSETS. NETSCO does not own any real property. NETSCO
has good, valid and marketable title to all tangible and intangible personal
property owned by it (collectively, the Personal Property"). The Personal
Property and the leased personal property referred to in Exhibit I constitute
the only personal property used in the conduct of the business of NETSCO. A list
of all leases of real and personal property to which NETSCO is a party, either
as lessor or lessee, are set forth in Exhibit I. All such leases are valid and
enforceable in accordance with their respective terms except as may be limited
by applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally or the availability of equitable remedies.
3.11. COMMITMENTS. Exhibit J (which shall be provided within sixty (60)
days after the execution of the Purchase Agreement) contains a list of all
material contracts, agreements and understandings, oral or written, to which
NETSCO is a party (the "Commitments"). There are no existing defaults, events of
default or events, occurrences, acts or omissions that, with the giving of
notice or lapse of time or both, would constitute defaults by NETSCO, and no
penalties have been incurred nor are amendments pending. The Commitments are in
full force and effect and are valid and enforceable obligations of the parties
thereto in accordance with their respective terms, and no defenses, offsets or
counterclaims have been asserted or, to the best knowledge of NETSCO, may be
made by any party thereto, nor has NETSCO waived any rights there under. NETSCO
has not received notice of any default with respect to any Commitment. Except as
contemplated hereby, NETSCO has received no notice of any plan or intention of
any other party to any Commitment to exercise any right to cancel or terminate
any Commitment or agreement, and NETSCO knows of no fact that would justify the
exercise of such a right. NETSCO does not currently contemplate, or have reason
to believe any other person or entity currently contemplates, any amendment or
change to any Commitment. None of the customers or suppliers of NETSCO has
refused, or communicated that it will or may refuse, to purchase or supply goods
or services, as the case may be, or has communicated that it will or may
IPVOICE-NETSCO Page 6 of 18 6/10/2004
substantially reduce the amounts of goods or services that it is willing to
purchase from, or sell to, NETSCO.
3.12. INSURANCE. NETSCO carries property, liability, workers' compensation
and such other types of insurance as is customary in the industry of the
insured. A list and brief description of all insurance policies of NETSCO are
set forth in Exhibit K. Such insurance shall be outstanding and duly in force
without interruption up to and including the Closing Date.
3.13. PATENTS, TRADEMARKS, SERVICE MARKS AND COPYRIGHTS. NETSCO has no
knowledge of any claim that, or inquiry as to whether, any product, activity or
operation of NETSCO infringes upon or involves, or has resulted in the
infringement of, any proprietary right of any other person, corporation or other
entity; and no proceedings have been instituted, are pending or are threatened
that challenge the rights of NETSCO with respect thereto.
3.14. TRADE SECRETS AND CUSTOMER LISTS. IPVOICE and NETSCO have the right
to use, free and clear of any claims or rights of others, all trade secrets,
customer lists and proprietary information required for the marketing of all
merchandise and services formerly or presently sold or marketed by NETSCO.
However, NETSCO may be restricted by certain NETSCO customers or NETSCO partners
such as Sun Micro Systems to use their name for Purchasers marketing purposes
unless cleared by the customer in writing. NETSCO is not using or in any way
making use of any confidential information or trade secrets of any third party,
including without limitation any past or present employee of NETSCO.
3.15. TAXES. Except as set forth in Exhibit L, NETSCO has paid or accrued
all taxes, penalties and interest that have become due with respect to any
returns that it has filed and any assessments of which it is aware. NETSCO is
not delinquent in the payment of any tax, assessment or governmental charge. No
tax deficiency or delinquency has been asserted against NETSCO. There is no
unpaid assessment, proposal for additional taxes, deficiency or delinquency in
the payment of any of the taxes of NETSCO that could be asserted by any taxing
authority. There is no taxing authority audit of NETSCO pending, or, to the
knowledge of NETSCO, threatened. NETSCO has not violated any federal, state,
local or foreign tax law. NETSCO has not granted an extension to any taxing
authority of the limitation period during which any tax liability may be
assessed or collected. All monies required to be withheld by NETSCO and paid to
governmental agencies for all income, social security, and unemployment
insurance. Sales excise, use and other taxes have been: (a) collected or
withheld and either paid to the respective governmental agencies or set aside in
accounts for such purpose; or (b) properly reflected in the Financial
Statements.
3.16. COMPLIANCE WITH LAWS. NETSCO has complied with all laws, regulations
and licensing requirements and has filed with the proper authorities all
necessary statements and reports. There are no existing violations by NETSCO of
any federal, state or local law or regulation that could affect the property or
business of NETSCO. NETSCO
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possesses all necessary licenses, franchises, permits and governmental
authorizations to conduct its business as now conducted.
3.17. FINDER'S FEE. Neither NETSCO nor any Stockholder has incurred any
obligation for any finder's, brokers or agent's fee in connection with the
transactions contemplated herein.
3.18. LITIGATION. Except as set forth on Exhibit M, there are no material
legal actions or administrative proceedings or investigations instituted, or to
the best knowledge of NETSCO threatened, against or affecting, or that could
affect, NETSCO, any of the Shares, or the business of NETSCO. Neither NETSCO nor
any Stockholder is: (i) subject to any continuing court or administrative order,
writ, injunction or decree applicable specifically to NETSCO or to its business,
assets, operations or employees; or (ii) in default with respect to any such
order, writ, injunction or decree. NETSCO knows of no basis for any such action,
proceeding or investigation.
3.19. ACCURACY OF INFORMATION FURNISHED. All information furnished to
Purchaser by NETSCO hereby or in connection with the transactions contemplated
hereby is true, correct and complete in all material respects.
3.20. CORPORATE NAME. There are no actions, suits or proceedings pending,
or to the best knowledge of NETSCO threatened, against or affecting NETSCO that
could result in any impairment of the right of IPVOICE or NETSCO to use the name
"NETSCO". The use of the name "NETSCO" does not infringe the rights of any third
party nor is it confusingly similar with the corporate name of any third party.
In the event Purchaser develop an opportunity to sell Netsco name, Xxxxx Xxxxxx
will have automatic first right of refusal. If Purchases decides to retire the
name or the name is inactive more than six (6) months, all rights to name
reverts back to Xxxxx Xxxxxx. In the event the name is sold to any other party
other than Xxxxx Xxxxxx, Purchase will pay Xxxxx Xxxxxx 25% commission on the
sale price.
3.21. ACCOUNTS RECEIVABLE. All accounts receivable of have arisen from bona
fide transactions in the ordinary course of business and are valid and
enforceable claims subject to no right of set-off or counterclaim.
3.22. PRODUCT WARRANTIES. There is no claim against or liability of NETSCO
on account of product warranties or with respect to the manufacture, sale or
rental of defective products.
3.23. BANKING RELATIONS. Set forth in Exhibit N is a complete and accurate
list of all arrangements that NETSCO has with any bank or other financial
institution, indicating with respect to each relationship the type of
arrangement maintained (such as checking account, borrowing arrangements, safe
deposit box, etc.) and the person or persons authorized in respect thereof.
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IV. REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER
Each Stockholder, severally, hereby represents and warrants to Purchaser
that:
4.1. INVESTMENT INTENT. Such Stockholder is acquiring the Preferred Stock
for its own account for investment and not with a view to, or for sale or other
disposition in connection with, any distribution thereof, nor with any present
intention of selling or otherwise disposing of the same except as noted in
Exhibit G.
4.2. SECURITIES ACT APPLICATIONS. Such Stockholder is a sophisticated
investor, understands the risks and illiquidity of owning the Preferred Stock
and that the sale of the Preferred Stock has not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), but is being sold
pursuant to an exemption under Section 4(2) of the Securities Act. Such
Stockholder is aware that the Preferred Stock may not be resold without
registration under the Securities Act or some other exemption there from and the
certificate(s) representing such shares of Preferred Stock (containing the
customary restrictive legends) but convertible to the Common Stock where for
this agreement the terms and scheduling conversion are described in Exhibit G of
this agreement.
4.3. PLACE OF BUSINESS. Such Stockholder resides in the jurisdiction listed
opposite such Stockholder's name on Exhibit A.
4.4. AUTHORIZATION. Such Stockholder has the requisite power and authority
to execute, deliver and perform its obligations under this Agreement and each of
the other agreements required to be delivered by such Stockholder hereunder.
This Agreement and each of the other agreements required to be delivered by such
Stockholder have been duly and validly executed and delivered by such
Stockholder and constitute the valid and binding obligations of such Stockholder
enforceable against such Stockholder in accordance with their terms, except to
the extent such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws in effect relating to
creditors' rights generally and except that the availability of equitable
remedies, including specific performance, is subject to the discretion of the
court before which any procedure may be brought (whether at law or in equity).
Such Stockholder has obtained all consents, authorizations and approvals of, and
has made or will timely make all declarations and filings with, all judicial
authorities and federal and state governmental authorities required on the part
of such Stockholder in connection with the consummation of the transactions
contemplated by this Agreement and each of the other agreements required to be
delivered by such Stockholder hereunder.
4.5. TITLE. Such Stockholder owns, beneficiary and of record, good and
marketable title to the shares of NETSCO Stock set forth opposite its name on
Exhibit A,
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free and clear of all Liens. At the Closing, such Stockholder will convey to
Purchaser good and marketable title to such shares of NETSCO Stock, free and
clear of any Liens.
4.6. COMMISSIONS AND FEES. Such Stockholder (either alone or together with
others) has not retained, and does not owe any fees to, any finder, broker,
agent, financial advisor or other intermediary in connection with the
transactions contemplated by this Agreement.
V. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to the Stockholders that:
5.1. EXISTENCE; GOOD STANDING. Purchaser is duly incorporated, validly
existing and in good standing under the laws of the state of Nevada, and has all
requisite power and authority to enter into, deliver and consummate the
transactions contemplated by this Agreement.
5.2. AUTHORIZATION. Purchaser has the requisite corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The Board of Directors of Purchaser has duly
and validly approved the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby. No other corporate
proceedings on the part of Purchaser are necessary to approve this Agreement or
to consummate the transactions contemplated hereby and thereby. This Agreement
has been duly and validly executed and delivered by Purchaser and constitutes
the valid and binding obligation of Purchaser enforceable against Purchaser in
accordance with its terms except to the extent such enforcement may be limited
by bankruptcy, insolvency, reorganization, moratorium and other similar laws in
effect relating to creditors' rights generally and except that the availability
of equitable remedies, including specific performance, is subject to the
discretion of the court before which any procedure may be brought (whether at
law or in equity).
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5.3. NO VIOLATION; CONSENTS. The execution, delivery and performance of
this Agreement will not (with or without notice or passage of time or both) (i)
violate any law, judgment, order, writ, injunction, decree, statute, rule or
regulation of any court, administrative agency, bureau, board, commission,
office, authority, department or other governmental entity applicable to
Purchaser, or (ii) violate or conflict with any of the provisions of the
Articles of Incorporation or By-Laws of Purchaser, nor will contravene, conflict
with or result in a violation of any resolution adopted by Purchaser, or the
board of directors or any committee of the board of directors of Purchaser or
(iii) violate, conflict with, or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default or breach) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, or increase the amount payable by Purchaser under any
contract or permit. No Consent of any Governmental authority or any other person
is necessary in connection with the execution and delivery by Purchaser of this
Agreement.
5.4. COMMISSIONS AND FEES. Purchaser has not retained, and does not owe any
fees to, any finder, broker, agent, financial advisor or other intermediary in
connection with the transactions contemplated by this Agreement.
5.5. PURCHASER PREFERRED STOCK. The Preferred Stock has been duly and
validly authorized and when issued will be fully paid and non assessable.
VI. COVENANTS
6.1. CLOSING EFFORTS; ADDITIONAL AGREEMENTS. Each of the parties will use
its reasonable best efforts to take all action and to do all things necessary,
proper or advisable in order to consummate and make effective the transactions
contemplated by this Agreement. In case at any time after the Closing any
further action is necessary (a) to carry out the intents and purposes of this
Agreement or (b) to vest Purchaser with full title to the Purchased Stock, free
and clear of all Liens, the Stockholders shall take all such necessary actions.
6.2. PUBLIC ANNOUNCEMENTS. Except as required by applicable law, securities
rules or regulations, neither Purchaser nor any Stockholder shall make, issue or
release any oral or written public announcement or statement concerning, or
acknowledge the existence of, or reveal the terms, conditions and status of, the
transactions contemplated by this Agreement, without the other party's prior
written approval of, and concurrence in, the contents of such announcement,
acknowledgement or statement.
6.3. CONVERSION OF PREFERRED STOCK. Notwithstanding any rights or
preferences of the Preferred Stock to the contrary, Purchaser and the
Stockholders agree that, expect as expressly permitted in this Section 6.3 and
by Exhibit G of this agreement, no Stockholder shall convert any Preferred Stock
in to shares of common stock, $0.001 par value, of the Company (the "Common
Stock"), and that any attempted conversion shall be null and void. Any time
after the closing the Stockholder shall be entitled to direct
IPVOICE-NETSCO Page 11 of 18 6/10/2004
conversion of 500 shares of Preferred Stock, with each Stockholder that desires
to participate in such conversion participating in proportion to its respective
Overall Ownership Percentage. At any time after the ninety (90) day anniversary
of the Closing Date, the Stockholders shall be entitled to direct the conversion
of additional 500 shares of Preferred Stock, with each Stockholder that desires
to participate in such conversion participating in proportion to its respective
Overall Ownership Percentage. At any time after the hundred and eighty (180) day
anniversary of the Closing Date, the Stockholders shall be entitled to direct
the conversion of an additional 500 shares of Preferred Stock, with each
Stockholder that desires to participate in such conversion participating in
proportion to its respective Overall Ownership Percentage. At any time after the
two hundred and seventy (270) day or nine- month anniversary of the Closing
Date, the Stockholders shall be entitled to direct the conversion of an
additional 500 shares of Preferred Stock, with each Stockholder that desires to
participate in such conversion participating in proportion to its respective. At
any time after the one-year anniversary of the Closing Date, any Stockholder has
the right to convert any of its remaining and due Preferred Stock per Section
1.3, subject only to the conversion terms as set forth in the Certificate of
Designation as filed with the State of Nevada. Notwithstanding anything to the
contrary in this Section 6.3, no Stockholder shall be entitled to convert any
Preferred Stock if the effect of such conversion would result in such
Stockholder owning more than 4.9% of the issued and outstanding Common Stock of
Purchaser.
6.4. RESTRICTIONS ON TRANSFER. Each Stockholder hereby covenants and agrees
with Purchaser that the Preferred Stock is not transferable.
6.5. GUARANTY OF NETSCO DEBT. The Stockholders and Purchaser acknowledge
the long and short term debt (liabilities) of NETSCO prior to Closing listed in
the provided NETSCO Income Statement (including principal and interest accrued
thereon to date) owed to certain financial institutions such as RBC Centura
Bank, Bank of America and real state firms such as High Wood which are all
listed the most current in balance sheet of NETSCO (defined in Exhibit F of this
agreement). Purchaser agrees to assume all these liabilities. Purchaser also
agrees to use all reasonable efforts for obtaining to release of any personal
liabilities of Xxxxx Xxxxxx for the dept owed by Netsco.
6.6. COMMITMENT TO PROVIDE FINANCING. Purchaser agrees to provide NETSCO
with U.S. $500,000 (Five Hundred Thousand Dollars) in working capital to finance
NETSCO operations and certain NETSCO identified projects that are expected by
Purchaser and DCI as revenue generating projects (attached hereto as Exhibit F).
Any financing amounts to be provided to NETSCO may be provided through other
operating affiliates or subsidiaries (such as DCI) of the Purchaser. Such
funding will be distributed at a minimum of forty-one thousand ($41K) per month
for twelve months. If Purchaser fails to meet its obligation for working capital
funding as outlined above, NETSCO has the right to execute termination of this
agreement per the terms outlined in Exhibit C.
6.7. NON-COMPETITION. In consideration of Purchaser's consummation of the
transactions contemplated by this Agreement, and as a material inducement to
Purchaser to enter into this Agreement, each Stockholder covenants and agrees as
follows:
IPVOICE-NETSCO Page 12 of 18 6/10/2004
(a) For one year after Closing, no Stockholder will at any time, in
any capacity, directly or indirectly, own an equity interest, directly or
indirectly, in a Competing Organization. "Competing Organization" will
include any Person, organization, business or other enterprise (i) located
or doing business anywhere in the world (the "Geographic Area"), and (ii)
then engaged in or about to become engaged in, a business identical to or
similar to the business of IPVOICE or NETSCO.
(b) During the period beginning on the Closing Date and ending on the
third anniversary of the Closing Date, no Stockholder will at any time in
any capacity, directly or indirectly, (i) induce or attempt to induce any
employee (ii) induce or attempt to induce any supplier, licensee, licensor,
franchisee, or other business relation of either Purchaser or any of its
affiliates to cease doing business with them or in any way interfere with
the relationship between either Purchaser or any of its affiliates and any
of their respective customers or business relations, or (iii) solicit the
business of any then existing customer of Purchaser or any of its
affiliates.
(c) If, at the time of enforcement of any of the provisions of this
section, a court of competent jurisdiction holds that the restrictions
stated in this section are unreasonable under the circumstances then
existing or are otherwise illegal, invalid or unenforceable in any respect
by reason of its duration, definition of Geographic Area or scope of
activity, or any other reason, the parties agree that the maximum period,
scope or geographical area reasonable or otherwise enforceable under such
circumstances will be substituted for the stated period, scope or area.
(d) Without limiting any of Purchaser's rights under this Agreement,
the parties hereto acknowledge that Purchaser will be entitled to enforce
its rights under this Section 6.9 specifically, to recover damages and
costs (including reasonable attorneys' fees) caused by any breach of any
provisions of this section and to exercise all other rights existing in its
favor. The parties acknowledge and agree that the breach of any term or
provision of this section by any Stockholder will materially and
irreparably harm Purchaser, that money damages will accordingly not be an
adequate remedy for any breach of the provisions of this section by any
Stockholder and that Purchaser in its sole discretion and in addition to
any other remedies it may have at law or in equity may apply to any court
of law or equity of competent jurisdiction (without posting any bond or
deposit) for specific performance and/or other injunctive relief in order
to enforce or prevent any violations of the provisions of this section.
6.8. PROHIBITION ON DIVIDENDS. For so long as any Stockholder holds any
Preferred Stock (which Preferred Stock has not be converted into Common Stock),
NETSCO will not, and Purchaser will cause NETSCO not to, issue any new shares of
its capital stock or declare or pay any dividends or other distribution on any
shares of its capital stock.
6.9. EMPLOYMENT. Purchaser and NETSCO agree that they will use their
commercially reasonable efforts not to terminate the existing senior management
of NETSCO for a period of three years following the Closing Date, and to
maintain for such
IPVOICE-NETSCO Page 13 of 18 6/10/2004
senior management those benefits and equity participation opportunities
generally afforded to other similarly situated employees in Purchaser's
organization, as such benefits and equity plans are in effect from time to time,
and amended or terminated in Purchaser's sole discretion. Notwithstanding the
foregoing, nothing herein shall be deemed to prohibit Purchaser from terminating
any employee or member of senior management for cause, in the reasonable
discretion of Purchaser. "Cause" for this purpose is defined as willful
misconduct, fraud, or other illegal conduct which damages NETSCO.
6.11. COMMITMENT TO PROVIDE KEY MAN LIFE INSURANCE. Purchaser and
Stockholder agrees to provide a minimum of $1,000,000 (One Million Dollars) term
life insurance to their key man qualified personnel as part of their benefit
package. Each key man qualified personnel will obtain their own term Life
Insurance policy of minimum 10 years term under their own name to be fully paid
by the Purchaser. However as long as this Life Insurance premiums are fully paid
by the Purchaser or its designee than the Purchaser and/or its designee will be
put on the policy as the full beneficiary.
VII. INDEMNIFICATION
7.1. INDEMNIFICATION BY THE STOCKHOLDERS. The Stockholders shall,
severally, indemnify and hold harmless the Purchaser, its successors and
assigns, and their respective officers, directors, agents, employees and
representatives (the "Purchaser Indemnities"), from and against, and will pay
them the amount of, any and all losses, costs, claims, liabilities, damages
(including incidental and consequential damages), penalties and expenses
(including reasonable attorneys' and auditors' fees and the reasonable costs of
investigation and defense) (collectively, "Losses"), incurred or suffered by the
Purchaser relating to or arising out of or in connection with any of the
following: (i) any breach or inaccuracy as of the date hereof in any
representation or warranty made by the Stockholders in Article III of this
Agreement or any closing document required to be delivered by the Stockholders
under this Agreement or (ii) any breach or nonfulfillment by the Stockholders of
any of their covenants, or agreements or other obligations in this Agreement or
any closing document required to be delivered by the Stockholders under this
Agreement.
7.2. INDEMNIFICATION BY THE PURCHASER. Purchaser shall severally, indemnify
and hold harmless the Stockholders of NETSCO, their successors and assigns, and
their respective officers, directors, agents, employees and representatives (the
"Stockholder Indemnities"), from and against, and will pay them the amount of,
any and all Losses incurred or suffered by the Stockholder Indemnities relating
to or arising out of or in connection with any of the following: (i) any breach
or inaccuracy as of the date hereof in any representation or warranty made by
Purchaser in Article V of this Agreement or any closing document required to be
delivered by Purchaser under this Agreement or (ii) any breach or no fulfillment
by the Purchaser of any of its covenants, or agreements or other obligations in
this Agreement or any closing document required to be delivered by the Purchaser
under this Agreement.
7.3. CLAIMS. Notwithstanding anything to the contrary herein, the
indemnities contained in this Article VII shall (i) expire twelve (12) months
following the Closing; provided,
IPVOICE-NETSCO Page 14 of 18 6/10/2004
that if at the stated expiration of any indemnification obligation there shall
then be pending any indemnification claim, such claimant shall continue to have
the right to such indemnification with respect to such claim notwithstanding
such expiration, and (ii) not exceed the consideration received by the
Indemnifying Party (as defined below) in the transactions which are the subject
of this Agreement. If a claim for indemnification is to be made by a party
entitled to indemnification under this Agreement (the "Indemnified Party"), the
Indemnified Party shall promptly give notice to the party obligated to provide
indemnification under this Agreement (the "Indemnifying Party") of such claim,
including the amount the Indemnified Party will be entitled to receive hereunder
from the Indemnifying Party; provided, however, that the failure of the
Indemnified Party to promptly give notice shall not relieve the Indemnifying
Party of its obligations under this Article VII. If the Indemnifying Party does
not object in writing to such claim within 20 days after receiving notice
thereof, the Indemnified Party shall be entitled to recover, on the 21st day
after such notice was given, from the Indemnifying Party the amount of such
claim, and no later objection by the Indemnifying Party shall be permitted or
effective. If the Indemnifying Party agrees that it has an indemnification
obligation under this Article VII with respect to such claim, but timely objects
as to the amount of such claim, the Indemnified Party shall nevertheless be
entitled to recover, on the 21st day after such notice was given, from the
Indemnifying Party the undisputed lesser or liquidated amount of such claim,
without prejudice to the Indemnified Party's claim for the difference. After
Closing, Purchaser agrees to maintain NETSCO's current liability insurance for a
period of twenty-four (24) months to include the current policy's coverage for
Xxxxx Xxxxxx.
7.4. FAILURE OF INDEMNIFYING PERSON TO ACT. In the event that the
Indemnifying Party does not assume the defense of any claim, suit, action or
proceeding covered by indemnification under this Article VII, then any failure
of the Indemnified Party to defend or to participate in the defense of any such
claim, suit, action or proceeding or to cause the same to be done, shall not
relieve the Indemnifying Party of its obligations under this Article VII.
7.5. SURVIVAL. All representations, warranties, covenants and agreements
contained in this Agreement shall survive the Closing and shall be deemed to
have been relied upon and shall not be affected in any respect by the Closing,
any investigation conducted by any party or by any information which any party
may receive Notwithstanding the foregoing sentence, the representations and
warranties contained in this Agreement shall terminate on the second anniversary
of the Closing (the "Survival Period"); provided, however, that such liability
shall not terminate (but shall survive until resolved among the parties) with
respect to any claim, whether or not fixed as to liability or liquidated as to
amount, with respect to which the Indemnified Party has given notice to the
Indemnifying Party on or prior to the expiration date of the Survival Period.
IPVOICE-NETSCO Page 15 of 18 6/10/2004
VIII. MISCELLANEOUS
8.1. COUNTERPARTS; FACSIMILE. This Agreement may be executed in
counterparts, each of which shall be considered an original, but all of which
together shall constitute one and the same instrument. This Agreement may be
executed by facsimile transmission, and a facsimile of this Agreement or of a
signature of a party thereto shall be effective as an original.
8.2. GOVERNING LAW. All questions concerning the construction, validity and
interpretation of this Agreement and the performance of the obligations imposed
by this Agreement shall be governed by the laws of the State of Delaware,
without reference to its internal choice of law provisions.
8.3. SEVERABILITY. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.
8.4. SUCCESSORS AND ASSIGNS. This Agreement and all of the provisions
hereof will be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns.
8.5. Headings. The descriptive headings of this Agreement are inserted for
convenience of reference only and do not constitute a part of and shall not be
utilized in interpreting this Agreement.
IPVOICE-NETSCO Page 16 of 18 6/10/2004
8.6. SPECIFIC PERFORMANCE. The parties hereto shall have all rights and
remedies set forth in this Agreement and all rights and remedies available under
any applicable law. The parties hereto agree and acknowledge that money damages
may not be an adequate remedy for any breach of the provisions of this Agreement
and that any party may, in its sole discretion, apply to any court of law or
equity of competent jurisdiction for specific performance or injunctive relief
(without posting bond or other security) in order to enforce, or prevent any
violations of, the provisions of this Agreement.
8.7. ENTIRE AGREEMENT. This Agreement and the Schedules and Exhibits hereto
constitute and encompass the entire agreement and understanding of the parties
hereto with regard to the transactions to be effected hereby.
8.8. AMENDMENTS; WAIVERS. This Agreement shall not be altered, amended or
supplemented except by a writing signed by Purchaser and Stockholders'
Representative. Any failure of any of the parties hereto to comply with any
obligation, covenant, agreement or condition herein may be waived by the party
entitled to the benefits thereof only by a written instrument signed by the
party granting such waiver, provided that any such waiver of any term, covenant,
agreement or condition contained in this Agreement shall not be deemed a waiver
of any other term, covenant, agreement or condition, and any waiver of any
default in any such term, covenant, agreement or condition shall not be deemed a
waiver of any later default thereof or of any other term, covenant, agreement or
condition.
8.9. CURRENCY. All dollar ($) amounts in this Agreement shall be deemed to
be United States Dollars.
8.10. NOTICES. Any notices required or permitted to be sent hereunder shall
be in writing and shall be delivered personally or sent by facsimile
transmission, electronic mail or delivered by overnight courier service to the
following addresses, or such other address as any party hereto designates by
written notice to the other party, and shall be deemed to have been given upon
delivery, if delivered personally, upon the transmission thereof if sent by
facsimile (with telephonic confirmation) or by electronic mail (with delivery
notification) provided that receipt of transmission occurs during normal
business hours, or one business day after delivery to the courier, if delivered
by overnight courier service provided the deadline for overnight deliveries for
such courier service has been met:
IPVOICE-NETSCO Page 17 of 18 6/10/2004
If to Purchaser: With a copy to:
IPVoice Communications, Inc. Xxxxxxx Xxxxxx & Xxxxxxx LLP
c/o Vergetech Incorporated 000 Xxxxx Xxxxxx Xxxxx, Xxxxx 0000
0000 Xxxxxxxx Xxxxx Xxxxxxx, XX 00000
Suite 210 Attention: Xxxxx Xxxxxxxx
Xxxxxx, XX 00000 Fax No.: (000) 000-0000
Fax No. 000-000-0000 Telephone No.: (000) 000-0000
Telephone No.: 000-000-0000 (x209)
Attention: Xxxxxx Xxxxxx
If to the Stockholders: With a copy to:
NETSCO Inc. INNOVA Inc.
XX Xxx 00000 000 Xxxxxxxx Xxxx
Xxxxxxxx Xxxxxxxx Xxxx Xxxxxxxxxxx, Xxxx 00000
Xxxxx Xxxxxxxx 00000 Attention: Cem Gokay
Attention: Xxxxx Xxxxxx Fax No.: (000) 000-0000
Fax No.: (000) 000-0000 Telephone No.: (000) 000-0000
Telephone No.: (000) 000-0000
[Signature page follows]
IPVOICE-NETSCO Page 18 of 18 6/10/2004
IN WITNESS WHEREOF, the parties have executed this Purchase Agreement as of
the date and year first above written.
IPVOICE COMMUNICATIONS, INC. "Purchaser"
By: Xxxxxx X. Xxxxxx Signature: /s/Xxxxxx X. Xxxxxx
----------------------- ------------------------------
NETSCO INC. "Stockholder"
By: Xxxxx Xxxxxx Signature: /s/Xxxxx Xxxxxx
----------------------- ------------------------------
IPVOICE-NETSCO Signature Page 6/10/2004
