ASSET PURCHASE AND SALE AGREEMENT
THIS ASSET PURCHASE AND SALE AGREEMENT ("Agreement"), is
entered into effective as of April 29, 1999, among INTERACTIVE
FLIGHT TECHNOLOGIES, INC., a Delaware corporation ("IFT") and THE
NETWORK CONNECTION, INC., a Georgia corporation ("TNCI").
R E C I T A L S :
WHEREAS, IFT is engaged primarily in the interactive
entertainment devices business (the "Business");
WHEREAS, TNCI desires to purchase, and IFT desires to sell
all of its right, title and interest in and to all or
substantially all of the tangible and intangible assets relating
to the Business as now conducted (the "Assets") and specific
liabilities relating to the Business ("Liabilities," with the
Assets "Net Assets") in exchange for restricted stock of TNCI.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, IFT and TNCI hereby agree as follows:
C O V E N A N T S :
1. Purchase and Sale of Assets. Subject to the terms and
conditions of this Agreement, on the Closing Date, as defined in
Paragraph 4 (the "Closing Date") IFT shall sell, convey, transfer
and assign to TNCI, and TNCI shall purchase from IFT, all of
IFT's right, title and interest in and to the Assets described in
Schedule 1.1.1 (the "Assets"). TNCI shall pay the consideration
set forth in Xxxxxxxxx 0, "Xxxxxxxx Price," to purchase the
Assets. All of the Exhibits and Schedules referred to in this
Agreement are made a part of the Agreement by this reference.
2. Assumption of Liabilities. Subject to the terms and
conditions of this Agreement, TNCI shall assume the Liabilities
of IFT as set forth in Schedule 2.1 (the "Assumed Liabilities"),
which shall specifically include any and all liabilities relating
to any potential claims arising out of IFT's relationship with
Swissair all as set forth in more detail on Schedule 2.1. Except
as set forth in Schedule 2.1, TNCI shall not assume any other
liabilities or obligations in connection with its purchase of the
Assets.
3. Purchase Price and Payment for Assets.
3.1 TNCI will acquire the Assets in consideration for:
3.1.1 its issuance to IFT of the greater of
1,055,745 restricted shares of its voting common stock, $.001 par
value ("Common Stock"), or the maximum number of authorized but
unissued shares of Common Stock of TNCI not otherwise reserved
for issuance as of the Closing Date provided TNCI has received
the approval of the Nasdaq Stock Market, Inc. to issue such
maximum number of shares as contemplated in Paragraph 9.2;
3.1.2 its issuance to IFT of that number of
shares of its Series D Preferred Stock (the terms and conditions
of which are set forth on Schedule 3.1.1-A) such that the total
of the number of shares of Common Stock into which the Series D
Preferred Stock is convertible plus the number of shares of
Common Stock issued to IFT under Paragraph 3.1.1 is equal to
sixty percent (60%) of the outstanding shares of capital stock of
TNCI immediately following the Closing Date, taking into account
the issuance of such Common Stock to IFT under Paragraph 3.1.1
and the conversion of Series D Preferred Stock into Common Stock,
and treating all convertible securities, options, warrants or
other rights to acquire securities of TNCI as if converted or
exercised as of the close of business on the date immediately
preceding the Closing Date (whether or not actually converted or
exercised as of the Closing Date) into Common Stock. The shares
of Common Stock and Series D Preferred Stock to be issued to IFT
as consideration for the transaction contemplated by this
Agreement are collectively referred to in this Agreement as the
"TNCI Shares." Schedule 3.1.1-B attached hereto sets forth the
computation of the TNCI Shares to be issued to IFT; and
3.1.3 The assumption by TNCI of the
Liabilities.
3.2 The purchase price ("Purchase Price") shall be
allocated among the Assets according to Schedule 3.2.
3.3 TNCI and IFT will determine, as of the Closing
Date, the number of TNCI Shares to be issued to IFT pursuant to
this Paragraph 3, and TNCI shall deliver a certificate at
closing, signed by the chief financial officer of TNCI,
certifying the accuracy of such number.
3.4 IFT will transfer title to the Assets and make the
Corporate Records of IFT available for copying to TNCI on the
Closing Date. The term "Corporate Records" shall mean any and
all records kept by IFT regarding the Assets and Assumed
Liabilities identified on Schedule 3.4.
4. Closing Date.
4.1 The closing under this Agreement shall take place
at the offices of Xxxxxxx Xxxx, P.A., Renaissance Xxx, Xxx Xxxxx
Xxxxxxx, Xxxxxxx, Xxxxxxx 00000-0000 on a date ("Closing Date")
as soon as practicable after:
4.1.1 Execution of this Agreement;
4.1.2 Completion of the due diligence
investigation contemplated under Paragraph 8, "Due Diligence
Inspection of Premises and Confidential Information";
4.1.3 Satisfaction of all conditions to
closing set forth in Paragraph 9, "Conditions Precedent to
Obligations of TNCI," and Paragraph 10, "Conditions Precedent to
the Obligations of IFT";
4.1.4 Receipt of any required approvals under
Arizona and Georgia corporate law and any other required
regulatory approvals and all consents or waivers from other
parties to licenses, indentures, agreements and other instruments
that are required (except where the failure to obtain such would
not have a material adverse effect on either party): (i) in
connection with the sale, transfer, assignment or conveyance of
the Assets and assignment of Assumed Liabilities or the
consummation of the transactions contemplated by this Agreement
or (ii) for preventing the acceleration or termination, or
creating the existence of a right to terminate or accelerate upon
consummation of this transaction, of any right, privilege,
license, franchise, permit or agreement of either IFT or TNCI,
which consents or waivers shall have been obtained at the expense
of IFT or TNCI, as relevant; and
4.1.5 Receipt of a "fairness opinion" by TNCI,
which fairness opinion is satisfactory in form and scope to the
board of directors of TNCI.
4.2 The Closing Date shall be no later than May 15,
1999, provided that IFT may extend the Closing Date for up to an
additional thirty (30) days.
5. Representations and Warranties of IFT. IFT represents
and warrants to TNCI that:
5.1 Organization and Good Standing. IFT is a
corporation duly organized and existing in good standing under
the laws of the State of Delaware. IFT has full corporate power
and authority to carry on the Business as now conducted and to
own or lease and operate the Assets. IFT is duly qualified to
transact business in the State of Delaware, the State of Arizona,
and in all states and jurisdictions in which the Business or
ownership of the Assets makes it necessary so to qualify, and the
failure to so qualify could have a material adverse effect on the
Assets or the Business of IFT.
5.2 Finders. No agent, broker, person or firm acting
on behalf of IFT is, or will be, entitled to any commission or
broker's or finder's fees from any of the parties to this
Agreement, or from any person controlling, controlled by or under
common control with any of the parties to this Agreement, in
connection with any of the transactions contemplated in this
Agreement.
5.3 Authority. IFT has the requisite power and
authority to own and transfer the Assets, to enter into this
Agreement and to carry out the transactions contemplated hereby.
The execution, delivery and performance of this Agreement by IFT
has been duly authorized by its Board of Directors. This
Agreement is valid and binding upon IFT, and is enforceable
against IFT in accordance with its terms, subject to bankruptcy,
reorganization, insolvency, fraudulent conveyance, moratorium,
receivership or other similar laws relating to or affecting
creditors' rights generally.
5.4 Validity of Agreement. Neither the execution nor
the delivery of this Agreement by IFT, nor the performance by IFT
of any of the respective covenants or obligations to be performed
by IFT hereunder, will result in any violation of any order,
decree or judgment of any court or other governmental body, or
statute or law applicable to IFT, or in any breach of any terms
or provisions of either the Certificate of Incorporation or
Bylaws of IFT, or constitute a default under any indenture,
mortgage, deed of trust or other material contract to which IFT
is a party or by which IFT or the Assets are bound.
5.5 Absence of Undisclosed Liabilities and
Obligations. IFT has no liability of any nature (whether
accrued, absolute, contingent or otherwise) related to the
Business or the Assets, except to the extent set forth in
Schedule 5.5, and as reflected on IFT's financial statements,
delivered to TNCI pursuant to paragraph 5.6 hereof.
5.6 Financial Statements and Public Reports. The
audited consolidated financial statements of IFT for the fiscal
year ended October 31, 1998, with accompanying notes, as
contained in IFT's Annual Report on Form 10-KSB for the fiscal
year ended October 31, 1998, and the unaudited financial
statements of IFT for the fiscal quarter ended January 31, 1999,
with accompanying notes, as contained in IFT's Quarterly Report
on Form 10-QSB for the fiscal quarter ended January 31, 1999
delivered to TNCI, fairly and accurately present, in all material
respects, the financial condition, the assets and liabilities
of IFT at such dates, and the results of its operation and
changes in its financial position for the periods and years ended
on such dates, in conformity with generally accepted accounting
principles consistently applied. Such financial statements (the
"Financial Statements") have been prepared from the books and
records of IFT in accordance with GAAP, on a consistent basis,
and contain and reflect all necessary adjustments for a fair and
accurate presentation of IFT's financial condition as of the
dates of such statements and for the year and period,
respectively, ended on such dates.
5.7 Absence of Certain Changes. During the period
from January 31, 1999 through and including the Closing Date, IFT
has not, with respect to the Business and the Assets:
5.7.1 Suffered any material adverse change
affecting the Assets, Liabilities, or Business;
5.7.2 Sold or transferred any of the Assets or
canceled any indebtedness or claims owing to it which constitute
part of the Business, except in the ordinary course of business
and consistent with its past practices;
5.7.3 Sold, assigned or transferred any
formulas, trade secrets, inventions, patents, patent
applications, trademarks, trade names, copyrights, copyright
applications, licenses, computer programs or software, know-how
or other intangible assets, which constitute part of the Assets;
5.7.4 Amended or terminated any contract,
agreement or license constituting part of the Business to which
it is a party otherwise than in the ordinary course of business
or as may be necessary for the consummation of the transactions
described herein;
5.7.5 Borrowed any money or incurred, directly
or indirectly (as a guarantor or otherwise), any single
instrument of indebtedness which constitutes part of the Assumed
Liabilities, in excess of $25,000, or incurred aggregate
additional indebtedness which constitutes part of the Assumed
Liabilities in excess of $50,000, except in the ordinary course
of business and consistent with its past practices;
5.7.6 Mortgaged, pledged or subjected to lien,
charge or other encumbrance any of the Assets, except in the
ordinary course of business and consistent with its past
practices; or
5.7.7 Entered into or committed to any other
material transaction as part of the Business other than in the
ordinary course of business, consistent with past practices.
5.8 Taxes. IFT (and any predecessor corporation or
partnership as to which IFT is the transferee or successor) has
timely filed, or has timely secured an extension and will (within
the permitted extension) file, all tax returns, including
federal, state, local and foreign tax returns, tax reports and
forms, as to which the due date for filing is prior to the
Closing Date; has reported all reportable income on such returns;
has adopted and followed in the preparation of such returns
methods of accounting accepted by law, and has not changed any
methods of accounting without compliance with procedures required
by law; has not deducted any expenses or charges or claimed any
credits which are not allowable; and except as set forth in
Schedule 5.8, has paid, or accrued and reserved for, all taxes,
penalties and interest shown to be due or required to be paid
pursuant to the returns as filed, or as adjusted pursuant to
amendment or correction. IFT has also provided copies of all
federal and state income and sales tax returns filed, FICA and
state income taxes withholding returns filed and evidence of
payment of such taxes as listed in Schedule 5.8 hereto. IFT has
(i) paid or will pay by the Closing Date any property taxes owed
with respect to the Assets that are due and payable through the
Closing Date; and (ii) no knowledge of any deficiency or
assertion of any deficiency relating to property taxes on the
Assets. No examination, audit, or inquiry of any tax return,
federal, state or otherwise of IFT is currently in progress and
IFT has not been advised by any taxing authority of any intent to
commence any inquiry, audit or examination of any tax return from
any taxing authority or of any issue or questions relating to any
return, report or declaration that would result in the assertion
of any deficiency for any federal state, local, or other tax or
interest or penalties in connection therewith. There are no
outstanding agreements or waivers extending the statutory period
of limitation applicable to any tax return of IFT.
5.9 Title to the Assets. IFT has good and marketable
title to all of the Assets, free and clear of all security
interests, liens, encumbrances, mortgages or charges of any
nature whatsoever other than those liabilities set forth in the
Financial Statements. Any security interests, liens,
encumbrances, mortgages or charges on the Assets not set forth in
IFT's Financial Statements shall be discharged in full on or
before the Closing Date and evidenced by UCC Releases delivered
by IFT on the Closing Date. The tangible personal property
(other than inventory) of IFT is in good working order, normal
wear and tear excepted.
5.10 Leases. Schedule 5.10 sets forth a list of each
lease or occupancy, possessory or similar agreement, as the same
may have been amended or modified under which IFT is lessee of,
or holds or operates, any real property owned by a third party
and which is used in the Business (the "Leased Real Property").
IFT has delivered a true and correct copy of each such agreement
to TNCI. IFT does not own any real property.
5.11 Accounts Receivable. No amount included in the
accounts receivable of IFT as of January 31, 1999, has been
released or settled for an amount less than the value at which it
was included in the financial statements as of that date. Except
as to the Swissair accounts receivable, there are no facts or
circumstances (other than general economic conditions) which
would result in any material increase in the uncollectibility of
such accounts receivable over historical collection rates.
5.12 Material Documents. Set forth in Schedule 5.12 is
a complete list of all material documents with respect to the
Assets or the Business to which IFT is a party (the "Scheduled
Agreements"). All such documents listed on and attached to
Schedule 5.12 are legal, valid, enforceable and accurate and
complete copies of such material documents (or, with the consent
of TNCI, forms thereof) as have been requested by TNCI have been
provided to TNCI. As used herein, material documents shall mean
agreements, covenants and any other instrument that relates to an
assets that is material to the Business, or which otherwise
involves an expenditure or liability of IFT in excess of $30,000
in the aggregate. Except as set forth in Schedule 5.12,
consummation of the transactions contemplated hereby will not
cause a breach of or constitute a default (with or without the
giving of notice or the lapse of time or both) under any of the
Scheduled Agreements, result in the forfeiture or impairment of
any rights thereunder, require the consent, approval or act of,
or the making of any filing with, any other Person pursuant to
the terms thereof (to the extent the absence of such consent or
approval would constitute a breach or default, or require or
result in the payment of any assignment or related fees or
costs). Except as set forth in Schedule 5.12, IFT has fulfilled
and performed its material obligations under each of the
Scheduled Agreements and is not in breach or default under, nor,
to IFT's knowledge, is there any basis for termination of any of
the Scheduled Agreements, and no other party to any of such
Scheduled Agreements has, to IFT's knowledge, breached or
defaulted thereunder, and no event has occurred and no condition
or state of facts exists which, with the passage of time or the
giving of notice, or both, would constitute such a default or
breach by IFT or, by any such other party. Except as set forth
on Schedule 5.12, IFT is not currently renegotiating any of the
Scheduled Agreements or paying liquidated damages in lieu of
performance thereunder. Complete and correct copies of each of
the written Scheduled Agreements (including without limitations
all amendments, supplements or other modifications thereto or
waivers of right thereunder) have heretofore been delivered to
TNCI. A complete and correct description of each oral Scheduled
Agreement appears in Schedule 5.12 in which such Scheduled
Agreement is listed.
5.13 Intellectual Property.
5.13.1 Schedule 5.13.1 contains a list and
brief description of:
5.13.1.1 all United States and foreign
patents and patent applications, all United States,
state and foreign trademarks and trademark
applications, service marks, trade names and copyrights
and copyright applications for which registrations have
been issued or applied for, and all other United
States, state and foreign trademarks, service marks,
trade names and copyrights (other than for software)
owned or used by IFT;
5.13.1.2 all agreements, contracts, or
licenses, relating or pertaining to any asset, property
or right of the character described in the preceding
clause (i) to which IFT is a party;
5.13.1.3 all licenses or agreements
pertaining to mailing lists, know-how, trade secrets,
inventions, disclosures or uses of ideas to which IFT
is a party; and
5.13.1.4 all registered, assumed or
fictitious names under which IFT is conducting
activities related to the Business or has within the
previous five years conducted activities related to the
Business.
5.13.2 Except as otherwise disclosed in
Schedule 5.13.1.2, to IFT's knowledge, all patents, trademarks
and registered copyrights owned, controlled or used by IFT are
valid and in force and all patent applications, trademark
registrations and copyright registrations of IFT listed therein
are in good standing all, to the knowledge of IFT, without
challenge of any kind and except as otherwise disclosed in
Schedule 5.13.1.2, IFT owns the entire rights, title and
interests in and to such patents and patent applications free and
clear of all Encumbrances. To IFT's knowledge, all of the
registrations for trade names, trademarks, service marks and
registered copyrights listed in Schedule 5.13.1, as being owned,
or used by IFT are valid and in force and all applications for
such registrations are in good standing, all without challenge of
any kind, and to IFT's knowledge, the entire right, title and
interest in and to each such trade name, trademark, service xxxx
and copyright so listed as well as the registrations and
application for registration therefor is owned by IFT, free and
clear of all encumbrances. Correct and complete copies of all
the patents and patent applications and of all of the trademarks,
trade names, service marks and copyrights and registrations,
applications or deposits therefor and all the licenses listed in
Schedule 5.13.1, have heretofore been delivered by IFT to TNCI.
5.13.3 To IFT's knowledge, IFT has good and
marketable title to that computer software described as "Owned
Software" on Schedule 5.13.1.4 hereto (the "Owned Software"),
free of all claims, including claims or rights of employees,
agents, consultants or other parties involved in the development
or creation of such computer software, except as set forth on
Schedule 5.13.1.4. Except as set forth on Schedule 5.13.1.4
hereto, IFT has the right and license to use that software
described as "Licensed Software" on Schedule 5.13.1.4 hereto (the
"Licensed Software") free and clear of any limitations or
encumbrances except as may be set forth in any license agreements
listed in Schedule 5.13.1.4. Except as disclosed on
Schedule 5.13.1.4, IFT is in full compliance with all provisions
of any license, lease or other similar agreement pursuant to
which it has rights to use the Licensed Software. Except as
disclosed on Schedule 5.13.1.4, none of the Licensed Software has
been incorporated into or made a part of any Owned Software or
any other Licensed Software and none of the Owned Software is
dependent on any Licensed Software in order to freely operate in
the manner in which it is intended. The Owned Software and
Licensed Software constitute all software used in the Business
("IFT's Software"). IFT has not received notice that it is
infringing any intellectual property rights or any other person
or entity with respect to IFT's Software, and to the knowledge of
IFT no other person or entity is infringing any intellectual
property rights of IFT with respect to IFT's Software which IFT
leases or licenses to it.
5.14 Governmental Permits.
5.14.1 IFT owns, holds or possesses all
governmental licenses, franchises, permits, privileges,
immunities, approvals, registrations, easements, rights and other
authorizations which are necessary to entitle it to own, lease,
operate and use its assets and properties and to carry on and
conduct the Business as currently conducted (herein collectively
called "IFT Permits"). Schedule 5.14.1 sets forth a list and
brief description of each such IFT Permit held by IFT as of the
date of this Agreement. Complete and correct copies of all of
the IFT Permits listed in Schedule 5.14.1 have heretofore been
delivered to TNCI by IFT.
5.14.2 IFT is in compliance in all material
respects with each of the IFT Permits owned, held or possessed by
it, and no event has occurred or condition or state of facts
exists which constitutes or, after notice or lapse of time or
both, would constitute a breach or default under any such IFT
Permit. No notice of cancellation, of default or of any dispute,
appeal or inquiry concerning any IFT Permit, or of any event,
condition or state of facts set forth in the preceding sentence,
has been received by IFT. Except as set forth in
Schedule 5.14.3, each of the IFT Permits is valid subsisting and
in full force and effect without challenge of any kind.
5.15 Litigation. Except as set forth in Schedule 5.15,
there are no actions, claims or proceedings pending or threatened
before any court, administrative agency or governmental body
relating to the Assets or the Business which may have an adverse
effect on the Business, the Assets, or IFT's financial condition.
There is no action, suit, proceeding or investigation pending or,
to IFT's knowledge, threatened which questions the legality or
propriety of the transactions contemplated by this Agreement or
which seeks to prevent or materially delay the transactions
contemplated by this Agreement.
5.16 Employees. Schedule 5.16 sets forth the name and
current monthly salary and any accrued benefit for each employee
of IFT set forth on the attached Schedule who the parties agree
shall be offered employment by TNCI immediately after the
Closing. There will be no changes in Schedule 5.16 through the
Closing Date, unless TNCI is advised of such changes in advance;
provided that to the exact TNCI reasonably disapproves of such
change, TNCI shall have the right to not offer employment to such
person after the Closing.
5.17 Compliance With Laws. Except as set forth in
Schedule 5.17, IFT has conducted and is continuing to conduct the
Business in compliance in all material respects with, and is in
compliance in all material respects with, all applicable
statutes, orders, rules and regulations promulgated by
governmental authorities relating in any material respect to the
conduct of the Business or use of properties, including, without
limitation, any applicable statute, order, rule or regulation
relating to (i) wages, hours, hiring, nondiscrimination,
retirement, benefits, pensions, working conditions, and worker
safety and health; (ii) air, water, toxic substances, noise, or
solid, gaseous or liquid waste generation, handling, storage,
disposal or transportation of environmentally hazardous materials
("Environmental Laws"); (iii) zoning and building codes; (iv) the
production, storage, processing, advertising, sale, distribution,
transportation, disposal, use and warranty of products; or
(v) trade and antitrust regulations. The execution, delivery and
performance of this Agreement by IFT and the consummation by IFT
of the transactions contemplated by this Agreement will not
violate, contravene or constitute a default under any applicable
statutes, orders, rules and regulations promulgated by
governmental authorities or cause a lien on any property used,
owned or leased by IFT to be created thereunder, except to the
extent it would not cause a material adverse effect on the Assets
or the Business. IFT has not taken any action that requires
notification of the employees of IFT pursuant to the provisions
of the WARN Act or that would cause IFT to have any liability
thereunder. There are no injunctions, orders, awards, decrees of
any governmental body or political subdivision currently in
effect against IFT.
5.18 Filings. IFT has made all filings and reports
required under all local, state and federal laws and regulations
with respect to the Business and the Assets, except where the
failure to make such filings and reports would not have a
material adverse effect on the Business or the Assets.
5.19 Insurance Coverage. The policies of fire,
liability or other forms of insurance of IFT relating to the
Business and Assets are described in Schedule 5.19.
5.20 Charter and By-Laws. IFT has heretofore delivered
to TNCI true, accurate and complete copies of the Certificate of
Incorporation and By-Laws of IFT, together with all amendments to
each of the same as of the date hereof.
5.21 Corporate Minutes. The minute books of IFT
previously made available to TNCI are the correct and only such
minute books and do and will contain complete and accurate
records of any and all proceedings and actions at all meetings,
including written consents executed in lieu of meetings of its
stockholders, Board of Directors and committees thereof through
the Closing Date. The stock records of IFT previously delivered
to TNCI at the Closing are copies of the correct and only such
stock records and accurately reflect all issues and transfers of
record of the capital stock of IFT.
5.22 Default on Indebtedness. IFT is not in monetary
default or in material default in any other respect under any
evidence of indebtedness for borrowed money, which is secured by
a lien on the Assets.
5.23 Governmental Approvals. No consent, approval or
authorization of, or notification to or registration with, any
governmental authority, either federal, state or local, is
required in connection with the execution, delivery and
performance of this Agreement by IFT, except for any filings
required to be made after the Closing Date, which are identified
on Schedule 5.23.
5.24 Investment Intent.
5.24.1 Investigation; Investment
Representation. IFT (i) possesses such knowledge and experience
in financial and business matters that it is capable of
evaluating the merits and risks of its investment hereunder; (ii)
has been afforded the opportunity to ask questions of, and
receive answers from, TNCI concerning the terms and conditions of
its investment, the transactions contemplated hereby and the
business and affairs of TNCI; (iii) has examined, to the extent
it deems appropriate, all of the agreements and documents
referred to herein or in the schedules hereto and such other
documents that it has requested, and has been provided copies of
and has reviewed (x) all of TNCI's public filings made pursuant
to the Securities Exchange Act of 1934, as amended, which have
been filed by TNCI since December 31, 1998, and (y) the Risk
Factors set forth on Schedule 5.24.1; and (iv) understands that
the TNCI Shares are not being registered under the 1933 Act, on
the grounds that the issuance thereof is exempt from registration
under Paragraph 4(2) of the 1933 Act, as a transaction by an
issuer not involving a public offering, and TNCI's reliance on
this exemption is predicated in part on IFT's representations and
warranties contained in this Paragraph 5.24.1. IFT is acquiring
the TNCI's Shares for its own account, for investment purposes
only and not with a view to the distribution or resale thereof.
IFT acknowledges that the certificates evidencing the TNCI Shares
shall bear restrictive securities legends and shall not be
transferable in the absence of the distribution thereof being
registered under the 1933 Act or any applicable state securities
laws, or the applicability of exemptions therefrom based upon an
opinion of counsel acceptable to TNCI. IFT is an "accredited
investor," as that term is defined in Regulation D, as
promulgated under the 0000 Xxx.
5.24.2 Stop Transfer Instructions and Legend.
IFT acknowledges that TNCI may cause its transfer agent to
establish appropriate stop transfer instructions with respect to
the TNCI Shares, and shall cause to be set forth on the
certificates representing any TNCI Shares, a legend substantially
in the following form:
"The securities represented by this certificate
have not been registered under the United States
Securities Act of 1933, as amended, or under any
applicable state securities laws. No transfer of such
securities shall be valid or effective except in
accordance with the applicable requirements of the
Securities Act of 1933, as amended, or applicable state
securities laws. In the absence of registration under
the Securities Act of 1933 and applicable state
securities laws, no transfer of such securities shall
be made in the absence of an exemption therefrom."
5.25 Product Liability Claims; Product Warranties.
Schedule 5.25 sets forth all product liability claims pending or,
to the knowledge of IFT, threatened against IFT and all product
liability claims paid by or on behalf of IFT for the three (3)
year period prior to the date of this Agreement. Except as set
forth on Schedule 5.25, IFT has not given or offered any
warranty covering any products sold or distributed by it, and IFT
has not extended to its customers any indemnification or
guarantees.
5.26 Environmental Protection.
5.26.1 Except as set forth on Schedule 5.26.1;
5.26.1.1 The operations of IFT comply in all
material respects with all applicable Environmental Laws and
there are no substances or conditions existing at any facility
that may support a claim or cause of action against IFT or TNCI
under any Environmental Laws.
5.26.1.2 IFT has obtained, or has taken
appropriate steps as required by Environmental Laws to obtain,
all environmental, health and safety permits necessary for its
operations, and all such permits are in good standing and IFT is
currently incompliance with all terms and conditions of such
permits; and
5.26.1.3 IFT's facilities and operations at
the facilities are not subject to any judicial or administrative
proceeding, order, judgment, decree or settlement, or to the
knowledge of IFT, any investigation, alleging or addressing (i)
violation of any Environmental Laws, or (ii) any remedial action;
and IFT has not received any notice of any claims or liabilities
and costs arising from the release or threatened release of a
contaminant into the environment, or claims, complaints, notices
or requests for information with respect to any alleged violation
of any Environmental Laws or complaints or notices regarding
potential liability under any Environmental Laws.
5.27 Employment Relations. IFT is in compliance with
all Federal, state or other applicable laws, domestic or foreign,
respecting employment and employment practices, terms and
conditions of employment and wages and hours, and has not and is
not engaged in any unfair labor practice which would result in a
material adverse effect on IFT; no unfair labor practice
complaint against IFT is pending before the National Labor
Relations Board; there is no labor strike, dispute, slow down or
stoppage actually pending or, to IFT's knowledge, threatened
against or involving IFT; no labor representation question exists
respecting the employees of IFT; no grievance which might have an
adverse effect upon IFT or the conduct of its business has been
filed against IFT; no arbitration proceeding arising out of or
under any collective bargaining agreement is currently being
negotiated by IFT; and IFT has not experienced any material labor
difficulty during the last three (3) years.
5.28 Completeness of Representations and Schedules.
The Schedules hereto, where applicable to IFT, completely and
correctly present in all material respects the information
required by this Agreement. This Agreement, the certificates to
be delivered by IFT at the Closing, the Schedules and the
representations and warranties contained in this Paragraph 5, and
the documents and written information pertaining to IFT furnished
to TNCI or its agents by or on behalf of IFT, do not contain any
untrue statement of a material fact or omit to state a material
fact necessary in order to make this Agreement, or such
certificates, schedules, documents or written information not
misleading.
60 Representations and Warranties of TNCI. TNCI
represents and warrants to IFT that:
6.1 Organization and Good Standing.
6.1.1 TNCI is a corporation duly organized and
existing in good standing under the laws of the State of Georgia.
TNCI has full corporate power and authority to carry on its
business as now conducted. TNCI is duly qualified to transact
business in the States of Arizona and Georgia and in all states
and jurisdictions in which the business or ownership of its
property makes it necessary so to qualify and the failure to so
qualify could have a material adverse effect on the business,
assets, financial condition, results of operations, or prospects
of TNCI.
6.1.2 TNCI is a publicly held company and is a
reporting company under the Securities Exchange Act of 1934 as
amended ("Exchange Act") and satisfies the informational
reporting requirements under Rule 144 promulgated under the
Exchange Act. TNCI has filed all the material required to be
filed under the Exchange Act and such reports are true, correct
and complete in all material respects and comply as to for with
the applicable requirements of the Exchange Act and the rules and
regulations promulgated thereunder.
6.2 Finders. No agent, broker, person or firm acting
on behalf of TNCI is, or will be, entitled to any commission or
broker's or finder's fees from any of the parties to this
Agreement, or from any person controlling, controlled by or under
common control with any of the parties to this Agreement, in
connection with any of the transactions contemplated in this
Agreement.
6.3 Authority and Consent. The execution, delivery
and performance of this Agreement by TNCI has been duly
authorized by its Board of Directors. This Agreement is valid
and binding upon TNCI, and is enforceable against TNCI in
accordance with its terms, subject to bankruptcy, reorganization,
insolvency, fraudulent conveyance, moratorium, receivership or
other similar laws relating to or affecting creditors' rights
generally.
6.4 Validity of Agreement. Neither the execution nor
the delivery of this Agreement by TNCI, nor the performance by
TNCI of any of the respective covenants or obligations to be
performed by TNCI hereunder, will result in any violation of any
order, decree or judgment of any court or other governmental
body, or statute or law applicable to TNCI, or in any breach of
any terms or provisions of either the Articles of Incorporation
or Bylaws of TNCI, or constitute a default under any indenture,
mortgage, deed of trust or other material contract to which TNCI
is a party or by which TNCI or its assets or properties are
bound.
6.5 Capitalization. The authorized capital stock of
TNCI consists solely of 10,000,000 shares of Common Stock, $.001
par value per share, of which 5,278,737 shares are issued and
outstanding and 2,500,000 shares of Preferred Stock, of which
1,500 shares of Series B Preferred Stock are issued and
outstanding ("TNCI Shares"). TNCI also has outstanding
indebtedness, options, warrants or other securities convertible
into capital stock as set forth on Schedule 6.5.1 outstanding
(the "Convertible Securities"). TNCI Shares are validly issued,
are fully paid and non-assessable and are subject to no
restrictions on transfer (other than those provided under state
and federal securities laws). TNCI Shares shown as outstanding
constitute the only outstanding shares of the capital stock of
TNCI of any nature whatsoever, voting and non-voting. All TNCI
Shares are required to be certificated, and TNCI has executed and
delivered no certificates for shares in excess of the number of
TNCI Shares set forth above. There are, and except as set forth
on Schedule 6.5.2 as of the Closing Date there will be, no
outstanding options, warrants, rights, calls, commitments,
conversion rights, plans or other agreements of any character
providing for the purchase, issuance or sale of, or any
securities convertible into, capital stock of TNCI, whether
issued, unissued or held in its treasury.
6.6 No Additional Outstanding Options and Warrants.
TNCI has not, and as of the Closing Date will not, issue any
additional shares of its capital stock or any Convertible
Securities or grant any rights to acquire or agree to issue any
additional shares of its capital stock or any Convertible
Securities.
6.7 No Subsidiaries. TNCI has no subsidiaries and
does not own five percent (5%) or more of the securities having
voting power of any corporation (or would own such securities in
such amount upon the closing of any existing purchase obligations
for securities).
6.8 Government Approvals. No consent, approval or
authorization of, or notification to or registration with, any
governmental authority, either federal, state or local, is
required in connection with the execution, delivery and
performance of this Agreement by TNCI.
6.9 Financial Statements and Public Reports. The
audited consolidated financial statements of TNCI for the fiscal
year ended December 31, 1998 with accompanying notes, all as
contained in TNCI's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1998 delivered to IFT, fairly and
accurately present, in all material respects, the financial
condition, assets and liabilities of TNCI at such date, the
results of its operation and changes in its financial position
for the year ended on such date, in conformity with generally
accepted accounting principles consistently applied. Such
financial statements have been prepared from the books and
records of TNCI in accordance with GAAP, on a consistent basis,
and contain and reflect all necessary adjustments for a fair and
accurate presentation of TNCI's financial condition as of the
date of such statements and for the year ended on such date.
TNCI has not had any disputes or disagreements during the last
three (3) years with its auditors on any matter of accounting
principles or practices, financial statement disclosure or
auditing scope or procedure.
6.10 Absence of Undisclosed Liabilities and
Obligations. TNCI has no liabilities or obligations of any
nature in excess of $5,000 individually or $15,000 in the
aggregate (whether accrued, absolute, contingent or otherwise)
except to the extent set forth in Schedule 6.10 and as reflected
on its Financial Statements. Except as set forth on Schedule
6.10, TNCI has no liabilities or obligations secured by a lien or
security interest in any of its assets.
6.11 Absence of Certain Changes. Except as set forth
in Schedule 6.11, during the period from December 31, 1998
through and including the Closing Date, TNCI has not:
6.11.1 Suffered any material adverse change
affecting its assets, liabilities, financial condition or
business;
6.11.2 Made any change in the compensation
payable or to become payable to any of its employees or agents,
or made any bonus payments, except for the bonuses which have
historically been made in the ordinary course of business or
compensation arrangements to or with any of its employees or
agents, whether direct or indirect;
6.11.3 Paid or declared any dividends,
distributions or other payments due or owing to its stockholders;
6.11.4 Issued any stock, or granted any stock
options or warrants to purchase stock or issued any securities
convertible into common stock of TNCI;
6.11.5 Sold or transferred any of its assets or
canceled any indebtedness or claims owing to it, except in the
ordinary course of business and consistent with its past
practices;
6.11.6 Sold, assigned, encumbered or
transferred any formulas, trade secrets, inventions, patents,
patent applications, trademarks, trade names, copyrights,
copyright application, licenses, computer programs or software,
know-how or other intangible assets;
6.11.7 Amended or terminated any contract,
agreement or license to which it is a party otherwise than in the
ordinary course of business or as may be necessary or appropriate
for the consummation of the transactions described herein;
6.11.8 Borrowed any money or incurred, directly
or indirectly (as a guarantor or otherwise), any single
instrument of indebtedness in excess of $25,000, or incurred
additional aggregate indebtedness in excess of $50,000, except in
the ordinary course of business and consistent with its past
practices;
6.11.9 Discharged or satisfied any lien or
encumbrance or paid any obligation or liability (absolute or
contingent), other than current liabilities shown in the
Financial Statements or current liabilities incurred since such
date in the ordinary course of business, consistent with its past
practices;
6.11.10 Mortgaged, pledged or subjected to lien,
charge or other encumbrance any of its assets, except in the
ordinary course of business and consistent with its past
practices; or
6.11.11 Entered into or committed to any other
material transaction other than in the ordinary course of
business, consistent with past practices.
6.12 Taxes. TNCI (and any predecessor corporation or
partnership as to which TNCI is the transferee or successor) has
timely filed, or has timely secured an extension and will (within
the permitted extension) file, all tax returns, including
federal, state, local and foreign tax returns, tax reports and
forms, as to which the due date for filing is prior to the
Closing Date; has reported all reportable income on such returns;
has adopted and followed in the preparation of such returns
methods of accounting accepted by law, and has not changed any
methods of accounting without compliance with procedures required
by law; has not deducted any expenses or charges or claimed any
credits which are not allowable; and except as set forth in
Schedule 6.12.1, has paid, or accrued and reserved for, all
taxes, penalties and interest shown to be due or required to be
paid pursuant to the returns as filed, or as adjusted pursuant to
amendment or correction. TNCI has also provided copies of all
federal and state income and sales tax returns filed, FICA and
state income taxes withholding returns filed and evidence of
payment of such taxes as listed in Schedule 6.12.2 hereto. No
examination, audit, or inquiry of any tax return, federal, state
or otherwise of TNCI is currently in progress and TNCI has not
been advised by any taxing authority of any intent to commence
any inquiry, audit or examination of any tax return from any
taxing authority or of any issue or question relating to any
return, report or declaration that could result in the assertion
of any deficiency for any federal, state, local, or other tax or
interest or penalties in connection therewith. There are no
outstanding agreements or waivers extending the statutory period
of limitation applicable to any tax return of TNCI.
6.13 Accounts Receivable. Except as specifically noted
in Schedule 6.13, no amount included in the accounts receivable
of TNCI as of December 31, 1998, has been released or settled for
an amount less than the value at which it was included in the
financial statements as of that date. Except as specifically
noted in Schedule 6.13, there are no facts or circumstances
(other than general economic conditions) which would result in
any material increase in the uncollectibility of such accounts
receivable over historical collection rates.
6.14 Material Documents. Set forth in Schedule 6.14.1
is a complete list of all material documents to which TNCI is a
party (the "Scheduled Agreements"). All such documents listed on
and attached to Schedule 6.14.1 are legal, valid, enforceable and
accurate and complete copies of such material documents (or, with
the consent of TNCI, forms thereof) as have been requested by IFT
have been provided to IFT. As used herein, material documents
shall mean agreements, covenants and any other instrument that
relates to an asset that is material to the business of TNCI or
which otherwise involves an expenditure or liability of TNCI that
is in excess of $30,000 in the aggregate. Except as set forth in
Schedule 6.14.2, consummation of the transactions contemplated
hereby will not cause a breach of or constitute a default (with
or without the giving of notice or the lapse of time or both)
under any of the Scheduled Agreements, result in the forfeiture
or impairment of any rights thereunder, require the consent,
approval or act of, or the making of any filing with, any other
Person pursuant to the terms thereof (to the extent the absence
of such consent or approval would constitute a breach or default,
or require or result in the payment of any assignment or related
fees or costs). Except as set forth in Schedule 6.14.2 TNCI has
fulfilled and performed its material obligations required to be
performed prior to the date hereof, under each of the Scheduled
Agreements and is not in, breach or default under nor, to TNCI's
knowledge is there any basis for termination of any of the
Scheduled Agreements, and no other party to any of such Scheduled
Agreements has, to TNCI's knowledge breached or defaulted
thereunder, and no event has occurred and no condition or state
of facts exists which, with the passage of time or the giving of
notice, or both, would constitute such a default or breach by
TNCI or, by any such other party. Except as set forth on
Schedule 6.14.2, IFT is not currently renegotiating any of the
Scheduled Agreements or paying liquidated damages in lieu of
performance thereunder. Complete and correct copies of each of
the written Scheduled Agreements (including without limitations
all amendments, supplements or other modifications thereto or
waivers of right thereunder) have heretofore been delivered to
IFT. A complete and correct description of each oral Scheduled
Agreement appears in the Schedule in which such Scheduled
Agreement is listed.
6.15 Intellectual Property.
6.15.1 Schedule 6.15.1 contains a list and
brief description of:
6.15.1.1 all United States and foreign
patents and patent applications, all United States,
state and foreign trademarks and trademark
applications, service marks, trade names and copyrights
and copyright applications for which registrations have
been issued or applied for, and all other United
States, state and foreign trademarks, service marks,
trade names and copyrights (other than the software)
owned or used by TNCI;
6.15.1.2 all agreements, contracts or
licenses, relating or pertaining to any asset, property
or right of the character described in the preceding
clause (i) to which TNCI is a party;
6.15.1.3 all licenses or agreements
pertaining to mailing lists, know-how, trade secrets,
inventions, disclosures or uses of ideas to which TNCI
is a party; and
6.15.1.4 all registered, assumed or
fictitious names under which TNCI is conducting
activities or has within the previous five years
conducted activities.
6.15.2 Except as otherwise disclosed in
Schedule 6.15.2, to TNCI's knowledge, all patents, trademarks and
registered copyrights owned, controlled or used by TNCI are valid
and in force and all patent applications, trademark registrations
and copyright registrations of TNCI listed therein are in good
standing all, to the knowledge of TNCI, without challenge of any
kind and except as otherwise disclosed in Schedule 6.15.2, TNCI
owns the entire rights, title and interests in and to such
patents and patent applications free and clear of all
Encumbrances. To TNCI's knowledge, all of the registrations for
trade names, trademarks, service marks and copyrights listed in
Schedule 6.15.1, as being owned, controlled, or used by TNCI are
valid and in force and all applications for such registrations
are in good standing, all without challenge of any kind, and to
TNCI's knowledge, the entire right, title and interest in and to
each such trade name, trademark, service xxxx and copyright so
listed as well as the registrations and application for
registration therefor is owned by TNCI, free and clear of all
encumbrances. Correct and complete copies of all the patents and
patent applications and of all of the trademarks, trade names,
service marks and copyrights and registrations, applications or
deposits therefor and all the licenses listed in Schedule 6.15.1,
have heretofore been delivered by TNCI to IFT.
6.15.3 To TNCI's knowledge, TNCI has good and
marketable title to that computer software described as "TNCI
Owned Software" on Schedule 6.15.3 hereto (the "TNCI Owned
Software"), free of all claims, including claims or rights of
employees, agents, consultants or other parties involved in the
development or creation of such computer software, except as set
forth on Schedule 6.15.3. Except as set forth on Schedule 6.15.3
hereto, TNCI has the right and license to use that software
described as "TNCI Licensed Software" on Schedule 6.15.3 hereto
(the "TNCI Licensed Software") free and clear of any limitations
or encumbrances except as may be set forth in any license
agreements listed in Schedule 6.15.3. Except as disclosed on
Schedule 6.15.3, TNCI is in full compliance with all provisions
of any license, lease or other similar agreement pursuant to
which it has rights to use the TNCI Licensed Software. Except as
disclosed on Schedule 6.15.3, none of the TNCI Licensed Software
has been incorporated into or made a part of any TNCI Owned
Software or any other TNCI Licensed Software and none of the TNCI
Owned Software is dependent on any TNCI Licensed Software in
order to freely operate in the manner in which it is intended.
The TNCI Owned Software and TNCI Licensed Software constitute all
software used by TNCI ("TNCI's Software"). TNCI has not received
notice that it is infringing any intellectual property rights or
any other person or entity with respect to TNCI's Software, and
to the knowledge of TNCI no other person or entity is infringing
any intellectual property rights of TNCI with respect to TNCI's
Software which TNCI leases or licenses to it.
6.16 Governmental Permits.
6.16.1 TNCI owns, holds or possesses all
governmental licenses, franchises, permits, privileges,
immunities, approvals, registrations, easements, rights and other
authorizations which are necessary to entitle it to own, lease,
operate and use its assets and properties and to carry on and
conduct the Business as currently conducted (herein collectively
called "TNCI Permits"). Schedule 6.16.1 sets forth a list and
brief description of each such TNCI Permit held by TNCI as of the
date of this Agreement. Complete and correct copies of all of
the TNCI Permits listed in Schedule 6.16.1 have heretofore been
delivered to IFT by TNCI.
6.16.2 TNCI is in compliance in all material
respects with each of the TNCI Permits owned, held or possessed
by it, and no event has occurred or condition or state of facts
exists which constitutes or, after notice or lapse of time or
both, would constitute a breach or default under any such TNCI
Permit. No notice of cancellation, of default or of any dispute,
appeal or inquiry concerning any TNCI Permit, or of any event,
condition or state of facts set forth in the preceding sentence,
has been received by TNCI. Except as set forth in
Schedule 6.16.2, each of the TNCI Permits is valid subsisting and
in full force and effect without challenge of any kind.
6.17 Litigation. Except as set forth in Schedule 6.17,
there are no actions, claims or proceedings pending or threatened
before any court, administrative agency or governmental body
against TNCI, the Assets, or TNCI's employees which may have an
adverse effect on TNCI or TNCI's financial condition. There is
no action, suit, proceeding or investigation pending or, to
TNCI's knowledge, threatened which questions the legality or
properties of the transactions contemplated by this Agreement or
which seeks to prevent or materially delay the transactions
contemplated by this Agreement.
6.18 Employees. Schedule 6.18 hereto sets forth the
name and current monthly salary and any accrued benefit for each
employee of TNCI. There will be no changes in Schedule 6.18
through the Closing Date, except in the ordinary course of
business.
6.19 Compliance With Laws. TNCI has conducted and is
continuing to conduct its business in material compliance with,
and is in material compliance with, all applicable statutes,
orders, rules and regulations promulgated by governmental
authorities relating in any material respect to its operations,
conduct of business or use of properties, including, without
limitation, any applicable statute, order, rule or regulation
relating to (i) wages, hours, hiring, nondiscrimination,
retirement, benefits, pensions, working conditions, and worker
safety and health; (ii) air, water, toxic substances, noise, or
solid, gaseous or liquid waste generation, handling, storage,
disposal or transportation; (iii) zoning and building codes;
(iv) the production, storage, processing, advertising, sale,
distribution, transportation, disposal, use and warranty of
products; or (v) trade and antitrust regulations. The execution,
delivery and performance of this Agreement by TNCI and the
consummation by TNCI of the transactions contemplated by this
Agreement will not violate, contravene or constitute a default
under any applicable statutes, orders, rules and regulations
promulgated by governmental authorities or cause a lien on any
material property used, owned or leased by TNCI to be created
thereunder. To the knowledge of TNCI there are no proposed
changes in any applicable statutes, orders, rules and regulations
promulgated by governmental authorities that would cause any
representation or warranty contained in this Paragraph 6.19 to be
untrue or have an adverse effect on its operations, conduct of
business or use of properties. TNCI has not taken any action
that requires notification of the employees of TNCI pursuant to
the provisions of the WARN Act or that would cause TNCI to have
any liability thereunder. There are no injunctions, orders,
awards, decrees of any governmental body or political subdivision
currently in effect against IFT.
6.20 Filings. TNCI has made all filings and reports
required under all local, state and federal laws and regulations
with respect to its business and assets and of any predecessor
entity or partnership, except where the failure to make such
filings and reports would not have a material adverse affect on
the business, assets, financial condition, or results of
operations or prospects of TNCI.
6.21 Certain Activities. TNCI has not, directly or
indirectly, engaged in or been a party to any of the following
activities:
6.21.1 Bribes, kickbacks or gratuities to any
person or entity, including domestic or foreign government
officials or any other payments to any such persons or entity,
whether legal or not legal, to obtain or retain business or to
receive favorable treatment of any nature with regard to business
(excluding commissions or gratuities paid or given in full
compliance with applicable law and constituting ordinary and
necessary expenses incurred in carrying on its business in the
ordinary course);
6.21.2 Contributions (including gifts), whether
legal or not legal, made to any domestic or foreign political
party, political candidate or holder of political office (except
where such is in compliance with applicable law);
6.21.3 Holding of or participation in bank
accounts, funds or pools of funds created or maintained in the
United States or any foreign country, without being reflected on
the corporate books of account, or as to which receipts or
disbursements therefrom have not been reflected on such books,
the purpose of which is to obtain or retain business or to
receive favorable treatment with regard to business;
6.21.4 Receiving or disbursing monies, the
actual nature of which has been improperly disguised or
intentionally misrecorded on or improperly omitted from the
corporate books of account;
6.21.5 Paying fees to domestic or foreign
consultants or commercial agents which exceed the reasonable
value of the ordinary and customary consulting and agency
services purported to have been rendered;
6.21.6 Paying or reimbursing (including gifts)
personnel of TNCI for the purpose of enabling them to expend time
or to make contributions or payments of the kind or for the
purposes referred to in Paragraphs 6.21.1 through 6.21.5 above;
6.21.7 Participating in any manner in any
activity which is illegal under the international boycott
provisions of the Export Administration Act, as amended, or the
international boycott provisions of the Internal Revenue Code, or
guidelines or regulations thereunder; and
6.21.8 Making or permitting unlawful charges,
mischarges or defective or fraudulent pricing under any contract
or subcontract under a contract with any department, agency or
subdivision thereof, of the United States government, state or
municipal government or foreign government.
6.22 Employment Relations. TNCI is in compliance with
all Federal, state or other applicable laws, domestic or foreign,
respecting employment and employment practices, terms and
conditions of employment and wages and hours, and has not and is
not engaged in any unfair labor practice which would result in a
material adverse effect on TNCI; no unfair labor practice
complaint against TNCI is pending before the National Labor
Relations Board; there is no labor strike, dispute, slow down or
stoppage actually pending or, to TNCI's knowledge, threatened
against or involving TNCI; no labor representation question
exists respecting the employees of TNCI; no grievance which might
have an adverse effect upon TNCI or the conduct of its business
has been filed against TNCI; no arbitration proceeding arising
out of or under any collective bargaining agreement is currently
being negotiated by TNCI; and TNCI has not experienced any
material labor difficulty during the last three (3) years.
6.23 Insurance Coverage. The policies of fire,
liability or other forms of insurance of TNCI are described in
Schedule 6.23.
6.24 Charter and By-Laws. TNCI has heretofore
delivered to TNCI true, accurate and complete copies of the
Articles of Incorporation and By-Laws of TNCI, together with all
amendments to each of the same as of the date hereof.
6.25 Corporate Minutes. The minute books of TNCI made
available to IFT previously and at the Closing are the correct
and only such minute books and do and will contain complete and
accurate records of any and all proceedings and actions at all
meetings, including written consents executed in lieu of meetings
of its stockholders, Board of Directors and committees thereof
through the Closing Date. The stock records of TNCI delivered to
IFT at the Closing are copies of the correct and only such stock
records and accurately reflect all issues and transfers of record
of the capital stock of TNCI.
6.26 Default on Indebtedness. TNCI is not in monetary
default or in material default in any other respect under any
evidence of indebtedness for borrowed money.
6.27 Indebtedness. Except as described in Schedule
6.27, TNCI's shareholders, and any corporation or entity with
which they are affiliated, are not indebted to TNCI, and TNCI has
no indebtedness or liability to its shareholders and any
corporation or entity with which they are affiliated.
6.28 Product Liability Claims; Product Warranties.
Schedule 6.28 sets forth all product liability claims pending or,
to the knowledge of TNCI, threatened against TNCI and all product
liability claims paid by or on behalf of TNCI for the three (3)
year period prior to the date of this Agreement. Except as set
forth on Schedule 6.29, TNCI has not given or offered any
warranty covering any products sold or distributed by it, and
TNCI has not extended to its customers and indemnification or
guarantees.
6.29 Environmental Protection. Except as set forth on
Schedule 6.29,
6.29.1 The operations of TNCI comply in all
material respects with all applicable Environmental Laws and
there are no substances or conditions existing at any facility
that may support a claim or cause of action under any
Environmental Laws.
6.29.2 TNCI has obtained, or has taken
appropriate steps as required by Environmental Laws to obtain,
all environmental, health and safety permits necessary for its
operations, and all such permits are in food standing and TNCI is
currently in compliance with all terms and conditions of such
permits;
6.29.3 TNCI's facilities and operations at the
facilities are not subject to any judicial or administrative
proceeding, order, judgment, decree or settlement, or to the
knowledge of TNCI, any investigation, alleging or addressing (i)
violation of any Environmental Laws, or (ii) any remedial action;
and TNCI has not received any notice of any claims or liabilities
and costs arising from the release or threatened release of a
contaminant into the environment, or claims, complaints, notices
or requests for information with respect to any alleged violation
of any Environmental Laws or complaints or notices regarding
potential liability under any Environmental Laws.
6.30 Completeness of Representations and Schedules.
The Schedules and Exhibits hereto completely and correctly
present in all material respects the information required by this
Agreement. This Agreement, the certificates to be delivered by
the officers of TNCI at the Closing, any Schedules and Exhibits
to be delivered under this Agreement and the representations and
warranties of this Paragraph 6, and the documents and written
information pertaining to TNCI furnished to IFT or its agents by
or on behalf of TNCI, do not contain any untrue statement of a
material fact or omit to state a material fact necessary in order
to make this Agreement, or such certificates, schedules,
documents or written information, not misleading.
70 Covenants.
7.1 Affirmative Covenants of IFT. Between the date
hereof and the Closing Date, except as otherwise contemplated by
this Agreement or as consented to by TNCI, IFT will:
7.1.1 Operate the Business and the Assets in
accordance with all applicable laws and regulations, and in the
ordinary course of business except where the failure to do so
will not result in a material adverse effect on the Business and
the Assets;
7.1.2 Provide TNCI with all information
regarding IFT which is reasonably required in connection with
TNCI's preparation of its proxy materials relating to the
transaction contemplated by this Agreement. Such information
will not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements, in
light of the circumstances in which they were made, not
misleading. IFT will promptly furnish amended and supplemental
information as may be necessary, in light of developments
occurring subsequent to the mailing of a proxy statement by TNCI
to its shareholders, to ensure that information regarding IFT
does not, as of the date of the TNCI shareholders' meeting,
contain any untrue statement of a material fact or omit a
material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading;
7.1.3 Promptly inform TNCI in writing of any
variances from the representations and warranties contained in
Paragraph 5 hereof;
7.1.4 Take all such actions as necessary to
obtain shareholder approval, if necessary for consummation of the
transactions contemplated by this Agreement and to approve the
transactions contemplated hereby; and
7.1.5 Use its best efforts to obtain all third
party consents necessary or desirable to consummate the
transactions contemplated hereby and to cause all conditions to
the closing to be satisfied.
7.2 Affirmative Covenants of TNCI. Between the date
hereof and the Closing Date, except as otherwise contemplated by
this Agreement or as consented to by IFT, TNCI will:
7.2.1 Conduct its operations according to the
ordinary and usual course of business, and use best efforts to
preserve intact its business organization and material rights and
franchises, proprietary rights, permits, licenses, and maintain
satisfactory relationship with licensors, suppliers,
distributors, customers and others having relationships with
TNCI;
7.2.2 Provide IFT with all information
regarding TNCI which is reasonably required in connection with
IFT's preparation of its proxy materials relating to the
transaction contemplated by this Agreement. Such information
will not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements, in
light of the circumstances in which they were made, not
misleading. TNCI will promptly furnish amended and supplemental
information as may be necessary, in light of developments
occurring subsequent to the mailing of a proxy statement by IFT
to its stockholders, ensure that information regarding TNCI does
not, as of the date of the IFT stockholders' meeting, contain any
untrue statement of a material fact or omit a material fact
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
7.2.3 Promptly inform IFT in writing of any
variances from the representations and warranties contained in
paragraph 6 hereof;
7.2.4 Take all such actions as necessary to
obtain shareholder approval, if necessary, to effectuate this
transaction and to approve the transactions contemplated hereby
and to amend TNCI's Articles of Incorporation to increase the
number of authorized shares to 30,000,000;
7.2.5 Use its best efforts to obtain all third
party consents necessary or desirable to consummate the
transactions contemplated hereby, and to cause all conditions to
the closing to be satisfied.
7.2.6 Use its best efforts to obtain the
approval of the Nasdaq Stock Market, Inc. to the proposed
transaction as contemplated by Paragraph 9.2; and
7.2.7 Use its best efforts to obtain the
irrevocable proxies in favor of IFT as contemplated by Paragraphs
10.13.1, 10.13.2 and 10.13.3.
7.3 Negative Covenants of IFT. Prior to the Closing
Date, without the prior written consent of TNCI or as otherwise
contemplated by this Agreement, IFT will not:
7.3.1 Voluntarily take any action that would
result in a breach of IFT's representations and warranties under
Paragraph 5 of this Agreement;
7.3.2 Incur any liabilities or obligations
relating to the Business, or increases in salaries of the
employees set forth in Schedule 5.16, other than those incurred
in the ordinary and necessary course of business, or undertake
any extraordinary capital expenditures relating to the Business;
or
7.3.3 Take or omit to take any action which
could be reasonably anticipated to have a material adverse effect
upon the Assets or the Business.
7.4 Negative Covenants of TNCI . Prior to the Closing
Date, without the prior written consent of IFT, TNCI will not:
7.4.1 Voluntarily take any action that would
result in a breach of TNCI's representations and warranties under
Paragraph 6 of this Agreement;
7.4.2 Incur any liabilities or obligations, or
increases in salaries or other direct or indirect corporation
expenses, other than those incurred in the ordinary and necessary
course of business and not exceeding $1,000 in aggregate, or
undertake any extraordinary capital expenditures in excess of
$5,000 in the aggregate;
7.4.3 Take or omit to take any action which
could be reasonably anticipated to have a material adverse effect
upon its business, operations, financial condition, operating
results, or assets;
7.4.4 Issue any additional shares of its
capital stock or any Convertible Securities or grant any rights
to acquire or agree to issue any additional shares of its capital
stock or any Convertible Security; or
7.4.5 Undertake any debt or equity financing.
7.5 Noncompetition.
7.5.1 IFT acknowledges and recognizes the
highly competitive nature of the business in which it is engaged
and accordingly agrees that, in the event that the transaction
contemplated hereby closes, to induce TNCI to consummate the
transaction contemplated by this Agreement, IFT shall not, for a
period of three (3) years after the Closing Date: (i) engage
directly or indirectly in any Competitive Business (as defined
below) anywhere in the Restricted Territory (as defined below),
whether such engagement be as an employer, officer, director,
owner, investor, employee, partner, consultant or other
participant in any Competitive Business; (ii) solicit or accept
business for any Competitive Business from anyone who is or
becomes an active or prospective customer of TNCI or its
Affiliates or who was an active or prospective customer of the
business at or prior to the Closing Date; (iii) solicit for
employment or hire any employee of IFT, TNCI, or its Affiliates;
or (iv) attempt to do any of the things or assist anyone else in
doing any of the things specified in subparagraphs (i), (ii) or
(iii) above. Notwithstanding the foregoing, the ownership or
control of up to no more than 5% of the outstanding securities of
any company which has a class of securities traded on any
national or regional stock exchange or on the NASDAQ market and
ownership of shares issued by TNCI, shall not be deemed a
violation of this Paragraph 7.5.1.
7.5.2 As used in this Paragraph 7.5.1: (i)
"Competitive Business" means and includes any business,
individual, corporation or other entity which is engaged wholly
or partly in any business directly competitive with the Business
as conducted at the Closing; and (ii) "Restricted Territory"
means anywhere in the world.
7.5.3 Not later than the Closing, IFT and TNCI
shall have obtained non-competition agreements from the current
officers of IFT and TNCI, containing terms substantially
identical to the terms of Paragraph 7.5.1.
7.6 No Public Announcements. Prior to Closing,
without the prior written consent of the other parties, neither
IFT nor TNCI shall make any press release or other public
disclosure, or make any statement to any customer, supplier or
other person with regard to the transactions contemplated by this
Agreement, except as may be required by any applicable securities
laws or regulations; provided, however, that TNCI and IFT may
each issue a press release and file such other reports and make
such other disclosure as may be required by applicable securities
law or the rules or regulations of NASDAQ or the Boston Stock
Exchange upon execution of this Agreement. Each party shall
provide the other with any such press release or other disclosure
document prior to its release for review and comment. After
Closing, without the prior written consent of each of TNCI and
IFT, neither party shall make any press release or other public
disclosure, or make any statement to any customer, supplier or
other person with regard to the transactions contemplated by this
Agreement, except as required by applicable securities laws or
regulations or the rules of regulations of NASDAQ or the Boston
Stock Exchange.
80 Due Diligence Inspection and Confidential Information.
8.1 Due Diligence Inspection. During the seven (7)
day period after execution of this Agreement, IFT and its
representatives shall have the right to inspect all plant,
equipment and operations of TNCI, its premises and its financial
and other records at reasonable times. IFT shall also have the
right to discuss the affairs of TNCI with the managers,
customers, prospective customers, employees, suppliers,
advertisers, retailers, banking and other financial institutions,
lessors and such other parties as IFT deems appropriate, upon
reasonable notice of the proposed times and dates thereof. IFT
shall complete its due diligence, provided it has received the
cooperation of TNCI contemplated in this Paragraph, no later than
seven (7) days following the execution and delivery of this
Agreement by the parties. TNCI shall likewise have the right,
upon the execution of this Agreement, to inspect IFT, its
financial and other records and to discuss the affairs of IFT
with appropriate parties under the same terms and conditions and
upon the same schedule as IFT shall have to complete its
preliminary due diligence. IFT and TNCI will cooperate with all
reasonable requests by the other party for information and will
use their best efforts to secure the cooperation of the foregoing
third parties who may reasonably be requested to furnish
information to each other.
8.2 Confidential Information. IFT shall keep all
confidential information derived from TNCI relating to the
business of TNCI confidential pending the Closing of the
transaction contemplated by this Agreement. TNCI shall keep all
confidential information derived from IFT relating to the
business of IFT confidential pending the Closing. No party to
this Agreement shall be liable for disclosure of confidential
information if such disclosure is required by law or if the
disclosure is of information already publicly available.
8.3 Return of Confidential Information. If this
Agreement should be terminated pursuant to Paragraph 12 of this
Agreement, TNCI and IFT shall return all such confidential
information and documents which they have received and agree not
to disclose or use such information in any manner which damages
the businesses or prospects of IFT or TNCI, as the case may be.
9. Conditions Precedent to the Obligations of TNCI. The
obligations of TNCI pursuant to this Agreement are, at the option
of TNCI, subject to the fulfillment to TNCI's reasonable
satisfaction on or before the Closing Date of each of the
following conditions:
9.1 Execution of Agreement. IFT has duly executed and
delivered this Agreement to TNCI.
9.2 Approval. TNCI shall have obtained the written
approval of the Nasdaq Stock Market, Inc. to issue the TNCI
capital stock contemplated by this Agreement without shareholder
approval; provided that TNCI waives this condition precedent if
TNCI has not obtained such approval by the Closing Date.
9.3 Representations and Warranties Accurate.
9.3.1 IFT shall deliver the Disclosure
Schedule to this Agreement no later than seven (7) days from the
date of this Agreement. TNCI shall have seven (7) days after its
receipt of the Disclosure Schedule to determine, in its sole
discretion, whether or not TNCI shall accept the representations
and warranties as modified or amplified by the Disclosure
Schedule. If TNCI determines that any part of the Disclosure
Schedule is unacceptable, TNCI may provide IFT additional time to
remedy the matter or may terminate this Agreement in accordance
with its provisions.
9.3.2 All representations and warranties of
IFT contained in this Agreement shall be true in all respects
when made on the date of execution of this Agreement, and also at
and as of the Closing Date as if such representations and
warranties were made at and as of the Closing Date. IFT shall
furnish TNCI with a certificate, dated the Closing Date and
signed on behalf of IFT and by a duly authorized officer thereof
stating the above in such form as TNCI may reasonably request.
The acceptance of the Purchase Price by IFT shall constitute an
affirmation by IFT of the truth, as of the Closing Date, of the
representations and warranties made by in this Agreement.
9.4 Performance of IFT. IFT shall have performed and
complied with all agreements, terms and conditions required by
this Agreement to be performed or complied with and IFT shall
deliver a certificate, in form and substance satisfactory to
TNCI, to that effect, dated the Closing Date, and signed in the
manner set forth in Paragraph 9.3.2, on or before the Closing
Date.
9.5 Title. At or prior to the Closing Date, there
shall have been delivered to TNCI in form reasonably satisfactory
to TNCI, the following documents transferring title to the Assets
to TNCI:
9.5.1 Appropriate bills of sales, assignments
and other instruments giving and conveying to TNCI all right,
title and interest in and to the Assets described in Schedule
1.1; and
9.5.2 Duly executed UCC-2 Releases, as
described in Paragraph 5.12, "Title to the Assets," of this
Agreement, or evidence that no liens have been recorded against
the Assets and consents to the assignment and transfer by IFT to
TNCI of all rights of IFT in and to all contracts, agreements,
commitments and other assets to be assigned and transferred to
TNCI hereunder in all instances in which the same may be
necessary to vest in TNCI all of IFT's right, title and interest
therein and thereto.
9.5.3 Evidence that all trademarks, trade
names, service marks, patents, licenses or other rights IFT uses
in connection with the Business are free and clear of any
encumbrances, controversies, infringement or other claims or
obligations on the Closing Date.
9.6 Consents. Prior to Closing, IFT shall have
obtained all approvals in conjunction with the transfer of the
Assets to TNCI as may be required by any contracts between IFT
and any of its customers or other third parties required to
effect the sale and transfer of the Assets, and such approvals
shall be issued in written form and substance satisfactory to
TNCI and its counsel or TNCI shall have waived such requirements.
9.7 Possession. IFT shall deliver to TNCI possession
of the Assets.
9.8 Opinion of Counsel. TNCI shall have received an
opinion of counsel for IFT substantially in the form set forth in
Exhibit A.
9.9 Fairness Opinion. TNCI shall have received a
"fairness opinion" with respect to the fairness, from a financial
point of view, of the transactions contemplated by this
Agreement to the shareholders of TNCI, which fairness opinion is
satisfactory in form and scope to TNCI's board of directors.
9.10 Financial and Other Conditions. IFT shall have no
contingent or other material liabilities connected with the
Business, except as disclosed in the financial statements or as
described in Schedule 2.1.
9.11 Legal Prohibition. On the Closing Date, there
shall exist no injunction or final judgment, law or regulation
threatening to restrain prohibiting or invalidating the
consummation of the transactions contemplated by this Agreement,
or which might affect TNCI's right to own, operate, and have
assigned to it the Assets.
9.12 [INTENTIONALLY OMITTED].
9.13 Material Changes. There shall be no material
adverse change in the Business, financial condition, results of
operates or prospects of the Business from the date of this
Agreement to the Closing Date.
10. Conditions Precedent to the Obligations of IFT . The
obligations of IFT under this Agreement are, at the option of
IFT, subject to the fulfillment to IFT's reasonable satisfaction
on or before the Closing Date of each of the following
conditions:
10.1 Execution of this Agreement. TNCI shall have duly
executed and delivered this Agreement to IFT.
10.2 Approval. IFT shall have obtained the approval of
its stockholders if required under Delaware law and the
requirements of the Nasdaq Stock Market, Inc.
10.3 [INTENTIONALLY OMITTED].
10.4 Payment. Subject to the terms and conditions
hereof, TNCI shall have transferred the TNCI Shares free and
clear of any liens, encumbrances or other obligations and assumed
the Assumed Liabilities of IFT in exchange for the Assets as
described in Xxxxxxxxx 0, "Xxxxxxxx Price."
10.5 Representations and Warranties Accurate.
10.5.1 TNCI shall deliver the Disclosure
Schedule to this Agreement no later than seven (7) days after the
date of this Agreement. IFT shall have seven (7) days after its
receipt of the Disclosure Schedule to determine, in its sole
discretion, whether or not IFT shall accept the representations
and warranties as modified or amplified by the Disclosure
Schedule. If IFT determines that any party of the Disclosure
Schedule is unacceptable, IFT may provide TNCI additional time to
remedy the matter or may terminate this Agreement in accordance
with its provisions.
10.5.2 All representations and warranties of
TNCI contained in this Agreement shall have been true in all
respects when made on the date of execution of this Agreement,
and also at and as of the Closing Date as if such representations
and warranties were made at and as of the Closing Date. TNCI
shall furnish IFT with a certificate, dated the Closing Date and
signed on behalf of TNCI and by a duly authorized officer thereof
stating the above in such form as IFT may reasonably request.
The acceptance of the Assets by TNCI shall constitute an
affirmation by TNCI of the truth, as of the Closing Date, of the
representations and warranties made by in this Agreement.
10.6 Performance of TNCI. TNCI shall have performed
and complied with all agreements, terms and conditions required
by this Agreement to be performed or complied with and TNCI shall
deliver a certificate, in form and substance satisfactory to IFT,
to that effect, dated the Closing Date, and signed in the manner
set forth in Paragraph 10.5.2, on or before the Closing Date.
10.7 Consents. Prior to Closing, TNCI shall have
obtained all consents and approvals in conjunction with the
transfer of the TNCI Shares to IFT as may be required to effect
such transfer and such consents and approvals shall be issued in
written form and substance reasonably satisfactory to IFT and its
counsel, or IFT shall have waived such requirements.
10.8 Opinion of Counsel. IFT shall have received an
opinion of counsel for TNCI substantially in the form set forth
in Exhibit B.
10.9 [INTENTIONALLY OMITTED].
10.10 [INTENTIONALLY OMITTED].
10.11 Financial Statements. TNCI's financial
statements, shall be acceptable to IFT, in its sole discretion,
and IFT shall have the opportunity in the due diligence process
to review such Financial Statements with TNCI's independent
auditors, PriceWaterhouseCoopers;
10.12 Board of Directors. The directors of TNCI
shall have appointed to the Board of Directors of TNCI those
persons set forth in Paragraph 16 hereof, and the directors shall
have appointed as the officers of TNCI those persons set forth in
Paragraph 16, to take effect upon consummation of the
transaction.
10.13 Convertible Securities. On or before the
execution of this Agreement, the holders of the outstanding
shares of Preferred Stock, convertible notes, and related
warrants of TNCI shall have reached agreements with IFT or TNCI,
as the case may be, on terms satisfactory to IFT, regarding the
disposition or conversion into shares of TNCI Common Stock of
their holdings. Without limiting the foregoing, the following
shall have occurred prior to the Closing:
10.13.1 The Holders of all of the outstanding
Series A Notes, Series D Notes and Series E Notes shall have
converted such Preferred Stock and notes into that number of
shares of Common Stock of TNCI on terms approved by IFT and shall
have granted IFT irrevocable proxies to vote such shares and
executed lock-up agreements respecting the shares for the
duration of the proxies on terms acceptable to IFT, in its
discretion;
10.13.2 Xxx Xxxxx and his wife, Xxxxx Xxxxx and
his wife, Xxx Xxxxx, Xx. and his wife and Xxxxx Xxxx and his
wife shall have granted IFT irrevocable proxies to vote their
shares of Common Stock of TNCI on terms acceptable to IFT, in its
discretion. The foregoing proxies shall be limited to voting to
approve the terms of this Agreement, increase the number of
authorized shares of Common Stock to at least 30,000,000 and
effect any other action or matter required to complete the
transactions contemplated by this Agreement. These proxies will
terminate upon the earlier of IFT obtaining the approval of
TNCI's shareholders on the foregoing matters or September 30,
1999, provided that such date may be extended up to December 31,
1999 if any legal or regulatory action prevents consideration of
such matters by the shareholders on or before September 30, 1999.
The parties granting these proxies shall not be permitted to
sell, transfer, assign or pledge their shares unless their
proposed transferees or pledgees agree to be bound by the terms
of these proxies; and
10.13.3 TNCI shareholders in addition to those
set forth in Paragraphs 10.13.1 and 10.13.2 shall have provided
irrevocable proxies to IFT to vote their shares of Common Stock
of TNCI on terms acceptable to IFT in its discretion, which
shares when added to the shares subject to the proxies granted to
IFT in Paragraphs 10.13.1 and 10.13.2 and such other shares of
voting capital stock of TNCI held by IFT shall equal at least
50.1% of the outstanding voting capital stock of TNCI. The
foregoing proxies shall be limited to voting to approve the terms
of this Agreement, increase the number of authorized shares of
Common Stock to at least 30,000,000 and effect any other action
or matter required to complete the transactions contemplated by
this Agreement. These proxies will terminate upon the earlier of
IFT obtaining the approval of TNCI's shareholders on the
foregoing matters or September 30, 1999, provided that such date
may be extended up to December 31, 1999 if any legal or
regulatory action prevents consideration of such matters by the
shareholders on or before September 30, 1999. The parties
granting these proxies shall not be permitted to sell, transfer,
assign or pledge their shares unless their transferees or
pledgees agree to be bound by the terms of these proxies.
10.14 Other Issues. IFT shall have acquired the
Series B Preferred Stock and the IFT secured note shall have been
amended on terms acceptable to IFT. IFT shall have received
proxies from certain shareholders of TNCI as determined by IFT.
10.15 Directors and Officers Coverage. TNCI shall
have purchased Directors and Officers liability insurance
policies in favor of the existing directors and officers and the
officers and directors set forth in Paragraph 16 in amounts and
on terms reasonably acceptable to IFT, but in any event with
limits not less than Fifteen Million Dollars ($15,000,000), to be
effective immediately following the Closing Date and with an
insurer reasonably acceptable to IFT.
10.16 Material Changes. There shall be no material
adverse change in the business, financial conditions, results of
operations or prospects of TNCI from the date of this Agreement
to the Closing Date.
11. Indemnification.
11.1 Survival of Representations, Warranties and
Certain Covenants. The representations and warranties made by
the parties in this Agreement and in the certificates delivered
at the Closing, and all of the covenants of the parties in this
Agreement, shall survive the execution and delivery of this
Agreement and the Closing Date and shall expire on the first
anniversary of the Closing Date. Any claim for indemnification
shall be effective only if notice of such claim is given by the
party claiming indemnification or other relief to the party
against whom such indemnification or other relief is claimed on
or before the first anniversary of the Closing Date (other than
in Paragraphs 5.8, 5.9 and 6.12, and any of which results from
fraud, the survival period for which shall be sixty (60) days
following the end of the applicable statute of limitations
period).
11.1.1 The representations and warranties of
the parties shall not be affected or diminished by any
investigation at any time by or on behalf of the party for whose
benefit such representations and warranties were made.
11.1.2 The expiration of any representation or
warranty shall not affect any parties' right to pursue any claim
made prior to such expiration.
11.2 Indemnification by TNCI.
11.2.1 TNCI agrees to indemnify and hold IFT
harmless, from and after the Closing Date, against and in respect
of all matters in connection with any losses, liabilities, costs
or damages (including reasonable attorneys' fees) incurred by IFT
that result from any misrepresentation or breach of the
warranties by TNCI in Paragraph 6, "Representations and
Warranties of TNCI," or any breach or nonfulfillment of any
agreement or covenant on the part of TNCI contained in this
Agreement, and all suits, actions, proceedings, demands,
judgments, costs and expenses incident to the foregoing matters,
including reasonable attorneys' fees.
11.2.2 No claim for indemnification may be made
under this Paragraph 11 after the first anniversary of the
Closing Date, except in accordance with Paragraph 11.1.
Notwithstanding the foregoing, no claim for indemnification under
Paragraphs 11.2.1 or Paragraph 11.3.1 may be made by an
indemnified party against an indemnifying party unless and until
the cumulative total of all losses suffered by such indemnified
party and covered by such Paragraphs (the "Losses") exceeds
$100,000 (the "Threshold"). Once Losses exceed the Threshold,
the indemnified party suffering such Losses may recover all
Losses which exceed the Threshold, without being able to recover
any Losses which do not exceed the Threshold.
11.3 Indemnification by IFT.
11.3.1 IFT agrees to indemnify and hold TNCI,
its officers, directors and representatives, (the "TNCI Parties")
harmless, from and after the Closing Date, against and in respect
of all matters in connection with any losses, liabilities, costs
or damages (including reasonable attorneys' fees) incurred by
TNCI that result from any misrepresentation or breach of the
warranties by IFT in Paragraph 5, "Representations and Warranties
of IFT," or any breach or nonfulfillment of any agreement or
covenant on the part of IFT contained in this Agreement, and all
suits, actions, proceedings, demands, judgments, costs and
expenses incident to the foregoing matters, including reasonable
attorneys' fees.
11.3.2 No claim for indemnification may be made
under this Paragraph 11 after the first anniversary of the
Closing Date, except in accordance with Paragraph 11.1.
Notwithstanding the foregoing, no claim for indemnification under
Paragraphs 11.2.1 or Paragraph 11.3.1 may be made by an
indemnified party against an indemnifying party unless and until
the cumulative total of all losses suffered by such indemnified
party and covered by such paragraphs (the "Losses") exceeds
$100,000 (the "Threshold"). Once Losses exceed the Threshold,
the indemnified party suffering such Losses may recover all
Losses which exceed the Threshold, without being able to recover
any Losses which do not exceed the Threshold.
11.4 Mediation. If any TNCI Party believes that a
matter has occurred that entitles it to indemnification under
Paragraph 11.3, "Indemnification by IFT," or any IFT Party
believes that a matter has occurred that entitles it to
indemnification under Paragraph 11.2, "Indemnification by TNCI,"
the TNCI Party or IFT Party as the case may be (the "Indemnified
Party"), shall give written notice to the party or parties
against whom indemnification is sought (each of whom is referred
to herein as an "Indemnifying Party") describing such matter in
reasonable detail (the "Dispute Notice"). The Indemnified Party
shall be entitled to give such notice prior to the establishment
of the amount of its losses, liabilities, costs or damages, and
to supplement its claim from time to time thereafter by further
notices as they are established. Each Indemnifying Party shall
send a written response to such claim for indemnification within
thirty (30) days after receipt of the claim stating its
acceptance or objection to the indemnification claim, and
explaining its position in respect thereto in reasonable detail.
If such Indemnifying Party does not timely so respond, it will be
deemed to have accepted the Indemnified Party's indemnification
claim as specified in the notice given by the Indemnified Party.
If the Indemnifying Party gives a timely objection notice, then
the parties shall resolve the dispute by binding mediation in
Phoenix, Arizona under the Commercial Mediation Rules of the
American Arbitration Association (AAA) in effect on the date of
the Dispute Notice. If the parties cannot agree on the selection
of a mediator within twenty (20) days after delivery of the
Dispute Notice, the mediator will be selected by the AAA. The
prevailing party in any such mediation shall be entitled to
recover from, and have paid by, the other party hereto all fees
and disbursements of such mediation, including its reasonable
attorneys.
11.5 Indemnification Shares. The parties agree that if
it is determined that IFT is entitled to indemnification pursuant
to Paragraph 11.4, then at the option of IFT's Board of
Directors, TNCI shall compensate IFT by issuing to IFT shares of
TNCI Common Stock. The number of shares to be issued pursuant to
this paragraph (the "Indemnification Shares") shall be determined
by dividing the dollar amount of TNCI's obligation for
indemnification by the average of the closing prices of the TNCI
Common Stock as reported on the principal trading market for TNCI
Common Stock for the twenty (20) trading days immediately
preceding the date that the notice of claim is given to TNCI.
The parties agree that this measure of damages is equitable in
light of the method of payment of the Purchase Price.
11.6 No Finders. TNCI represents and warrants to IFT
and IFT represents and warrants to TNCI that there are no
obligations to pay any fee or commission to any broker, finder or
intermediary for or on account of the transactions contemplated
by this Agreement. TNCI agrees to indemnify and hold harmless
IFT from any breach of TNCI's representation in the previous
sentence, and IFT agrees to indemnify and hold TNCI harmless from
any breach of its representation in the previous sentence.
11.7 Third Person Claim Procedures. If any third
person asserts a claim against an Indemnified Party in connection
with the matter involved in such claim, the Indemnified Party
shall promptly (but in no event later than ten (10) days prior to
the time at which an answer or other responsive pleading or
notice with respect to the claim is required) notify the
Indemnifying Party of such claim. The Indemnifying Party shall
have the right, at its election, to take over the defense or
settlement of such claim by giving prompt notice to the
Indemnified Party that it will do so, such election to be made
and notice given in any event at least five (5) days prior to the
time at which an answer or other responsive pleading or notice
with respect thereto is required. If the Indemnifying Party
makes such election, the Indemnifying Party may conduct the
defense of such claim through counsel of its choosing (subject to
the Indemnified Party's approval, not to be unreasonably
withheld), will be responsible for the expenses of such defense,
and shall be bound by the results of its defense or settlement of
the claim to the extent it produces damage or loss to the
Indemnified Party. The Indemnifying Party shall not settle such
claims without prior notice to and consultation with the
Indemnified Party, and no such settlement involving any
injunction or material and adverse effect on the Indemnified
Party may be agreed to without its consent. Notwithstanding the
assumption of the defense of any claim by the indemnifying party,
the indemnified party(ies) shall have the right to employ a
single, separate legal counsel (together with appropriate local
counsel) and to participate in the defense of such claim, and the
indemnifying party shall bear the reasonable fees, out-of-pocket
costs and expenses of such single, separate legal counsel to the
indemnified party(ies) if (and only if): (x) the indemnifying
party shall have agreed to pay such fees, out-of-pocket costs and
expenses, (y) the indemnifying party, based upon an opinion of
counsel in writing, reasonably acceptable to the indemnifying
party, shall have concluded that representation of the
indemnified party(ies) and the indemnifying party by the same
legal counsel would not be appropriate due to actual (i)
conflicts of interest between such parties in the conduct of the
defense of such claim, or (ii) if there may be legal defenses
available to the indemnified party(ies) that are in addition to
or disparate from those available to the indemnifying party and
which can not be presented by counsel to the indemnifying party,
or (z) the indemnifying party shall have failed to employ legal
counsel reasonably satisfactory to the indemnified party(ies)
within a reasonable period of time after notice of the
commencement of such claim [it being recognized and acknowledged
that Nixon, Hargrave, Devans & Xxxxx LLP and Xxxxxxx Lang, PA,
shall be regarded as such reasonably satisfactory counsel to the
indemnified party(ies)]. IF the indemnifying party employs
separate legal counsel in circumstances other than as described
in clauses (x), (y) or (z) above, the fees, costs and expenses of
such legal counsel shall be borne exclusively by the indemnified
party(ies). As long as the Indemnifying Party is diligently
contesting any such claim in good faith, the Indemnified Party
shall not pay or settle any such claim. If the Indemnifying
Party does not make such election, or having made such election
does not proceed diligently to defend such claim prior to the
time at which an answer or other responsive pleading or notice
with respect thereto is required, or does not continue diligently
to contest such claim, then the Indemnified Party may take over
defense and proceed to handle such claim in its exclusive
discretion, and the Indemnifying Party shall be bound by any
defense or settlement that the Indemnified Party may make in good
faith with respect to such claim and shall pay the reasonable
attorneys fees of such defense, subject to paying for only one
counsel. The parties agree to cooperate in defending such third
party claims, and the defending party shall have access to
records, information and personnel in control of the other part
which are pertinent to the defense thereof.
11.8 Limitation of Remedies. No party to this
Agreement shall be liable to any other party or parties or have
any remedies against any other party or parties under this
Agreement other than as provided in Paragraph 11,
"Indemnification," and Paragraph 12, "Termination." The parties
understand that this requires that all disputed claims shall be
submitted to arbitration in accordance with Paragraph 10.4,
"Arbitration."
12. Termination.
12.1 Termination Events. This Agreement may be
terminated and abandoned prior to the closing thereof, by notice
given in the manner hereinafter provided:
12.1.1 By TNCI, (a) if without a material
breach of the terms or conditions of this Agreement by TNCI, all
of the conditions set forth in Paragraph 9, "Conditions Precedent
to the Obligations of TNCI," shall not have been satisfied on or
before the Closing Date and have not been waived by TNCI on or
before such dates, as the case may be, or (b) a material breach
of the terms or conditions of this Agreement by IFT occurs which
breach is not cured within ten (10) days following the giving of
written notice thereof to IFT.
12.1.2 By IFT, (a) if without a material breach
of the terms or conditions of this Agreement by IFT occurs which
breach is not cured within ten (10) days following the giving of
written notice thereof to IFT, all of the conditions set forth in
Paragraph 10, "Conditions Precedent to the Obligations of IFT,"
shall not have been satisfied on or before the Closing Date and
have not been waived by IFT on or before such date, as the case
may be, or (b) a material breach of the terms or conditions of
this Agreement by TNCI occurs which breach is not cured within
ten (10) days following the giving of written notice thereof to
TNCI.
12.1.3 By the mutual agreement of TNCI and IFT.
12.2 Effect of Termination. In the event this
Agreement is terminated pursuant to Paragraph 12.1, "Termination
Events," this Agreement shall forthwith become void, and, there
shall be no liability or continuing obligations on the part of
the parties hereunder, except as provided below:
12.2.1 no party may terminate this Agreement
pursuant to Paragraph 12.1.1(b) or 12.1.2(b) if such party is in
material breach of the terms of this Agreement;
12.2.2 TNCI shall continue to be bound by
Paragraph 7.4.5 through November 14, 1999 so long as IFT owns at
least 20% of the outstanding Common Stock of TNCI, computed by
assuming that all Preferred Stock or convertible notes held by
IFT have been converted into Common Stock of TNCI; and provided
that if IFT does not give its consent to a proposed transaction
during the foregoing period, which consent shall not be
unreasonably withheld, TNCI may purchase the Common Stock and
Common Stock equivalents based on conversion of Preferred Stock
and convertible debt held by IFT at a price equal to the greater
of $3.50 per share or the average of the bid and ask prices of
the Common Stock on the principal market on which the Common
Stock is traded on the date of purchase; and
12.2.3 after November 14, 1999 IFT shall have a
right of first refusal, for a period of fifteen (15) days after
receipt of written notice from TNCI, to purchase any debt or
equity securities of TNCI on the same terms and conditions as any
bona fide third party. IFT shall have the foregoing right of
first refusal so long as IFT owns at least 20% of the outstanding
Common Stock of TNCI, computed by assuming that all Preferred
Stock and convertible debt held by IFT have been converted into
Common Stock of TNCI.
12.2.4 TNCI shall grant IFT a license to use
TNCI's technology under terms of a license agreement attached as
Exhibit C hereto, which license shall (i) permit TNCI to continue
to utilize such technology directly in its business, but not
license such technology to any third party; (ii) be for a fifteen
(15) year term; (iii) permit IFT to license the technology on a
royalty-free basis; and (iv) give IFT a first right of refusal to
purchase the technology on the same terms and conditions as TNCI
proposes to sell the technology to a bona fide third party
purchaser.
13. Expenses and Transfer Taxes.
-
13.1 TNCI shall be solely responsible for paying its
own expenses and costs incident to the preparation of this
Agreement and to the consummation of the transactions
contemplated by this Agreement, and shall have no obligation for
paying such expenses or costs of IFT.
13.2 IFT shall be solely responsible for paying is own
expenses and costs incident to the preparation of this Agreement
and to the consummation of the transactions contemplated by this
Agreement, and shall have no obligation to reimburse the expenses
or costs of TNCI.
13.3 Notwithstanding any of the other provisions
hereof, in the event of arbitration with respect to the
interpretation or enforcement of this Agreement in accordance
with Paragraph 11.4 hereof, the prevailing party in any such
matter shall be entitled to recover from the other party their or
its reasonable costs and expense, including reasonable attorneys'
fees, incurred in such arbitration and/or litigation. For
purposes of this subparagraph 13.3, a party shall be deemed to be
the prevailing party only if such party (A)(i) receives an award
or judgment in such arbitration and/or litigation for more than
50% of the disputed amount involved in such matter, or (ii) is
ordered to pay the other party less than 50% of the disputed
amount involved in such matter or (B)(i) succeeds in having
imposed a material equitable remedy on the other party (such as
an injunction or order compelling specific performance), or (ii)
succeeds in defeating the other party's request for such an
equitable remedy.
13.4 TNCI and IFT do not believe any sales or transfer
taxes will be due as a result of the sale and transfer of the
Assets as contemplated in this Agreement. TNCI shall, however,
pay any sales or transfer taxes which may become due on the sale
or transfer of the Assets to TNCI and the other transactions
contemplated under this Agreement.
14. Risk of Loss. The risk of loss or destruction of all
or any part of the Assets prior to the Closing Date from any
cause (including, without limitation, fire, theft, acts of God or
public enemy) shall be upon IFT. Such risk shall be upon TNCI if
such loss occurs after the Closing Date.
15. Notification of Claims. Each party will promptly
notify the other of any third party claims against any party
relating to TNCI or the Assets of which it receives knowledge or
notice so as to permit such party an opportunity to prepare a
timely defense to such claim or to attempt settlement.
16. TNCI Board of Directors. On the Closing Date, the
Board of Directors and officers of TNCI shall consist of the
following seven (7) persons; Xxxxx X. Xxxxx (Chairman), Xxxxxx
Xxxxx, Xx. (President and CEO), Xxxxxx X. Xxxxx (Executive Vice
President), Xxxxx X. Xxxxx (Executive Vice President), two (2)
outside directors to be determined by IFT, and one (1) outside
director to be determined by TNCI.
17. Miscellaneous.
17.1 Binding Agreement. The parties covenant and agree
that this Agreement, when executed and delivered by the parties,
will constitute a legal, valid and binding agreement between the
parties and will be enforceable in accordance with its terms.
17.2 Negotiations with Third Parties. In consideration
of the undertakings by the parties of the substantial legal,
accounting and other expenses incident to the parties proceeding
toward the closing of the transaction contemplated hereby the
parties agree that, through the earlier of May 15, 1999 or the
Closing Date, neither party will enter into or pursue any
arrangements or negotiations with any other party relative to (i)
the merger of TNCI into any other party or any purchase or sale
of substantially all of the assets or control relative to any
extraordinary transaction, in the case of TNCI, without the
consent of IFT, and (ii) the acquisition by IFT of all or
substantially all of the assets, or the voting control, of a
company whose business is related to or in competition with the
business conducted by TNCI, without the consent of TNCI.
17.3 Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit
of the parties hereto, their legal representatives, successors
and assigns.
17.4 Entire Agreement. This Agreement and its exhibits
and schedules constitute the entire contract among the parties
hereto with respect to the subject matter thereof, superseding
all prior communications and discussions and no party hereto
shall be bound by any communication on the subject matter hereof
unless such is in writing signed by any necessary party thereto
and bears a date subsequent to the date hereof. The exhibits and
schedules shall be construed with and deemed as an integral part
of this Agreement to the same extent as if the same had been set
forth verbatim herein. Information set forth in any exhibit,
schedule or provision of this Agreement shall be deemed to be set
forth in every other exhibit, schedule or provision of this
Agreement and therefore shall be deemed to be disclosed for all
purposes of this Agreement.
17.5 Modification. This Agreement may be waived,
changed, amended, discharged or terminated only by an agreement
in writing signed by the party against whom enforcement of any
waiver, change, amendment, discharge or termination is sought.
17.6 Notices. All notices, requests, demands and other
communications shall be deemed to have been duly given three (3)
days after postmark of deposit in the United States mail, if
mailed, certified or registered mail, postage prepaid, one day
after delivery to a nationally recognized overnight courier, upon
receipt by facsimile (with confirmation back), or upon hand
delivery:
If to IFT:
Interactive Flight Technologies, Inc.
0000 Xxxxx Xxxxxxx Xxxxxx, Xxxxx X-000
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxx X. Xxxxx, Chief Executive
Officer
With copy to:
Xxxxxxxxx X. Xxxxxxxx, III
Xxxxxxx Xxxx, P.A.
Renaissance Xxx
Xxx Xxxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
If to TNCI:
The Network Connection, Inc.
0000 Xxxxx Xxxx Xxxx
Xxxxxxxxxx, Xxxxxxx 00000
Attn: Xxxxxx Xxxxx, Xx., President
With a copy to:
Xxxxx X. Xxxxxxxx, Esq.
Nixon, Hargrave, Devans & Xxxxx LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
or to such other address as any party shall designate to the
other in writing. The parties shall promptly advise each other
of changes in addresses for such notices.
17.7 Choice of Law. This Agreement shall be governed
by, construed, interpreted and enforced according to the laws of
the State of Delaware.
17.8 Severability. If any portion of this Agreement
shall be finally determined by any court or governmental agency
of competent jurisdiction to violate applicable law or otherwise
not to conform to requirements of law and, therefore, to be
invalid, the parties will cooperate to remedy or avoid the
invalidity, but, in any event, will not upset the general balance
of relationships created or intended to be created between them
as manifested by this Agreement and the instruments referred to
herein. Except insofar as it would be an abuse of the foregoing
principle, the remaining provisions hereof shall remain in full
force and effect.
17.9 Other Documents. The parties shall upon
reasonable request of the other, execute such documents as may be
reasonably necessary to carry out the intent of this Agreement.
17.10 Headings and the Use of Pronouns. The
paragraph headings hereof are intended solely for convenience of
reference and shall not be construed to explain any of the
provisions of this Agreement. All pronouns and any variations
thereof and other words, as applicable, shall be deemed to refer
to the masculine, feminine, neuter, singular or plural as the
identity of the person or matter may require.
17.11 Time is of the Essence. Time is of the
essence of this Agreement.
17.12 No Waiver and Remedies. No failure or delay
on a parties part to exercise any right or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial
exercise by a party of a right or remedy hereunder preclude any
other or further exercise. No remedy or election hereunder shall
be deemed exclusive but it shall, where ever possible, be
cumulative with all other remedies in law or equity.
17.13 Counterparts. This Agreement may be executed
in two or more counterparts, and by the 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.
17.14 Further Assurances. Each of the parties
hereto shall use commercially practicable efforts to fulfill all
of the conditions set forth in this Agreement over which it has
control or influence (including obtaining any consents necessary
for the performance of such party's obligations hereunder) and to
consummate the transactions contemplated hereby, and shall
execute and deliver such further instruments and provide such
documents as are reasonably necessary to effect this Agreement.
17.15 Rules of Construction. The normal rules of
construction which require the terms of an agreement to be
construed most strictly against the drafter of such agreement are
hereby waived since each party has been represented by counsel in
the drafting and negotiation of this Agreement.
17.16 Third Party Beneficiaries. Each party hereto
intends that this Agreement shall not benefit or create any right
or cause of action in or on behalf of any person other than the
parties hereto.
17.17 Bulk Sales; Sales Tax. The parties hereby
waive compliance with the requirements of any applicable bulk
sales or bulk transfer statutes of any states having
jurisdiction, and IFT hereby agrees to be responsible for and
shall indemnify and hold harmless TNCI against any liability that
may arise as a result of any obligations imposed by such
statutes. Additionally, IFT shall be responsible for and shall
indemnify and hold harmless TNCI for any sales tax due upon the
transfer of the Assets pursuant to this Agreement or any sales
tax which should have been collected by IFT in connection with
operation of the Business being transferred on or prior to the
Closing Date.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
IFT: TNCI:
INTERACTIVE FLIGHT THE NETWORK CONNECTION, INC.,
TECHNOLOGIES, INC., a Delaware a Georgia corporation
Corporation
Xxxxxx Xxxxx, Xx., President
Xxxxx X. Xxxxx, Chief
Executive Officer
