FIRST AMENDMENT
TO
ASSET PURCHASE AND SALE AGREEMENT
THIS FIRST AMENDMENT (the "Amendment") to that certain Asset Purchase and
Sale Agreement dated as of April 29, 1999 (the "Purchase Agreement"), is entered
into as of this 14th day of May, 1999 by and among Interactive Flight
Technologies, Inc. ("IFT"), and The Network Connection, Inc. ("TNCI").
WHEREAS, the parties have previously entered into the Purchase Agreement;
and
WHEREAS, the parties now wish to amend the Purchase Agreement to provide
for the other matters set forth herein.
NOW THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties do hereby agree as
follows:
1. Section 7 is hereby amended by adding a new Section 7.7 which shall read
in its entirety as follows:
7.7. Payment of Net Litigation and Other Proceeds; Performance of
Contracts.
7.7.1 IFT shall pay to TNCI the Net Swissair Proceeds (as defined
below) actually collected by IFT with respect to existing accounts receivable
identified on Schedule 1.1 from Swissair Swiss Air Transport Company, Ltd., SR
Technics, Ltd. and SAIR Group (the "Accounts"), and other amounts sought to be
recovered from such parties pursuant to the Complaint filed by IFT in the United
States District Court for the District of Arizona on May 6, 1999 (Civ.
99-0836PHX SMM) (collectively with the Accounts, the "Swissair Claims"). As used
herein, Net Swissair Proceeds shall mean the aggregate amounts actually received
by IFT with respect to such Swissair Claims, net of (i) any cost or expenses,
direct or indirect, incurred by IFT in connection with the collection of such
Swissair Claims (including without limitation, any and all costs of litigation,
attorneys' fees, court costs, and the like, incurred either in connection with
the prosecution of such Swissair Claims or in defending any counterclaims in
connection therewith; (ii) any costs or expenses of performing any IFT
obligations under any of the existing contracts, or otherwise incurred with
respect to such receivables, which are incurred following the Closing Date;
(iii) any counterclaims or other amounts paid or payable by IFT to such parties;
and (iv) state and federal taxes paid by IFT with respect to amounts received by
IFT pursuant to the Swissair claims, the amounts of which tax payments have been
approved by TNCI, which approval will not be unreasonably withheld. In
connection therewith, TNCI agrees that it shall perform on behalf of IFT any
obligations required of IFT under any contracts with such parties and shall
indemnify, defend, and hold harmless IFT from any costs and expenses incurred by
IFT as a result of TNCI's performance.
7.7.2 IFT shall pay to TNCI the Net Other Proceeds (as defined
below) actually received by IFT in connection with the pending litigation
against Avnet/Xxxxxxxx Hallmark, FortuNet, and the employees set forth in
Schedule 7.7.2 (collectively, the "Miscellaneous Claims"). As used herein, Net
Other Proceeds shall mean the aggregate amounts actually received by IFT with
respect to such Miscellaneous Claims, net of (i) any costs or expenses, direct
or indirect, incurred by IFT in connection with the collection of such
Miscellaneous Claims (including, without limitation, any and all costs of
litigation, attorneys' fees, court costs, and the like, incurred either in
connection with the prosecution of such Miscellaneous Claims or in defending any
counterclaims in connection therewith; (ii) any costs or expenses of performing
any IFT obligations under the FortuNet agreement; (iii) any counterclaims or
other amounts paid or payable by IFT to such parties; and (iv) taxes paid by IFT
with respect to amounts received by IFT pursuant to the Swissair claims, the
amounts of which tax payments have been approved by TNCI, which approval will
not be unreasonably withheld. Such amounts shall also be reduced by the amount
of any judgments or amounts payable to such parties pursuant to any
counterclaims or otherwise. In connection therewith TNCI agrees that it shall
perform on behalf of IFT any obligations of IFT under the FortuNet contract.
2. Section 7 is hereby further amended by adding a new Section 7.8 which
shall read in its entirety as follows:
7.8 Upon a determination by TNCI that such transfers are desirable, IFT
shall use reasonable efforts to effect the transfers of the permits set forth in
Schedule 5.14.1 with all required approvals.
3. Section 8.1 is hereby amended to read in its entirety as follows:
8.1 Due Diligence Inspection. During the period from the date hereof
until and through May 14, 1999, 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
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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 May 14, 1999. 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.
4. Section 9.3.1 is hereby amended to read in its entirety as follows:
9.3.1 IFT shall deliver the Disclosure Schedule to this
Agreement no later than May 14, 1999. TNCI shall have the lesser of seven (7)
days after its receipt of the Disclosure Schedule or the remaining time until
the Closing Date 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.
5. Section 10.5.1 is hereby amended to read in its entirety as follows:
10.5.1 TNCI shall deliver the Disclosure Schedule to this
Agreement no later than May 14, 1999. IFT shall have the lesser of seven (7)
days after its receipt of the Disclosure Schedule or the remaining time until
the Closing Date 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.
6. A new Section 10.13.1 is hereby added to read in its entirety as
follows:
10.13.1 To the extent any holder of the outstanding Series A
Notes, Series D Notes, and Series E Notes refuses to convert such notes into
capital stock on terms verbally agreed to with IFT as reflected in Schedule
3.1.1-B after the Closing Date, and IFT issues more shares or other
consideration than originally agreed to, IFT will be reimbursed to the extent of
such additional consideration by TNCI issuing that number of additional shares
of TNCI common stock (based upon the conversion price set forth in the Allonge
pertaining to such notes that were not so converted) equal to the value of the
additional consideration paid by IFT which shall be measured as of the date it
is agreed to in writing to be given by IFT. If the consideration consists of
securities traded on a stock exchange or automated quotation system, the value
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of such securities shall be the average closing price for the five trading days
preceding the date of determination.
7. Section 10.14 is hereby amended to read in its entirety as follows:
10.14 Other Issues. IFT shall have acquired from The Shaar Fund, Ltd.
the 1,500 shares of the Series B Preferred Stock of TNCI which are outstanding
and the secured note dated January 25, 1999 (as amended), payable to the order
of IFT by TNCI in the original face amount of $500,000 shall have been amended
on terms acceptable to IFT. IFT shall have received proxies from certain
shareholders of TNCI as determined by IFT.
8. Section 11.1 is hereby amended by adding the following at the end of the
Section after the word "period":
,and other than as a result of breach of the agreements to perform certain
obligations and to indemnify IFT set forth in Sections 7.7 and 11.2.2 as to
which such time limit shall not apply.
9. Section 11.2.2 is hereby renumbered as Section 11.2.3 and a new Section
11.2.2 is hereby added to read in its entirety as follows:
11.2.2. TNCI hereby agrees to indemnify IFT as set forth in Section 7.7
hereof.
10. Section 16 is hereby amended to read in its entirety as follows:
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. (Executive Vice President-Business Development), Xxxxxx
X. Xxxxx (Executive Vice President and Chief Financial Officer), Xxxxx X.
Xxxxx (President and Chief Executive Officer), two (2) outside directors to
be determined by IFT and one (1) outside director to be determined by TNCI.
11. Section 2 is hereby amended by deleting everything after "(the "Assumed
Liabilities")" from the first sentence thereof [thereby deleting reference to
certain Swissair liabilities], and replacing the "," with a period.
12. The first "Whereas" clause in the Recitals is amended by deleting the
work "primarily" and inserting in its place the words "in part."
13. Section 7 is further amended by deleting Section 7.2.2 in its entirety
and replacing that section with the words "Intentionally Omitted."
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IN WITNESS WHEREOF, the parties have executed this Amendment as of the
_____ day of May, 1999.
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IFT:
INTERACTIVE FLIGHT TECHNOLOGIES, INC.,
a Delaware corporation
By:
Its:
TNCI:
THE NETWORK CONNECTION, INC.
By:
Its:
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