EXHIBIT 10.21
ASSET PURCHASE AGREEMENT
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THIS ASSET PURCHASE AGREEMENT ("Agreement") is made as of this 1st day of
February, 1999, by and between CONVERGENT COMMUNICATIONS SERVICES, INC., a
Colorado corporation ("Purchaser"), whose address is 000 Xxxxxxxxx Xxxxx Xxxxx,
Xxxxxx Xxxxx, Xxxxxxxxx, Xxxxxxxx 00000, and KANSAS COMMUNICATIONS, INC., a
Kansas corporation ("Seller"), whose address is 0000 Xxxxxxxx Xxxxx, Xxxxxx,
Xxxxxx.
WHEREAS, Seller is engaged in the business of providing telephone service,
equipment and installation, and maintenance throughout Missouri, Kansas and
Wisconsin (the "Business").
WHEREAS, Seller uses the trade names "BT Services" in Missouri, "Kansas
Communications" in Kansas and "SoftNet Business Solutions" in Wisconsin.
Purchaser wishes to acquire the rights Seller has to the trade names "BT
Services" and "Kansas Communications," but not to the trade name "SoftNet
Business Solutions."
WHEREAS, Purchaser intends to buy, and Seller intends to sell,
substantially all of the assets of Seller that relate directly or indirectly to
Seller's Business, upon the terms and conditions set forth in this Agreement.
In addition, Purchaser desires to assume certain specific liabilities of Seller
as set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, both parties agree as follows:
1. TRANSFER OF ASSETS. SUBJECT TO THE TERMS AND CONDITIONS OF THIS AGREEMENT,
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SELLER AGREES TO SELL AND DELIVER TO PURCHASER, AND PURCHASER AGREES TO PURCHASE
FROM SELLER, AS OF THE CLOSING BALANCE SHEET DATE (AS DEFINED HEREIN), ALL OF
SELLER'S RIGHT, TITLE AND INTEREST TO AND IN ALL ASSETS, PROPERTIES AND RIGHTS
(OF ANY KIND, NATURE, CHARACTER AND DESCRIPTION, WHETHER TANGIBLE OR INTANGIBLE,
WHETHER ACCRUED, CONTINGENT OR OTHERWISE, WHEREVER LOCATED) OWNED BY SELLER AS
OF THE CLOSING BALANCE SHEET DATE THAT RELATE TO OR ARE USED IN, OR OTHERWISE
ASSOCIATED WITH, THE BUSINESS (THE "PURCHASED ASSETS"); PROVIDED, HOWEVER,
SELLER WILL RETAIN AND NOT TRANSFER TO PURCHASER THE ASSETS DESCRIBED IN SECTION
2 OF THIS AGREEMENT (THE "EXCLUDED ASSETS"). THE PURCHASED ASSETS SHALL
INCLUDE, WITHOUT LIMITATION, THE FOLLOWING:
1.1. Personal Property. All equipment, fixtures, furniture, supplies and other
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personal property owned, utilized or held for use by Seller in the Business,
including, without limitation, the equipment and other assets described on
Schedule 1. 1 (the "Personal Property").
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1.2. Leases. All rights of Seller under the leases of real property and
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Personal Property used in connection with Seller's Business which are listed on
Schedule 1.2 under the heading "Assumed Leases." The leases referred to in this
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Section 1.2 are referred to herein as the "Assumed Leases." The Assumed Leases
shall not include, however, and Purchaser shall not assume, any other lease that
is not an Assumed Lease (collectively, the "Excluded Leases").
1.3. Contracts. All rights of Seller (including, without limitation, all of
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Seller's right to receive goods and services and to assert claims and to take
other action with respect to breaches, defaults and other violations pursuant to
such contracts) under all contracts, agreements and commitments which are
identified on Schedule 1.3.A; provided that the assumption of such contracts,
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agreements and commitments by Purchaser shall not constitute a waiver of any
rights of indemnification or other rights under this Agreement which Purchaser
may have by virtue of such contract, or any of its provisions, constituting a
breach of any representation or warranty made by Seller herein. The contracts
referred to in this Section 1.3 are referred to herein as the "Assumed
Contracts." The Assumed Contracts shall not include, however, and Purchaser
shall not assume, any other contract which is not an Assumed Contract,
including, without limitation, those contracts set forth under the heading
"Excluded Contracts" on Schedule 1.3.B (collectively, the "Excluded Contracts").
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1.4. Intangible Assets. All of Seller's right, title and interest in and to all
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goodwill, licenses, trade names (including, without limitation, the names
"Kansas Communications" and "BT Services," together with all derivations and
variations of such names, but specifically excluding the name "SoftNet Business
Solutions," together with all derivations and variations of such name), assumed
names, trade dress, business identifiers, trademarks, service marks, copyrights,
applications and registrations for any of the foregoing, trade secrets,
confidential information, know-how, causes of action (including all claims for
infringement), claims (including contractual claims), contractual rights or
agreements granting any right, title, license or privilege with respect to
intellectual property and all other intangible assets relating to, used in or
held for use in the operation of the Business (the "Intangible Assets"),
including, without limitation, the Intangible Assets listed on Schedule 1.4.
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1.5. Intentionally Omitted.
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1.6. Records and Documents. All records, computer software and documents,
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computer source codes and programs, books, supplier, dealer and customer lists,
catalogs and technical data, work orders, credit information and correspondence,
operating data, drawings, blueprints, specifications, designs, financial
information, product data and records, account information, sales leads, sales
representative information, and all other records and documents used in
connection with the operation of the Purchased Assets, but specifically
excluding Seller's Articles of Incorporation (with all amendments thereto),
Bylaws (with all amendments thereto), corporate minutes and documents relating
to the qualification of Seller as a domestic or foreign corporation in Kansas,
Missouri and Wisconsin.
1.7. Prepaid Assets. All of Seller's rights to prepaid deposits, lease
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payments, insurance and other prepaid items, including, without limitation,
those prepaid items listed on Schedule 1.7 (the "Prepaid Assets").
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1.8. Literature. All sales literature, promotional literature,
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catalogs, sales and marketing materials and similar materials relating to the
Business, but excluding any literature containing the named "SoftNet" and any
literature that is the basis for any pending or threatened litigation.
Purchaser shall be entitled to use all such materials in the operation of the
Purchased Assets.
1.9. Vehicles. All automobiles, trucks, trailers, automotive equipment and
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other vehicles owned, leased or used in connection with the operation of the
Business, including, without limitation, those listed on Schedule 1.9 (the
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"Vehicles").
1.10. Accounts Receivable. All of Seller's accounts receivable and all
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evidences of indebtedness and rights, including contingent rights, to receive
payment from any other person or entity, including, without limitation, those
items listed on Schedule 1.10.A (the "Accounts Receivable"), but excluding the
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receivables listed on Schedule 1.10.B due from the Shareholder of Seller under
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the heading "Excluded Receivables." The term "Shareholder" shall mean SoftNet
Systems, Inc., the sole shareholder of Seller.
1.11. Inventory. All of Seller's inventory used in connection with the
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Business, including, but not limited to, the inventory items listed on Schedule
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1.11 (the "Inventory").
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1.12. No Encumbrances. Except as specifically assumed by Purchaser in
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Section 3 of this Agreement, Seller shall transfer the Purchased Assets free and
clear of all liabilities, obligations, liens, security interests and
encumbrances.
2. ASSETS EXCLUDED FROM SALE. THERE SHALL BE
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EXCLUDED FROM SALE UNDER THIS AGREEMENT THOSE ASSETS
SPECIFICALLY IDENTIFIED ON SCHEDULE 2 (THE "EXCLUDED
ASSETS").
3. LIABILITIES.
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3.1. Excluded Liabilities. Except as specifically provided in Section 3.2,
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Purchaser shall not assume, and shall not be obligated to pay, perform or
discharge any debts, liabilities or obligations of Seller, whether actual,
contingent or accrued, known or unknown, including, but not limited to, any
Employee Payments (as defined in Section 8.19 of this Agreement), which
liabilities shall be retained by Seller and shall hereafter be referred to as
the "Excluded Liabilities." Seller shall indemnify and hold Purchaser harmless
(which indemnity and hold harmless shall be indefinite and not subject to the
duration or other limitations in Section 15) against any Excluded Liabilities.
3.2. Assumed Liabilities. Subject to the terms and conditions of this
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Agreement, Purchaser shall assume and pay, perform and discharge in accordance
with their terms only the following obligations and liabilities of Seller as of
the Closing Balance Sheet Date (the "Assumed Liabilities"):
(a) liabilities identified on Schedule 3.2 which arise under the
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Assumed Leases and Assumed Contracts; and
(b) those liabilities which Purchaser specifically agrees to assume
and are specifically identified on Schedule 3.2.
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4. PURCHASE PRICE.
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4.1. Amount. In consideration of Seller's sale, assignment and transfer of
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the Purchased Assets and the performance by Seller of all the terms, covenants
and provisions of this Agreement on its part to be kept and performed, Purchaser
shall (subject to adjustment as set forth in Section 4.3) assume the Assumed
Liabilities set forth on Schedule 3.2 and pay to Seller a purchase price of
approximately $6,200,000 (the "Purchase Price").
4.2. Manner of Payment of the Purchase Price. The Purchase Price shall be
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paid to Seller in the following manner:
(a) $100,000 has previously been paid by Purchaser to Seller
as an xxxxxxx money deposit on November 11, 1998, and shall be applied towards
the Purchase Price on the Closing Date (as defined herein).
(b) $1,400,000 shall be paid in immediately available funds
to Seller, in accordance with Seller's written payment instructions, on the
Closing Date.
(c) $2,000,000 shall be paid pursuant to a secured
promissory note in favor of Seller in the form attached hereto as Exhibit A (the
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"Secured July Note"), which shall be secured by a security agreement in the form
attached hereto as Exhibit B, on the Closing Date.
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(d) 30,000 shares of common stock, no par value, (the
"Convergent Stock", and together with the Additional Shares (as defined herein),
referred to herein as the "Convergent Stock") of Purchaser's parent company,
Convergent Communications, Inc., a Colorado corporation ("Convergent"), which
Seller and Purchaser have agreed is valued at $10.00 per share for a total of
$300,000 shall be issued as follows: Purchaser shall cause Convergent to deliver
a treasury request to Convergent's transfer agent directing the issuance to
Seller of 30,000 shares of Convergent Stock. In order to evidence such transfer
and issuance of the Convergent Stock, Purchaser shall cause Convergent to
deliver a copy of the treasury request issued to Convergent's transfer agent to
Seller on the Closing Date. The share certificate evidencing the Convergent
Stock shall be delivered to Seller by Convergent's transfer agent within twenty
(20) days of the Closing Date.
(e) $1,000,000 shall be paid pursuant to a secured
promissory note in favor of Seller in the form attached hereto as Exhibit C
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("Secured Purchaser's Note"), which shall be secured by a security
agreement in the form attached hereto as Exhibit B, on the Closing Date.
(f) $1,500,000, less any adjustments made pursuant to
Section 4.3(a), shall be paid pursuant to a secured promissory note in favor of
Seller in the form attached hereto
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as Exhibit D ("Secured Contingent Note"), which shall be secured by a security
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agreement in the form attached hereto as Exhibit B, not later than twenty (20)
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days of the Closing Date.
4.3. Adjustments to the Purchase Price.
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(a) Within fifteen (15) days of the Closing Date (the
"Adjustment Date"), Seller shall deliver to Purchaser the Seller's balance sheet
prepared by Seller for the period ended January 31, 1999 (the balance sheet is
referred to herein as the "Closing Balance Sheet," and the date of such Closing
Balance Sheet is referred to herein as the "Closing Balance Sheet Date"). If the
Closing Balance Sheet indicates net working capital and assets of less than
$2,200,000 (such amount being referred to herein as the "Deficiency Amount"),
the Purchase Price, and thereby the Secured Contingent Note, shall each be
reduced dollar for dollar by the Deficiency Amount. If the Closing Balance Sheet
indicates net working capital and assets greater than $2,200,000 (such amount
being referred to herein as the "Share Increase"), the Purchase Price shall be
increased dollar for dollar by the Share Increase and shall be paid to Seller in
additional shares of Convergent Stock, rounded to the nearest $10.00 (the
"Additional Shares"). "Net working capital" shall be calculated for illustration
purposes as set forth in the second column of Seller's Balance Sheet (as defined
herein) set forth on Schedule 4.3. Cash as of the Closing Balance Sheet Date
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shall remain with Seller, and the Purchaser shall pay this amount to Seller on
the Adjustment Date.
(b) Seller shall reimburse Purchaser on a dollar for dollar
basis for any accounts receivable reflected on the Seller's Balance Sheet that
remain uncollected after April 30, 1999 (the "Uncollected Accounts Receivable")
in the manner described in this Section 4.3(a). Prior to April 30, 1999,
Purchaser shall make reasonable efforts to collect such receivables in the
ordinary course of its business. Within thirty (30) days of April 30, 1999,
Purchaser shall have the right to: (i) reduce the Allowance for Doubtful
Accounts reflected on the Seller's Balance Sheet on a dollar for dollar basis to
the extent of the Uncollected Accounts Receivable, and (ii) to the extent that
the amount of the Uncollected Accounts Receivable is greater than the Allowance
for Doubtful Accounts reflected on the Seller's Balance Sheet, offset any such
Uncollected Accounts Receivable from the amounts owing to Seller under the
Secured Contingent Note and then the Secured Purchaser's Note, in that order.
Purchaser shall notify Seller of the Uncollected Accounts Receivable and assign
to Seller the right to pursue any claims arising out of such Uncollected
Accounts Receivable for Seller's benefit in connection therewith.
(c) In the event that the Fujitsu Consent (as defined in
Section 11.3(a)) has not been delivered to Purchaser in accordance with Section
11.3(a) within forty-five (45) days of the Closing Date, the Purchase Price and
the Secured Contingent Note shall each be reduced in the amount of $600,000;
provide, however, if the Fujitsu Consent is delivered to Purchaser prior to the
maturity date of the Secured Contingent Note, the $600,000 will be reinstated in
the Secured Contingent Note and shall be due and payable in accordance with the
terms of such Note. In the event that the three (3) Executone Assignments and
Amendments (as defined in Section 11.3(b)) and the consents to the transfer or
assignment of the Assumed Contracts identified as Items 1 through 9 on Schedule
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1.3.A, have not been delivered to
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Purchaser in accordance with Section 11.3(b) within forty-five (45) days of the
Closing Date, the Purchase Price, and thereby the Secured Contingent Note, shall
each be reduced in the amount of $10,000 for each such consent or Executone
Assignment and Amendment that has not been delivered; provided, however, that
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the adjustment shall not exceed $90,000.
(d) Within 45 days of the Closing Date, Purchaser shall have
completed a written inventory of all of the fixed assets that comprise the fixed
assets being purchased hereunder (the "Fixed Asset Inventory List"), which is
identified on the Closing Balance Sheet as "net fixed assets" (the "Fixed Asset
Value"). If the Fixed Asset Value is $50,000 or greater than the value reflected
on the Fixed Asset Inventory List, then the Purchase Price and the Secured
Contingent Note shall each be reduced dollar for dollar as of the Closing Date
to reflect the decrease in value. If the Fixed Asset Value is within $50,000 of
the value reflected on the Fixed Asset Inventory List, then there shall be no
adjustment to the Purchase Price pursuant to this Section 4.3(d).
(e) In the event that the outstanding principal amount of
the Secured Contingent Note or the Secured Purchaser's Note is required to be
adjusted in accordance with this Section 4.3, Purchaser shall execute and
deliver to Seller an Allonge Endorsement in the form attached hereto as Exhibit
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H-1 or Exhibit H-2, whichever the case may be (the "Allonge Endorsement"), and
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Seller shall attach such Allonge Endorsement to the Secured Contingent Note or
the Secured Purchaser's Note, as the case may be. Upon execution and delivery of
any Allonge Endorsement by Purchaser to Seller, the respective Secured
Contingent Note or Secured Purchaser's Note, as the case may be, shall
automatically be deemed to be amended to reflect any adjustment to the
outstanding principal and interest amounts of such Note in accordance with the
terms of this Agreement with no further action required by Purchaser.
4.4. Allocation of Purchase Price. The Purchase Price shall be assigned
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and allocated to the Purchased Assets in the manner mutually agreed upon by the
parties within 20 days of the Closing Date and in accordance with the allocation
to be described in Schedule 4.4 attached hereto.
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4.5. Payments of Transfer Tax. All taxes imposed in connection with the
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sale and transfer of the Purchased Assets to Purchaser shall be borne by Seller
and Seller shall indemnify and hold Purchaser harmless with respect to any such
tax which might be levied on or collected from Purchaser.
5. INTENTIONALLY OMITTED.
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6. CLOSING. THE CLOSING OF THIS TRANSACTION, INCLUDING THE TRANSFER OF ALL
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OF THE PURCHASED ASSETS AND THE ASSUMPTION OF THE ASSUMED lIABILITIES), SHALL
TAKE PLACE AT THE OFFICES OF XXXXXXXX & XXXXXX, 000 XXXXXXXXXXX XXXXXX, XXXXX
0000, XXXXXX, XXXXXXXX AT 10:00 A.M. ON THE 12TH DAY OF fEBRUARY, 1999 (THE
"CLOSING DATE").
7. REPRESENTATIONS AND WARRANTIES OF PURCHASER. AS MATERIAL REPRESENTATIONS
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TO INDUCE SELLER TO ENTER INTO THIS TRANSACTION, PURCHASER MAKES THE FOLLOWING
REPRESENTATIONS AND WARRANTIES TO SELLER, EACH OF WHICH IS TRUE AND CORRECT AS
OF THE CLOSING DATE:
7.1. Corporate Organization. Purchaser is a corporation duly organized and
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existing in good standing under the laws of the State of Colorado and has filed
all reports required to be filed with the Secretary of State of the State of
Colorado and has all corporate power and authority to own, operate and lease its
properties and carry on its businesses as now conducted. Purchaser is duly
licensed and qualified to transact business as a foreign corporation and is in
good standing in each of the jurisdictions in which such qualification is
necessary whether by reason of the ownership or leasing of its properties or the
conduct or nature of its business.
7.2. Authorization of Agreement. Purchaser has all corporate power and
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authority to execute and deliver this Agreement and to consummate the
transactions provided for herein and the execution and delivery of this
Agreement by Purchaser and the performance of its obligations to be performed
hereunder have been duly authorized by all necessary and appropriate action by
Purchaser's Board of Directors. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby do not and will not
conflict with or result in a breach of, or constitute a default under, the terms
or conditions of Purchaser's Articles of Incorporation or Bylaws, or any order,
judgment or decree or any agreement or instrument to which Purchaser is a party
or by which Purchaser or its assets are bound or affected. This Agreement is,
and each other agreement and document to be executed by Purchaser will be when
so executed, a valid and binding obligation of Purchaser enforceable in
accordance with its terms.
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7.3. Disclosure. No representation or warranty by Purchaser contained in this
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Agreement or in any writing to be furnished pursuant hereto or previously
furnished to Seller contains or will contain any untrue statement of fact or
omits or will omit to state any fact required to make the statements therein
contained not misleading. All statements and information contained in any
certificate, instrument, disclosure schedule or document delivered by or on
behalf of Purchaser shall be deemed representations and warranties by Purchaser.
7.4. Consents. Purchaser shall have delivered to Seller copies of all
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consents from any person or entity not a party to this Agreement whose consent
is necessary or desirable for the execution and performance of this Agreement by
Purchaser, on or prior to the Closing Date.
7.5. Purchase Price Allocation. Purchaser represents, warrants and covenants
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to Seller to report the transaction contemplated by this Agreement as a sale and
purchase of the Purchased Assets in the specific amounts to be described on
Schedule 4.4 for purposes of federal, state and local taxes or filings required
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to be made under the Securities Exchange Act of 1934, as amended, after the
Closing Date and shall not take any position to the contrary in any tax return
or proceeding before any taxing authority. Purchaser shall cooperate fully with
Seller, shall execute any documents reasonably requested by Seller, and shall
furnish appropriate information and testimony, upon request, with respect to any
liability asserted by taxing authorities, all without payment of further
consideration; provided such tax liability relates to the Purchased Assets or
Assumed Liabilities after the Closing Date.
7.6. Brokers and Finders. Neither Purchaser nor any affiliate nor any officer
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or director thereof has engaged any finder or broker in connection with the
transactions contemplated hereunder.
7.7. Convergent Stock. The Convergent Stock will, upon issuance, be duly
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authorized, fully paid and non-assessable.
8. REPRESENTATIONS AND WARRANTIES OF SELLER. AS MATERIAL REPRESENTATIONS TO
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INDUCE PURCHASER TO ENTER INTO THIS TRANSACTION, SELLER MAKES THE FOLLOWING
REPRESENTATIONS AND WARRANTIES TO PURCHASER, EACH OF WHICH IS TRUE AND CORRECT
AS OF THE CLOSING DATE:
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8.1. Corporate Organization. Seller is a corporation duly organized and
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existing in good standing under the laws of the State of Kansas and has filed
all reports required to be filed with the Secretary of State of the State of
Kansas and has all corporate power and authority to own, operate and lease its
properties and carry on its businesses as now conducted. Seller is duly
licensed and qualified to transact business as a foreign corporation and is in
good standing in each of the jurisdictions in which such qualification is
necessary whether by reason of the ownership or leasing of its properties or the
conduct or nature of its business. Seller is a wholly-owned subsidiary of
Shareholder.
8.2. Authorization of Agreement. Seller has all corporate power and
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authority to execute and deliver this Agreement and to consummate the
transactions provided for herein and the execution and delivery of this
Agreement by Seller and the performance of its obligations to be performed
hereunder have been duly authorized by all necessary and appropriate action by
Seller's Board of Directors. Subject to the provisions of Section 8.30, the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby do not and will not conflict with or result in
a breach of, or constitute a default under, the terms or conditions of Seller's
Articles of Incorporation or Bylaws, or any order, judgment or decree or any
agreement or instrument to which Seller is a party or by which Seller or its
assets are bound or affected. This Agreement is, and each other agreement and
document to be executed by Seller will be when so executed, a valid and binding
obligation of Seller enforceable in accordance with their terms.
8.3. Financial Statements. Seller has delivered to Purchaser copies of the
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balance sheets of Seller as of September 30, 1997, September 30, 1998, and
December 31, 1998 (the later balance sheet is referred to herein as "Seller's
Balance Sheet," and the date of such Seller's Balance Sheet being referred to
herein as the "Seller's Balance Sheet Date") and the related unaudited statement
of income and cash flows of Seller for the period then ended, all of which are
complete and correct, have been prepared from the books and records of Seller
consistently maintained throughout the periods indicated and fairly present the
financial condition of Seller as of their respective dates and the results of
its operations for the periods covered thereby. Seller's books of account are
complete and correct and have been maintained in accordance with sound business
practices, including the maintenance of an adequate system of internal controls.
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8.4. Absence of Undisclosed Liabilities. To the best knowledge of Seller, and
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except as set forth on Schedule 8.4, there are no liabilities or obligations,
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direct or indirect, absolute or contingent, or any outstanding evidence of
indebtedness, including any open purchase orders, arising out of or relating to
the Business or the Purchased Assets, except (i) as fully reflected or as
specifically reserved against on the Seller's Balance Sheet, and (ii)
liabilities incurred in the ordinary course of business after the Seller's
Balance Sheet Date, consistent with Seller's prior practice, which, in the
aggregate, do not result in any adverse change in the financial condition of the
Business or the Purchased Assets from that set forth in Seller's Balance Sheet.
8.5. Business Changes. Except as set forth on Schedule 8.5, since the Seller's
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Balance Sheet Date, there has not been:
(a) with respect to the Business, Seller or the Purchased
Assets, any material adverse change in condition or prospects (financial or
other); (ii) material damage, destruction or loss (whether or not covered by
insurance); or (iii) material transaction outside the ordinary course of
business;
(b) any sale, lease, transfer, assignment, abandonment or
other disposition of any asset that if owned by Seller on the Closing Date would
have been a Purchased Asset (other than in the ordinary course of business);
(c) any notice or indication of termination or potential
termination of any other material contract, lease or relationship, which, in any
case or in the aggregate, has or may have an adverse effect upon the Business or
the Purchased Assets;
(d) any change in the rate of compensation, commission,
bonus or other direct or indirect remuneration payable or to be paid, or any
agreement or promise to pay, conditionally or otherwise, any extra compensation
to any officer, director or employee of Seller, other than in the ordinary
course of business consistent with past practice ;
(e) any other change in the selling, pricing, advertising or
personnel practices of Seller inconsistent with Seller's prior practice and
prudent business practices prevailing in the industry;
(f) any payment of any liability other than those then
required to be discharged or satisfied or current liabilities shown on the
Seller's Balance Sheet and current liabilities incurred since the Seller's
Balance Sheet in the ordinary course of business and consistent with past
practices;
(g) any intercompany loans or payments, dividends or
transfers of cash or other assets by Seller out of the ordinary course of
business other than the payments to the
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Shareholder of the cash reflected on the Closing Balance Sheet in accordance
with Section 4.3(a);
(h) any material deviation from the ordinary and usual
course of conducting the operation of the Business;
(i) any mortgage, pledge or creation of any lien, charge,
security interest or other encumbrance on any of the Purchased Assets;
(j) any change or modification of Seller's accounting
methods or practices;
(k) any indebtedness incurred by Seller for money borrowed;
(1) any capital expenditures in excess of $50,000;
(m) any negotiations or contract for the sale of the
Business, or any part thereof or for the purchase of another business, whether
by merger, consolidation, exchange of capital stock or otherwise (other than
negotiations with respect to this Agreement);
(n) any declaration of payment of dividends upon or in
respect of any of its shares of capital stock, or redemption or obligation to
redeem any of its shares of capital stock or other securities, other than the
payments to the Shareholder of the cash reflected on the Closing Balance Sheet
in accordance with Section 4.3(a); or
(o) any encounter with any labor union organizing activity,
any actual or threatened employee strikes, works stoppages, slowdowns or
lockouts or any material change in its relations with its employees, agents,
customers and suppliers.
8.6. Title to Purchased Assets. Except as set forth on Schedule 8.6, Seller has
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good, indefeasible and marketable title to all Purchased Assets, free and clear
of all mortgages, security interests, title retention agreements, options to
purchase, rights of first refusal, liens, easements, encumbrances, restrictions
and other burdens of any nature whatsoever ("Liens"). Except for the Liens set
forth on Schedule 8.6, and subject to the provisions of Section
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8.30, none of the Purchased Assets are subject to any restrictions with respect
to the transferability thereof and Seller has complete and non-restricted power
and right to sell, assign, convey and deliver the Purchased Assets to Purchaser
as contemplated hereby. On the Closing Date, Purchaser will receive good and
marketable title to all the Purchased Assets, free and clear of all Liens, but
subject to any Liens disclosed on Schedule 8.6 and the provisions of Section
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8.30.
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8.7. Condition of Purchased Assets. To the best knowledge of Seller, (i) no
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maintenance outside the ordinary course of business is needed with respect to
the Purchased Assets, and (ii) the Purchased Assets are in all respects in good
condition and working order (reasonable wear and tear excepted).
8.8. Inventory. The inventory reflected on the Seller's Balance Sheet, or
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thereafter acquired and as set forth on Schedule 1.11, is, after the reserve for
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obsolete inventory, merchantable, or suitable and usable for the production or
completion of merchantable products, for sale in the ordinary course of business
as first quality goods at normal xxxx-ups, none of such item is obsolete or
below standard quality, and each item of such inventory reflected in the Balance
Sheet and the books and records of Seller and set forth on Schedule 1.11 is
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valued at the lower of cost (on a last-in, first-out basis) or market. The
Purchased Assets include the quantity of each type of such inventory to meet the
normal requirements of Seller's business and operations.
8.9. Personal Property. The Personal Property reflected on the Closing
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Balance Sheet or otherwise set forth on Schedule 1.1 or delivered by Seller
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pursuant to Section 11.3(j), contains a true and complete list of all equipment,
fixtures, furniture, supplies and other personal property owned, utilized or
held for use by Seller in the Business.
8.10. Contracts and Leases. To the best knowledge of Seller, except as set
--------------------
forth on Schedule 8.10, and subject to the provisions of Section 8.30: (i)
-------------
Seller does not have any oral or written rights, obligations, powers of
attorney, contracts, agreements, instruments, or leases with respect to the
Business or the Purchased Assets other than the Assumed Leases and Assumed
Contracts and the Excluded Leases and Excluded Contracts listed on Schedule 1.2
------------
and Schedule 1.3, respectively; (ii) all Assumed Leases and Assumed Contracts
------------
are legally valid and binding and in full force and effect with respect to the
parties thereto; and (iii) neither Seller nor any of the other parties to any of
the Assumed Leases and Assumed Contracts are in default or breach thereof, and
Seller has no notice or knowledge of any claimed breach, or of the occurrence of
any event which after the passage of time or the giving of notice or both would
constitute a breach by any party to any Assumed Lease and Assumed Contract.
Subject to the provisions of Section 8.30, (i) none of the rights of Seller
under the Assumed Leases and the Assumed Contracts will be impaired in any
respect by the consummation of the transactions contemplated by this Agreement,
and (ii) the Assumed Leases and Assumed Contracts are validly assignable and all
of the rights of Seller thereunder will be enforceable by Purchaser after the
Closing Date without the consent or agreement of any other party.
13
8.11. Litigation and Proceedings; Product Liability; Liquidation.
----------------------------------------------------------
(a) Except as set forth on Schedule 8.11, there is no suit,
-------------
action or legal, administrative, arbitrative or other proceeding pending or
threatened against Seller affecting the Purchased Assets, and, to the best
knowledge of Seller, Seller is not under investigation, nor has Seller received
any written notice of any proceeding which is with respect to any charge
concerning violation of any law or administrative regulation, federal, local or
state, in respect to the operation of the Purchased Assets.
(b) There have been no product liability claims and similar
claims, actions, litigation or other proceedings relating to products, or
services rendered by Seller which are presently pending or, to the best
knowledge of Seller, which are threatened, or which have been asserted or
commenced against Seller within the past two (2) years, in which a party thereto
either requested injunctive relief (whether temporary or permanent) or alleged
damages in excess of $5,000 (whether or not covered by insurance), in respect to
the operation of the Purchased Assets.
(c) Seller has not adopted any plan of liquidation or
dissolution affecting the Purchased Assets.
8.12. Government Licenses and Permits. To the best knowledge of Seller: (i)
-------------------------------
Seller has all state, county and city governmental licenses and permits
necessary to operate the Business and own and use the Purchased Assets as
conducted, owned and used prior to the Closing Date and such licenses and
permits are in full force and effect; (ii) Seller is not aware of any rights of
Seller under such licenses and permits which are not transferable to Purchaser
under applicable law solely upon the assignment of such licenses and permits by
Seller to Purchaser hereunder or which will not be exercisable by Purchaser
after the consummation of the transactions contemplated by this Agreement; and
(iii) Seller is not aware of and has not received any written notice of any
proceeding which is pending or threatened regarding the revocation or limitation
of any such governmental license or permit and, to the best knowledge of Seller,
there is no such basis or grounds for any revocation or limitation of any such
governmental license or permit.
14
8.13. Taxes. Except as set forth on Schedule 8.13, all federal, state, county
----- -------------
and local property, income, excise, sales, transfer, use, gross receipts, ad
valorem, payroll and other taxes, fees and assessments imposed on the Business
of Seller as of the Closing Balance Sheet Date and payable by Seller and all
federal and state payroll taxes required to be withheld by Seller as of the
Closing Balance Sheet Date have been or will be on the Closing Date duly, timely
and fully reported, paid and discharged except where extensions have been
applied for and granted and where such extensions have not expired. Except as
set forth on Schedule 8.13, all federal, state, county, local and other tax
-------------
returns required to be filed by or on behalf of Seller have been timely filed
and, when filed, were true and correct in all respects. From the Seller's
Balance Sheet Date until the Closing Balance Sheet Date, Seller shall pay all
taxes as and when the same become due and payable.
8.14. Intangible Assets. Schedule 1.4 contains a true and complete list of
----------------- ------------
all trademarks, trade names, trade dress, service marks, copyrights and licenses
thereof relating to the Business and all pending applications and applications
to be filed therefor used or to be used in the operation of the Business, all of
which are fully assignable and are being transferred hereunder to Purchaser free
and clear of any adverse interests. Except as set forth on Schedule 1.4, all
------------
other trade secrets, confidential information, and know-how used in the
operation of the Business are fully assignable and are being transferred
hereunder free and clear of any adverse claims or interests, and no licenses,
sublicenses, covenants or agreements have been granted or entered into by Seller
relating to any such trademarks, trade names, service marks, licenses,
applications trade secrets, know-how, and other confidential information and
intangible assets. To the best knowledge of Seller, the Business and the use of
its products by customers have not involved any infringement, and there exists
no basis for any claim of infringement, of any trademarks, trade names, service
marks, copyrights, licenses, or intangible assets of others. Seller does not
require any of such rights or intangible assets that it does not already have
(and which are being transferred to Purchaser) in order to conduct its business
as currently being conducted or proposed to be conducted. There are no
inquiries, investigations or claims or litigation challenging or threatening to
challenge Seller's right, title and interest with respect to its continued use
and right to preclude others from using any such trade rights or intangible
assets. To the best knowledge of Seller, all such trade rights or intangible
assets of Seller are valid and enforceable and there are no equitable defenses
to enforcement based on any act or omission of Seller, and no other person is
infringing on the trade rights and intangible assets of Seller.
15
8.15. Compliance with Law. To the best knowledge of Seller, Seller and the
-------------------
operations of the Business and the use of the Purchased Assets are in compliance
with all applicable federal, state, local and international laws or ordinances
and any other rule or regulation of any international, federal, state or local
agency or body, including, without limitation, all energy, safety,
environmental, zoning, health, trade practice, anti-discrimination, antitrust,
wage, hour and price control laws, orders, rules or regulations. Schedule 8.15
-------------
lists all citations issued to Seller in the past two (2) years from any city,
state or federal agency, and except as set forth on Schedule 8.15, all citations
-------------
that have been issued have been properly remedied. Seller has not received any
written notice of any proceeding which is from any governmental body claiming
any violation or alleged violation of any law, ordinance, code, rule or
regulation or requiring, or calling attention to the need for, any work,
repairs, construction, alterations or installation on or in connection with the
Purchased Assets or the Business with which Seller has not complied. To the
best knowledge of Seller, Seller has no liability (whether accrued, absolute,
contingent, direct or indirect) for past or continuing violations of any law,
ordinance, code, rule or regulation. Except as set forth on Schedule 8.13, all
-------------
reports and returns required to be filed by Seller with any governmental
authority have been filed and were accurate and complete when filed.
To the best of Seller's knowledge, no payments of cash or other
consideration have been made to any person, entity or government by Seller or by
any agent, employee, officer, director, Shareholder or other person or entity on
behalf of Seller which were unlawful under the laws of the United States or any
state or other governmental authority.
8.16. Accounts Receivable. Set forth on Schedule 1.10 is a complete and
------------------- -------------
accurate list of all Accounts Receivable of Seller as of the Seller's Balance
Sheet Date. All of the Accounts Receivable reflected on the Seller's Balance
Sheet arose in the ordinary course of business and represent amounts payable by
a buyer for goods actually sold or services actually performed and are currently
collectible at the aggregate recorded amounts thereof, less the reserve for bad
debts reflected on the Seller's Balance Sheet, and are not subject to any
counterclaims or setoffs (other than Purchaser's right to setoff under the terms
of this Agreement). Accounts Receivable arising after the Seller's Balance
Sheet Date through the Closing Date, have arisen in the ordinary course of
business and represent amounts payable by a buyer for goods actually sold or
services actually performed and are current and collectible at the aggregate
recorded amounts thereof, less a reserve for bad debts consistent with the
reserve stated on the Seller's Balance Sheet.
16
8.17. Environmental Matters. To the best knowledge of Seller: (i) Seller
---------------------
has duly complied with, and the operation of the Business, equipment and other
assets in the facilities owned or leased by Seller are in compliance with the
provisions of all applicable federal, state and local environmental, health and
safety laws, statutes, ordinances, rules and regulations of any governmental or
quasi governmental authority relating to (a) error omissions, (b) discharges to
surface water or ground water, (c) solid or liquid waste disposal, (d) the use,
storage, generation, handling, transport, discharge, release or disposals of
toxic or hazardous substances or waste, (e) the emission of non-ionizing
electromagnetic radiation, or (f) other environmental, health or safety matters,
including, without limitation, the Comprehensive Environmental Response
Compensation Liability Act of 1980, as amended by the Superfund Amendments and
Authorization Act of 1986, the Occupational Safety and Health Act, the Resource
Conservation and Recovery Act of 1976, as amended, the Federal Water Pollution
Control Act of 1970, the Safe Drinking Water Act of 1974, the Toxic Substances
Control Act of 1976, the Emergency Planning and Community Right to Know Act of
1986, as amended, and the Clean Air Act, as amended (collectively "Environmental
and Health Laws") or the Federal Communications Act, as amended ("FCC Laws");
(ii) there are no investigations, administrative proceedings, judicial actions,
orders, claims or notices which are pending, anticipated or threatened against
Seller relating to violations of the Environmental and Health Laws or FCC Laws,
and (iii) Seller has not received notice of, and does not know or have any
reason to suspect, any facts which might constitute a violation of any
Environmental and Health Laws or FCC Laws which relate to the use, ownership or
occupancy of any property or facilities used by Seller in connection with the
operation of Seller's Business or any activity of Seller's Business which would
result in a violation or threatened violation of any Environmental and Health
Laws or FCC Laws.
8.18. Labor Matters.
-------------
(a) Seller is not a party to or bound by any union
collective bargaining agreements or other labor contracts. Seller is not, with
respect to the operation of the Business, a party to any pending arbitration or
grievance proceeding or other claim relating to any labor contract. Seller has
no knowledge of any such action in respect to the operation of the Purchased
Assets.
(b) Seller is not bound by any court, administrative agency,
tribunal, commission or board decree, judgment, decision, arbitration agreement
or settlement relating to collective bargaining agreements, conditions of
employment, employment discrimination or attempts to organize a collective
bargaining unit which in any case may materially and adversely affect Seller,
the Business or the Purchased Assets, and Seller has no notice or knowledge of
any employment discrimination, safety or unfair labor practice or other
employment-related investigation, claim or allegation against or in respect of
the operation of the Purchased Assets.
17
(c) Seller has made all required payments to the appropriate
governmental authorities with respect to applicable unemployment compensation
reserve accounts for Seller's employees. Seller has no regular full-time
employees except in Kansas, Missouri and Wisconsin.
8.19. Employment Contracts. Except as set forth on Schedule 8.19,
-------------------- -------------
Seller has no employment contract with any person, nor any contract with any
employee, involving termination, retirement or severance pay, deferred
compensation, profit sharing or pension plans, employee benefit plans or other
employee benefits or post-employment benefits of any kind. Except as
specifically set forth on Schedule 3.2 and identified as account numbers 2301,
------------
2302 and 2303, Purchaser shall not assume any liabilities of Seller to any
former or current employee of Seller for compensation, bonus, severance,
vacation, employee benefits or any other fee or wage payment of any kind or
nature, including, but not limited to, any payments under COBRA or any
disability or unemployment insurance policies (collectively, "Employee
Payments").
8.20. Insurance. Seller is insured by reputable
---------
insurers and through the Closing Date will be adequately insured against all
liabilities and risks and in at least such amounts as are usually carried by
prudent business persons engaged in the same or similar lines of business (and
in the case of property casualty insurance, at least at replacement cost). All
premiums on policies due to the Closing Date have been paid, and no notice has
been received nor does Seller have any reason to believe, that any such
insurance is in default, will be canceled or not renewed, or will be renewed at
premium rates materially in excess of the premiums used in preparing the
financial statements of the Business.
8.21. Disabled Employees. No employee of Seller is eligible for long-term
------------------
disability but has not yet been certified as such, and (ii) no employee of
Seller is on medical leave. Seller shall remain solely liable and responsible
for, and Purchaser shall have no liability or responsibility whatsoever for, any
Employee Payments.
8.22. Subsidiaries. Seller has no subsidiaries. The Business has not been
------------
operated through any other direct or indirect subsidiary or affiliate of
Seller's Shareholder.
18
8.23. Year 2000 Compliance.
--------------------
(a) Except as set forth on Schedule 8.23, (i) the Purchased
-------------
Assets, including, but not limited to, all of the computer hardware, software,
and embedded microcontrollers in noncomputer equipment ("the Computer Systems"),
which are used by Seller in the Business, are or can be made Year 2000 Compliant
(as defined below) and (ii) Seller has received certifications from the critical
service providers it relies upon that all such providers, including, but not
limited to, Fujitsu Business Communication Systems, Inc. and Executone
Information Systems, Inc., concerning their stated compliance with Year 2000
issues.
(b) For purposes of this Section 8.23, "Year 2000 Compliant"
shall mean that the Computer Systems meet each of the following criteria
(1) the functions, calculations, and other computing processes of
the Computer Systems (collectively, "Processes") perform in a consistent manner
regardless of the date in time on which the Processes are actually performed and
regardless of the date data input into the Computer Systems, whether before, on
or after January 1, 2000 and whether or not the data is affected by leap years;
(2) the Computer Systems accept, calculate, compare, sort, extract,
sequence, return and display and otherwise process date data in a consistent
manner regardless of the dates used in such date data, whether before, on or
after January 1, 2000;
(3) the Computer Systems will function without interruptions caused
by the date in time on which the Processes are actually performed or by the date
data input to the Computer Systems, whether before, on, or after January 1,
2000;
(4) the Computer Systems accept and respond to two-digit year-date
input in a manner that resolves any ambiguities as to the century in a defined,
predetermined, and appropriate manner;
(5) the Computer Systems store and display date data in ways that
are unambiguous as to the determination of the century; and
(6) no date data will cause the Computer Systems to perform an
abnormally ending routine or function within the Processes or generate incorrect
values or invalid results.
19
8.24. Disclosure. To the best of Seller's knowledge, there exists no fact,
----------
condition or threatened development of any nature not otherwise disclosed in
this Agreement, or the Exhibits, Schedules and attachments hereto, that would be
materially adverse to the Purchased Assets or the operation of the Business. No
warranty or representation by Seller contained in this Agreement, including any
exhibit, schedule (including any attachment to any schedule), financial
statement or certificate prepared or furnished in connection hereto, or in any
writing to be furnished pursuant hereto or previously furnished to Purchaser,
contains or will contain any untrue statement of fact or omits or will omit to
state any fact required to make the statements therein contained not misleading.
All statements and information contained in any certificate, instrument,
disclosure schedule or documents delivered by or on behalf of Seller shall be
deemed representations and warranties by Seller.
8.25. Accuracy of Documents and Information. The copies of all instruments,
-------------------------------------
agreements, other documents and written information set forth as, or referenced
in, Exhibits, Schedules and attachments to this Agreement or specifically
required to be furnished pursuant to this Agreement to Purchaser by Seller are
complete and correct in all material respects.
8.26. Purchase Price Allocation. Seller represents, warrants and covenants
-------------------------
to Purchaser to report the transaction contemplated by this Agreement as a sale
and purchase of the Purchased Assets in the specific amounts to be described on
Schedule 4.4 for purposes of federal, state and local taxes or filings required
------------
to be made under the Securities Exchange Act of 1934, as amended, after the
Closing Date, and shall not take any position to the contrary in any tax return
or proceeding before any taxing authority. Seller shall cooperate fully with
Purchaser, shall execute any documents reasonably requested by Purchaser and
shall furnish appropriate information and testimony, upon request, with respect
to any liability asserted by taxing authorities, all without payment of further
consideration; provided such tax liability relates to the Purchased Assets or
Assumed Liabilities as conducted by Seller prior to the Closing Date.
8.27. Brokers and Finders. Except for Shoreline Pacific Institutional
----------- -------
Finance, which has been engaged solely by Seller, neither Seller nor any
affiliate nor any officer or director thereof has engaged any finder or broker
in connection with the transactions contemplated hereunder.
20
8.28. Records and Documents. To Seller's knowledge, the records and
--------------------
documents required to be provided pursuant to Section 1.6 constitute all of the
records and documents used in connection with, or which are necessary or
desirable to operate, the Purchased Assets.
8.29. Stock Representations. Seller: (i) intends to acquire the shares of
---------------------
the Convergent Stock solely for the purpose of investment and not for the resale
and distribution thereof, and has no present intention to offer, sell, pledge,
hypothecate, assign or otherwise dispose of the same except in accordance with
this Section 8.29; (ii) understands and acknowledges that the sale of such
shares of Convergent Stock will not be registered under the Securities Act of
1933, as amended (the "Securities Act"), and that the Convergent Stock and the
Additional Shares being acquired pursuant to this Agreement constitute
"restricted securities" as that term is defined under Rule 144 promulgated under
the Securities Act and may not be sold except pursuant to a registration
statement under the Securities Act or pursuant to an exemption available under
federal and applicable state Securities laws, and such shares of Convergent
Stock may be required to be held indefinitely unless the shares of Convergent
Stock are subsequently registered under the Securities Act or an exemption from
such registration is available, (iii) agrees that it will not offer, sell,
pledge, hypothecate, transfer, assign or otherwise dispose of any such shares of
Convergent Stock unless such shares of Convergent Stock and such offer, pledge,
hypothecation, transfer, assignment or other disposition shall be registered or
exempt from registration under the Securities Act and shall comply with all
applicable federal and state securities laws, and (iv) agrees and acknowledges
that the stock certificates representing the shares of Convergent Stock will
contain a legend restricting the transferability of the shares as provided
herein and that stop order instructions may be imposed by Convergent's transfer
agent restricting the transferability of the Convergent Stock.
8.30. Accuracy of Representations. In the event that any of the foregoing
---------------------------
representations or warranties should be inaccurate as of the Closing Date,
Seller shall have forty-five (45) days from the Closing Date by which to cure
such inaccuracy (the "Cure Period"). Seller shall have delivered to Purchaser
all consents to the transfer or assignment of the Assumed Contracts and the
Assumed Leases on or prior to the expiration of the Cure Period. In the event
that Seller fails to deliver the consents to the transfer or assignment of the
Assumed Contracts identified as Items 1 through 10 on Schedule 1.3.A on or prior
--------------
to the expiration of the Cure Period, the Purchase Price, and thereby the
Secured Contingent Note, shall automatically be adjusted in accordance with
Section 4.3(c).
21
9. SELLER'S EMPLOYEES AND CUSTOMERS. PURCHASER IS NOT A SUCCESSOR
--------------------------------
BUSINESS TO SELLER NOR ANY OPERATION OF SELLER. PURCHASER SHALL NOT BE LIABLE
FOR ANY OBLIGATIONS WHICH SELLER HAS ON ANY CONTRACTS, INCLUDING EMPLOYMENT
CONTRACTS, EXISTING OR FUTURE WORKERS COMPENSATION CLAIMS, EMPLOYMENT
DISCRIMINATION CLAIMS, UNFAIR LABOR PRACTICE CLAIMS, COMPENSATION OR EMPLOYEE
PAYMENTS, EXCEPT THOSE OBLIGATIONS, IF ANY, SPECIFICALLY IDENTIFIED IN SECTION 1
---------
AND ON SCHEDULE 3.2, AND ANY OTHER OBLIGATIONS WHICH pURCHASER SPECIFICALLY
------------
ASSUMES IN WRITING. PURCHASER IS PURCHASING THE PURCHASED ASSETS ONLY, AND IS
NOT ASSUMING ANY EMPLOYMENT CONTRACTS FOR ANY EMPLOYEES OR ANY OBLIGATIONS UNDER
AGREEMENTS ENTERED INTO BY SELLER IN ITS OWN RIGHT AND PURCHASER SHALL NOT BE
LIABLE FOR ANY SUMS OWED TO CUSTOMERS BY SELLER, EXCEPT THOSE OBLIGATIONS, IF
ANY, SPECIFICALLY IDENTIFIED IN SECTION 1 AND ON SCHEDULE 3.2, AND ANY OTHER
--------- ------------
OBLIGATIONS WHICH PURCHASER SPECIFICALLY ASSUMES IN WRITING.
10. REPRESENTATIONS, COVENANTS AND AGREEMENTS OF PURCHASER. PURCHASER HEREBY
------------------------------------------------------
REPRESENTS, COVENANTS AND AGREES THAT:
10.1. Accuracy of Representations and Warranties. Each of the representations
------------------------------------------
and warranties of Purchaser contained in this Agreement or in any schedule,
certificate or other document delivered by Purchaser is true and correct in all
respects, and Purchaser has performed and satisfied all of its covenants,
conditions and agreements and shall have delivered to Seller all documents and
agreements required by this Agreement to be performed, satisfied or delivered by
Purchaser on or prior to the Closing Date.
10.2. Deliveries on the Closing Date. Purchaser shall have delivered or cause
------------------------------
to be delivered to Seller the following documents on or prior to the
Closing Date:
(a) An executed original of this Agreement, the Secured July
Note, the Secured Purchaser's Note, the Security Agreement and UCC-1 financing
statements to be filed in the States of Colorado, Kansas, Wisconsin and Missouri
in connection with the Security Agreement, which have been executed by
Purchaser; provided, however, that Seller shall be
-------- -------
22
responsible for preparing and delivering the UCC-1 financing statements to
Purchaser on or prior to the Closing Date.
(b) A copy of the treasury request issued to Convergent's
transfer agent pursuant to Section 4.2(d).
(c) Certified copies of resolutions adopted by the Board of
Directors of Purchaser authorizing the execution of this Agreement and the
purchase of the Purchased Assets and the assumption of the Assumed Liabilities
in accordance with the terms hereof.
(d) Certified copies of resolutions adopted by the Board of
Directors of Convergent authorizing the issuance of the Convergent Stock.
(e) An opinion of Purchaser's counsel substantially in the
form of Exhibit F.
---------
(f) An Officer's Certificate executed by an authorized
officer of Purchaser certifying that all of Purchaser's representations and
warranties contained in Section 7 are true and correct on the Closing Date.
(g) A copy of Convergent's Form 10-Q for the quarterly
period ended September 30, 1998, previously provided to the holders of the
senior notes of Convergent.
10.3. Deliveries During the Cure Period. Purchaser shall have delivered, or
---------------------------------
caused to be delivered, to Seller the following documents on or prior to the
expiration of the Cure Period:
(a) A stock certificate representing 30,000 shares of
Convergent Stock.
(b) A stock certificate representing the Additional Shares,
if any.
(c) An executed original of the Secured Contingent Note.
10.4. Cooperation in Obtaining Consents. Purchaser shall use commercially
---------------------------------
reasonable efforts in response to any reasonable request of Seller to assist
Seller in obtaining any consent of third parties necessary for the consummation
of the transactions contemplated by this Agreement during the Cure Period.
23
10.5. Waiver of Compliance with Bulk Sales Laws. Purchaser hereby waives
-----------------------------------------
compliance by Seller with the requirements of any so called bulk sales or
transfers laws of any jurisdiction in connection with the sale of the Purchased
Assets to Purchaser; but such waiver shall not affect the obligation of Seller
under Section 15 to indemnify Purchaser and hold Purchaser harmless from and
against any loss, liability, damage or expense which Purchaser may suffer or
sustain or to which Purchaser may become subject as a result of or in connection
with the failure by Seller to so comply.
10.6. Access to Books and Records After the Closing Date. For a period of
--------------------------------------------------
three (3) years following the Closing Date, Purchaser agrees to maintain in a
reasonably accessible place any books and records delivered to Purchaser
pursuant to Section 1.6, to provide Seller and its representatives reasonable
access to such books and records during normal business hours and to provide
copies of such books and records to Seller or its representatives, at Seller's
expense. Purchaser agrees to notify Seller prior to disposing of any such books
and records and, upon request made within sixty (60) days after receipt of such
notice, to deliver such books and records to Seller at Seller's expense.
10.7. Change of Name. As of the Closing Date, Purchaser shall refrain from
--------- ----
using the name "SoftNet Business Solutions."
11. REPRESENTATIONS, COVENANTS AND AGREEMENTS OF SELLER. SELLER HEREBY
---------------------------------------------------
REPRESENTS, COVENANTS AND AGREES THAT:
11.1. Accuracy of Representations and Warranties. Each of the representations
------------------------------------------
and warranties of Seller contained in this Agreement or in any schedule,
certificate or other document delivered by Seller is true and correct in all
respects, and Seller has performed and satisfied all of its covenants,
conditions and agreements and shall have delivered to Purchaser all documents
and agreements required by this Agreement to be performed, satisfied or
delivered by Seller on or prior to the Closing Date.
11.2. Deliveries on the Closing Date. Seller shall have delivered or
------------------------------
caused to be delivered to Purchaser the following documents at or prior to the
Closing Date, unless otherwise specified herein:
(a) An executed original of this Agreement and the Xxxx of
Sale, Assumption of Liabilities and Assignment of Contracts in the form attached
hereto as Exhibit D.
----------
24
(b) Certified copies of resolutions adopted by the Board of
Directors and Shareholder of Seller authorizing the execution of this Agreement
and the sale of the Purchased Assets to Purchaser in accordance with the terms
hereof.
(c) Certificate of status or good standing of Seller issued
by the Secretaries of States of the States of Kansas, Missouri and Wisconsin,
dated within two weeks of the Closing Date.
(d) An opinion of Seller's Counsel substantially in the form
of Exhibit G.
(e) Executed UCC-2 Termination Statements for each of the
Liens identified as UCC-1 file numbers 2177983, 2177984, 2177985, 2587559.
(f) Written payment instructions with respect to the payment
of the cash portion of the Purchase Price to be paid on the Closing Date.
(g) An Officer's Certificate executed by an authorized
officer of Seller certifying that all of Seller's representations and warranties
contained in Section 8 are true and correct on the Closing Date.
(h) All necessary governmental approvals, permits and
licenses required for the performance by Seller for the closing of the
transactions contemplated by this Agreement.
(i) Copies of the balance sheets of Shareholder as of
September 30, 1997 and September 30, 1998 and statements of income and cash
flows of Shareholder for the 12-month period then ended, all of which have been
reviewed by Shareholder's independent certified public accountants.
(j) Copies of all invoices not otherwise attached to
Schedule 1.1 reflecting personal property that Purchaser has acquired hereunder.
(k) Such other documents as Purchaser reasonably deems
necessary or appropriate to vest in it good and marketable title to all or any
part of the Purchased Assets, free and clear of all liens, encumbrances and
other rights as provided in this Agreement
11.3. Deliveries During the Cure Period. Seller shall have delivered,
---------------------------------
or caused to be delivered, to Purchaser the following documents on or prior to
the expiration of the Cure Period:
(a) Written consents to the transfer or assignment to
Purchaser of the Purchased Assets, including the Assumed Contracts and Assumed
Leases, in a form and substance reasonably satisfactory to Purchaser; including
but not limited to, consent to the
25
transfer or assignment of the contract between Seller and Fujitsu Business
Communication Systems, Inc., dated March 4, 1994 (the "Fujitsu Consent").
(b) Evidence satisfactory to Purchaser that the three (3)
contracts between Seller and Executone Information Systems, Inc., each dated
October 1, 1996 (collectively, the "Executone Contracts") have been assigned to
Purchaser and amended (the "Executone Assignments and Amendments"), which
Assignment and Amendment shall delete Section 1 regarding "Competing Products"
(as such term is defined therein), or, in the alternative, Seller shall deliver
to Purchaser a written waiver of Section 1 of the Executone Contracts executed
by Executone or a written consent executed by Executone providing for the
ability of Purchaser to sell such "Competing Products."
(c) Executed UCC-2 Amendments for each of the Liens
identified on Schedule 8.6, naming Purchaser as the debtor.
(d) A general ledger account reconciliation of Seller as of
January 31, 1999.
(e) Evidence satisfactory to Purchaser that Nations Bank is
the successor-in-interest to the Bank IV, N.A. Equipment Lease Agreement No. 01-
1130-001, dated July 22, 1996 and the Boatmen's National Bank Equipment Lease
Agreement No. 00-0000-00, dated January 17, 1997.
11.4. Access to Books and Records After the Closing Date. For a period of
--------------------------------------------------
three (3) years following the Closing Date, Seller agrees to maintain in a
reasonably accessible place any books and records not delivered to Purchaser
hereunder relating to the Business, to provide Purchaser and its representatives
reasonable access to such books and records during normal business hours and to
provide copies of such books and records to Purchaser or its representatives, at
their expense. Seller agrees to notify Purchaser prior to disposing of any such
books and records and, upon request made within sixty (60) days after receipt of
such notice, to deliver such books and records to Purchaser at Purchaser's
expense.
26
11.5. Continued Assistance. Seller shall refer to Purchaser in writing, as
--------------------
promptly as practicable, any letters, orders, notices, requests, inquiries and
other communications relating to the Business, together with notice of any
telephone calls received with respect to the Business. Seller shall use its
reasonable efforts to refer any such contacts or inquiries to Purchaser by
instructing the inquiring party to contact Purchaser at the address and phone
number listed in Section 17.5. Seller shall use its reasonable best efforts to
cooperate in an orderly transfer of the Business and to assist Purchaser in the
successful continuation of the operation of the Business. After the Closing
Date, Seller shall promptly transfer and deliver to Purchaser upon Seller's
receipt any cash or other property that Seller may receive in respect of any
Assumed Contract or Assumed Lease. From time to time, Seller shall execute,
acknowledge and deliver such documents, instruments or assurances and take such
other actions as Purchaser may reasonably request to more effectively assign,
convey and transfer the Purchased Assets.
11.6. Change of Name. As of the Closing Date, Seller shall immediately
--------- ----
cease to use, and thereafter refrain from using, the trade names "BT Services"
and "Kansas Communications," and shall file any and all documents required to
allow Purchaser to use such name or any variation thereof, if any.
11.7. Limitations on Certain Corporate Actions. Seller agrees that from and
----------------------------------------
after the Closing Date and for a period of two (2) years, Seller will not (a)
dissolve or otherwise terminate its legal existence, or (b) merge or consolidate
with any other corporation in a merger consolidation in which it is not the
surviving or resulting corporation.
12. INTENTIONALLY OMITTED.
---------------------
13. INTENTIONALLY OMITTED.
---------------------
27
14. INDEMNIFICATION BY PURCHASER.
----------------------------
14.1. Indemnification. Purchaser and its successors shall indemnify, defend and
---------------
hold Seller, each of Seller's subsidiaries, Shareholder, affiliates, officers,
directors, employees, agents, successors and assigns (Seller and such persons,
collectively, "Seller's Indemnified Persons") harmless from and against any
demand, claim, damage, liability, loss (which shall include any diminution in
value), cost, deficiency or expense (including, but not limited to, interest,
penalties, costs of preparation and investigation, and the reasonable fees,
disbursements and expenses of attorneys, accountants and other professional
advisors (collectively, the "Seller's Losses") imposed or incurred by Seller's
Indemnified Persons, directly or indirectly, arising out of, resulting from or
relating to:
(a) any inaccuracy in or breach of any representation or
warranty of Purchaser pursuant to this Agreement in any respect, whether or not
Seller's Indemnified Persons relied thereon or had knowledge thereof, including
schedules and documents delivered pursuant hereto;
(b) any failure of Purchaser to duly perform or observe any
term, provision, expectation, covenant or agreement to be performed or observed
by Purchaser pursuant to this Agreement or any of the documents contemplated by
this Agreement;
(c) the operation of the Purchased Assets after the Closing
Date;
(d) any action, suit, investigation, proceeding, demand,
assessment, audit, judgment and claim resulting from the operation of the
Purchased Assets and discharge of the Assumed Liabilities by Purchaser after the
Closing Date; or
(e) acts or omissions in connection with business activities
conducted or to be conducted by Purchaser, including, without limitation, the
sale of goods or provision of services after the Closing Date.
14.2. Procedures. The procedural rules set forth in Section 15.2
----------
shall apply with respect to indemnification by Purchaser except that the
parties' respective obligations under Section 15.2 shall be reversed as
appropriate.
14.3. Survival of Indemnification. The obligations of Purchaser to
----------- ---------------
indemnify and hold Seller's Indemnified Persons harmless shall survive for the
applicable statute of limitations.
28
14.4. Remedies Cumulative. The remedies provided by this Section 14 shall
-------------------
be cumulative and shall not preclude the assertion by Seller's Indemnified
Persons of any other rights or the seeking of any other remedies against
Purchaser.
15. INDEMNIFICATION BY SELLER.
-------------------------
15.1. Indemnification. Seller and its successors shall indemnify, defend and
---------------
hold Purchaser, each of Purchaser's subsidiaries, shareholders, affiliates,
officers, directors, employees, agents, successors and assigns (Purchaser and
such persons, collectively, "Purchaser's Indemnified Persons") harmless from and
against any demand, claim, damage, liability, loss (which shall include any
diminution in value), cost, deficiency or expense (including, but not limited
to, interest, penalties, costs of preparation and investigation, and the
reasonable fees, disbursements and expenses of attorneys, accountants and other
professional advisors) (collectively, the "Purchaser's Losses") imposed or
incurred by Purchaser's Indemnified Persons, directly or indirectly, arising out
of, resulting from or relating to:
(a) any inaccuracy in or breach of any representation or
warranty of Seller pursuant to this Agreement in any respect, whether or not
Purchaser's Indemnified Persons relied thereon or had knowledge thereof,
including schedules and documents delivered pursuant hereto;
(b) any failure of Seller to duly perform or observe any
term, provision, expectation, covenant or agreement to be performed or observed
by Seller pursuant to this Agreement or any of the documents contemplated by
this Agreement;
(c) any and all liabilities or obligations of Seller other
than the Assumed Liabilities, including, but not limited to, any fines,
penalties, interest or other changes that may be imposed as a result of any tax
returns of Seller that have been or were required to be, filed on or prior to
the Closing Date, including, without limitation, tax returns for which
extensions have been granted and tax returns for liabilities accruing prior to
the Closing Balance Sheet Date;
(d) any material misrepresentations in or omissions from any
Exhibit, Schedule or other attachment to this Agreement;
(e) any action, suit, investigation, proceeding, demand,
assessment, audit judgment, claim, including any employment-related claim
relating to the time period on or prior to the Closing Date (collectively
"Claims"), even though such claims may not be filed or come to light until after
the Closing Date;
29
(f) acts or omissions in connection with business activities
conducted or to be conducted by Seller, including, without limitation, the sale
of goods or provision of services prior to the Closing Date;
(g) any fees or expenses owed or owing to Shoreline Pacific
Institutional Finance;
(h) any failure to comply with the laws of any jurisdiction
relating to bulk transfers which may be applicable in connection with the
transfer of the Purchased Assets to Purchaser other than nonpayment of the
Assumed Liabilities; or
(i) Schedules 8.4, 8.9, 8.11, 8.13, 8.15,8.16 and 8.19.
The obligations of Seller to indemnify and hold Purchaser's Indemnified
Persons harmless as described herein shall survive after the Closing Date and
the consummation of the transactions contemplated by this Agreement.
15.2. Procedures. Purchaser's Indemnified Persons shall give Seller prompt
----------
written notice of any written claim, demand, assessment, action, suit or
proceeding to which the indemnity set forth in this Section 15 applies (the
"Indemnification Notice"). If the document evidencing such claim or demand is a
court pleading, Purchaser shall give such notice within ten (10) days of receipt
of such pleading, otherwise, Purchaser shall give such notice within thirty (30)
days of the date it receives written notice of such claim. Failure to give
timely notice, including the Indemnification Notice, of a matter which may give
rise to an indemnification claim shall not affect the rights of Purchaser's
Indemnified Persons to collect such Loss from Seller so long as such failure to
so notify does not materially adversely affect Seller's ability to defend such
Loss against a third party.
If Purchaser's Indemnified Persons' request for indemnification arises
from the claim of a third party, the written notice, including the
Indemnification Notice, shall permit Seller to assume control of the defense of
any such claim, or any litigation resulting from such claim. Failure by Seller
to notify Purchaser's Indemnified Persons of its election to defend a complaint
by a third party within ten (10) days shall be a waiver by Seller of its right
to respond to such complaint and within thirty (30) days after notice thereof
shall be a waiver by Seller of its right to assume control of the defense of
such claim or action. If Seller assumes control of the defense of such claim or
litigation resulting therefrom, Seller shall take all reasonable steps necessary
in the defense or settlement of such claim or litigation resulting therefrom and
Seller hold Purchaser's Indemnified Persons, to the extent provided in this
Section 14, harmless from and against all Seller's Losses arising out of or
resulting from any settlement approved by Seller or any judgment in connection
with such claim or litigation. Notwithstanding Seller's assumption of the
defense of such third-party claim or demand, Purchaser's Indemnified Persons
shall have the right to participate in the defense of such third-party claim or
demand at its own expense. Seller shall not, in the defense of such claim or
litigation, consent to entry of any judgment or enter into
30
any settlement, except in either case with written consent of Purchaser's
Indemnified Persons, which consent shall not be unreasonably withheld.
Purchaser's Indemnified Persons shall furnish Seller in reasonable detail all
information Purchaser's Indemnified Persons may have with respect to any such
third-party claim and shall make available to Seller and its representatives all
records and other similar materials which are reasonably required in the defense
of such third-party claim and shall otherwise cooperate with and assist Seller
in the defense of such third-party claim.
If Seller does not assume control of the defense of any such third-party
claim or litigation resulting therefrom, Purchaser's Indemnified Persons may
defend against such claim or litigation in such manner as it may reasonably deem
appropriate, and Seller shall indemnify Purchaser's Indemnified Persons from any
Purchaser's Loss indemnifiable under Section 14.1 incurred in connection
therewith.
All statements of fact contained in any written statement, certificate,
schedule, exhibit, or other document delivered to Purchaser by or on behalf of
Seller pursuant to Section 7 of this Agreement shall be deemed representations
and warranties of Seller hereunder.
15.3. Survival of Indemnification. The obligations of Seller to indemnify
---------------------------
and hold Purchaser's Indemnified Persons harmless shall survive for three years
from the Closing Date.
15.4. Remedies Cumulative. The remedies provided by this Section 15
-------------------
shall be cumulative and shall not preclude the assertion by Purchaser's
Indemnified Persons of any other rights or the seeking of any other remedies
against Seller.
15.5. Right to Set-Off. Purchaser shall have the right to set off
----------------
any amounts, including amounts owed under the Secured Contingent Note and the
Secured Purchaser's Note, in that order, owed by Purchaser to Seller for any of
Purchaser's Losses that may arise hereunder. In the event that the outstanding
principal amount of the Secured Contingent Note or the Secured Purchaser's Note
is required to be adjusted in accordance with this Section 15.5, Purchaser shall
execute and deliver to Seller an Allonge Endorsement in the form attached hereto
as Exhibit H-1 or Exhibit H-2, whichever the case may be (the "Allonge
----------- -----------
Endorsement"), and Seller shall attach such Allonge Endorsement to the Secured
Contingent Note or the Secured Purchaser's Note, as the case may be. Upon
execution and delivery of any Allonge Endorsement by Purchaser to Seller, the
respective Secured Contingent Note or Secured Purchaser's Note, as the case may
be, shall automatically be deemed to be amended to reflect any adjustment to the
outstanding principal amount of such Note in accordance with the terms of this
Agreement with no further action required by Xxxxxxxxx.
00
00. COVENANTS NOT TO COMPETE; NON-SOLICITATION.
------------------------------------------
16.1. Seller's Non-Compete. Seller agrees that for a period of one (1) year
--------------------
from the Closing Date (the "Non-Compete Period"), Seller and its affiliates
shall not, directly or indirectly, own, manage, operate, control or participate
in the ownership, management, operation or control of a business that provides
telephone service, equipment and installation and maintenance within any area or
at any location constituting a Relevant Area. For the purposes of this Section
16, the "Relevant Area" shall be defined for the purposes of this Agreement as
any area located within, or within fifty (50) miles of, the legal boundaries or
limits of, any city within which the Purchaser or any parent, subsidiary or
affiliate thereof is providing telephone service, equipment and installation and
maintenance, has commenced the acquisition of any authorizations, rights of way
or facilities or has commenced the construction of facilities for the purposes
of providing telephone service, equipment and installation or maintenance or has
announced the intention to provide telephone service, equipment and installation
and maintenance.
17. MISCELLANEOUS.
-------------
17.1. Amendment and Severability. This Agreement may be amended, modified or
--------------------------
altered only by the express written agreement executed by Purchaser and Seller.
If any provision of this Agreement or the application thereof to any party or
circumstances shall for any reason be held invalid, illegal, or unenforceable in
any respect, such invalidity, illegality, or unenforceability shall not affect
any other provisions of this Agreement and this Agreement shall be construed as
if such invalid, illegal, or unenforceable provision had never been part of this
Agreement. Furthermore, in lieu of each such illegal, invalid, or unenforceable
provision, there shall be added automatically as part of this Agreement a
provision as similar in terms to such illegal, invalid, or unenforceable
provision as may be possible and be legal, valid, and enforceable.
17.2. Definition of Knowledge. In this Agreement, any reference to the
-----------------------
knowledge or awareness of Seller shall mean the knowledge of Xxxxxxx Xxxxxx,
Xxxx Xxxxxxxx, Xxxxx Xxxxxx, Xxx Xxxxxxxx, Xxxx Xxxxxxx and Xxxx Xxxxxxxx after
each of them individually shall have made the inquiry that a reasonably prudent
business person would have made with respect to such matters.
32
17.3. Definition of Material Adverse Effect. In this Agreement, any
-------------------------------------
reference to a material adverse effect shall mean any event, change or effect
that is materially adverse to the condition (financial or otherwise),
properties, assets, liabilities, business, operations or results of operations,
taken as a whole, and is specific to the Seller and not an effect arising from
or in connection with changes in Seller's industry.
17.4. Waiver. The failure of Seller or Purchaser to insist, in any or more
------
instances, upon performance of any of the terms or conditions of this Agreement,
shall not be construed as a waiver or relinquishment of any rights granted
hereunder or the future performance of any such term, covenant or condition.
Moreover, Purchaser's or Seller's decision to close this transaction
notwithstanding its constructive or actual knowledge of the breach by Seller or
Purchaser of one or more of their representations, warranties or obligations
hereunder shall not relieve such parties of their indemnification obligations
hereunder with respect to such breach; in such case, Purchaser and Seller
specifically are relying upon each other's indemnification obligation, as well
as the underlying representation, warranty or contractual obligation. All
rights and remedies granted in this Agreement to Purchaser and Seller shall be
cumulative and nonexclusive of all other rights and remedies that Purchaser and
Seller may have.
17.5. Notices. Any notice to be given hereunder shall be given in writing
-------
and (a) personally delivered; (b) sent by telecopier, facsimile transmission or
other electronic means of transmitting written communications; or (c) sent to
the parties at their respective addresses indicated herein by registered or
certified U.S. mail, return receipt requested and postage prepaid; or (d) by
private overnight mail courier service. The respective addresses to be used for
all such notices, demands or requests are as follows:
in the case of Purchaser, to:
Convergent Communications Services, Inc.
000 Xxxxxxxxx Xxxxx Xxxxx
Xxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Attn: Legal Department
Telephone:(000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxxx & Xxxxxx
000 Xxxxxxxxxxx Xxxxxx
00
Xxxxx 0000
Xxxxxx, XX 00000
Attn: Xxxxx Xxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
and in the case of Seller, to
Kansas Communications, Inc.
000 Xxxxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, XX 00000-0000
Attn: Xxxxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Jeffer, Mangels, Xxxxxx & Xxxxxxx, LLP
Xxx Xxxxxxx Xxxxxx, Xxxxxxx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxx, III, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
or to such other address as Seller or Purchaser may designate by notice in
writing to the other. If personally delivered, such communication shall be
deemed delivered upon actual receipt; if electronically transmitted pursuant to
this Section 17.5, such communications shall be deemed delivered the next
business day after transmission (and the sender shall bear the burden of proof
of delivery); if sent by overnight courier pursuant to this Section 17.5, such
communication shall be deemed delivered upon receipt; and if sent by U.S. mail
pursuant to this Section 17.5, such communication shall be deemed delivered as
of the date of delivery indicated on the receipt issued by the relevant postal
service, or, if the addressee fails or refuses to accept delivery as of the date
of such failure or refusal.
17.6. Benefit. This Agreement shall be binding upon and inure to the benefit
-------
and burden of the parties hereto, their successors and assigns. This Agreement
may not be assigned by any party without the express written consent of the
other party, which consent may be withheld in the sole discretion of the party
requiring such consent.
34
17.7. No Third Party Beneficiaries. This Agreement shall be for and inure
----------------------------
to the benefit of Purchaser and Seller and there shall be no third party
beneficiaries thereto. Specially excluded from any beneficial status hereunder
are Seller's creditors, employees, customers and suppliers.
17.8. Expenses; Taxes. All expenses incurred by Seller or Purchaser in
---------------
connection with the transactions contemplated hereby, including, without
limitation, legal and accounting fees, shall be the responsibility of and for
the account of the party who ordered the particular service or incurred the
particular expense, except (a) as otherwise provided herein, and (b) any and all
federal, state or local income, sales, use or other taxes or charges arising out
of, resulting from or relating to Seller's sale of the Purchased Assets, and any
and all real or personal property taxes or assessments applicable to the period
before the Closing Date, shall be paid by Seller.
17.9. Governing Law and Forum. This Agreement shall be construed under the
-----------------------
laws of the state of Colorado and any action to enforce, construe or modify this
Agreement shall be brought in an appropriate court of competent jurisdiction in
Colorado.
17.10. Entire Agreement. This Agreement, together with the Exhibits, the
----------------
Schedules and other documents to be delivered pursuant hereto, including that
certain side letter agreement dated February 12, 199b between Purchaser and
Seller, constitute the entire agreement among the parties hereto and there are
no agreements, representations or warranties which are not set forth herein.
All prior negotiations, agreements and understandings are superseded hereby.
All parties being represented by counsel, no one party shall be deemed the
drafter of this Agreement with respect to its interpretation.
17.11. Paragraph Headings. The Section and paragraph headings contained in
------------------
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
17.12. Time of the Essence. Time is of the essence of this Agreement and
----------- -------
the obligations of the parties hereunder.
17.13. Survival of Representations and Warranties. The representations and
------------------------------- ----------
warranties of Purchaser and Seller provided herein shall survive after the
Closing Date for a period of three (3) years following the Closing Date.
35
17.14. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
17.15. Confidentiality. Seller and Purchaser agree to not disclose the
---------------
terms and conditions of this Agreement except (i) as may be required to fulfill
obligations hereunder; (ii) as may be required by law, regulation, custom or
judicial or administrative proceeding; or, (iii) as and to the extent such
information becomes known to the general public through no fault of either party
in tangible, demonstrable form. Both parties shall take reasonable precautions
to insure that their respective employers, employees and agents also treat such
information in a confidential manner. The obligations of confidentiality shall
survive the consummation of the transactions herein set forth.
17.16. Public Announcement. Each party acknowledges and agrees that either
-------------------
party may make a public announcement of the transactions contemplated by this
Agreement any time after the Closing Date provided that the other party approves
the form and substance of any such public announcement prior to its release,
which approval shall not be unreasonably withheld.
17.17. Attachments. All Exhibits, Schedules and attachments to this
-----------
Agreement are made a part of this Agreement by this reference. Any information
disclosed in an Exhibit, Schedule or attachment shall be deemed to be disclosed
and incorporated into any other Exhibit, Schedule or attachment where such
disclosure would be appropriate.
17.18. Additional Documentation. Seller shall from time to time, subsequent
------------------------
to the Closing Date, at Purchaser's request and without further consideration,
execute and deliver such other instruments of conveyance, assignment and
transfer and take such other action as Purchaser reasonably may require in order
more effectively to effectuate the transfer of the Purchased Assets.
36
17.19. Arbitration. Notwithstanding anything to the contrary herein, in the
-----------
event that there is any dispute arising pursuant to or in any way related to
this Agreement or the transactions contemplated hereby, the parties shall first
attempt to resolve the dispute between each other. The party claiming the
dispute shall provide written notification to the other party detailing the
nature and facts of the dispute. The parties shall attempt to resolve the
dispute within thirty (30) days, or such other longer period of time as the
parties may mutually agree. In the event that the parties fail to resolve the
dispute within the thirty (30) day period, or such other longer period as shall
have been agreed upon by the parties, the dispute shall be settled by
arbitration at a mutually agreed upon location in Denver, Colorado; provided,
however, that nothing in this Section 17.19 shall restrict the right of any
party to apply to a court of competent jurisdiction for emergency relief pending
final determination of a claim by arbitration in accordance with this Section
17,19; and further provided, that in the event the dispute involves an amount of
money to be paid to a party, the arbitration shall only be commenced to the
extent of the disputed amount. All arbitration shall be conducted in accordance
with the rules and regulations of the American Arbitration Association, in force
at the time of any such dispute. Each party shall pay its own expenses
associated with such arbitration, provided that the prevailing party in any
arbitration shall be entitled to reimbursement of reasonable attorneys' fees and
expenses (including, without limitation, arbitration expenses) relating to such
arbitration. The decision of the arbitrators, based upon written findings of
fact and conclusions of law, shall be binding upon the parties; and judgment in
accordance with that decision may be entered in any court having jurisdiction
thereof. In no event shall the arbitrators be authorized to grant any punitive,
incidental or consequential damages of any nature or kind whatsoever.
17.20. Force Majeure. This Agreement and the obligations of the parties
-------------
hereunder shall not be impaired or invalidated and a party shall not be in
breach hereof if such party is unable to fulfill any of its obligations
hereunder or is delayed in doing so by reason of strike, labor troubles, acts of
God or any cause beyond the reasonable control of such party.
[The remainder of this page intentionally left blank.]
37
17.21. Rules of Construction. The parties hereto agree that they have been
---------------------
represented by counsel during the negotiation, preparation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will construed against the party drafting such agreement or document.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives on the day and year first
above written.
CONVERGENT COMMUNICATIONS
SERVICES, INC., a Colorado corporation
By: /s/ Xxxx X. Xxxxx
________________________________
Name: Xxxx X. Xxxxx
Title: Chief Executive Officer
KANSAS COMMUNICATIONS, INC., a Kansas corporation
By: /s/ Xxxxxxx X. Xxxxxx
_______________________________
Name: Xxxxxxx X. Xxxxxx
Title: Vice President
38
SCHEDULES
Schedule 1.1 Personal Property
Schedule 1.2 Assumed Leases
Schedule 1.3.A. Assumed Contracts
Schedule 1.3.B Excluded Contracts
Schedule 1.4 Intangible Assets
Schedule 1.7 Prepaid Assets
Schedule 1.9 Vehicles
Schedule 1.10.A Accounts Receivable
Schedule 1.10.B Excluded Receivables
Schedule 1. 11 Inventory
Schedule 2 Excluded Assets
Schedule 3.2 Assumed Liabilities
Schedule 4.3 Closing Statement
Schedule 4.4 Allocation of Purchase Price
Schedule 8.4 Disclosed Liabilities
Schedule 8.6 Title to Purchased Assets
Schedule 8.10 Impairment of Contracts and Leases
Schedule 8.11 Litigation and Proceedings
Schedule 8.13 Taxes
Schedule 8.15 Compliance with Law
Schedule 8.19 Employee Contracts
Schedule 8.23 Year 2000 Compliance
39
EXHIBITS
--------
Exhibit A Secured July Note
Exhibit B Security Agreement
Exhibit C Secured Purchaser Note
Exhibit D Secured Contingent Note
Exhibit E Xxxx of Sale, Assumption of Liabilities
and Assignment of Contracts
Exhibit F Form of Purchaser's Counsel Opinion
Exhibit G Form of Seller's Counsel Opinion
Exhibit H-1 Allonge Endorsement to the Secured Contingent Note
Exhibit H-2 Allonge Endorsement to the Secured Purchaser's Note
40
