STOCK PURCHASE AGREEMENT
Exhibit
4.11
Confidential
Treatment
Requested:
Confidential
portions of
this document have been redacted and have been filed separately with the
Commission.
This
Stock Purchase Agreement (the
“Agreement”) is made and entered into as of the 30th day of March 2006 by and
between Advanced Tel, Inc., a California corporation (“ATI”), Xxxxx Xxxxxx, an
individual and sole shareholder of ATI (“Singer” or the “Seller”), and
InterMetro Communications, Inc., a California corporation (the “Buyer” or
“Company”), with respect to the following facts:
R
E C I T A L S
| A. | Singer owns 100% of the total issued and outstanding capital stock of ATI. |
| B. | ATI is engaged in the business of selling telecommunications services to businesses and consumers (the “Business”). |
| C. | The Company desires to acquire from Singer and Singer desires to sell to the Company 100% of the total issued and outstanding stock of ATI in exchange for up to $750,000 in cash, up to 1,000,000 shares of the Company’s common stock (“Common Stock”), and a two year unsecured note payable by ATI in a principal amount to be determined pursuant to Section 1.2(e) of the Agreement which is subject to adjustment, in accordance with the terms and conditions of this Agreement. |
NOW,
THEREFORE, for
good and valuable consideration the receipt and sufficiency of which are hereby
acknowledged by the parties to this Agreement, and in light of the above
recitals to this Agreement, the parties to this Agreement hereby agree as
follows:
| 1. | SALE AND PURCHASE |
1.1
Sale
and Purchase of
Stock. In consideration for the Purchase Price (as defined in
Section 1.2 of this Agreement) and the other covenants of the Company in
this Agreement, Singer hereby agrees to convey to the Company all of his capital
stock (the “ATI Stock”) and right, title and interest in and to ATI, on the
Closing Date (as defined in Section 5.1 of this Agreement).
1.2
Purchase
Price. As consideration for the sale by Singer of the shares of ATI
Stock to the Company on the Closing Date (as defined in Section 5.1 of this
Agreement), the Company will pay to Singer an amount (the “Purchase Price”)
(1) up to 1,000,000 shares (the “Shares”) of the Company’s Common Stock
(the “Stock Payment”), (2) up to $750,000 in cash (the “Cash Payment”)
payable by Buyer to Seller, and (3) a two year unsecured note in a
principal amount to be determined pursuant to Section 1.2(e) of this
Agreement (the “Note Payment”) payable by ATI to Seller, subject in all cases to
the conditions and adjustments described in Sections 1.2(b), 1.2(c), 1.2(d),
1.2(e), and 1.2(g) of this Agreement. Unless registered under
the Securities Act
of 1933, as amended, prior to issuance to Seller, the Shares will bear the
following legend:
-1-
“THE
SHARES EVIDENCED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THEY
HAVE BEEN REGISTERED UNDER THAT ACT OR AN EXEMPTION FROM REGISTRATION IS
AVAILABLE.”
(a)
Payment
of Purchase
Price. The Purchase Price will be paid as follows: (1) The issuance of
500,000 Shares to Seller on the Closing (“Initial Stock Payment”), subject to
possible increase as provided in Section 1.2(b) or possible decrease as
provided in Sections 1.2(d) and 1.2(g) of this Agreement, (2) $250,000 in
cash, payable $42,000 on a date 30 days after the Closing, $41,600 on a date
60
days after the Closing, $41,600 on a date 90 days after the Closing, $41,600
on
a date 120 days after the Closing, $41,600 on a date 150 days after the Closing,
and $41,600 on a date 180 days after the Closing, and (3) a two year
unsecured note payable by ATI in a principal amount to be determined pursuant
to
Section 1.2(e) of this Agreement bearing no interest, payable in 24 equal
monthly installments beginning on the Note Calculation Date (as that term is
defined in Section 1.2(e) of this Agreement) (the “Note”). The initial
$250,000 of the Cash Payment is subject to possible increase as provided in
Section 1.2(c) and this possible increase is subject to possible decrease
as provided in Sections 1.2(d) and 1.2(g) of this Agreement. The Note Payment
is
subject to possible decrease as provided in Sections 1.2(d), 1.2(e), and 1.2(g)
of this Agreement.
(b)
Adjustment
to Number of
Shares. The Purchase Price will be increased by up to an additional 500,000
Shares as follows: (1) up to 250,000 additional Shares will be issued to
Seller within 60 days after the first full twelve months after the date of
the
Closing (“2006 Stock Payment”) if Qualified Revenue (as defined in
Section 2 of this Agreement) for such twelve month period is equal to or
greater than $[***], subject to adjustment by the mutual written consent of
Singer and the Company (the “Revenue Threshold”); provided, that to the extent
that the actual Qualified Revenue during said twelve month period is less than
the Revenue Threshold, then the number of additional Shares will be reduced
below 250,000 by the same percentage as the percentage short-fall of Qualified
Revenue compared to the Revenue Threshold; and (2) up to an additional
250,000 Shares will be issued to the Seller within 60 days after the next twelve
month period (“2007 Stock Payment”) if Qualified Revenue (as defined in
Section 2 of this Agreement) is equal to or greater than $[***] subject to
adjustment by the mutual written consent of Singer and the Company (the “2007
Revenue Threshold”); provided, that to the extent that actual Qualified Revenue
during such twelve month period is less than the 2007 Revenue Threshold, then
the number of additional Shares will be reduced below 250,000 by the same
percentage as the percentage short-fall of Qualified Revenue compared to the
2007 Revenue Threshold. In the event that the Company’s Common Stock becomes
freely tradable on a U.S. national stock exchange, NASDAQ, OTC Bulletin Board
or
“Pink Sheets” (collectively a “Stock Market”) within two years from the date of
the Closing (the “Two Year Period”), then each of the Initial Stock Payment,
[***]Confidential
material redacted
and filed separately with the Commission.
-2-
2006
Stock Payment and 2007 Stock
Payment may be increased as follows: The Company will calculate (the
“Calculation”) the potential adjustment separately for each of the Initial Stock
Payment, the 2006 Stock Payment and the 2007 Stock Payment. The calculation
will
be made for each Stock Payment on the first day on which all of the following
conditions with respect to each of those Stock Payments have been satisfied:
(i) the Two Year Period has elapsed, (ii) the Shares associated with
the particular Stock Payment have been freely tradable without restriction
for a
period of 60 days (i.e. at least eligible for Rule 144(k)) and the trading
of
Buyer’s stock has not been suspended or terminated by order of the Securities
and Exchange Commission, and (iii) the Shares associated with the Stock
Payment have not been sold or otherwise transferred by the Seller. If the
closing last sale price of the Company’s Common Stock during the period
commencing on the first day that the Seller may freely trade the Shares without
restriction and ending on the date of the Company’s Calculation (the “Free Trade
Period”) has not equaled or exceeded $[***] per share on the Stock Market for
five consecutive trading days, then the Stock Payment will be increased by
an
amount equal to $[***] minus the greater of (a) the average closing last
sale price of the Company’s Common Stock on the Stock Market during the Free
Trade Period, or (b) the closing last sale on the last day of the Free
Trade Period, multiplied by the number of Shares included in the particular
Stock Payment, less the principal amount of the Note, as adjusted pursuant
to
Section 1.2(e) of this Agreement and less any existing or future disputes
or liabilities of ATI based upon events which occurred on or before the Closing.
This Additional Purchase Price (the “APP”) will be payable by the Company in
either of the following forms at the sole option of the Company: (x) in
cash in four equal calendar quarterly payments with the first payment due on
the
last day of the first full calendar quarter after the end of the Free Trade
Period, plus simple interest thereon at the rate of 8% per annum, or
(y) in the form of freely tradable shares of the Company’s Common Stock
with a value equal to the APP, based upon the closing last sale price of the
Company’s Common Stock on the Stock Market on the trading day immediately
preceding the date of the issuance of such additional freely tradable shares
to
the Seller.
If
the Company’s Common Stock does
not become publicly traded within the Two Year Period, then the Purchase Price
will be increased by $[***] per Share multiplied by the sum of all Stock
Payments, payable by the Company in cash in four equal calendar quarterly
payments, with the first payment due on the last day of the first full calendar
quarter after the expiration of the Two Year Period, plus simple interest
thereon at the rate of 8% per annum.
(c)
Adjustment
to Cash
Payment. The Purchase Price will be increased by up to an additional
$500,000 as follows: Within 60 days after the end of each of the first eight
full fiscal quarters after the Closing (the “Transaction Quarters”), the Company
will pay to the Seller in cash an amount (provided that it is a positive number)
equal to 10% multiplied by Qualified Revenue for the most recent Transaction
Quarter minus Qualified Revenue for the prior Transaction Quarter which had
the
highest Qualified Revenue. For the purpose of the first calculation, the amount
of Qualified Revenue for the previous fiscal quarter will be $[***]. In no
event
will cumulative additional Cash Payments pursuant to Section 1.3(c) of this
Agreement exceed $500,000.
[***]Confidential
material redacted
and filed separately with the Commission.
-3-
(d)
Adjustment
for Termination of
Employment Agreement. If the Employment Agreement for Singer referenced in
Section 3 of this Agreement is terminated for any reason prior to the end
of its three year term, other than solely because of a material breach of it
by
the Company, then all of the Stock Payments, except for the Initial Stock
Payment, and Cash Payments, except for the initial $250,000 of the Cash Payment,
will be reduced by 20%.
(e)
Adjustment
to Note
Payment. Singer and Buyer agree that the principal amount of the Note will
be equal to the Working Capital (as hereinafter defined) of ATI as of
March 31, 2006 plus 60% of any cash recovered by ATI within six
(6) months after the Closing Date from those certain uncollectible
receivables disclosed in writing by Seller to Buyer prior to the Closing Date
and acknowledged by Buyer in writing prior to the Closing Date less any and
all
expenses incurred by Buyer or ATI to collect such uncollectible receivables
(the
“Receivable Recovery Amount”). For the purposes of this Agreement, Working
Capital means current assets of ATI less current liabilities of ATI calculated
pursuant to generally accepted accounting principals (“GAAP”), which in no case
will be less than $150,000 initially, less any adjustments, if any, pursuant
to
Section 1.2(g). The parties agree to determine ATI’s Working Capital at
March 31, 2006, by no later than June 30, 2006 (the “Note Calculation
Date”) at which time the Note will be executed. If applicable, the parties agree
to amend the principal amount of the Note six (6) months after the Closing
Date to include the Receivable Recovery Amount, if any.
(f)
Purchase
Price
Allocations. The parties agree that the sum of ten thousand dollars
($10,000) of the cash portion of the Purchase Price will be allocated to the
covenant not to compete set forth in Section 4 of this Agreement.
(g)
Right
of Offset.
Notwithstanding anything else herein to the contrary, the Buyer will have the
right to offset and reduce the amount of any Stock Payments, except for the
Initial Stock Payment, or Cash Payments, except for the initial $250,000 of
the
Cash Payment, or Note Payment under this Agreement for any loss, cost, damage,
liability, claim, or expense incurred by the Buyer or any of its affiliates
or
by ATI as a result of a breach by Singer or ATI of any of their covenants,
representations, or warranties in this Agreement, or as a result of any
liabilities of ATI accrued prior to the Closing or disputes based upon events
which occurred on or before the Closing, or for which Seller has an
indemnification obligation to Buyer or any of its affiliates pursuant to
Section 11.1 of this Agreement. Offsets and reductions to Stock Payments,
if any, will be calculated assuming a price of $3.00 per share of the Company’s
Common Stock (as adjusted for any stock dividends, stock splits, and similar
extraordinary transactions). Buyer’s right to offset and reduce payments herein
is not its exclusive remedy and is cumulative with all other remedies available
to Buyer. Buyer may seek any other remedy available to it at law or in equity
that is available to it in any order it determines in its sole and absolute
discretion.
-4-
| 2. | Qualified Revenue. |
For
purposes of this Agreement,
“Qualified Revenue” means actual gross revenue attributable to ATI’s Customer
Agreements, as determined by GAAP, (i) excluding any revenue derived from
the Company, (ii) prior to any taxes and (iii) after any credits,
discounts or disputed amounts. In addition, to be considered Qualified Revenue,
revenue generated from an ATI Customer Agreement must return a Gross Profit
of
at least fifteen percent (15%), subject to adjustment by the mutual written
consent of Singer and the Company. For purposes of this Agreement, Gross Profit
is net revenue calculated pursuant to GAAP, net of all direct costs including
but not limited to commissions.
| 3. | Employment Agreement. |
On
the Closing Date, the Company and
Singer will enter into an employment agreement pursuant to which the Company
will hire Singer as President of ATI, for a three year term for an annual base
salary of $185,000, with benefits outlined in that certain Employment Agreement
dated March 31, 2006 (the “Employment Agreement”). The Employment Agreement
will provide that Singer’s responsibilities will include managing the day-to-day
operations of ATI.
| 4. | Non-Compete Agreement. |
As
an inducement to Buyer to enter
into and to perform its obligations under this Agreement, Singer covenants
to
enter into a non-compete agreement with the Buyer on or before the Closing
Date
pursuant to which Singer will agree that for a period of the shorter of
(i) five years from the Closing Date or (ii) 30 months from the date
of termination of the Employment Agreement referenced in Section 3 of this
Agreement, and in any event while Singer is an employee, officer, director,
or
consultant of the Buyer or any of its affiliates, he will not directly or
indirectly, whether (a) as employee, agent, consultant, employer,
principal, partner, officer or director; (b) holder of more than five
percent of any class of equity securities or more than five percent of the
aggregate principal amount of any class of equity securities or more than five
percent of the aggregate principal amount of any class of debt, notes or bonds
of a company with publicly traded equity securities; or (c) in any other
individual or representative capacity whatsoever, in each case for his own
account or the account of any other person or entity, engage in any business
or
trade competing with any of the businesses or trades of the Buyer or its
affiliates, which they conduct as of the Closing Date, during the term of the
Employment Agreement, or as of the termination of the Employment Agreement,
in
the United States (the “Non-Compete Agreement”). The Seller and Singer
acknowledge that the restrictions set forth in this Section 4 are fair and
reasonable with respect to their duration, scope and area. If, at the time
of
enforcement of this Section 4, a court holds that the duration, scope or
area restrictions stated herein are unreasonable under circumstances then
existing, the parties agree that the maximum duration, scope or area reasonable
under such circumstances will be substituted for the stated duration, scope
or
area. In the event of any breach of any provisions of this Section 4, Buyer
will have the right, in addition to any other rights and remedies existing
in
its favor hereunder, to enforce its rights and the obligations of Singer under
this Section 4 not only by an action or actions for damages but also by an
action or actions for specific performance and/or injunctive or other
equitable relief
in order to enforce or prevent any violations of the provisions of this
Section 4.
-5-
| 5. | Closing and Further Acts. |
5.1
Time
and Place of
Closing. Upon satisfaction or waiver of the conditions set forth in
Section 8 of this Agreement, the closing of the transactions contemplated
by this Agreement (the “Closing”) will take place at 0000 Xxxx Xxxxxx Xxxxx,
Xxxxxxxx X, Xxxx Xxxxxx, Xxxxxxxxxx 00000 at 11:00 a.m. (local time) on the
date
that the parties may mutually agree in writing, effective as of March 31,
2006 (the “Closing Date”).
5.2
Actions
at
Closing. At the Closing, the following actions will take place:
(a)
Buyer will pay to Seller the
Purchase Price as described in Section 1.2 of this Agreement by delivery of
(i) the appropriate cash or cash equivalent, (ii) stock certificates
evidencing the Initial Stock Payment, and (iii) the Note.
(b)
Seller will tender to the
Company certificates and any other documents evidencing 100% of Seller’s
ownership in ATI.
(c)
ATI will deliver to Buyer copies
of necessary resolutions of the Board of Directors of ATI authorizing the
execution, delivery, and performance of this Agreement and the other agreements
contemplated by this Agreement for ATI’s execution, and consummation of the
transactions contemplated by this Agreement, which resolutions have been
certified by an officer of ATI as being valid and in full force and effect.
(d)
Buyer will deliver to Seller
copies of corporate resolutions of the Board of Directors of Buyer authorizing
the execution, delivery and performance of this Agreement and the other
agreements contemplated by this Agreement for Buyer’s execution, if any, and
consummation of the transactions contemplated by this Agreement, which
resolutions have been certified by an officer of Buyer as being valid and in
full force and effect.
(e)
Each of ATI and the Company will
deliver to the other party true and complete copies of each party’s Certificate
of Incorporation and a Certificate of Good Standing from the appropriate
official of each party’s jurisdiction of incorporation, which certificates and
certificates of good standing are dated not more than 30 days prior to the
Closing Date.
(f)
Each party to the Employment
Agreement shall have executed and delivered to the other parties the Employment
Agreement.
-6-
(g)
Any additional documents or
instruments as a party may reasonably request or as may be necessary to evidence
and affect the sale, assignment, transfer and delivery of the ATI Stock to
the
Buyer.
5.3
Conduct
of Business
Prior to Closing. After the execution of this Agreement by the
Buyer and until the Closing, ATI will:
(a)
consistent with the ordinary
course of business, maintain the operations and goodwill of the Business and
ATI, and continue its relationships with persons having business dealings with
ATI; and
(b)
consistent with the ordinary
course of business, maintain all of the assets of ATI in their current
condition, ordinary wear and tear excepted, and insurance on all of said assets
in such amounts and of such kinds comparable to that in effect on the date
of
this Agreement; and
(c)
maintain the books, accounts and
records of ATI using ATI’s normal business practices consistently applied,
including recognition of revenues and expenses, continue to collect accounts
receivable and pay accounts payable utilizing normal procedures and without
discontinuing or accelerating payment of such accounts and comply with all
contractual and other obligations applicable to the ATI; and
(d)
not make any change to, or
otherwise amend in any way, the contracts with, salaries, wages or other
compensation of, any officer, director, agent or other similar representative
of
ATI (including any increase in any benefits or benefit plan costs or any change
in any bonus, insurance, pension, compensation or other benefit plan); and
(e)
not hire any officer, director,
employee, agent or other similar representative of ATI except employees hired
in
the normal course of business; and
(f)
not incur any indebtedness for
borrowed money except in the ordinary course of business, and not pledge or
grant liens or security interests in any of the ATI’s Assets; and
(g)
not sell, transfer or dispose of
any assets except for sales in the ordinary course of business; and
(h)
not distribute any assets of ATI
to any of its shareholders or other affiliates of the ATI, or to any other
party.
5.4
No
Solicitation and
Due Diligence. ATI will not, nor will ATI encourage, facilitate,
solicit, or authorize any of its shareholders, directors, officers, employees,
agents or representatives to solicit or enter into any discussion (or continue
any discussion) with any third party (including the provision of any information
to a third party), or enter into any agreement or understanding of any kind
regarding the purchase, sale, lease, assignment, conveyance or other disposition
or acquisition of all or any portion of its assets, the Business or any capital
stock of ATI, for the
period commencing on the date first above written and extending until
March 31, 2006. During this period and until the Closing or termination of
this Agreement, ATI will fully cooperate with the Buyer, and it representatives
to enable them to conduct complete due diligence of ATI, the Business, and
the
books, records and documents relating to ATI and the Business.
-7-
5.5
Due
Diligence by
Buyer. Until the Closing, ATI and Singer will fully cooperate with
reasonable requests made by Buyer, and its representatives to enable them to
conduct due diligence of ATI.
5.6
Due
Diligence by
Seller. Until the Closing, Buyer will fully cooperate with
reasonable requests made by Seller, and its representatives to enable them
to
conduct due diligence of Buyer.
| 6. | Representations and Warranties of ATI and Singer. |
ATI
and Singer represent and warrant
to Buyer as follows:
6.1
Power
and Authority;
Binding Nature of Agreement. ATI and Singer have full power and
authority to enter into this Agreement and to perform their obligations
hereunder. The execution, delivery, and performance of this Agreement by ATI
has
been duly authorized by all necessary action on its part. Assuming that this
Agreement is a valid and binding obligation of each of the other parties hereto,
this Agreement is a valid and binding obligation of ATI and Singer.
6.2
Subsidiaries. There is no corporation, general partnership,
limited partnership, joint venture, association, trust or other entity or
organization that ATI directly or indirectly controls or in which ATI directly
or indirectly owns any equity or other interest.
6.3
Good
Standing. ATI (i) is duly organized, validly existing and in
good standing under the laws of the jurisdiction in which it is incorporated,
(ii) has all necessary power and authority to own its assets and to conduct
its business as it is currently being conducted, and (iii) is duly
qualified or licensed to do business and is in good standing in every
jurisdiction (both domestic and foreign) where such qualification or licensing
is required.
6.4
Charter
Documents and
Corporate Records. ATI has delivered to Buyer complete and correct
copies or provided Buyer with the right to inspect true and complete copies
of
all (i) the articles of incorporation, bylaws and other charter or
organizational documents of ATI, including all amendments thereto, (ii) the
stock records of ATI, and (iii) the minutes and other records of the
meetings and other proceedings of the shareholders and directors of ATI. ATI
is
not in violation or breach of (i) any of the provisions of its articles of
incorporation, bylaws or other charter or organizational documents, or
(ii) any resolution adopted by its shareholders or directors. There have
been no meetings or other proceedings of the shareholders or directors of ATI
that are not fully reflected in the appropriate minute books or other written
records of ATI.
-8-
6.5
Financial
Statements. ATI has delivered to Buyer the following financial
statements relating to ATI prior to the Closing (the “ATI Financial
Statements”): (i) the unaudited assets of ATI as of December 31, 2005
and (ii) the unaudited statements of income for the years ended
June 30, 2003, 2004 and 2005 and the six months ended December 31,
2005 and the unaudited balance sheet, statements of retained earnings and
shareholders’ equity for the month ended December 31, 2005. Except as
stated therein or in the notes thereto, the ATI Financial Statements:
(a) present fairly the financial position of ATI as of the respective dates
thereof and the results of operations and changes in financial position of
ATI
for the respective periods covered thereby; and (b) have been prepared in
accordance with ATI’s normal business practices applied on a consistent basis
throughout the periods covered. Buyer understands that pursuant to
Section 8.1(e) of this Agreement, the ATI Financial Statements will be
audited, prepared in accordance with GAAP and delivered to the Buyer prior
to or
as soon as practicable after the Closing at the expense of Buyer.
6.6
Capitalization. The authorized capital stock of ATI consists of
1,000,000 shares of common stock, no par value per share, of which 1,000 shares
are issued and outstanding, and zero shares of preferred stock, no par value,
none of which are issued or outstanding. All of the outstanding shares of the
capital stock of ATI are validly issued, fully paid and nonassessable, and
have
been issued in full compliance with all applicable federal, state, local and
foreign securities laws and other laws.
6.7
Absence
of
Changes. Except as otherwise set forth on Schedule 6.7 hereto or
otherwise disclosed to Buyer in writing prior to the Closing, since
December 31, 2005:
(a)
There has not been any material
adverse change in the business, condition, assets, operations or prospects
of
ATI and no event has occurred or, to ATI’s knowledge, is expected to occur after
the Closing that might have a material adverse effect on the business,
condition, assets, operations or prospects of ATI.
(b)
ATI has not (i) declared,
set aside or paid any dividend or made any other contribution in respect of
any
shares of capital stock, nor (ii) repurchased, redeemed or otherwise
reacquired any shares of capital stock or other securities.
(c)
ATI has not sold or otherwise
issued any shares of capital stock or any other securities.
(d)
ATI has not amended its articles
of incorporation, bylaws or other charter or organizational documents, nor
has
it effected or been a party to any merger, recapitalization, reclassification
of
shares, stock split, reverse stock split, reorganization or similar transaction.
(e)
ATI has not formed any
subsidiary or contributed any funds or other assets to any subsidiary.
-9-
(f)
ATI has not purchased or
otherwise acquired any assets, nor has it leased any assets from any other
person, except in the ordinary course of business consistent with past practice.
(g)
ATI has not made any capital
expenditure outside the ordinary course of business or inconsistent with past
practice, or in an amount exceeding ten thousand dollars ($10,000) singly or
in
excess of fifty thousand dollars ($50,000) in the aggregate, without Buyer’s
consent.
(h)
ATI has not sold or otherwise
transferred any assets to any other person, except in the ordinary course of
business consistent with past practice and at a price equal to the fair market
value of the assets transferred.
(i)
There has not been any loss,
damage or destruction to any of the properties or assets of ATI (whether or
not
covered by insurance).
(j)
ATI has not written off as
uncollectible any indebtedness or accounts receivable, except for write offs
that were made in the ordinary course of business consistent with past practice
and that involved less than $60,000 singly and less than $115,000 in the
aggregate.
(k)
ATI has not leased any assets to
any other person except in the ordinary course of business consistent with
past
practice and at a rental rate equal to the fair rental value of the leased
assets.
(l)
ATI has not mortgaged, pledged,
hypothecated or otherwise encumbered any assets, except in the ordinary course
of business consistent with past practice.
(m)
ATI has not entered into any
contract, or incurred any debt, liability or other obligation (whether absolute,
accrued, contingent or otherwise), except for (i) contracts that were
entered into in the ordinary course of business consistent with past practice
and that have terms of less than six months and do not contemplate payments
by
or to ATI which will exceed, over the term of the contract, ten thousand dollars
($10,000) in the aggregate, and (ii) current liabilities incurred in the
ordinary course of business consistent with the past practice.
(n)
ATI has not made any loan or
advance to any other person, except for advances that have been made to
customers in the ordinary course of business consistent with past practice
and
that have been properly reflected as “accounts receivables.”
(o)
Other than annual raises or
bonuses paid or provided consistent with past business practices, ATI has not
paid any bonus to, or increased the amount of the salary, fringe benefits or
other compensation or remuneration payable to, any of the directors, officers
or
employees of ATI.
-10-
(p)
No contract or other instrument
to which ATI is or was a party or by which ATI or any of its assets are or
were
bound has been amended or terminated, except in the ordinary course of business
consistent with past practice.
(q)
ATI has not discharged any lien
or discharged or paid any indebtedness, liability or other obligation, except
for current liabilities that (i) are reflected in the ATI Financial
Statements as of December 31, 2005 or have been incurred since
December 31, 2005 in the ordinary course of business consistent with past
practice, and (ii) have been discharged or paid in the ordinary course of
business consistent with past practice.
(r)
ATI has not forgiven any debt or
otherwise released or waived any right or claim, except in the ordinary course
of business consistent with past practice.
(s)
ATI has not changed its methods
of accounting or its accounting practices in any respect.
(t)
ATI has not entered into any
transaction outside the ordinary course of business or inconsistent with past
practice.
(u)
ATI has not agreed or committed
(orally or in writing) to do any of the things described in clauses
(b) through (t) of this Section 6.7.
6.8
Absence
of
Undisclosed Liabilities. ATI has no debt,
liability or other obligation of any nature (whether due or to become due and
whether absolute, accrued, contingent or otherwise) that is not reflected or
reserved against in the ATI Financial Statements as of December 31, 2005,
except for obligations incurred since December 31, 2005 in the ordinary and
usual course of business consistent with past practice.
6.9
Contracts.
(a)
ATI has delivered to Buyer a
complete and accurate list and provided Buyer with true and complete copies
of
all contracts or agreements of ATI which are (i) material to the Business
as currently conducted; (ii) are subject to default or termination upon a
change in control of ATI; (iii) create a partnership or joint venture;
(iv) impose a noncompetition obligation on ATI, or an officer, director or
employee thereof; or (v) relating to the employment of any individual on a
full-time, part-time, consulting, or other basis (collectively, “Material
Contracts”).
(b)
To the best of Seller’s and
ATI’s knowledge, each Material Contract is in full force and effect and is valid
and enforceable in accordance with its terms.
(c)
To ATI’s knowledge, no event has
occurred or circumstance exists that may contravene, conflict with or result
in
a violation or breach of, or give any party to a Material Contract the right
to
declare a default or exercise any remedy thereunder, or to accelerate the
maturity or performance of, or to cancel, terminate, or modify any Material
Contract.
-11-
(d)
Neither ATI nor any of its
affiliates have received any written notice regarding any actual, alleged or
potential violation or breach of, or default under, any Material Contract which
has not been entirely cured.
(e)
No Addendum 2 to that certain
Wholesale Services Agreement by and between ATI and Qwest Communications
Corporation, dated March 19, 2002, as amended, or any other document
setting forth additional “Security Terms and Conditions,” exists.
6.10
Accounts
Receivable. Except as otherwise disclosed in writing to Buyer prior
to the Closing, all of ATI’s accounts receivable represent valid obligations
arising from sales actually made or services actually performed in the ordinary
course of Business and have been collected or are collectible in the lawful
and
ordinary course of business as heretofore conducted, subject to the reserve
for
bad debt recorded on the ATI Financial Statements.
6.11
ATI
Assets.
(a)
The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby
will
not result in a breach of the terms and conditions of, or result in a loss
of
rights under, or result in the creation of any lien, charge or encumbrance
upon,
any of the assets of the Business.
(b)
ATI has good and marketable
title to all of its assets, free and clear of all mortgages, liens, leases,
pledges, charges, encumbrances, equities or claims, except as expressly
disclosed in writing by Seller to Buyer prior to the Closing Date.
(c)
ATI owns all copyrights,
trademarks, and tradenames related to the Business and the use of such
copyrights, trademarks, and tradenames has not and will not infringe on the
rights of any third party.
(d)
ATI’s assets are not subject to
any material liability, absolute or contingent, which has not been disclosed
by
Seller to Buyer in writing prior to the Closing Date nor is ATI subject to
any
liability, absolute or contingent, which has not been disclosed to and
acknowledged by Buyer in writing prior to the Closing Date.
(e)
Seller has provided to Buyer in
writing an accurate description of all of the assets of ATI or used in the
business of ATI.
(f)
To the best of Seller’s and
ATI’s knowledge, Seller has provided to Buyer in writing a list of all
contracts, agreements, licenses, leases, arrangements, commitments and other
undertakings to which ATI is a party or by which it or its property is bound.
Except as specified by Seller to Buyer in writing prior to the Closing Date,
to
the best of Seller’s and ATI’s knowledge all of such contracts, agreements,
leases, licenses and commitments are valid, binding and in full force and
effect.
-12-
(g)
All of the machinery, equipment,
furniture and fixtures as of the Closing Date will be in the same condition
as
on the date of this Agreement, normal wear and tear excepted. ATI hereby conveys
to Buyer (to the extent it is able under the applicable warranty documents)
any
and all product warranty or similar rights that ATI may have against third
parties in respect of the condition of any assets.
6.12
Compliance
With
Laws; Licenses and Permits. ATI is not in
violation of, nor has it failed to conduct its business in full compliance
with,
any applicable federal, state, local or foreign laws, regulations, rules,
treaties, rulings, orders, directives or decrees. ATI has delivered to Buyer
a
complete and accurate list and provided Buyer with the right to inspect true
and
complete copies of all of the licenses, permits, authorizations and franchises
to which ATI is subject and all said licenses, permits, authorizations and
franchises are valid and in full force and effect. Said licenses, permits,
authorizations and franchises constitute all of the licenses, permits,
authorizations and franchises necessary to permit ATI to conduct its business
in
the manner in which it is now being conducted, and ATI is not in violation
or
breach of any of the terms, requirements or conditions of any of said licenses,
permits, authorizations or franchises.
6.13
Taxes. Except as disclosed herein, to ATI’s
knowledge, ATI has accurately and completely filed with the appropriate United
States state, local and foreign governmental agencies all tax returns and
reports required to be filed (subject to permitted extensions applicable to
such
filings), and has paid or accrued in full all taxes, duties, charges,
withholding obligations and other governmental liabilities as well as any
interest, penalties, assessments or deficiencies, if any, due to, or claimed
to
be due by, any governmental authority (including taxes on properties, income,
franchises, licenses, sales and payrolls). (All such items are collectively
referred to herein as “Taxes”). The ATI Financial Statements fully accrue or
reserve all current and deferred taxes. ATI is not a party to any pending action
or proceeding, nor is any such action or proceeding threatened by any
governmental authority for the assessment or collection of Taxes. No liability
for taxes has been incurred other than in the ordinary course of business.
There
are no liens for Taxes except for liens for property taxes not yet delinquent.
ATI is not a party to any Tax sharing, Tax allocation, Tax indemnity or statute
of limitations extension or waiver agreement and in the past year has not been
included on any consolidated combined or unitary return with any entity other
than ATI. ATI has duly withheld from each payment made to each person from
whom
such withholding is required by law the amount of all Taxes or other sums
(including but not limited to United States federal income taxes, any applicable
state or municipal income tax, disability tax, unemployment insurance
contribution and Federal Insurance Contribution Act taxes) required to be
withheld therefrom and has paid the same to the proper tax authorities prior
to
the due date thereof. To the extent any Taxes withheld by ATI have not been
paid
as of the Closing Date because such Taxes were not yet due, such Taxes will
be
paid to the proper tax authorities in a timely manner. All Tax returns filed
by
the ATI are accurate and comply with and were prepared in accordance with
applicable statutes and regulations.
6.14
Environmental
Compliance Matters. To the best of the knowledge of ATI, without
conducting any study or independent investigation, ATI has at all relevant
times
with respect to the Business been in material compliance with all environmental
laws, and has received no potentially responsible party notices or similar
notices from any governmental agencies or private parties concerning releases
or
threatened releases of any “hazardous substance” as that term is defined under
42 U.S.C. 960(1)(14).
-13-
6.15
Compensation. Since January 1, 2006, ATI
has not paid or committed to pay to or for the benefit of any of its officers
or
directors any compensation of any kind other than wages, salaries and benefits
at times and rates in effect on January 1, 2006, subject to wage increases
of less than ten percent paid or payable to employees other than officers and
directors, nor have they effected or agreed to effect any amendment or
supplement to any employee profit sharing, stock option, stock purchase,
pension, bonus, incentive, retirement, medical reimbursement, life insurance,
deferred compensation or any other employee benefit plan or arrangement. ATI
does not have any bonus plan or obligations with respect to any bonus plan.
ATI
has provided Buyer with a full and complete list of all officers, directors,
employees and consultants of ATI as of the date hereof, specifying their names
and job designations, their dates of hire, the total amount paid or payable
as
wages, salaries or other forms of direct compensation, and the basis of such
compensation, whether fixed or commission or a combination thereof.
6.16
No
Default.
(a)
Each of the contracts,
agreements or other instruments of ATI and each of the standard Customer
Agreements or contracts of ATI is a legal, binding and enforceable obligation
by
or against ATI, subject to the effect of applicable bankruptcy, insolvency,
reorganization, moratorium or other similar federal or state laws affecting
the
rights of creditors and the effect or availability of rules of law governing
specific performance, injunctive relief or other equitable remedies (regardless
of whether any such remedy is considered in a proceeding at law or in equity).
No party with whom ATI has an agreement or contract is in default thereunder
or
has breached any terms or provisions thereof which is material to the conduct
of
ATI’s business.
(b)
ATI has performed, or is now
performing, the obligations of, and ATI is not in material default (or would
by
the lapse of time and/or the giving of notice be in material default) in respect
of, any contract, agreement or commitment binding upon it or its assets or
properties and material to the conduct of its Business. No third party has
raised any claim, dispute or controversy with respect to any of the executory
contracts of ATI, nor has ATI received notice of warning of alleged
nonperformance, delay in delivery or other noncompliance by ATI with respect
to
its obligations under any of those contracts, nor are there any facts which
exist indicating that any of those contracts may be totally or partially
terminated or suspended by the other parties thereto.
6.17
Business
and
Customers. ATI has provided Buyer a complete and accurate list and
provided Buyer with the right to inspect true and complete copies of (a) a
written list of all its customers as of the Closing Date, (b) the amount
for which each such customer was invoiced during the twelve month period ending
December 31, 2005, and (c) the expiration date of the ATI’s contracts
with such customers. Except as otherwise disclosed to Buyer in writing, ATI
has
received no notice and, has no reason to believe, that any significant customer
of ATI (i) has ceased, or will cease, to use the products, goods, or
services of ATI, (ii) has substantially reduced, or will
substantially
reduce, the use of products, goods, or services of ATI or (iii) has sought,
or is seeking, to reduce the price it will pay for products, goods, or services
of ATI, including in each case after the consummation of the transactions
contemplated hereby. No customer of ATI described in clause (a) of this
section has otherwise threatened to take any action described in the preceding
sentence as a result of the consummation of the transactions contemplated by
this Agreement.
-14-
6.18
Suppliers. ATI has provided Buyer with (a) the names of all
suppliers from which ATI ordered inventories and other products, goods, and
services with an aggregate purchase price for each such supplier of $10,000
or
more during the twelve month period ended December 31, 2005 and
(b) the amount for which each such supplier invoiced ATI during such
period. ATI has not received any notice from any such supplier indicating that
there is or will be a material change in the price of such items or services,
and has no reason to believe that there will be any such material change in
the
price of such items or services, or that any such supplier (other than Buyer)
will not sell such items to ATI at any time after the Closing Date on terms
and
conditions similar to those used in its current sales to ATI, subject to general
and customary price increases. No supplier to ATI described in clause
(a) of the first sentence of this section has otherwise threatened to take
any action described in the preceding sentence as a result of the consummation
of the transactions contemplated by this Agreement.
6.19
Product
Warranties. Except as otherwise disclosed in writing to Buyer prior
to the Closing and for warranties under applicable law, (a) there are no
warranties, express or implied, written or oral, with respect to the products
of
ATI, (b) there are no pending or threatened claims with respect to any such
warranty, and (c) ATI has no, and after the Closing Date, will have no,
liability with respect to any such warranty, whether known or unknown, absolute,
accrued, contingent, or otherwise and whether due or to become due, other than
customary returns in the ordinary course of business that are fully reserved
against in the ATI Financial Statements.
6.20
Proprietary
Rights.
(a)
ATI has provided Buyer in
writing a complete and accurate list and provided Buyer with the right to
inspect true and complete copies of all software, patents and applications
for
patents, trademarks, trade names, service marks, and copyrights, and
applications therefor, owned or used by ATI or in which it has any rights or
licenses, except for software used by ATI and generally available on the
commercial market. ATI has provided Buyer with a complete and accurate
description of all agreements or provided Buyer with the right to inspect true
and complete copies of all agreements of ATI with each officer, employee or
consultant of ATI providing ATI with title and ownership to patents, patent
applications, trade secrets and inventions developed or used by ATI in its
business. To ATI’s knowledge, all of such agreements are valid, enforceable and
legally binding, subject to the effect or availability of rules of law governing
specific performance, injunctive relief or other equitable remedies (regardless
of whether any such remedy is considered in a proceeding at law or in
equity).
-15-
(b)
ATI owns or possesses licenses
or other rights to use all computer software, software programs, patents, patent
applications, trademarks, trademark applications, trade secrets, service marks,
trade names, copyrights, inventions, drawings, designs, customer lists,
propriety know-how or information, or other rights with respect thereto
(collectively referred to as “Proprietary Rights”), used in the business of ATI,
and the same are sufficient to conduct ATI’s business as it has been and is now
being conducted.
(c)
To ATI’s knowledge, the
operations of ATI do not conflict with or infringe, and no one has asserted
to
ATI that such operations conflict with or infringe on any Proprietary Rights
owned, possessed or used by any third party. There are no claims, disputes,
actions, proceedings, suits or appeals pending against ATI with respect to
any
Proprietary Rights, and to the knowledge of the management of ATI none has
been
threatened against ATI. To the best knowledge of the management of ATI there
are
no facts or alleged fact which would reasonably serve as a basis for any claim
that ATI does not have the right to use, free of any rights or claims of others,
all Proprietary Rights in the development, manufacture, use, sale or other
disposition of any or all products or services presently being used, furnished
or sold in the conduct of the business of ATI as it has been and is now being
conducted.
(d)
To ATI’s knowledge, no employee
of ATI is in violation of any term of any employment contract, proprietary
information and inventions agreement, non-competition agreement, or any other
contract or agreement relating to the relationship of any such employee with
ATI
or any previous employer.
6.21
Insurance. ATI has provided Buyer with a complete and accurate
list of all policies of insurance and provided Buyer with the right to inspect
true and complete copies of all policies of insurance to which ATI is a party
or
is a beneficiary or named insured as of the Closing Date. ATI has in full force
and effect, with all premiums due thereon paid, the policies of insurance set
forth therein. All the insurable properties of ATI are insured in amounts and
coverage and against risks and losses which are adequate and usually insured
against by persons holding or operating similar properties in similar
businesses. There were no claims in excess of $10,000 asserted or currently
outstanding under any of the insurance policies of ATI in respect of all motor
vehicle, general liability, errors and omissions, workers compensation, and
medical claims during the calendar year ending on December 31, 2005.
6.22
Labor
Relations. None of the employees of ATI are represented by any
union or are parties to any collective bargaining arrangement, and no attempts
are being made to organize or unionize any of ATI’s employees. Except as
disclosed in writing to Buyer prior to the Closing, there is not presently
pending or existing, and there is not presently threatened, any (a) strike,
slowdown, picketing, work stoppage or employee grievance process, or
(b) action, arbitration, audit, hearing, investigation, litigation, or suit
(whether civil, criminal, administrative, investigative, or informal) against
or
affecting ATI relating to the alleged violation of any legal requirement
pertaining to labor relations or employment matters. ATI is in compliance with
all applicable laws respecting employment and employment practices, terms and
conditions of employment, wages and hours, occupational safety and health and
is
not engaged in any unfair labor practices. ATI is in compliance with the
Immigration Reform and Control Act of 1986.
-16-
6.23
Employee
Benefits. ATI has provided Buyer with a complete and accurate list
of all employee payroll and benefit plans of the ATI and provided Buyer with
the
right to inspect true and complete copies of all employee payroll and benefit
plans of ATI (i) currently in effect, and (ii) with respect to which
ATI may have any liability or obligation (the “Employee Plans”). ATI has made
available to Buyer a copy of each Employee Plan, including any amendments
thereto and all related trust agreements and insurance contracts and, to the
extent any Employee Plan is not in writing, a short summary of such plan has
been provided to Buyer. All Employee Plans have been administered in substantial
compliance with their terms, except for any noncompliance that could not be
reasonably expected to have a material adverse effect on ATI, its Business,
or
the Acquired Assets. Except as disclosed to Buyer by ATI in writing, none of
the
employees of ATI are covered by a collective bargaining agreement or any
multi-employer plan.
6.24
S
Corporation
Status. ATI has not at any time elected to be treated as, and is
not currently governed by, Subchapter S of the Internal Revenue Code of 1986,
as
amended.
6.25
Condition
of
Premises. All real property leased by ATI is in good condition and
repair, ordinary wear and tear excepted.
6.26
No
Distributor
Agreements. Except as disclosed in writing to Buyer prior to the
Closing, ATI is not a party to, nor is the property of ATI bound by, any
distributors’ or manufacturer’s representative or agency agreement.
6.27
Conflict
of Interest
Transactions. No past or present shareholder, director, officer or
employee of ATI or any of their affiliates (i) is indebted to, or has any
financial, business or contractual relationship or arrangement with ATI, or
(ii) has any direct or indirect interest in any property, asset or right
which is owned or used by ATI or pertains to the business of ATI.
6.28
Litigation. There is no action, suit,
proceeding, dispute, litigation, claim, complaint or investigation by or before
any court, tribunal, governmental body, governmental agency or arbitrator
pending or, to ATI’s knowledge, threatened against or with respect to ATI which
(i) if adversely determined would have an adverse effect on the business,
condition, assets, operations or prospects of ATI, or (ii) challenges or
would challenge any of the actions required to be taken by ATI under this
Agreement. There exists no basis for any such action, suit, proceeding, dispute,
litigation, claim, complaint or investigation.
6.29
Non-Contravention. Neither (a) the
execution and delivery of this Agreement, nor (b) the performance of this
Agreement will: (i) contravene or result in a violation of any of the
provisions of the organizational documents of ATI; (ii) contravene or
result in a violation of any resolution adopted by the shareholders or directors
of ATI; (iii) result in a violation or breach of, or give any person the
right to declare (whether with or without notice or lapse of time) a default
under or to terminate, any agreement or other instrument to which ATI is a
party
or by which ATI or any
of its assets are bound; (iv) give any person the right to accelerate the
maturity of any indebtedness or other obligation of ATI; (v) result in the
loss of any license or other contractual right of ATI; (vi) result in the
loss of, or in a violation of any of the terms, provisions or conditions of,
any
governmental license, permit, authorization or franchise of ATI;
(vii) result in the creation or imposition of any lien, charge, encumbrance
or restriction on any of the assets of ATI; (viii) result in the
reassessment or revaluation of any property of ATI; by any taxing authority
or
other governmental authority; (ix) result in the imposition of, or subject
ATI; to any liability for, any conveyance or transfer tax or any similar tax;
or
(x) result in a violation of any law, rule, regulation, treaty, ruling,
directive, order, arbitration award, judgment or decree to which ATI or any
of
its assets or any limited liability interests are subject.
-17-
6.30
Approvals. ATI has provided Buyer with a
complete and accurate list of all jurisdictions in which ATI is authorized
to do
business. To ATI’s knowledge, no authorization, consent or approval of, or
registration or filing with, any governmental authority is required to be
obtained or made by ATI in connection with the execution, delivery or
performance of this Agreement, including the conveyance to Buyer of the Business
and the Acquired Assets.
6.31
Brokers. ATI has not agreed to pay any
brokerage fees, finder’s fees or other fees or commissions with respect to the
transactions contemplated by this Agreement, and, to ATI’s knowledge, no person
is entitled, or intends to claim that it is entitled, to receive any such fees
or commissions in connection with such transaction.
6.32
Special
Government
Liabilities. Other than telecom relay service tax (“TRS Tax”) and
fees payable to certain states, which states have been disclosed in writing
to
Buyer prior to the Closing, which will be payable upon certification, ATI has
no
existing or pending liabilities, obligations or deferred payments due to any
federal, state or local government agency or entity in connection with its
business or with any program sponsored or funded in whole or in part by any
federal, state or local government agency or entity, nor is ATI or Singer aware
of any threatened action or claim or any condition that could support an action
or claim against ATI, the Acquired Assets or the Business for any of said
liabilities, obligations or deferred payments.
6.33
Full
Disclosure. Neither this Agreement (including the
exhibits hereto) nor any statement, certificate or other document delivered
to
Buyer by or on behalf of ATI contains any untrue statement of a material fact
or
omits to state a material fact necessary to make the representations and other
statements contained herein and therein not misleading.
6.34
Non-Distributive
Intent. The Shares being acquired by Singer as
part of the Purchase Price pursuant to this Agreement are not being acquired
by
Singer with a view to the public distribution of them.
6.35
Representations
True
on Closing Date. The representations and warranties of ATI set
forth in this Agreement are true and correct on the date hereof, and will be
true and correct on the Closing Date as though such representations and
warranties were made as of the Closing Date. Buyer’s knowledge will not act as a
waiver of any breach of the representations and warranties contained herein
by
ATI, Singer, or any other shareholders of ATI.
-18-
6.36
Tax
Advice.
ATI
and Singer hereby represent and
warrant that they have sought their own independent tax advice regarding the
transactions contemplated by this Agreement and neither ATI nor Singer have
relied on any representation or statement made by Buyer, the Company, or their
representatives regarding the tax implications of such transactions.
| 7. | Representations and Warranties of Buyer. |
Buyer
represents and warrants to
Seller as follows:
7.1Power
and Authority; Binding Nature of Agreement. Buyer
has full power and authority to enter into this Agreement and to perform its
obligations hereunder. The execution, delivery and performance of this Agreement
by Buyer have been duly authorized by all necessary action on its part. Assuming
that this Agreement is a valid and binding obligation of the other party hereto,
this Agreement is a valid and binding obligation of Buyer.
7.2
Good
Standing of
Buyer. Buyer (i) is duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it
is
incorporated, (ii) has all necessary power and authority to own its assets
and to conduct its business as it is currently being conducted, and
(iii) is duly qualified or licensed to do business and is in good standing
in every jurisdiction (both domestic and foreign) where such qualification
or
licensing is required.
7.3
Charter
Documents and
Corporate Records of Buyer. Buyer has made
available to Seller to review complete and correct copies of (i) the
articles of incorporation, bylaws and other charter or organizational documents
of Buyer, including all amendments thereto, (ii) the stock records of
Buyer, and (iii) the minutes and other records of the meetings and other
proceedings of the shareholders and directors of Buyer. Buyer is not in
violation or breach of (i) any of the provisions of its articles of
incorporation, bylaws or other charter or organizational documents, or
(ii) any resolution adopted by its shareholders or directors. There have
been no meetings or other proceedings of the shareholders or directors of Buyer
that are not fully reflected in the appropriate minute books or other written
records of Buyer.
7.4
Capitalization
of
Buyer. The authorized capital stock of Buyer
consists of 100,000,000 shares of common stock, no par value per share,
40,000,000 shares of which are issued and outstanding, and 30,000,000 shares
of
preferred stock, no par value, 2,000,000 shares of which are issued or
outstanding. All of the outstanding shares of the capital stock of Seller are
validly issued, fully paid and nonassessable, and have been issued in full
compliance with all applicable federal, state, local and foreign securities
laws
and other laws. Buyer either has sufficient authorized capital stock to meet
its
obligations under this Agreement or has the ability to authorize the issuance
of
additional capital stock.
7.5
Financial
Statements. The Company has made available to
Seller to review the following financial statements (the “Company Financial
Statements”): the draft audited income statements and statement of operations of
the Company for the fiscal years ended September 30, 2003, 2004 and 2005,
the draft audited balance sheet of the Company as of September 30, 2005,
and the draft unaudited
income statements, statement of operations, and balance sheet of the Company
for
the three months ended December 31, 2005. Except as stated therein or in
the notes thereto, the Company Financial Statements: (a) present fairly the
financial position of the Company as of the respective dates thereof and the
results of operations and changes in financial position of the Company for
the
respective periods covered thereby; and (b) have been prepared in
accordance with the Company’s normal business practices applied on a consistent
basis throughout the periods covered.
-19-
7.6
Approvals. To Buyer’s knowledge, no
authorization, consent or approval of, or registration or filing with, any
governmental authority or any other person is required to be obtained or made
by
Buyer in connection with the execution, delivery or performance of this
Agreement or the Employment Agreement.
7.7
Full
Disclosure. To the best of the Company’s
knowledge, neither this Agreement (including the exhibits hereto) nor any
statement, certificate or other document delivered to Seller by or on behalf
of
Buyer contains any untrue statement of a material fact or omits to state a
material fact necessary to make the representations and other statements
contained herein and therein not misleading.
7.8
Brokers. Buyer has not agreed to pay any
brokerage fees, finder’s fees or other fees or commissions with respect to the
transactions contemplated by this Agreement, and, to Buyer’s knowledge, no
person is entitled, or intends to claim that it is entitled, to receive any
such
fees or commissions in connection with such transaction.
7.9
Representations
True
on Closing Date. To the best of the Buyer’s
knowledge, the representations and warranties of Buyer set forth in this
Agreement are true and correct on the date hereof, and will be true and correct
on the Closing Date as though such representations and warranties were made
as
of the Closing Date.
7.10
Non-Distributive
Intent. The shares of ATI Stock being purchased by
the Company pursuant to this Agreement are not being acquired by the Company
with a view to the public distribution of them.
7.11
Non
Contravention. To the Company’s knowledge neither
the execution and delivery of this Agreement, nor the performance of this
Agreement will contravene or result in a material violation of any of the
provisions of any other agreement or obligation of the Company.
| 8. | Conditions to Closing. |
8.1
Conditions
Precedent
to Buyer’s Obligation To Close. Buyer’s obligation
to close the stock purchase as contemplated in this Agreement is conditioned
upon the occurrence or waiver by Buyer of the following:
(a)
Singer shall have delivered to
the Company all certificates evidencing Singer’s ownership of 100% of the
capital stock of ATI.
-20-
(b)
Singer must have entered into
the Employment Agreement and Non-Compete Agreement.
(c)
Other than the TRS tax, all
Taxes (except corporate income taxes) due and payable by ATI without regard
to
any deferral by reason of extension, payment programs, or any other reason,
must
have been paid in full. Any Taxes accrued but not yet payable must be reflected
on ATI’s balance sheet delivered to Buyer.
(d)
The financial condition of ATI
must be as set forth in the ATI Financial Statements as of December 31,
2005, except for changes arising as a result of the conduct of ATI’s Business in
the ordinary course of business, since December 31, 2005. ATI must submit
to Buyer prior to or as soon as practicable after the Closing audited financial
statements prepared in accordance with GAAP, certified by an independent
certified public accounting firm qualified to practice before the Securities
and
Exchange Commission, covering ATI’s two most recent fiscal years (at Buyer’s
expense) and its most recent fiscal quarter (unaudited and prepared in ATI’s
normal business practices consistently applied).
(e)
ATI must have delivered to Buyer
a certificate executed by the Secretary of ATI certifying (i) the names of
the officers of ATI authorized to sign this Agreement to which it is a party
and
all other documents and instruments executed by ATI pursuant hereto, together
with the true signatures of such officers; (ii) copies of corporate
resolutions adopted by the Board of Directors of ATI authorizing the appropriate
officers of ATI to execute and deliver this Agreement and all other agreements,
documents and instruments executed by the Seller pursuant hereto and to
consummate the transactions contemplated herein.
(f)
The Buyer must in its sole
discretion be satisfied with its full and complete due diligence of ATI and
all
other aspects of the transactions contemplated by this Agreement, including
but
not limited to financial, legal and business affairs of ATI, discussions with
ATI’s customers and vendors, verification that the Business will reasonably be
expected to generate at least $6,700,000, subject to adjustment by the mutual
written consent of Singer and the Company, of sustainable revenue per year
at a
Gross Profit of at least 15% for the Buyer. The Buyer must confirm its
satisfaction in a writing delivered to the Seller.
(g)
Such directors of ATI as the
Company shall have specified in writing shall have submitted their resignations
(to be effective as of the Closing) from the Board of Directors of the Company.
The directors of ATI shall have duly appointed (effective as of the Closing)
such other persons as the Company shall have designated to fill the vacancies
on
the Company’s Board of Directors.
(h)
All representations and
warranties of ATI and Singer made in this Agreement or in any exhibit or
schedule hereto delivered by ATI or Singer must be true and correct as of the
Closing Date with the same force and effect as if made on and as of that date.
Buyer must receive a written representation from ATI and Singer at the
Closing that no
material adverse change has occurred to ATI or the Business between
December 31, 2005 and the Closing Date.
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(i)
ATI must have performed and
complied with all agreements, covenants and conditions required by this
Agreement to be performed or complied with by ATI prior to or at the Closing
Date.
(j)
ATI must have signed any
customary investor representation letters requested by the Buyer in connection
with the issuance of the Buyer’s securities as part of the purchase price for
the ATI Stock, which will include, but not be limited to representations and
warranties by ATI and Singer confirming their investment sophistication,
knowledge, and experience, their financial condition, and their access to
information regarding the Buyer.
8.2
Conditions
Precedent
to Seller’s Obligation To Close. Seller’s
obligation to close the stock purchase as contemplated in this Agreement is
conditioned upon the occurrence or waiver by Seller of the following:
(a)
Seller’s satisfaction,
determined in its sole discretion, with the level of Buyer’s Earnings Before
Depreciation and Amortization.
(b)
Seller’s and ATI’s satisfaction,
determined in their sole discretion, with the tax consequences of the
transaction contemplated by this Agreement.
(c)
All representations and
warranties of Buyer made in this Agreement or in any exhibit hereto delivered
by
Buyer must be true and correct on and as of the Closing Date with the same
force
and effect as if made on and as of that date.
(d)
Buyer must have performed and
complied with all agreements and conditions required by this Agreement to be
performed or complied with by Buyer prior to or at the Closing Date.
(e)
The financial condition of
Company must be as set forth in the Company’s Financial Statements as of
December 31, 2005, except for changes arising as a result of the conduct of
the Company’s business in the ordinary course of business, including but not
limited to the Company’s build out and commencement of Feature Group D service
offerings, consistent with GAAP, since December 31, 2005.
(f)
Buyer must have provided to
Seller information regarding the capitalization of the Company on a fully
diluted basis as of December 31, 2005.
8.3
Notice
Requirement. Seller or Singer will give prompt
written notice to Buyer of any development occurring after the date of this
Agreement, or any item about which ATI did not have actual knowledge on the
date
of this Agreement, which causes or reasonably could be expected to cause a
breach of any of the representations and warranties in Section 6 of this
Agreement. Buyer will give prompt written notice to Singer of any development
occurring after the date of this
Agreement, or any item about which Buyer did not have
actual knowledge on the date of this Agreement, which causes or reasonably
could
be expected to cause a breach of any of the representations and warranties
in
Section 7 of this Agreement.
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| 9. | Further Assurances and Post Closing Covenants and Obligations. |
9.1
Books
and
Records. Following the Closing, Buyer shall,
whenever reasonably requested by Singer (including reasonable prior notice
to
Buyer) and during normal business hours, permit Singer or his respective
representatives to have access to such business records (including without
limitation computer files) turned over to Buyer pursuant to this Agreement
as
may be required by Singer. Buyer shall use commercially reasonable efforts
to
preserve and maintain ATI’s payroll records for each fiscal year until the
expiration of the statute of limitations (and any waivers or extensions thereof)
for tax purposes relating to such year, and all other records relating to the
Business for at least five years after the Closing Date.
9.2
Financial
Statements. When available after the Closing,
Buyer will submit to Singer audited financial statements prepared in accordance
with GAAP, certified by an independent certified public accounting firm
qualified to practice before the Securities and Exchange Commission, as of
September 30, 2005. Until the Company’s common stock becomes publicly
traded and provided (a) Seller owns at least 400,000 shares of the
Company’s common stock, (b) the Note is outstanding, and (c) Seller is
an employee of ATI, the Company will provide Seller with the same quarterly
and
audited annual financial statements that it provides to its other shareholders
when such financial statements are available.
9.3
Government
Approvals. Seller will (a) assist and fully
cooperate with Buyer to obtain, as soon as practicable after the Closing, all
state, local, and other governmental approvals and all other consents or
approvals of any third parties necessary for ATI to conduct the Business as
the
Business was conducted prior to Closing and (b) use his best efforts to
permit ATI to conduct the Business in the same manner as the Business was
conducted prior to Closing until such approvals are obtained.
9.4
Internal
Revenue Code
Section 368. The Seller intends that this
transaction qualify for tax treatment under Section 368(a)(1)(B) of the
Internal Revenue Code of 1986 of 1986, as amended. While no representation
regarding the tax treatment of Seller is made by Buyer herein or otherwise,
Buyer agrees to cooperate with Seller in furnishing documents to Seller relating
to the transaction covered by this Agreement that are (a) requested in
writing by the Seller, (b) specifically necessary for Seller to make his
submissions to relevant tax authorities, and (c) the disclosure of which
would not violate any applicable law, rule, regulation or court order, nor
cause
Buyer any hardship or to be in breach of any contract or other document
applicable to it.
9.5
Employee
Proprietary
Information, Confidentially, Loyalty, and Nonsolicitation
Agreements. Each of ATI’s employees will be bound
by a proprietary information, confidentially, loyalty, and nonsolicitation
agreement with ATI within two weeks from the date of the Closing. Furthermore,
Seller will assist and fully cooperate with Buyer to ensure that each of ATI’s
employees is so bound. Seller and ATI are not aware of any failure by any ATI
employee to maintain the confidentiality of ATI’s proprietary
information.
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| 10. | Survival of Representations and Warranties. |
All
representations and warranties
made by each of the parties hereto will survive the Closing for a period of
two
years after the Closing Date.
| 11. | Indemnification. |
11.1
Indemnification
by
Seller. Seller agrees to indemnify, defend and
hold harmless Buyer and its affiliates against any and all claims, demands,
losses, costs, expenses, obligations, liabilities and damages, including
interest, penalties and attorney’s fees and costs, incurred by Buyer or any of
its affiliates arising, resulting from, or relating to any and all liabilities
of ATI accrued prior to the Closing or relating to the ATI Stock, any
misrepresentation of a material fact or omission to disclose a material fact
made by Seller or ATI in this Agreement, in any exhibits to this Agreement
or in
any other document furnished or to be furnished by Seller or ATI under this
Agreement, or any breach of, or failure by ATI or Singer to perform, any of
their representations, warranties, covenants or agreements in this Agreement
or
in any exhibit or other document furnished or to be furnished by ATI or Seller
under this Agreement.
11.2
Indemnification
by
Buyer. Buyer agrees to indemnify, defend and hold
harmless Seller against any and all claims, demands, losses, costs, expenses,
obligations, liabilities and damages, including interest, penalties and
attorneys’ fees and costs incurred by Seller arising, resulting from or relating
to any breach of, or failure by Buyer to perform, any of its representations,
warranties, covenants or agreements in this Agreement or in any exhibit or
other
document furnished or to be furnished by Buyer under this Agreement.
11.3
Limitations
on
Indemnification by Seller.
| (a) | Seller’s indemnification obligation shall be limited to the maximum Purchase Price payable under this Agreement; provided, however, Seller will not be obligated with respect to the first Indemnity Claims up to an aggregate of $15,000 (the “Indemnification Exclusion”). The Indemnification Exclusion will not include individual Indemnity Claims of less than $1,000. |
| (b) | The indemnification obligations of Seller are solely for the benefit of Buyer, ATI, and their successors in interest and are not intended to, nor shall they, constitute an agreement for the benefit of, or be enforceable by, any other person or entity. |
| (c) | Seller shall have no liability with respect to any representation or warranty, unless, within three (3) years from the Closing Date, the Buyer has notified Seller of a claim as provided for in this Section 11. |
11.4
Limitations
on
Indemnification by Buyer. Buyer shall have no liability with
respect to any representation, warranty, or covenant, unless, within three
(3) years from the Closing Date, the Seller has notified Buyer of a claim
as provided for in this Section 11.
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11.5
Procedure
for
Indemnification Claims.
(a)
Whenever any parties become
aware that a claim (an “Underlying Claim”) has arisen entitling them to seek
indemnification under this Section 11 of the Agreement, such parties (the
“Indemnified Parties”) shall promptly send a notice (“Notice”) to the parties
liable for such indemnification (the “Indemnifying Parties”) of the right to
indemnification (the “Indemnity Claim”); provided, however, that the failure to
so notify the Indemnifying Parties will relieve the Indemnifying Parties from
liability under this Agreement with respect to such Indemnity Claim only if,
and
only to the extent that, such failure to notify the Indemnifying Parties results
in the forfeiture by the Indemnifying Parties of rights and defenses otherwise
available to the Indemnifying Parties with respect to the Underlying Claim.
Any
Notice pursuant to this Section 11.3(a) shall set forth in reasonable
detail, to the extent then available, the basis for such Indemnity Claim and
an
estimate of the amount of damages arising therefrom.
(b)
If an Indemnity Claim does
not result from or arise in connection with any Underlying Claim or legal
proceedings by a third party, the Indemnifying Parties will have thirty
(30) calendar days following receipt of the Notice to issue a written
response to the Indemnified Parties, indicating the Indemnifying Parties’
intention to either (i) contest the Indemnity Claim or (ii) accept the
Indemnity Claim as valid. The Indemnifying Parties’ failure to provide such a
written response within such thirty (30) day period shall be deemed to be
an acceptance of the Indemnity Claim as valid. In the event that an Indemnity
Claim is accepted as valid, the Indemnifying Parties shall, within fifteen
(15) Business Days thereafter, pay the damages incurred by the Indemnified
Parties in respect of the Underlying Claim in cash by wire transfer of
immediately available funds to the account or accounts specified by the
Indemnified Parties. To the extent appropriate, payments for indemnifiable
damages made pursuant to Section 11 of the Agreement will be treated as
adjustments to the Purchase Price.
(c)
In the event an Indemnity Claim
results from or arises in connection with any Underlying Claim or legal
proceedings by a third party, the Indemnifying Parties shall have fifteen
(15) calendar days following receipt of the Notice to send a Notice to the
Indemnified Parties of their election to, at their sole cost and expense, assume
the defense of any such Underlying Claim or legal proceeding; provided that
such
Notice of election shall contain a confirmation by the Indemnifying Parties
of
their obligation to hold harmless the Indemnified Parties with respect to
damages arising from such Underlying Claim. The failure by the Indemnifying
Parties to elect to assume the defense of any such Underlying Claim within
such
fifteen (15) day period shall entitle the Indemnified Parties to undertake
control of the defense of the Underlying Claim on behalf of and for the account
and risk of the Indemnifying Parties in such manner as the Indemnified Parties
may deem appropriate, including, but not limited to, settling the Underlying
Claim. However, the parties controlling the defense of the Underlying Claim
shall not settle or compromise such Underlying Claim without the prior written
consent of the other parties, which consent shall not be unreasonably withheld
or delayed. The non-controlling
parties shall be entitled to participate in (but not
control) the defense of any such action, with their own counsel and at their
own
expense.
-25-
(d)
The Indemnifying Parties and the
Indemnified Parties will cooperate reasonably, fully and in good faith with
each
other, at the sole expense of the Indemnifying Parties, in connection with
the
defense, compromise or settlement of any Underlying Claim including, without
limitation, by making available to the other parties all pertinent information
and witnesses within their reasonable control.
| 12. | Injunctive Relief. |
12.1
Damages
Inadequate. Each party acknowledges that it would
be impossible to measure in money the damages to the other party if there is
a
failure to comply with any covenants and provisions of this Agreement, and
agrees that in the event of any breach of any covenant or provision, the other
party to this Agreement will not have an adequate remedy at law.
12.2
Injunctive
Relief. It is therefore agreed that the other
party to this Agreement who is entitled to the benefit of the covenants and
provisions of this Agreement which have been breached, in addition to any other
rights or remedies which they may have, will be entitled to immediate injunctive
relief to enforce such covenants and provisions, and that in the event that
any
such action or proceeding is brought in equity to enforce them, the defaulting
or breaching party will not urge a defense that there is an adequate remedy
at
law.
| 13. | Further Assurances. |
Following
the Closing, Seller shall
furnish to Buyer such instruments and other documents as Buyer may reasonably
request for the purpose of carrying out or evidencing the transactions
contemplated hereby.
| 14. | Fees and Expenses. |
ATI
shall pay all fees, costs and
expenses that it incurs in connection with the negotiation and preparation
of
this Agreement and in carrying out the transactions contemplated hereby
(including, without limitation, all fees and expenses of its counsel and
accountant) through March 31, 2006. ATI shall pay all fees, costs and
expenses that it incurs in connection with carrying out the transactions
contemplated by this Agreement after March 31, 2006 up to an amount equal
to $13,000. All additional fees, costs and expenses associated with this
Agreement incurred by ATI or Seller will be paid by Seller. Buyer shall pay
all
fees, costs and expenses that it incurs in connection with the negotiation
and
preparation of this Agreement and in carrying out the transactions contemplated
hereby (including, without limitation, all fees and expenses of its counsel
and
accountant).
| 15. | Waivers. |
If
any party at any time waives any
rights hereunder resulting from any breach by the other party of any of the
provisions of this Agreement, such waiver is not to be construed as a
continuing waiver
of
other breaches of the same or other provisions of this Agreement. Resort to
any
remedies referred to herein will not be construed as a waiver of any other
rights and remedies to which such party is entitled under this Agreement or
otherwise.
-26-
| 16. | Successors and Assigns. |
Each
covenant and representation of
this Agreement will inure to the benefit of and be binding upon each of the
parties, their personal representatives, assigns and other successors in
interest.
| 17. | Entire and Sole Agreement. |
This
Agreement constitutes the
entire agreement between the parties and supersedes all other agreements,
representations, warranties, statements, promises and undertakings, whether
oral
or written, with respect to the subject matter of this Agreement. This Agreement
may be modified or amended only by a written agreement signed by the parties
against whom the amendment is sought to be enforced. The parties acknowledge
that as of the execution of this Agreement, that certain Letter of Intent among
certain of the parties dated January 19, 2006 will be terminated and be of
no further force or effect.
| 18. | Governing Law. |
This
Agreement will be governed by
the laws of California without giving effect to applicable conflict of laws
provisions. With respect to any litigation arising out of or relating to this
Agreement, each party agrees that it will be filed in and heard by the state
or
federal courts with jurisdiction to hear such suits located in Los Angeles
County, California.
| 19. | Counterparts. |
This
Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts will
be
deemed to be an original, and such counterparts will constitute but one and
the
same instrument.
| 20. | Assignment. |
Except
in the case of an affiliate
of the Buyer, this Agreement may not be assignable by any party without prior
written consent of the other parties.
| 21. | Remedies. |
Except
as otherwise expressly
provided herein, none of the remedies set forth in this Agreement are intended
to be exclusive, and each party will have all other remedies now or hereafter
existing at law, in equity, by statute or otherwise. The election of any one
or
more remedies will not constitute a waiver of the right to pursue other
available remedies.
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| 22. | Section Headings. |
The
section headings in this
Agreement are included for convenience only, are not a part of this Agreement
and will not be used in construing it.
| 23. | Severability. |
In
the event that any provision or
any part of this Agreement is held to be illegal, invalid or unenforceable,
such
illegality, invalidity or unenforceability will not affect the validity or
enforceability of any other provision or part of this Agreement.
| 24. | Notices. |
Each
notice or other communication
hereunder must be in writing and will be deemed to have been duly given on
the
earlier of (i) the date on which such notice or other communication is
actually received by the intended recipient thereof, or (ii) the date five
(5) days after the date such notice or other communication is mailed by
registered or certified mail (postage prepaid) to the intended recipient at
the
following address (or at such other address as the intended recipient will
have
specified in a written notice given to the other parties hereto):
If
to Seller:
Xxxxx
Xxxxxx
30575
Trabuco Canyon Road, Suite 200
Xxxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Telephone:
000 000 0000
Facsimile:
000 000 0000
And
to:
Xxxxxxx
X. Xxxxxxx, Esq.
Dongell
Xxxxxxxx Xxxxxx Xxxxxxxx
000
Xxxxxxxx Xxxx., 00xx
Xxxxx
Xxx
Xxxxxxx, XX 00000
Telephone:
000 000 0000
Facsimile:
000 000 0000
If
to Buyer:
InterMetro
Communications, Inc.
0000
Xxxx Xxxxxx Xxxxx, Xxxxxxxx X
Xxxx
Xxxxxx, Xxxxxxxxxx 00000
Attention:
Xxxxxxx Xxxx, Chief
Executive Officer
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
-28-
| 25. | Publicity. |
Except
as may be required in order
for a party to comply with applicable laws, rules, or regulations or to enable
a
party to comply with this Agreement, or necessary for the Buyer to prepare
and
disseminate any private or public placements of its securities or to communicate
with its shareholders, no press release, notice to any third party or other
publicity concerning the transactions contemplated by this Agreement will be
issued, given or otherwise disseminated without the prior approval of each
of
the parties hereto; provided, however, that such approval will not be
unreasonably withheld.
IN
WITNESS WHEREOF,
this Agreement has been entered into as of the date first above written.
| ATI: | ADVANCED TEL, INC. | |||||||
| By: |
/S/ XXXXX
XXXXXX
|
|||||||
| Xxxxx Xxxxxx, Chief Executive Officer | ||||||||
| Singer/Seller: | ||||||||
|
/S/ XXXXX
XXXXXX
|
||||||||
| Xxxxx Xxxxxx, Individually | ||||||||
| Company/Buyer: | INTERMETRO COMMUNICATIONS, INC. | |||||||
| By: |
/S/ XXXXXXX
XXXX
|
|||||||
| Xxxxxxx Xxxx, Chief Executive Officer | ||||||||
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EXHIBIT
A
FORM
OF NOTE
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