EXHIBIT 2.2
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and
entered into as of April 1, 1998, by and among Telegen Corporation, a California
corporation ("Telegen"), Telegen Communications Corporation, a California
corporation and wholly owned subsidiary of Telegen (individually "TCC" and,
together with Telegen, "Selling Parties"), and SynerCom Inc., a Nevada
corporation ("Purchaser"), with reference to the following:
RECITALS
A. TCC is in the business of manufacturing, selling, marketing
and distributing electronic telecommunication products including, without
limitation, the "International Dialer," "ACS2010," "TeleblockerPlus(TM)," "Net
Timer," "Unique Ringer," "ACS2100," and "Multi-Line Dialer" (collectively the
"TCC Business").
B. Selling Parties and Purchaser have entered into a letter of
intent dated February 25, 1998 (the "LOI"), pursuant to which the parties stated
the intent of Selling Parties to sell, and the intent of Purchaser to purchase,
certain property related to the TCC Business, subject to the negotiation and
execution of a definitive agreement between the parties.
C. Purchaser has paid to Telegen the sum of Three Hundred and
Twenty Thousand Dollars ($320,000) in the manner described in Section 2(a)(i),
which sum Telegen shall apply to the Purchase Price (as defined in Section 2(a))
if the transactions contemplated by this Agreement are consummated.
D. Purchaser desires to purchase, and Selling Parties desire
to sell, substantially all of the assets and rights of Selling Parties relating
to the ownership and operation of the TCC Business in exchange for the Purchase
Price, all on the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual covenants set forth below, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties, intending to be legally bound, hereby agree as follows:
1. Sale and Purchase of Assets; Assumption of Liabilities.
(a) Sale of Assets.
Upon the terms and subject to the conditions of this
Agreement, at the Closing (as defined below) on the Closing Date (as defined
below), Selling Parties shall sell, convey, transfer, assign and deliver to
Purchaser, and Purchaser shall purchase from Selling Parties all of the right,
title and interest of Selling Parties in and to the Assets (as defined in
Section 1(b)), free and clear of any and all debts, liabilities, obligations,
taxes, security interests, liens, pledges, charges and encumbrances of every
kind (collectively, "Liens"), except for the Assumed Liabilities as defined in
Section 1(d) herein.
(b) Assets Defined.
The assets to be conveyed to Purchaser shall include all
personal tangible and intangible assets, properties, rights and business owned
by Selling Parties of whatever description that relate in any way to the
ownership, use or operation of the TCC Business, except assets specifically
excluded pursuant to Section 1(c) hereof, but including all property and rights
acquired or obtained by either of the Selling Parties from the date hereof
through the Closing that relate to the TCC Business, (collectively, the
"Assets"). Such Assets shall include, without limitation:
(i) Fixed Assets.
All fixed assets and tangible personal property of Selling
Parties useful in the TCC Business, including, without limitation, furniture,
office equipment, machinery, tools, supplies, computer equipment, telephones,
test equipment, tools, manufacturing equipment, inventory handling equipment,
fixtures and other fixed assets (collectively, the "Fixed Assets"). A list of
Fixed Assets having a net book value in excess of Five Hundred Dollars ($500)
shall be prepared by Selling Parties, approved by Purchaser, and attached hereto
as Schedule 1(b)(i) prior to the Closing. All Fixed Assets are located at (A)
000 Xxxxxxx Xxxxx, Xxxxxxx Xxxx, Xxxxxxxxxx 00000 (the "Premises"), (B) the
residence and business premises of Xxxxx Xxxxxxxxxx in Gardnerville, Nevada, and
(C) the business premises of Xxxxxxx Xxxxxx in Hong Kong.
(ii) Inventory.
All of Selling Parties' inventories of raw material, stock,
work-in-process, spare parts, supplies and finished products used and produced
in connection with the TCC Business (collectively, the "Inventory"). Selling
Parties and Purchaser agree that immediately prior to the Closing, a physical
inventory will be taken jointly and the actual inventory purchased by Purchaser
shall be based thereon. A list of the Inventory being purchased shall be
prepared by Selling Parties, approved by Purchaser, and attached hereto as
Schedule 1(b)(ii) prior to the Closing.
(iii) Accounts Receivable.
All of Selling Parties' notes receivable, accounts receivable,
security deposits, deposits by customers and unbilled receivables in connection
with the TCC Business (collectively, the "Accounts Receivable"), including all
interest due and payable on such receivables. A list of the Accounts Receivable
shall be prepared by Selling Parties, approved by Purchaser, and attached hereto
as Schedule 1(b)(iii) prior to the Closing.
(iv) Contracts.
All leases, agreements, contracts, instruments, security
interests, guaranties, and other similar arrangements, and all of Selling
Parties' rights therein, relating to the TCC Business (collectively, the
"Assigned Contracts"). A list of the Assigned Contracts shall be prepared by
Selling Parties, approved by Purchaser, and attached hereto as Schedule 1(b)(iv)
prior to the Closing.
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(v) Intangible Property; Intellectual
Property.
All intangible property of Selling Parties useful in the TCC
Business, including, without limitation, all of Selling Parties' claims and
rights under trade secrets, issued patents (including, without limitation, U.S.
Patent No. 5,590,182, dated December 31, 1996), patent rights, applications to
patent, trademarks, registered trademarks (including, without limitation, U.S.
Trademark No. 1,824,133), applications for registration of trademarks, service
marks, trade names, copyrights, inventions, formulas, know-how, confidential
proprietary technical information, licenses, royalty rights, computer programs,
software or firmware, data processing information, any other intellectual
property, held for use by Selling Parties in the TCC Business, and goodwill (the
"Intangible Property"). Included in Intangible Property shall be all
information, documents, designs, files, notes, and records of every kind and
nature prepared or maintained in connection with the research and development
activities of the TCC Business, including without limitation, those concerning
the original development of existing products, enhancements or changes made to
products of the TCC Business (whenever made), enhancements or changes proposed
to be made or being considered to be made to existing products, or the
development of new products. The Intangible Property shall not include such
property that, as of the date hereof, is not necessary for the operation of the
TCC Business and which is used in the business and operation, other than the TCC
Business, of Telegen or any of Telegen's subsidiaries, including but not limited
to the "Telegen" name; provided , however, that for a period of one year
following the Closing Date, Purchaser may use the "Telegen" name as reasonably
needed by Purchaser in connection with the transition of ownership of the Assets
from Selling Parties to Purchaser. Such reasonable use of the "Telegen" name by
Purchaser shall include without limitation use of the "Telegen" name on
previously printed labels, brochures, manuals, circuit boards, parts and other
inventory, and in connection with permits and licenses issued by Underwriters
Laboratories and the Federal Communications Commission until such time that such
licenses are obtained in the name of Purchaser. A list of the Intangible
Property shall be prepared by Selling Parties, approved by Purchaser, and
attached hereto as Schedule 1(b)(v).
(vi) Books and Records.
All of Selling Parties' files (in any format, including paper
and electronic), documents, lists and records useful in the TCC Business,
including those records relating to the customers of and vendors to the TCC
Business (collectively the "Books and Records"). Included in the Books and
Records shall be, without limitation, copies of personnel files of all employees
employed in connection with the TCC Business (such employees, collectively, the
"TCC Employees"), addresses and telephone numbers used by Selling Parties in the
TCC Business, and any yellow pages and trade journal advertising, web site files
and web site links, and all other advertising relating to the TCC Business. A
list of the Books and Records shall be prepared by Selling Parties, approved by
Purchaser, and attached hereto as Schedule 1(b)(vi).
(c) Excluded Assets.
The assets set forth on Schedule 1(c) to this Agreement shall
be retained by Selling Parties and shall not be sold, assigned or transferred to
Purchaser (the "Excluded Assets").
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(d) Assumption of Liabilities.
Except for those liabilities and obligations of Selling
Parties that are specifically set forth on Schedule 1(d) (such items disclosed
on Schedule 1(d) collectively referred to herein as the "Assumed Liabilities"),
it is expressly understood that Purchaser shall not assume and in no event shall
Purchaser shall be deemed to have assumed or agreed to pay or perform, and
Selling Parties shall at all times remain solely responsible for, any debts,
contracts, commitments, obligations or other liabilities of Selling Parties of
any kind or nature whatsoever, including without limitation those of the TCC
Business or connected in any way to the Assets arising or accruing prior to the
Closing. In connection with the TCC Business, all liabilities, debts, contracts,
agreements and other obligations of Selling Parties other than the Assumed
Liabilities, are referred to herein as the "Nonassumed Liabilities").
(e) Purchase of Entire TCC Business.
Selling Parties and Purchaser hereby acknowledge and agree
that, except for the Excluded Assets and Nonassumed Liabilities, Purchaser is
purchasing the entire TCC Business owned by Selling Parties.
(f) Risk of Loss.
Until the Closing, Selling Parties shall bear all risk of
loss, injury, damage or destruction of the Assets. If any loss, injury, damage
or destruction substantially impairs the value of the Assets prior to the
Closing, Purchaser may terminate this Agreement at Purchaser's sole option.
2. Purchase Price; Allocation.
(a) Purchase Price and Manner of Payment.
Subject to the other terms and conditions of this Agreement,
and in full consideration for the Assets, Purchaser agrees that the aggregate
purchase price of the Assets (the "Purchase Price") shall be Five Hundred
Thousand Dollars ($500,000) plus any Additional Payments (defined below) and
Assumed Liabilities, payable as follows:
(i) Refundable Deposit.
Purchaser has paid to Telegen Three Hundred and Twenty
Thousand Dollars ($320,000) in the following manner: (A) concurrently with
execution of the LOI, Purchaser paid to Telegen One Hundred and Fifty Thousand
Dollars ($150,000), (B) on March 19, 1998, Purchaser paid to Telegen One Hundred
Thousand Dollars ($100,000), (C) on March 30, 1998, Purchaser paid to Telegen
Seventy Thousand Dollars ($70,000) (such amounts, collectively, the "Refundable
Deposit"). In the event the transactions contemplated by this Agreement are not
consummated within thirty (30) days after the execution of this Agreement,
Telegen shall deliver the Refundable Deposit to Purchaser on demand therefor;
provided, however, that in the event that the failure to consummate the
transactions contemplated herein is caused directly by a material breach of this
Agreement by Purchaser, Purchaser shall forfeit One Hundred and Fifty Thousand
Dollars ($150,000) of the Refundable Deposit to Telegen.
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(ii) Closing Payment.
At the Closing, Purchaser shall pay to Telegen Thirty Thousand
Dollars ($30,000) (the "Closing Payment"), by wire transfer to a trust account
of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, such funds to be received on behalf of
Telegen.
(iii) Promissory Note.
At the Closing, Purchaser shall deliver to Telegen a
promissory note (the "Promissory Note"), substantially in the form of Exhibit A
hereto in the original principal amount of One Hundred and Fifty Thousand
Dollars ($150,000), which shall be payable, net of any Setoff Amounts (as
defined in Section 9(d)), to Telegen in accordance with the terms set forth in
the Promissory Note.
(iv) Additional Payments.
Following the Closing, Purchaser shall pay to Telegen certain
additional payments (the "Additional Payments") on the terms and conditions set
forth below:
(A) Payment of Additional Payments.
For a period of three (3) years after the Closing Date,
Purchaser or any successor in interest, whether by sale, merger, consolidation,
operation at law or otherwise, to the TCC Products listed in this Section
2(a)(iv)(c) below, such successor in interest which shall be bound by the
provisions of this Section 2(a)(iv)(c), shall deliver to Telegen within thirty
(30) days after the end of each calendar quarter, net of any Setoff Amounts, the
amount of Additional Payments accruing to Telegen during such calendar quarter.
Payment shall be accompanied by a summary of the basis for determining the
amount of such payment.
(B) Gross Sales Price.
For purposes of calculating any Additional Payments, "Gross
Sales Price" shall mean the aggregate dollar gross sales of a certain TCC
product made by Purchaser during a calendar quarter. "Gross Sales Price" shall
not include unfilled product orders or costs related to freight, duty or tax in
connection with the sale and delivery of TCC products.
(C) Calculation of Additional
Payments.
Additional Payments be calculated as follows:
(1) International Dialer
Payment.
The "International Dialer Payment" shall equal seven and
one-half percent (7.5%) of the Gross Sales Price of the International Dialer for
each calendar quarter.
(2) Category A Products
Payment.
The "Category A Products Payment" shall equal five percent
(5%) of the aggregate Gross Sales Price of all Category A Products for each
calendar quarter. The "Category
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A Products" shall mean the following TCC products: ACS 2010,
TeleblockerPlus(TM), Net Timer, and Unique Ringer.
(3) Category B Product
Payment.
The "Category B Product Payment" shall equal two and
one-quarter percent (2.25%) of the Gross Sales Price of the Category B Product
for each calendar quarter. The "Category B Product" shall mean the following TCC
product: ACS 2100.
(4) Category C Product.
The "Category C Product Payment" shall equal one and one-half
percent (1.5%) of the Gross Sales Price of the Category C Product for each
calendar quarter. The "Category C Product" shall mean the following TCC product:
Multi-Line Dialer.
(D) Materially Changed Products.
In the event that Purchaser makes a material change to any of
the products described in Section 2(a)(iv)(C) (such product a "Materially
Changed Product"), Purchaser shall have no obligation to make Additional
Payments in connection with sales of such Materially Changed Product. With
respect to whether a new product is a "Materially Changed Product," evidence of
material change shall include, without limitation, the following:
significantly improved functionality.
(b) Allocation of Purchase Price.
At the Closing, Purchaser and Selling Parties in good faith
shall agree on an allocation of the Purchase Price in accordance with the
respective fair market value of the Assets being purchased and as provided for
under Section 1060 of the Internal Revenue Code of 1986, as amended (the
"Code"). Such allocation of Purchase Price shall be listed on a document
substantially in the form of Schedule 2(b) attached hereto. Purchaser and each
of the Selling Parties further agree to file their income tax returns and their
other tax returns reflecting the allocation as determined pursuant to this
Section 2(b).
3. Closing Date and Actions at Closing.
(a) Closing Date.
The closing of the transactions contemplated by this Agreement
(the "Closing") shall take place at the offices of Xxxxxx Xxxxxx Xxxxxxx &
Xxxxxxx LLP, 000 Xxxx Xxx Xxxxxx Xxxxxx, Xxx. 0000, Xxx Xxxx, Xxxxxxxxxx, at
10:00 A.M., Pacific Standard Time, on April 1, 1998, or at such other time and
place as may be mutually agreed upon by the parties (the "Closing Date").
(b) Transfer Documents.
At the Closing, Selling Parties shall execute and deliver to
Purchaser one or more bills of sale, each in substantially the form of Exhibit B
attached hereto (the "Xxxx of Sale"), and all such other good and sufficient
instruments of sale, transfer and conveyance, including
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assignments of leases, as shall be effective to vest in Purchaser all of Selling
Parties' right and title to, and interest in, the Assets.
(c) Assignment and Assumption Documents.
At the Closing, Purchaser and Selling Parties shall execute
and deliver a general assignment and assumption agreement, in substantially the
form of Exhibit C attached hereto (the "Assignment and Assumption Agreement"),
in order to effect the assignment of the Remaining Assets (as defined therein)
by the Selling Parties and assumption of the Assumed Liabilities by the
Purchaser.
(d) Additional Actions.
Selling Parties and Purchaser shall, on request, both at the
Closing and after the Closing Date, take such further actions as may be
reasonably requested by the other party to carry out the intent of this
Agreement and the Xxxx of Sale, the Assignment and Assumption Agreement, and all
other documents and agreements to be executed and delivered at the Closing as
agreed to by the parties (collectively, the "Closing Documents").
4. Representations and Warranties of Selling Parties.
The Selling Parties hereby jointly and severally represent,
warrant and covenant to Purchaser as follows:
(a) Organization, Good Standing and Qualification.
Each of the Selling Parties is a corporation duly organized,
validly existing and in good standing under the laws of the State of California,
has all necessary corporate powers to own its property and to carry on its
business as now owned and operated by it, and is duly qualified to do business
and is in good standing in all jurisdictions in which the nature of such Selling
Parties' business or it property makes such qualification necessary.
(b) Corporate Power; Authority.
Selling Parties have all requisite corporate power and
authority to enter into, perform and carry out this Agreement. This Agreement
has been duly authorized, executed and delivered by the Selling Parties, and
constitutes a legal and valid obligation of each of the Selling Parties,
enforceable in accordance with its terms.
(c) Assets.
The Selling Parties are the true and lawful owners of all of
the Assets and have all necessary power and authority to sell the Assets to
Purchaser, free and clear of all Liens. The Assets include all of the operating
assets of the Selling Parties useful and necessary to conduct the TCC Business
as operated by Selling Parties prior to the Closing Date. Except as set forth on
Schedule 4(c), on the Closing Date, Purchaser will acquire good and valid title
to the Assets free and clear of all Liens, except to the extent any of the
Assets are subject to either a purchase
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contract with an outstanding balance, or a lease, in either case only to the
extent set forth on Schedule 4(c).
(d) Compliance with Law.
Selling Parties hold, and at all times have held, all material
licenses, permits and authorizations necessary for the lawful operation of the
TCC Business pursuant to all materially applicable statutes, laws, ordinances,
rules and regulations of all governmental bodies, agencies and subdivisions
having, asserting or claiming jurisdiction over either of Selling Parties, the
TCC Business or any other part of Selling Parties' operations. Except as set
forth on Schedule 4(d), since January 1, 1997, (i) there has been no violation
of any material law, regulation, decree, judgment or order by either of Selling
Parties or concerning the operation of the TCC Business and (ii) there has been
no inspection of the facilities used in connection with TCC Business by or on
behalf of any governmental bodies, agencies or subdivisions.
(e) No Violation of Other Instruments.
Neither the execution of this Agreement nor the consummation
of the transactions contemplated hereby will result in any breach or violation
of the terms of any decree, judgment, law, regulation or order (to which either
of the Selling Parties is subject or is a named party) now in effect of any
court or other governmental body. Except as set forth on Schedule 4(e) no
consent, permit, approval, order or authorization of, or registration,
qualification, or filing with, any governmental agency or authority, or any
other person, is required in connection with the consummation of the
transactions contemplated by this Agreement or the conduct of the TCC Business
by Purchaser after the Closing. The execution and delivery of this Agreement and
consummation of the transactions contemplated hereby will not conflict with, or
result in any breach of, any of the terms, conditions and provisions of, or
constitute a default under or result in the acceleration of any outstanding
indebtedness of either of the Selling Parties or creation of any lien, charge,
or encumbrance upon any of the assets of either of the Selling Parties, pursuant
to either Selling Parties' Articles of Incorporation, Bylaws or any indenture,
mortgage, lease, agreement or other instrument to which any of the Selling
Parties is a party or by which either of the Selling Parties or any Asset is
bound.
(f) Financial Statements; Undisclosed Liabilities.
The Selling Parties have delivered to Purchaser certain
financial information relating to the TCC Business ("TCC's Financial
Information") as described in Schedule 4(f). TCC's Financial Information (i) is
in accordance with the books and records of TCC and (ii) correctly and fully
sets forth the financial position and results of operations of TCC as of the
dates indicated. Purchaser acknowledges that such statements have not been
audited or reviewed by a certified public accountant.
(g) Patents, Trademarks, Tradenames and Copyrights.
To the knowledge of Selling Parties, Schedule 1(b)(v)
comprises a listing of (i) all trademarks (either registered, common law or
registration applied for), trade names, issued patents, patent applications,
copyrights, know-how and trade secrets which are held for use by Selling Parties
and useful in the TCC Business, (ii) all trademarks, trademark registration
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applications, trade names, copyrights, know-how and trade secrets which are
owned by third parties and are used in the TCC Business or in which Selling
Parties have any interest; and (iii) all licenses, sublicenses, assignments or
agreements of any kind relating to the aforesaid. Except as otherwise noted in
Schedule 4(g), no litigation or claim is pending or has been threatened against
Selling Parties or any director, officer, shareholder, agent or employee of
Selling Parties for the infringement of any patents, copyrights, trademarks or
trade names of any third party or for the misuse or misappropriation of any
trade secrets or know-how owned by any third party used in the TCC Business. All
trademarks, copyrights, trade names, designs, trade secrets or know-how which
are necessary to the TCC Business conducted by Selling Parties are owned or are
usable (without restriction or payment) by Selling Parties. Except as set forth
on Schedule 4(g), there has been no infringement or unauthorized use by Selling
Parties of any patent, trademark, trade name, copyright, process, design,
formula, invention, trade secret, know-how, or technology belonging to a third
party in connection with the TCC Business.
(h) Contracts.
Schedule 4(h) describes all currently effective contracts
entered into in connection with the TCC Business, oral or written, known to
Selling Parties to which either of the Selling Parties is a party and which (i)
involve the payment or receipt of more than $10,000, (ii) have a duration of
more than one year, (iii) are financing documents, or (iv) are not for the
purchase or sale of goods or services in the ordinary course of the TCC Business
consistent with past practices. True and complete copies of all such contracts
are attached to Schedule 4(h). Except as set forth on Schedule 4(h), neither of
the Selling Parties nor any party to any such contract is in default in
performance of or not in compliance with any material provision of any such
contract. Selling Parties have no intent, and have no knowledge of any intent by
any other party, not to perform its obligations under any such contract.
(i) Litigation.
Except as set forth in Schedule 4(i), neither of the Selling
Parties nor any of the directors, officers, shareholders, agents or employees of
the Selling Parties is a party to any pending or threatened action, suit,
proceeding or investigation, at law or in equity or otherwise, in, for or by any
court or governmental board, commission, agency, department or office arising
from, relating to or in any way affecting the TCC Business or any of the Assets.
(j) Personnel.
Schedule 4(j) comprises a complete and correct list of (i) all
contractual employment, bonus, profit-sharing, welfare benefit (as that term is
defined in the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), percentage compensation, pension or retirement plans, contracts or
agreements with directors, officers, shareholders or employees, collective
bargaining or consulting agreements, to which either of the Selling Parties is a
party or is subject in connection with the TCC Business, (ii) the names and
current compensation rates and planned increases in compensation of all salaried
and non-salaried employees of Selling Parties employed in the TCC Business, and
(iii) all group insurance programs in effect for TCC Employees. All of the
profit-sharing, pension, welfare benefit and retirement plans set forth on
Schedule 4(j) are qualified under the Internal Revenue Code and ERISA and all
past service liabilities thereunder have been fully funded. Schedule 4(j) sets
forth
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a listing of all bonuses paid to TCC Employees in 1997 and 1998, the aggregate
amount of accrued vacation and sick leave for TCC Employees, and the amount
payable to TCC Employees under other fringe benefit plans.
(k) Consent of Board, Shareholders and Others.
Each of the Selling Parties has obtained or will obtain prior
to the Closing Date, the consent of its Board of Directors, shareholders, and
all others required by its Articles of Incorporation, Bylaws or otherwise, to
the transactions contemplated by this Agreement.
(l) Accuracy of Documents and Information.
There is no fact known to Selling Parties which materially and
adversely affects the TCC Business, any of the Assets, or the transactions
contemplated by this Agreement which has not been expressly and fully set forth
in this Agreement or the exhibits and schedules hereto.
(m) Related Parties; Acknowledgements.
Selling Parties are aware that Xxxx Xxxxx ("Xxxxx") and Xxxxxx
Xxxx Xxxxxxx ("Xxxxxxx") are principal shareholders, directors and officers of
Purchaser. Selling Parties are aware that Xxxxx is an officer of TCC and a
member of the Board of Directors of Telegen, and that Lempert has, in the past,
provided legal representation to Selling Parties. Selling Parties have been
informed by Lempert that the Rules of Professional Conduct of the California
State Bar provide that an attorney shall not enter into any business
relationship with a client without first informing the client of the
advisability that the client consult with an independent attorney to assure that
the business transaction is fair, just and reasonable to client. Selling Parties
previously have been advised of this rule, have had a reasonable period of time
to consult, and to the extent Selling Parties have deemed it advisable, have
consulted independent counsel.
5. Purchaser's Representations and Warranties.
Purchaser hereby represents, warrants and covenants to Selling
Parties as follows:
(a) Organization and Authority.
Purchaser is a corporation duly organized, validly existing
and in good standing under the laws of the State of Nevada. Purchaser has all
requisite corporate power and authority to enter into, perform and carry out
this Agreement.
(b) Compliance with Law and Other Instruments.
The execution and delivery of this Agreement and compliance
with the provisions hereof by Purchaser will not conflict with, result in any
material breach of any of the terms, conditions and provisions of, or constitute
a material default under any Article, Bylaw, indenture, mortgage, lease,
agreement or other instrument to which Purchaser is a party or by which it is
bound.
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6. Conditions to Purchaser's Obligations.
Except as otherwise specifically set forth herein, all
obligations of Purchaser under this Agreement are subject to the fulfillment,
prior to or at the Closing Date or as of such later date as Purchaser may
designate, of each of the following conditions, any one or more of which may be
waived in writing by Purchaser in its sole discretion.
(a) Representations and Warranties True at Closing.
The representations and warranties of the Selling Parties
contained in this Agreement (including the Schedules hereto) shall be deemed to
have been made again at and as of the Closing Date with respect to the state of
facts then existing and shall then be true, complete and correct in all material
respects. On the Closing Date, Selling Parties shall have delivered to Purchaser
a certificate to such effect and to the effect that all conditions set forth in
this Section 6 have been satisfied on or before the Closing Date, which
certificate shall be satisfactory in form and substance to Purchaser. Purchaser
shall not have discovered any error, misstatement or omission in the
representation and warranties made by Selling Parties.
(b) Authority.
All corporate and other proceedings required to be taken by,
or on the part of, Selling Parties to authorize Selling Parties to execute,
deliver and carry out this Agreement and to sell the Assets to Purchaser shall
have been duly and properly taken, including the written approval of all of the
shareholders of TCC to this Agreement and the Promissory Note.
(c) Material Changes.
Between the most recent date of TCC's Financial Information
and the Closing Date (i) there shall have been no materially adverse change in
the position, financial or otherwise, of the Assets or the TCC Business; (ii)
Selling Parties shall not be involved in any labor dispute which materially and
adversely affects Selling Parties; and (iii) Selling Parties shall not have
suffered any liability, judgment, lien or termination of any contract or the
imposition of any obligation, the effect of which shall be materially adverse to
the TCC Business.
(d) Approvals.
Purchaser and Selling Parties, as the case may be, shall
either (i) have received as of the Closing Date all material licenses, permits,
consents, authorizations and approvals of any governmental agency or authority,
or any other person ("Approvals") necessary or appropriate for the operation of
the TCC Business, or (ii) if such Approvals have not been issued prior to the
date first set forth above, Purchaser shall be satisfied in its discretion that
such Approvals will be issued in the ordinary course after such date and that
Purchaser can operate the TCC Business as presently operated after such date
prior to the issuance of such Approvals without incurring any material liability
or obligation based on such operation prior to the issuance of such Approvals.
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(e) Other Documents and Agreements.
In addition to all documents and instruments required pursuant
to Section 1 hereof, Selling Parties shall have delivered to Purchaser the
following documents and agreements: (i) the Xxxx of Sale substantially in the
form attached hereto as Exhibit B, and (ii) the Assignment substantially in the
form attached hereto as Exhibit C.
(f) No Action to Prevent Completion.
There shall not have been instituted and be continuing or
threatened against Selling Parties or any of the directors, officers,
shareholders, agents or employees of Selling Parties any claim, action or
proceeding which would materially adversely affect the TCC Business, nor shall
there have been instituted and be continuing or threatened any action or
proceeding by or before any court or other governmental body to restrain,
prohibit or invalidate, or to obtain damages in respect of, the transactions
contemplated by this Agreement or which might adversely affect the right of
Purchaser after the Closing Date to own the Assets or to operate or control the
TCC Business, as contemplated by this Agreement.
(g) Failure of Conditions.
In the event any one or more of the conditions set forth in
this Section 6 is not satisfied within the dates required, Purchaser, in its
sole and absolute discretion, may elect: (i) to waive any such condition
precedent, (ii) to terminate this Agreement pursuant to Section 10, or (iii) to
postpone the Closing Date for a period not to exceed 30 days.
7. Conditions to Obligations of Selling Parties.
Except as otherwise specifically set forth herein, all
obligations of Selling Parties under this Agreement are subject to the
fulfillment and satisfaction, prior to or at the Closing, of each of the
following conditions, any one or more of which may be waived in writing by
Selling Parties.
(a) Representations and Warranties True at the
Closing.
The representations and warranties of Purchaser contained in
this Agreement shall be deemed to have been made again at and as of the Closing
Date with respect to the state of facts then existing and shall then be true in
all material respects.
(b) No Action to Prevent Completion.
There shall not have been instituted and be continuing or
threatened any action or proceeding by or before any court or other governmental
body to restrain, prohibit or invalidate, or to obtain substantial money damages
in respect of, the transactions contemplated by this Agreement.
12
(c) Authority.
All corporate and other proceedings required to be taken by,
or on the part of, Purchaser, to authorize Purchaser to execute, deliver and
carry out this Agreement, shall have been duly and properly taken.
(d) Delivery of Closing Payment; Promissory Note.
Selling Parties shall have delivered to Purchaser the following
documents and agreements: (i) the Closing Payment and (ii) the Promissory Note
substantially in the form attached hereto as Exhibit A.
8. Covenants.
(a) No Agency.
From and after the date hereof, neither Purchaser nor either
of the Selling Parties shall represent itself as the agent of the other.
(b) Confidentiality.
Neither Selling Parties nor Purchaser shall make a public
announcement about the transactions contemplated hereunder without the prior
written consent of the other party, unless required by law. Selling Parties and
its agents each agree that all confidential and proprietary information relating
to the business or operations of Purchaser shall be treated as confidential, and
each of the Selling Parties shall not use or disclose such information after the
Closing Date; provided, however, that there shall be no obligation to keep in
confidence any information which (i) was permitted in writing by Purchaser to be
used or disclosed or (ii) is within the public domain or comes within the public
domain without any breach of this Agreement.
(c) Access.
To the extent reasonably necessary for a period of 180 days
after the Closing Date, and then with appropriate consideration of the
confidentiality of the subject transaction, Purchaser and its counsel,
accountants and other representatives shall have full access during normal
business hours to all the, books, accounts, records, contracts and documents of
or relating to the Assets, and Selling Parties shall furnish or cause to be
furnished to Purchaser and its representatives all data and information
concerning its business, finances and properties that may be reasonably
requested.
(d) Insurance.
Through and until the Closing Date, either or both of the
Selling Parties shall continue to carry insurance in connection with the TCC
Business and Assets in amounts required to fully replace the same in the event
of loss or damage.
13
(e) Cooperation; Employees of TCC.
Selling Parties shall not discourage in any way any of the
employees, customers or suppliers from commencing and maintaining similar
relations with Purchaser. Selling Parties shall use their best efforts to assist
Purchaser in hiring the TCC Employees and Purchaser shall provide each such TCC
Employee employment with Purchaser for a position similar to that held by such
employee with the Selling Parties. Selling Parties shall not persuade or entice
any TCC Employee employed by Purchaser to leave the employment of Purchaser or
terminate their contractual relationship with Purchaser for any reason or
purpose.
(f) Taxes.
All transfer, use, documentary transfer, stamp or excise
taxes, or other similar taxes of any type payable in connection with the sale
and transfer of the Assets or otherwise in connection with the consummation of
the transactions contemplated by this Agreement and the other Closing Documents,
shall be borne by the Selling Parties; provided, however, that Purchaser shall
pay for any sales tax owing to the State of California in connection with this
transaction.
(g) Premises.
Selling Parties shall take all action, including, without
limitation, obtaining all necessary consents, waivers and permits, so as to
allow Purchaser to occupy, rent free, 2500 square feet of the Premises (the "TCC
Premises"), including, without limitation, private offices, engineering and
storage space until December 31, 1998, and conduct the TCC Business therefrom.
Attached hereto as Schedule 8(g) is a detailed floorplan of the TCC Premises. In
the event Selling Parties vacate the Premises, Selling Parties shall provide
Purchaser no less than thirty (30) days notice prior to the date Selling Parties
intend to vacate the Premises; provided, however, that in the event Selling
Parties receive less than thirty (30) days notice to vacate the Premises,
Selling Parties shall use best efforts to promptly inform Purchaser of such
notice and shall have no further obligation to the Purchaser hereunder in
connection with the Premises. Purchaser shall have no liability with respect to
the TCC Premises after it ceases to occupy the Premises. Selling Parties shall
provide Purchaser full access to the Premises, including, without limitation,
the necessary passwords, codes and access codes to gain entry to the Premises.
Purchaser shall pay a pro rata share, based on a ratio of the TCC Premises to
the Premises as a whole, of utilities, common area maintenance costs and
telephone charges in connection with its use of the TCC Premises.
(h) Satisfaction of Conditions.
Each party shall in good faith proceed to take or cause to be
taken all actions within its power necessary to satisfy all conditions to its
obligations to close and consummate the transactions contemplated by this
Agreement.
(i) Conduct of Business Prior to Closing Date.
Between the date hereof and the Closing Date, except with the
consent of Purchaser and except as may be required to effect transactions
contemplated in this Agreement,
14
Selling Parties will (i) conduct the TCC Business in the ordinary course thereof
in accordance with past practices; (ii) not make any changes in its accounting
methods or practices except as required by generally accepted by generally
accepted accounting principles; (iii) not enter into any agreement, commitment
or contract of any kind which would be required to be disclosed in a schedule to
this Agreement except those in the ordinary course of the TCC Business and
consistent with past practices; and (iv) not sell or lease, or agree to sell or
lease, all or substantially all of the Assets and the TCC Business.
(j) Litigation.
Selling Parties shall retain control of the prosecution and
defense of all claims in connection with those certain legal actions to which
Telegen and Rates Technology, Inc. are parties; provided, however, that Selling
Parties shall promptly provide written notice to Purchaser in the event the
prosecution, defense or settlement of such action could affect the Assets or TCC
Business.
(k) Release.
In consideration of certain cash advances personally made by
Xxxxx on behalf of Selling Parties for certain expenses including, without
limitation, travel expenses, spare parts and other expenses related to the TCC
Business, and for other good and valuable consideration, Selling Parties hereby
waive, release and forever discharge Xxxxx from any and all claims it has in
connection with that certain $10,000 cash advance of salary made by Selling
Parties to Xxxxx. Selling Parties hereby acknowledge that they have read,
understood, and hereby expressly waive any and all right and benefit which they
now have, or in the future may have, conferred upon them by virtue of the
provisions of Section 1542 of the Civil Code of the State of California which
provides as follows: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING
THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT
WITH THE DEBTOR."
(l) Confidentiality Agreements; Non-Competition
Agreements.
Selling Parties acknowledge that all confidentiality
agreements and non-competition agreements entered into between Selling Parties
and the TCC Employees are included in the Assigned Contracts, to the extent they
relate to the Assets only, and will be assigned to Purchaser effective as of the
Closing Date. Selling Parties hereby agree and acknowledge that after the
Closing Date, Purchaser shall have sole authority to enforce such agreements.
(m) Bulk Sale Laws.
The Selling Parties and the Purchaser understand that notices
of bulk sales may be required under California law in connection with the
consummation of this transaction and that no such notices are given hereunder.
9. Indemnity.
15
(a) Indemnity of Purchaser.
With respect to claims asserted by Purchaser after the Closing
Date, Selling Parties shall jointly and severally indemnify, hold harmless and
defend Purchaser from and against any and all losses, costs, expenses,
liabilities claims, demands and judgments of every nature (including the defense
thereof and reasonable attorneys' fees incurred) arising out of or in connection
with or related to (i) any and all claims (whether known or unknown, fixed or
contingent), losses, costs, expenses, commitments, agreements, liabilities and
obligations of either of the Selling Parties, or arising from the operations or
commitments of either of the Selling Parties, whether arising or existing either
before or after the Closing, whether accrued, absolute, contingent or otherwise
and whether or not disclosed in this Agreement or on the exhibits or schedules
hereto, to the extent not expressly assumed by Purchaser pursuant to this
Agreement (whether or not such liability or obligation is imposed by statute);
(ii) the breach by either of the Selling Parties of any warranty or
representation made by Selling Parties pursuant to this Agreement, (iii) the
non-performance, partial or total, of any covenant made by either of the Selling
Parties pursuant to this Agreement; (iv) product or testing liabilities relating
to periods prior to the Closing Date; (v) human resource liabilities relating to
periods prior to the Closing Date (including, for example, obligations to
retirees); and (vi) any liabilities resulting from bulk sales laws except for
liabilities resulting from assumption of any and all liabilities by the
Purchaser hereunder.
(b) Indemnity of Selling Parties.
With respect to claims asserted by Selling Parties after the
Closing Date, Buyer shall indemnify and hold Selling Parties harmless from and
against any and all losses, costs, expenses, liabilities, claims, demands and
judgments of every nature (including the defense thereof and reasonable
attorneys' fees incurred) arising out of or in connection with or which are
related to the non-performance, partial or total, of Purchaser's covenant to pay
any sales tax owing to the State of California in connection with this
transaction.
(c) Notice of Claims - Participation in Third Party
Suits.
Any party making a claim for indemnity under this Section 9
("Indemnitee") against the other party ("Indemnitor") shall give notice of such
claim in writing, which notice shall state in general terms the facts upon which
Indemnitee makes such claim for indemnification together with reasonable
documentation of such claim. In the event of any claim or demand asserted
against Indemnitee by a third party upon which Indemnitee may claim
indemnification under this Section 9, Indemnitee shall give Indemnitor written
notice within 15 days after receipt thereof indicating whether Indemnitee
intends to conduct the defense of such claim or demand. Indemnitor shall have
the right, at such Indemnitor's own expense, to participate in such defense, by
written notice given to Indemnitee within 15 days from the date of Indemnitee's
notice of such claim. If Indemnitee conducts the defense and Indemnitor doesn't
participate in such defense, Indemnitee shall have the right fully to control
and to settle the proceeding. If Indemnitor elects to participate in such
defense, Indemnitee shall nonetheless control the proceeding, but shall not
settle the same without the consent of Indemnitor, which consent shall not be
unreasonably withheld. If Indemnitee elects not to conduct the defense,
16
Indemnitor shall conduct such defense and Indemnitor shall not settle the same
without the consent of Indemnitee, which consent shall not be unreasonably
withheld.
(d) Setoff.
Purchaser may, in its sole discretion, setoff the amount, or
any portion thereof (such amounts being "Setoff Amounts"), of any claims for
indemnity for which Selling Parties are liable hereunder against the Purchase
Price. If at any time Purchaser's claims exceed the amounts then payable to
Selling Parties thereunder (or if Purchaser does not elect to effect such Setoff
Amounts), Selling Parties shall be liable to Purchaser for such amount, and
Selling Parties shall make the required payment of such amount in cash within
ten (10) days after receipt of such claims from Purchaser.
10. Termination.
(a) Termination by Mutual Consent.
At any time prior to the Closing, this Agreement may be
terminated by the written consent of Purchaser and the Selling Parties.
(b) Termination by Purchaser or Selling Parties.
(i) Termination by Purchaser.
Purchaser may terminate this Agreement at any time prior to
the Closing by delivery of written notice to Selling Parties if: (A) either of
the Selling Parties has breached or violated this Agreement in any material
respect and, if such breach or violation is curable, has failed to cure such
violations within ten (10) days of receiving written notice thereof; (B) any
representation or warranty made by either of the Selling Parties is false or
inaccurate in any material respect or there is any material misrepresentation or
omission by any of the Selling Parties; or (C) upon the occurrence of an event
that has a material adverse effect on the TCC Business.
(ii) Termination by Selling Parties.
Selling Parties may terminate this Agreement at any time prior
to the Closing by delivery of written notice to Purchaser if: (A) Purchaser has
breached or violated this Agreement in any material respect and, if such breach
or violation is curable, has failed to cure such violations within ten (10) days
of receiving written notice thereof; or (B) any representation or warranty made
by Purchaser is false or inaccurate in any material respect or there is any
material misrepresentation or omission by Purchaser.
(c) Effect of Termination.
In the event of termination as provided above, all parties
hereto shall bear their own costs associated with this Agreement and all
transactions mentioned herein and there shall be no obligation on the part of
either party's officers, directors or stockholders; provided, however, that in
the event that the failure to consummate the transactions contemplated herein is
caused directly by a material breach of this Agreement by Purchaser, Purchaser
shall forfeit One
17
Hundred and Fifty Thousand Dollars ($150,000) of the Refundable Deposit to
Telegen. Nothing herein will relieve any party from liability for any breach of
this Agreement prior to termination.
(d) No Election of Remedies.
The election of a party to terminate hereunder shall not be
deemed an election of remedies, and all other remedies allowed hereby will
survive such termination.
11. Miscellaneous.
(a) Assignment.
This Agreement shall be binding upon and inure to the benefit
of the assigns, heirs, administrators, executors, legal representatives and
successors in interest of the parties hereto, provided, however, that this
Agreement shall not be assignable or delegable by either of the Selling Parties.
With the consent of Selling Parties (which shall not be unreasonably withheld),
Purchaser may assign, in whole or in part and to one or more third parties, any
of Purchaser's rights or obligations under this Agreement.
(b) Expenses.
Except as expressly provided herein, Purchaser and Selling
Parties shall each pay their own costs and expenses, including legal and
accounting expenses, relating to the transactions provided for herein,
irrespective of when incurred.
(c) Additional Documentation.
Selling Parties shall from time to time, subsequent to the
date first set forth above, 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 consummate the transactions contemplated by
this Agreement.
(d) Notices.
Any notice required or permitted hereunder shall be in writing
and shall be given by facsimile, personal delivery or telegraph, telex or US
mail, certified or registered with return receipt requested, and shall be deemed
to have been duly given on personal delivery or one business day after confirmed
fax or three days after the mailing to the respective persons named below:
If to Telegen: Telegen Corporation
000 Xxxxxxx Xxxxx
Xxxxxxx Xxxx, XX 00000
Attn: Xxxx Xxxxxxxxx
Fax: (000) 000-0000
18
If to TCC: Telegen Communications Corporation
000 Xxxxxxx Xxxxx
Xxxxxxx Xxxx, XX 00000
Attn: Xxxx Xxxxxxxxx
Fax: (000) 000-0000
19
If to Purchaser: SynerCom Inc.
000 Xxxxxxx Xxxxx
Xxxxxxx Xxxx, XX 00000
Attn: Xxxx Xxxxx
Fax: (000) 000-0000
With a copy to: Law Offices of Xxxxxx Xxxx Xxxxxxx
000 Xxxxxxxx Xxxxxx, 0x Xxxxx
Xxxxx Xxxxx, XX 00000-0000
Attn: Xxxxxx Xxxx Xxxxxxx, Esq.
Fax: (000) 000-0000
(e) Survival of Terms.
All representations, warranties, covenants and agreements made
herein or otherwise referenced herein shall survive the execution and delivery
of this Agreement and the consummation of the transactions contemplated herein.
(f) Governing Law; Consent to Jurisdiction.
This Agreement shall be governed by and construed in
accordance with the laws of the State of California applicable to contracts
executed by residents of California and wholly to be performed in California.
All judicial proceedings brought against Purchaser or Selling Parties with
respect to this Agreement or the transactions contemplated hereby may be brought
in any court of competent jurisdiction in the State of California, and by
execution and delivery of this Agreement, each party hereto hereby submits to
the exclusive jurisdiction and venue of such court. Each party agrees that
service upon such party in any such action or proceeding may be made by first
class mail, certified or registered, return receipt requested as provided by the
giving of notices in Section 11(d).
(g) Attorneys' Fees.
In the event of litigation under this Agreement, the
prevailing party shall be entitled to reimbursement of reasonable attorneys'
fees and costs of suit.
(h) Risk of Loss and Prorations.
Selling Parties and Purchaser hereby acknowledge and agree
that, except as otherwise provided herein, Selling Parties shall have possession
of all of the Assets through the Closing Date, and all risk of loss to said
Assets being sold hereunder prior to the Closing shall be that of the Selling
Parties. Insurance coverage, taxes, rentals, utility bills, and other day-to-day
expenses, except for employee related expenses which are treated in the
following sentence, shall be paid by the Selling Parties through the Closing
Date; any such items pre-paid for time periods after the Closing Date shall be
returned to Telegen. All TCC Employees-related expenses, including wages, taxes,
withholdings, accrued vacation allowances, and all other customary
20
employee expenses shall be paid by the Selling Parties through January 31, 1998;
any such expenses incurred after such date shall be borne by the Purchaser.
(i) Severability.
If any provision of this Agreement or any other agreement
entered into pursuant hereto is contrary to, prohibited by or deemed invalid
under applicable law or regulation, such provision shall be inapplicable and
deemed omitted to the extent so contrary, prohibited or invalid, but the
remainder hereof shall not be invalidated thereby and shall be given full force
and effect so far as possible.
(j) Preparation of Agreement.
This Agreement has been negotiated between parties who are
sophisticated and knowledgeable in the matters contained in this Agreement and
who have acted in their own self-interest. Accordingly, this Agreement shall not
be construed more strongly against any party regardless of who is responsible
for its preparation. The parties acknowledge each contributed and is equally
responsible for its preparation.
(k) Entire Agreement and Modification.
This Agreement and the schedules and exhibits hereto
constitute and contain the entire agreement of the parties and supersede any and
all prior negotiations, correspondence, understandings and agreements between
the parties respecting the subject matter hereof. This Agreement may only be
amended by a written instrument signed by the parties hereto.
(l) Captions.
The captions to Sections of this Agreement have been inserted
for identification and reference purposes and shall not by themselves determine
the construction or interpretation of this Agreement.
(m) Counterparts.
This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original, but all of which when taken together
shall constitute one and the same instrument.
[Reminder of this page intentionally left blank.]
21
IN WITNESS WHEREOF, the parties hereto have caused this Asset
Purchase Agreement to be executed as of the date first above written.
SELLING PARTIES: Telegen Corporation
By: /s/ XXXX X. XXXXXXXXX
--------------------------------------
Name: Xxxx X. Xxxxxxxxx
----------------------------------
Title: Chief Executive Officer
----------------------------------
Telegen Communications Corporation
By: /s/ XXXXXX X. XXXXXXX
-------------------------------------
Name: Xxxxxx X. Xxxxxxx
----------------------------------
Title: Chief Financial Officer
----------------------------------
PURCHASER: SynerCom Inc.
By: /s/ XXXXXXXXX X. XXXXX XX.
-------------------------------------
Name: Xxxxxxxxx X. Xxxxx, Xx.
----------------------------------
Title: President
----------------------------------
22
LIST OF EXHIBITS AND SCHEDULES TO ASSET PURCHASE AGREEMENT
EXHIBIT A -- SECURED PROMISSORY NOTE FOR $150,000
EXHIBIT B -- XXXX OF SALE
EXHIBIT C -- ASSIGNMENT AND ASSUMPTION AGREEMENT
Schedule 1(b)(i) -- Fixed Asset
Schedule 1(b)(ii) -- Inventory
Schedule 1(b)(iii) -- Accounts Receivable
Schedule 1(b)(iv) -- Assigned Contracts
Schedule 1(b)(v) -- Intangible Property
Schedule 1(b)(vi) -- Books and Records
Schedule 1(c) -- Excluded Assets
Schedule 1(d) -- Assumed Liabilities
Schedule 2(b) -- Allocation of Purchase Price
Schedule 4(c) -- Assets
Schedule 4(d) -- Compliance with Law
Schedule 4(e) -- No Violation of Other Instruments
Schedule 4(f) -- Financial Statements; Undisclosed Liabilities
Schedule 4(g) -- Patents, Trademarks, Tradenames and Copyrights
Schedule 4(h) -- Contracts
Schedule 4(i) -- Telegen v. Rates Technology, Inc.
Schedule 4(j) -- Personnel
Schedule 8(g) -- Floorplan of the TCC Premises
