EXHIBIT 10.1
Execution Copy
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ASSET PURCHASE AGREEMENT
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AMONG
IP GLOBAL VOICE, INC. (D/B/A XIPTEL),
NEWMARKET TECHNOLOGY, INC.
CORSA NETWORK TECHNOLOGIES, INC.
AND
▇▇▇▇▇▇ ▇▇▇▇▇, THE SHAREHOLDER OF CORSA NETWORK TECHNOLOGIES, INC.
dated
June 27, 2005
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered into as
of the 27th day of June, 2005, by and among IP Global Voice, Inc. (d/b/a
Xiptel), a Delaware corporation ("Buyer"), NewMarket Technology, Inc., a Nevada
corporation ("NewMarket"), Corsa Network Technologies, Inc., a California
corporation ("Seller") and ▇▇▇▇▇▇ ▇▇▇▇▇, the shareholder of Seller (the
"Shareholder") signing this Agreement.
RECITALS
Seller is engaged in the business of the sale and installation of secure
communication networks (the "Business"). Seller desires to sell, and Buyer
desires to purchase as an ongoing concern substantially all of the assets of the
Business, upon the terms and subject to the conditions set forth in this
Agreement.
NOW, THEREFORE, the Parties, intending to be legally bound, hereby agree as
follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. For purposes of this Agreement and any attachments, including
the Disclosure Schedule, the terms defined in this Agreement when capitalized
and used in this Agreement or any attachments shall have the respective meanings
specified in this Agreement. In addition, the following terms when capitalized
and used in this Agreement or any attachments shall have the meanings set forth
below unless the context or use requires another or different meaning:
"Account Receivable" means any account or note receivable, whether billed
or unbilled, whether current or noncurrent, arising out of the Business prior to
the Closing.
"Acquired Assets" means all of Seller's right, title and interest in and to
the Business' properties, assets and rights of any kind, whether tangible or
intangible, real or personal, and constituting, or used in connection with, or
related to, the Business, including all of Seller's right, title and interest in
and to the following:
(a) all Accounts Receivable;
(b) all Inventory;
(c) all Intellectual Property;
(d) all rights under all Contracts and Real Estate Leases that are
Assumed Liabilities;
(e) all real property, leasehold interests and leasehold improvements
relating to the Business, other than those arising out of Assumed
Contracts;
(f) all Fixtures and Equipment;
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(g) all Books and Records, other than those arising out of Assumed
Contracts;
(h) all Permits, to the extent assignable or transferable to Buyer,
other than those arising out of Assumed Contracts;
(i) all interests (whether stock, membership interests, partnership
interests or otherwise) in foreign entities and operations, including
foreign joint ventures;
(j) all computer hardware and software relating to the Business;
(k) all deposits, refunds, pre-payments or pre-paid expenses relating
to the Business, including Pre-Paid Assets, to the extent assignable or
transferable to Buyer;
(l) all amounts prepaid on any insurance policy and any rights to
recoveries under any insurance policy maintained by Seller on behalf of the
Business prior to the Closing;
(m) all rights under or pursuant to all warranties, representations
and guarantees made by Persons (including all contractual or other rights
of Seller to return inventory) in connection with the Acquired Assets or
services furnished to Seller pertaining to the Business or affecting the
Acquired Assets; and
(n) all claims, causes of action, choses in action, rights of recovery
and rights of set off of any kind, against any Person, including any Liens
or other rights to payment or to enforce payment in connection with
products or services delivered by Seller in connection with the Business on
or prior to the Closing Date;
but excluding therefrom the Excluded Assets.
"Adjustment Amount" shall have the meaning set forth in Section 3.3.
"Affiliate" means, with respect to any Person, any other Person directly or
indirectly controlling, controlled by or under common control with such Person,
whether such control is through voting securities, contract or otherwise.
"Agreement" shall have the meaning set forth in the preamble.
"Assumed Liabilities" means the following:
(a) the payment and performance obligations of Seller arising after
the Closing Date under the Real Estate Leases and Contracts listed on
Schedule 1.1(b) (the "Assumed Contracts"), excluding any obligations of
Seller under such Real Estate Leases and Contracts (x) which are the result
of Seller's violation or breach thereof or (y) the existence of which would
constitute an inaccuracy in or breach of any of Seller's representations or
warranties made in this Agreement, as if made on and as of the Closing
Date; and
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(b) all trade accounts payable of Seller existing as of the Closing
Date that (x) are reflected on the Balance Sheet or (y) have been incurred
by Seller since the date of the Balance Sheet in the ordinary course of
business consistent with past practice and are of the same general type and
amount as the accounts payable reflected on the Balance Sheet (in each
case, other than any accounts payable resulting from, arising out of,
relating to, in the nature of, or caused by any breach of contract, breach
of warranty, tort, infringement or violation of law).
"Books and Records" means (a) all records and lists of Seller pertaining to
the Acquired Assets; (b) all records and lists pertaining to the Business,
customers, suppliers, vendors, distributors or personnel of the Business; (c)
all product, business and marketing plans, sales literature and promotional
literature relating to the Business; and (d) all other books, ledgers, files,
reports, plans, drawings and operating records of every kind maintained by
Seller in connection with the Business, including its foreign operations, but
excluding the originals of Seller's minute books, stock books and tax returns.
"Contract" means any agreement, contract, note, loan, evidence of
indebtedness, Purchase Order, Sales Order, customer order, letter of credit,
franchise agreement, undertaking, covenant not to compete, license, instrument,
obligation or commitment, Personal Property Lease (but excluding all Real Estate
Leases): (a) to which Seller is a Party or (b) to which Seller, any Asset or the
Business is bound, in each case whether written or oral.
"Disclosure Schedule" means the Schedules delivered by Seller to Buyer as
of the date hereof, as may be amended as provided herein, that set forth the
exceptions to the representations and warranties contained in Article IV and
certain other information called for by this Agreement.
"Environmental Liabilities" means any loss, damage or expense of any kind
or nature (including, fines, penalties, investigation expenses, costs of
remediation or removal, natural resource damages, consequential or incidental
damages, personal injury, including death, or property damage) resulting from a
claim, suit, cause of action, proceeding, order, arbitration, request for
information, administrative action or settlement brought, or presented or
threatened by any Party whatsoever (including, any governmental unit or
regulatory agency, employees of Seller, purchasers or users of products of
Seller, and owners, lessees or occupants of any properties) arising out of or
based on the actual or alleged acts or omissions of any person with respect to
any actual or alleged treatment, handling, use, generation, transportation,
incorporation into any product, presence, recycling, storage, disposal or
release (as these terms are defined under any state, federal, foreign or local
environmental law) of a hazardous material or substance, petroleum or petroleum
product, toxic substance, hazardous or special waste, contaminant, chemical, or
pollutant (as defined or regulated under any state, federal, foreign or local
environmental law) or any tanks, drums or containers thereof and (i) arising
from the operations of Seller; or (ii) existing at or under and releases onto or
from any property (including the air, soil, groundwater, surface water, or
within any buildings or structures) which is or has been owned, leased or
occupied, or to which Seller has sent any Hazardous Materials, at any time
before or after the Closing.
"Excluded Assets" means, notwithstanding any other provision of this
Agreement, the following assets of Seller which are not to be acquired by Buyer
hereunder:
(a) this Agreement and all rights of Seller hereunder;
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(b) Seller's corporate charter, original minute books, stock books,
tax returns and other documents relating to the organization, maintenance
and existence of Seller as a corporation; and
(c) all Plans and assets of Plans.
"Excluded Liabilities" means any and all liabilities, costs, expenses,
claims, losses or other obligations of Seller, whether actual or contingent,
matured or unmatured, liquidated or unliquidated, or known or unknown, whether
arising out of occurrences prior to, at or after the date hereof, including the
following:
(a) all liabilities and obligations of Seller for fees, costs and
expenses of attorneys, independent public accountants, investment bankers
or other representatives incurred in connection with the negotiation,
preparation or consummation of the Transaction Documents;
(b) all liabilities and obligations relating to sales or other
transactions of Seller made on or prior to the Closing Date that are not
specifically included as Assumed Liabilities;
(c) all liabilities and obligations of Seller arising out of any
litigation, proceeding, audit or other action based on any state of facts
or events occurring on or prior to the Closing Date, whether or not
disclosed in the Disclosure Schedules;
(d) all liabilities and obligations of Seller arising out of or based
on any Contract or Real Estate Lease (other than the Assumed Contracts)
entered into on or prior to the Closing Date, including any Contract or
Real Estate Lease that is required to be, but is not disclosed in the
Disclosure Schedules;
(e) all liabilities and obligations of Seller for any Taxes, workers'
compensation liabilities, payroll, consulting fees or for fees or other
expenses of Seller, including all liabilities incurred in connection with
or related to the sale or transfer of the Acquired Assets;
(f) any claims relating to any Plan, any other benefit or compensation
plan, fund, arrangement or agreement, of Seller, or the termination thereof
accruing or arising on or before the Closing Date;
(g) all liabilities and obligations of Seller arising out of the
operation of the Business prior to the Closing, including any Environmental
Liabilities, any liabilities or obligations relating to any Product
manufactured or service provided by Seller prior to the Closing, including
claims of injuries to persons or property, product liability, warranty
claims (whether arising under contract or tort law), and recalls of
Products ordered by customers, manufacturers or governmental authorities;
(h) all liabilities and obligations of Seller arising out of any
operations, arrangements or other activities shared with any Affiliate of
Seller; and
(i) all liabilities and obligations of Seller related to Excluded
Assets.
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"Facilities" means the Real Estate, together all offices, manufacturing
plants, warehouses, building improvements and related facilities used in
connection with the Business.
"Fixtures and Equipment" means all of the furniture, fixtures, furnishings,
office furnishings and other tangible personal property owned by Seller and used
in connection with the Business.
"GAAP" means United States generally accepted accounting principles applied
in a manner consistent with past practice of the Business.
"Intellectual Property" means all intellectual, industrial and proprietary
rights, whether domestic or foreign (including goodwill associated therewith) of
Seller, including: (i) all inventions; (ii) all granted patents for inventions
and any reissues thereof; (iii) copyrights, whether registered or unregistered;
(iv) designs and all registrations and applications for registration therefor;
(v) trademarks, trade names, and any word, symbol, icon, logo or other indicia
of origin adopted or used in connection with any Product made or service
provided in the Business, whether registered or unregistered, and rights to
prevent unfair trading including, but not limited to, the name Corsa Network
Technologies, Inc. and any variation thereof; (vi) trade secrets, confidential
information and know-how, including all technical, manufacturing and engineering
information, software, source code, new developments, inventions or ideas, and
documentation thereof to encompass related papers, parts, drawings, tool
drawings, chemical compositions, formulae, diaries, notebooks, specifications,
methods of manufacture, discs and tapes and all data contained therein and
thereon; (vii) all applications and registrations for all of the foregoing;
(viii) all telephone and telecopier numbers; (ix) all Internet addresses, domain
names, web sites and other Business addresses; (x) all licenses, including
sub-licenses granted to or by third parties to use any of the foregoing; and
(xi) all Proprietary Rights. "Inventory" means all inventory of Seller held for
resale or in transit with respect to the Business and all of Seller's raw
materials, work in process, finished products, spare parts, supplies, packaging
items and similar items with respect to the Business, in each case wherever the
same may be located.
"Knowledge" or "awareness" of any entity means the actual knowledge or
awareness of such entity's officers and other individuals exercising supervisory
authority and, in the case of Seller, the Shareholder, and such knowledge or
awareness as such entity's officers and other individuals exercising supervisory
authority and, in the case of Seller, the Shareholder, should have had after
reasonable investigation; and "Knowledge" or "awareness" of any individual means
the actual knowledge or awareness of such individual, and such knowledge or
awareness as such individual should have had after reasonable investigation.
"Lien" means any claim, lien, tax lien, pledge, option, charge, easement,
security interest, deed of trust, mortgage, right-of-way, encroachment, building
or use restriction, conditional sales agreement, shareholders' agreement,
encumbrance or restriction of any nature or kind, whether voluntarily incurred
or arising by operation of law, and including any agreement to give any of the
foregoing in the future, and any contingent sale or other title retention
agreement or lease in the nature thereof.
"Material" means any charge, claim, damage or other financial effect or
consequence having a value, either singly or in the aggregate, exceeding
$10,000.
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"Material Adverse Effect" means any event, occurrence, fact, condition,
change or effect that is adverse and Material to the business, assets, condition
(financial or otherwise), operating results, employees, customer relations or
prospects of the specified Person.
"Parties" means collectively Seller, NewMarket, Buyer and the Shareholder.
"Party" shall mean, as the context shall indicate, each or any of Buyer,
NewMarket, Seller and Shareholder.
"Permitted Liens" means (i) Liens for current taxes not yet due or any
taxes being contested in good faith by appropriate proceedings and as to which
appropriate reserves have been established which are reflected on the Balance
Sheet or (ii) Liens on the Acquired Assets that Buyer has agreed to assume from
Seller pursuant to this Agreement.
"Person" means any individual, sole proprietorship, partnership, limited
liability company, joint venture, trust, unincorporated association,
corporation, entity or government (whether federal, foreign, state, county, city
or otherwise, including any instrumentality, division, agency or department
thereof).
"Taxes" has the meaning set forth in Section 4.16.
"Transaction" collectively means the transactions contemplated by this
Agreement and all other Transaction Documents.
"Transaction Documents" shall collectively refer to this Agreement and the
Ancillary Agreements as amended, modified or supplemented from time to time in
accordance with the terms thereof and all other instruments, certificates and
agreements executed by any Party in connection with transactions contemplated by
such agreements, including the Disclosure Schedule.
1.2 Interpretations. When reference is made in this Agreement to an Article,
Section, Exhibit or Schedule, such reference is to an Article or Section of, or
an Exhibit or Schedule to, this Agreement unless otherwise indicated. The
headings contained in this Agreement are for reference purposes only and shall
not affect the interpretation of this Agreement. Whenever the words "include",
"includes", or "including" are used in this Agreement, they shall be deemed to
be followed by the words "without limitation". Whenever the words "hereof",
"herein", "hereunder" and words of similar import are used in this Agreement,
they refer to this Agreement as a whole and not to any particular provision of
this Agreement. All terms defined in this Agreement and the other Transaction
Documents shall have the defined meanings given therein when used in any
certificate or other document made or delivered pursuant to this Agreement
unless otherwise defined therein. The definitions contained in this Agreement
are applicable to the singular as well as the plural forms of such terms and to
the masculine as well as to the feminine and neuter genders of such term. Any
agreement, instrument or statute defined or referred to in this Agreement or any
other Transaction Document means such agreement, instrument or statute as from
time to time amended, modified or supplemented, including in the case of
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statutes by succession of comparable successor statutes. All references to
statutes in this Agreement or any other Transaction Document shall be deemed to
include the applicable regulations promulgated under such statutes. All dollar
amounts referred to in the Transaction Documents are in United States Dollars.
ARTICLE II
PURCHASE AND SALE
2.1 Purchase and Sale of Assets. At the Closing, and on the terms and subject to
the conditions set forth in this Agreement, Buyer agrees to purchase from Seller
as an on-going concern, and Seller agrees to sell, convey, transfer, assign and
deliver to Buyer, the Acquired Assets, free and clear of any Liens, except for
Permitted Liens.
2.2 Assumption of Liabilities. At the Closing, and on the terms and subject to
the conditions set forth in this Agreement, Buyer shall assume the Assumed
Liabilities, and Buyer shall pay, perform and discharge the Assumed Liabilities
as and when due.
2.3 Excluded Liabilities. Notwithstanding any other provision of this Agreement,
Buyer shall not assume, or otherwise be responsible for, any Excluded
Liabilities. Seller shall retain, and be responsible for, and pay, perform and
discharge all Excluded Liabilities as and when due.
ARTICLE III
CLOSING, PURCHASE PRICE AND ADJUSTMENTS
3.1 Closing. Subject to the conditions set forth in this Agreement, the closing
of the purchase and sale of the Acquired Assets and other transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of the Buyer at 10:00 a.m., local time, on June 27, 2005, or at such other
place, date and time as the Parties may agree. The date on which the Closing
occurs is referred to herein as the "Closing Date." The effective time of the
Closing shall be 12:01 a.m., local time, on the Closing Date.
3.2 Purchase Price; Payment. Subject to adjustment pursuant to Section 3.3
hereof, the purchase price (the "Purchase Price") for the Acquired Assets and
other obligations will be (i) $100,000 in cash; (ii) 1,400 shares of Series I 8%
Cumulative Convertible Preferred Stock of NewMarket having a stated value of
$1,000 per share (the "NewMarket Preferred Stock"); and (iii) 490 shares of
Convertible Preferred Stock of the Buyer ("Buyer Preferred Stock"), which shall
(a) have a stated value and have such other economic terms as shall be mutually
determined by the Parties within 30 days of the Closing Date; (b) be issued, in
equal installments over the twelve (12) month period commencing with the Closing
and (c) be convertible into 4.9% of the issued and outstanding shares of common
stock of Buyer (on a fully diluted basis) beginning on the first anniversary of
the Closing. The consideration described in the foregoing clauses (i), (ii) and
(iii) shall be defined herein as the "Purchase Price."
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3.3 Purchase Price Adjustment.
(a) No later than July 7, 2006, Buyer shall prepare and deliver to the
Seller a statement (the "Revenue Statement") of the gross revenues of the
Seller for a year after Closing, as measured from the Closing Date through
June 30, 2006 (the "Section 3.3 Revenue"). Unless the Seller delivers a
notice to Buyer in writing of its objection to the calculation of the
Section 3.3 Revenue within 10 days after its receipt of the Revenue
Statement, the Revenue Statement shall be final and binding on the Parties.
The Purchase Price shall be reduced for every shortfall of $1 million or
fraction thereof of Section 3.3 Revenue below $11.3 million by (i) $50,000
(in the stated value of the NewMarket Preferred Stock) and (ii) either 50
shares of Buyer Preferred Stock or 0.5% of common stock ownership of Buyer
on a fully diluted basis, assuming conversion of the Buyer Preferred Stock
(from a ceiling of 4.9% of the stock). For example, if the Section 3.3
Revenue were $9.7 million, the Purchase Price would be reduced by (i)
$100,000 of New Market Preferred Stock (to $1.3 million in stated value)
and (ii) 100 shares of Buyer Preferred Stock (to 390 shares) or, assuming
conversion of Buyer Preferred Stock, 1.0% of the common stock of Buyer (to
3.9% of the outstanding common stock). The maximum reduction in Purchase
Price shall be (i) $200,000 in stated value of the NewMarket Preferred
Stock and (ii) 200 shares of Buyer Preferred Stock, or, assuming conversion
of the Buyer Preferred Stock, 2% of Buyer's common stock.
(b) Buyer and Seller shall attempt in good faith to resolve any
disagreements with respect to the Revenue Statement. If, at the end of such
period, Buyer and Seller do not resolve such disagreements, either Buyer or
Seller may submit the matter to a mutually acceptable independent
accounting firm of recognized national standing (the "Accounting Firm") to
review the Revenue Statement and resolve any remaining disagreements
regarding the calculation of the Section 3.3 Revenue under the Revenue
Statement. The fees and expenses of the Accounting Firm shall be divided
equally among the Buyer and Seller.
3.4 Tax Allocation. Within sixty (60) calendar days after the Closing Date,
Buyer and Seller shall use their reasonable best efforts to reach an agreement
regarding how the Purchase Price and the aggregate dollar amount of the Assumed
Liabilities shall be allocated for tax purposes. Upon having reached such an
agreement, Buyer and Seller shall file all tax returns and statements, forms and
schedules in connection therewith consistent with such allocation and shall take
no position contrary thereto unless required by law. Buyer and Seller shall
treat the purchase and sale of assets under this Agreement as an "applicable
asset acquisition" within the meaning of Section 1060 of the Code, and shall
prepare and timely file Internal Revenue Service Form 8594 (and any required
exhibits thereto) in a manner consistent with the allocation of the Purchase
Price under this Section 3.4.
3.5 Transfer Taxes. Notwithstanding any other provision herein, any documentary
and transfer Taxes and any sales, use or other Taxes imposed by reason of the
transfers of Acquired Assets provided hereunder and any deficiency, interest or
penalty asserted with respect thereto shall be borne by Seller.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
4.1 Corporate Existence.
(a) Seller is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization with
full power and authority to own its properties and assets and to conduct
the Business as now conducted. Seller is qualified to conduct business as a
foreign corporation in each state or jurisdiction in which the property
owned, leased or operated by, the employees, agents or representatives
employed by it, any other facts or circumstances applicable to the nature
of the businesses now conducted or proposed to be conducted by it make such
qualification necessary. Schedule 4.1(a) contains a list of each
jurisdiction in which Seller is currently licensed or qualified to do
business as a foreign corporation. Correct and complete copies of the
Articles of Incorporation and Bylaws of Seller have been provided to Buyer.
The Shareholder is the record and beneficial owner of all outstanding
capital stock of Seller.
(b) Schedule 4.1(b) sets forth a correct and complete list of each
Person in which Seller owns (directly or indirectly or beneficially or of
record), or has owned, an interest (whether stock, or other securities,
membership interests, partnership interests, participating interest, joint
venture or otherwise) (collectively, the "Subsidiaries"), including a
description of the type and amount of interest owned, or formerly owned, by
Seller in each Subsidiary. Each Subsidiary is an entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its organization with full power and authority to own its properties and
assets and to conduct its business as now conducted. Each Subsidiary is
qualified to conduct business in each jurisdiction in which the property
owned, leased or operated by, the employees, agents or representatives
employed by it, any other facts or circumstances applicable to the nature
of the business now conducted or proposed to be conducted by it make such
qualification necessarily. Schedule 4.1(b) --------------- contains a list
of each jurisdiction in which each Subsidiary is currently licensed or
qualified to do business. Correct and complete copies of the charter and
other governing documents (including bylaws and joint venture agreements)
of each Subsidiary have been provided to Buyer.
4.2 Corporate Authorization; Enforceability. Each of Seller and the Shareholder
has full power and authority to enter into and perform the Transaction Documents
to which it is a Party and to consummate the transactions contemplated thereby
in accordance with their respective terms. Seller has taken all corporate and
shareholder actions necessary to authorize and approve the execution, delivery
and performance of the Transaction Documents to which it is (or will be) a Party
and the transactions contemplated thereby. Each of the Transaction Documents
constitutes (or will constitute when executed) a legal, valid and binding
obligation of Seller and the Shareholder that is a Party to such Transaction
Document, enforceable against them in accordance with their respective terms.
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4.3 No Conflict. Except as disclosed in Schedule 4.3, compliance with the terms
and conditions hereof will not (i) violate or conflict with any provision of the
charter documents or other governing documents of Seller, any Subsidiary or any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge or other restrictions of any government, governmental agency or
court to which Seller, any Subsidiary or any Shareholder is subject; or (ii)
result in the breach or termination of any provision of, result in the
acceleration of, create in any Person the right to accelerate, terminate, modify
or cancel, require any notice or constitute a breach or default under any note,
bond, indenture, Real Estate Lease or Contract or other instrument or obligation
to which Seller, any Subsidiary or any Shareholder is a Party or by which the
Acquired Assets are subject, bound or affected except in each case where such
violation, regulation or breach would not have a Materially Adverse Effect on
Seller. Neither Seller, any Subsidiary nor any Shareholder is otherwise a Party
to any Contract or subject to any other legal restriction that would prevent or
restrict complete fulfillment by Seller and Shareholder of all of the terms and
conditions of the Transaction Documents to which they are a Party or compliance
with any of their obligations thereunder.
4.4 Required Consents. Except as set forth in Schedule 4.4 and as may be
required by the HSR Act, no consents or approvals of, or notices to, any third
Person and no consents or waivers from, or notices to, any other Parties to
leases, licenses, franchises, Permits, indentures, Real Estate Leases, Contracts
or other instruments are required for the consummation by Seller or the
Shareholder of the transactions contemplated by the Transaction Documents to
which they are or will be a Party. Except as set forth in Schedule 4.4, the
Assumed Liabilities to be transferred to and assumed by Buyer pursuant to the
terms of the Transaction Documents are transferable and assumable by Buyer
without the consent or approval of, or notice to, any Person.
4.5 Broker's Fees. Neither Seller, any Shareholder nor any of their respective
Affiliates has dealt with any Person that will result in the obligation of
Seller, any Shareholder or Buyer to pay a broker's commission, finder's fee,
investment banker's fee or similar payment for arranging the transaction
contemplated hereby or introducing the Parties to each other.
4.6 Books and Records. To Seller's Knowledge, all Books and Records, including,
correspondence, customer lists, records and information, sales and promotional
materials, catalogs and advertising literature, advertiser lists, customer
market data, blueprints, drawings and other technical papers and specifications,
product research and test data, quality control records, service manuals,
service bulletins, training materials, product bulletins, product information
booklets, maintenance, repair and asset history and depreciation records,
occupational safety and health administration ("OSHA") and Environmental
Protection Agency ("EPA") files, plans, specifications, drawings, renderings and
documents relating to the leasing of the Facilities and accounting records,
ledgers and books of original entry relating to the operation of the Business
("Accounting Books") are, and have been, maintained in Seller's usual, regular
and ordinary manner consistent with past practice, and, to the extent
applicable, in accordance with GAAP and applicable law.
4.7 Accounts Receivable. The Accounts Receivable to be reflected on the Closing
Statement and Accounting Books of Seller at the Closing Date shall be actual,
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bona fide receivables for transactions in the ordinary and normal course of the
Business, representing valid and binding obligations of others to Seller for the
total dollar amount shown thereon, subject to no recoupments, set-offs or
counterclaims of any kind or nature whatsoever, and shall be current and
collectible in amounts not less than the amount shown on the Closing Statement,
subject to any recorded reserves for doubtful or uncollectible accounts
applicable thereto established in a manner consistent with GAAP. Set forth in
Schedule 4.7 is a correct and complete list and dollar amount of all of the
Accounts Receivable appearing on Accounting Books of Seller as of June 23, 2005.
4.8 Inventory. The Inventory to be reflected on the Closing Statement and
Accounting Books of Seller at the Closing Date shall (i) consist of items of a
quantity and quality historically useable and/or salable in the ordinary and
normal course of the Business; (ii) be free from material defects in materials
and/or workmanship; and (iii) not be excessive in kind or amount, slow moving or
obsolete, in light of the business of Seller done or expected to be done, except
to the extent that a reserve for obsolescence has been established therefore in
a manner consistent with GAAP. On the Closing Date, all Inventory shall be
located at the Facilities.
4.9 Prepaid Assets. The Prepaid Assets to be reflected the Closing Statement and
Accounting Books of Seller at the Closing Date shall be actual, bona fide
prepaid assets and/or deposits of Seller have been incurred by Seller in the
ordinary and normal course of the Business. For purposes of this Agreement, the
term "Prepaid Assets" means those prepaid assets and deposits of the type
described in Schedule 4.9.
4.10 Financial Statements. Seller has provided to Buyer correct and complete
copies of the following financial statements of Seller (collectively, the
"Financial Statements"): (i) the balance sheets of Seller at December 31, 2004
and the related statements of income, stockholders' equity and cash flows for
the years ended December 31, 2004 and (ii) statements of income, stockholders'
equity and cash flows for the months of January through April 2005. The
Financial Statements are in accordance with the books and records of Seller or
its Subsidiary, as the case may be, and fairly present the financial position of
Seller and its Subsidiaries, as the case may be, as of the dates thereof, and
the results of operations and cash flows and changes in shareholders' equity of
Seller or its Subsidiaries, as the case may be, for the fiscal period or as of
the respective dates thereof. Each of the Financial Statements, including the
notes thereto, has been prepared in accordance with GAAP consistently applied
during the periods involved, subject in the case of the interim Financial
Statements to normal year-end adjustment and absence of footnote disclosure. The
books and records of Seller and its Subsidiaries have been, and are being,
maintained in accordance with all applicable legal requirements and GAAP.
4.11 Equipment. The Fixtures and Equipment are all the tangible property used
in, useful, necessary, incidental, pertaining to or associated with the
operation of the Business as conducted by Seller. All of the Fixtures and
Equipment are located at the Facilities. There is no other tangible property
owned by any other Person for which Seller is responsible, nor are there any
Acquired Assets in which any other Person (whether a customer, supplier or other
Person) has a claim, or has, or claims to have, an interest, except as disclosed
in Schedule 4.11.
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4.12 Real Estate; Facilities. Except as set forth in Schedule 4.12 (together
with all improvements located on such real property, the "Real Estate"), neither
Seller nor any of its Subsidiaries owns any real property. Title to the Real
Estate is good and marketable, and free and clear of all Liens (except Permitted
Liens), adverse claims or other matters affecting the title of Seller's
Subsidiary to or possession of such Real Estate, including all encroachments,
boundary disputes, covenants, restrictions, easements, rights of way, mortgages,
security interests, leases, encumbrances and title objections, excepting only
such easements, restrictions and covenants including those presently of record,
which easements, restrictions and covenants will not interfere with or impair
the use of any of the Real Estate to conduct the Business. Schedule 4.12
contains a complete list of all leases, subleases or other agreement pursuant to
which Seller or its Subsidiaries leases or subleases, whether written or oral,
any real property (the "Real Estate Leases") used or held for use by Seller or
its Subsidiaries in the Business. Except as set forth in Schedule 4.12, no
Person has the right of use or occupancy of any portion of the Facilities. All
ingress and egress to the Facilities, whether of record or currently used by
Seller or its Subsidiaries, is sufficient for the operation of the Business as
presently conducted. The zoning classification of the Facilities permits the
intended use for the operation of the Business and, Seller has not received
notice of, any petition to materially change the zoning or land use designation
of the Facilities or any adjoining parcel of real property. There is no pending
or threatened condemnation, appropriation, eminent domain or similar proceeding
or legislation affecting or relating to the Facilities, or the widening, change
of grade or limitation on use of streets providing access to any Facilities,
nor, to Seller's Knowledge, are any such proceedings contemplated by any
governmental authority. Seller has neither received notice of, nor does Seller
have any Knowledge of, any proposed or actual assessments against the Facilities
relating to utilities, sewers, roadways, other improvements or other matters.
4.13 Leased Personal Property. Schedule 4.13 sets forth a correct and complete
list and description of each item of personal property leased or subleased to
Seller, whether under a capital lease or operating lease (the "Leased Personal
Property"), and correct and complete copies of the leases and subleases for the
Leased Personal Property (the "Personal Property Leases") have been delivered to
Buyer.
4.14 Condition and Sufficiency of Assets. The Fixtures and Equipment,
Facilities, Leased Personal Property and Business have been operated and
maintained in all material respects in accordance with all applicable laws,
rules and regulations and in accordance with all applicable Real Property Leases
and Contract related thereto. The Fixtures and Equipment, Facilities and Leased
Personal Property have been maintained in accordance with normal industry
practice and are in good operating condition and repair (reasonable wear and
tear excepted) and are free of any material structural or engineering defects.
The Fixtures and Equipment, Facilities and Leased Personal Property are
sufficient in all material respects to carry on the operations of the Business
as now conducted by Seller and are suitable for their use in the Business as
presently conducted. Except for the Acquired Assets, there are no other assets,
agreements, rights or licenses of any kind or nature whatsoever material to
Seller in the operation of the Business as is presently conducted.
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4.15 Title to Properties. Seller has good, valid, complete, effective, rightful,
indefeasible and marketable fee simple title to all of the Acquired Assets, free
and clear of any and all Liens other than (i) those Liens that will be released
or caused to be released by Seller on or before the Closing Date; and (ii) the
Permitted Liens (each of which are identified in Schedule 4.15). Except as set
forth in Schedule 4.15, no financing statement under the Uniform Commercial Code
(the "UCC") or similar law naming Seller as debtor has been filed in any
jurisdiction and is still in effect, and Seller is not a Party to or bound by
any agreement or arrangement authorizing any Party to file any such financial
statement and all financing statements shall be released or caused to be
released by Seller on or before the Closing Date. At the Closing and upon
delivery of the instruments of transfer by Seller to Buyer as provided in this
Agreement, good, valid, complete, effective, rightful, indefeasible and
marketable fee simple title to the Acquired Assets shall vest in Buyer, free and
clear of all Liens, other than Permitted Liens.
4.16 Taxes. All federal, state, county, municipal and foreign tax and tax
information returns, reports, statements and declarations ("Tax Returns") that
are required to be filed prior to the Closing Date by Seller and its
Subsidiaries with respect to the Business and the Acquired Assets, have been, or
will be, filed by Seller and its Subsidiaries in a timely manner, and are, or
will be, true, correct and complete in all material respects. With respect to
the operation of the Business by Seller, there have been withheld and paid all
Taxes that have become due pursuant to the Tax Returns and all other Taxes that
have become due and are imposed by law upon Seller, other than those due on or
after the Closing Date that relate to periods prior to the Closing Date, which
shall be adequately provided for and reserved against Closing Statement. No
outstanding notice of deficiency or assessment of additional Taxes has been
received with respect to Seller or its Subsidiaries. For purposes of this
Agreement, the term "Taxes" means any federal, state, local, foreign or other
Taxes, including all income, business, gross receipts, license, payroll,
employment, pension plan, excise, severance, stamp, occupation, premium,
windfall profits, ad valorem, environmental (including Taxes under Section 59A
of the Code), capital stock, franchise, duty, profits, withholding, social
security, unemployment, disability, real property, personal property,
production, sales, use, transfer, registration, alternative or add-on minimum,
estimated or other tax of any kind whatsoever, including any interest, penalty
or addition thereto, whether disputed or not. There are no Liens for Taxes
against any of the Acquired Assets. Schedule 4.16 lists all jurisdictions in
which Seller files tax returns or pays Taxes with respect to the Business.
4.17 Purchase Orders. All Purchase Orders have been entered into by Seller in
the ordinary course of the Business, are in full force and effect and binding
upon the other Parties thereto, and Seller has not suffered or been threatened
with any Material Adverse Effect in, or loss of, any relationship between Seller
and any of Seller's suppliers. For purposes of this Agreement, the term
"Purchase Orders" means all the outstanding purchase orders issued by Seller for
the purchase of products and/or services. Set forth in Schedule 4.17 is a
correct and complete list and dollar amount of each outstanding Purchase Order
in excess of $10,000 as of January 1, 2005.
4.18 Contracts and Commitments. Except as set forth on Schedule 4.18, neither
Seller nor any of its Subsidiaries is, with respect to the Business or the
operation thereof, a Party to, nor are any of the Acquired Assets or Leased
Property bound or subject to, any:
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(a) Contract, Real Estate Lease or other similar document that has an
aggregate value of $10,000 or more;
(b) Contract, Real Estate Lease or other similar document that cannot
be terminated or canceled without further liability to Seller or its
Subsidiaries, the Business, the Acquired Assets or the Leased Property on
the giving of no more than ninety (90) days notice;
(c) Contract with any present or former employee or consultant, or for
the employment of any Person, including any consultant, who is engaged in
the conduct of the Business;
(d) distribution, dealer, representative or sales agency agreement or
other similar Contract;
(e) Contract or commitment limiting or restraining the Business or any
successor thereto from engaging or competing in any manner or in any
business, nor, to Seller's Knowledge, is any employee of the Business
engaged in the conduct of the Business subject to any such Contract or
commitment;
(f) license, assignment, franchise, distributorship or other similar
Contract that relates in whole or in part to any software (other than
readily available "off-the-shelf" software), patent, trademark, trade name,
service ▇▇▇▇ or copyright or to any ideas, technical assistance or know-how
or other Intellectual Property of or used by Seller or its Subsidiaries in
the conduct of the Business;
(g) Contract under which Seller or its Subsidiaries has advanced or
loaned any other Person amounts in the aggregate exceeding $1,000;
(h) Contract relating to borrowed money or other indebtedness or the
mortgaging, pledging or otherwise placing a Lien on any material asset or
material group of assets of Seller;
(i) Contract relating to joint ventures or agreements involving a
sharing of profits;
(j) Contract relating to cleanup, abatement or other actions in
connection with environmental liabilities;
(k) Contract under which Seller is lessor of or permits any third
Person to hold or operate any property owned or controlled by Seller;
(l) Contract for the future purchase of fixed assets or the
maintenance thereof or for the future purchase of materials, supplies or
equipment in excess of Seller's normal operating requirements; and
(m) Contract or other undertaking that, taken alone or aggregated with
Contracts or other undertakings of a similar nature, is material to the
condition of the Business, including, Contracts with officers, employees,
agents, consultants, advisors, salesmen, sales representatives,
distributors or dealers.
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Each of the Contracts, Real Estate Leases and other agreements and
commitments listed on Schedule 4.18 shall be collectively referred to herein as
the "Material Contracts." All Material Contracts are legal, valid, binding and
enforceable in accordance with their terms, in full force and effect and binding
upon the other Parties thereto. Except as set forth in Schedule 4.18, there is
no breach or default in any material respect by Seller or its Subsidiaries or,
to Seller's Knowledge, any other Party in the performance, observance or
fulfillment of any obligations, covenants, liabilities or conditions contained
in any of the Material Contracts, and no event has occurred or condition exists
that with or without notice, lapse of time or the happening or occurrence of any
other event would constitute a breach or default in any material respect, or
permit termination, modification or acceleration, by any Party to, or bound by,
the Material Contracts. Except as set forth in Schedule 4.18, Seller has not
assigned, secured, pledged, transferred, conveyed, mortgaged, deeded in trust or
encumbered in any way any interest in any of the Material Contracts. Except as
set forth in Schedule 4.18, there are no disputes, oral agreements or
forbearance programs in effect as to any Material Contract. Complete and
accurate copies of all Material Contracts that are in writing (including any
amendments or supplements thereto) have been delivered to Buyer by Seller and
any oral Material Contract has been summarized on Schedule 4.18. Except as set
forth in Schedule 4.18, no consent or approval from, or notice to, any third
Party is required for transfer and assignment of the Assumed Contracts to Buyer
pursuant to this Agreement. Upon assignment by Seller of the Assumed Contracts
to Buyer at the Closing, each of the Assumed Contracts will vest in Buyer at the
Closing.
4.19 Conduct of the Business. With respect to the Business and except as
disclosed in Schedule 4.19, Seller has not (i) incurred any obligation or
liability (absolute or contingent), except normal trade or business obligations
or liabilities incurred in the ordinary and normal course of the business of the
Business, or mortgaged, pledged or subjected to any Lien (other than Permitted
Liens) any of the Acquired Assets or Leased Personal Property; (ii) failed to
discharge or satisfy any Lien (other than Permitted Liens) or pay any obligation
or liability (absolute or contingent), other than in the ordinary and normal
course of the Business; (iii) sold, assigned, transferred, leased, exchanged or
otherwise disposed of any of its properties or assets other than current assets
in the ordinary and normal course of the Business; (iv) made any general wage or
salary increase, increased the compensation of any employee, entered into any
employment contract with any employee, or instituted any employee welfare,
bonus, stock option, profit-sharing, retirement or similar plan or arrangement;
(v) suffered any damage, destruction or loss, whether as the result of fire,
explosion, earthquake, accident, casualty, labor trouble, requisition or taking
of property by any government or any agency of any government, flood, windstorm,
embargo, riot or Act of God or the enemy, or other similar casualty or event or
otherwise, and whether or not covered by insurance adversely affecting the
business of the Business or the Acquired Assets or Leased Personal Property;
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(vi) canceled or compromised any debt or claim other than in the ordinary and
normal course of the business of Seller; (vii) entered into any transaction,
contract or commitment outside the ordinary and normal course of the Business
which would have a Material Adverse Effect on the Business, except as expressly
contemplated by the Transaction Documents; (viii) acquired or sold any real
estate, real estate options, leaseholds, or leasehold improvements; (ix)
terminated, discontinued, closed or disposed of the Facilities or any business
operation; (x) suffered any adverse change in its financial condition, results
of operations or cash flows or in the Business, the Acquired Assets or Leased
Personal Property; (xi) made (or committed to make) any material capital
expenditures in connection with operation of the Business; (xii) failed to
operate the Business only in the ordinary and normal course; (xiii) failed to
collect the Accounts Receivable in the ordinary and normal course of the
Business consistent with past practice; (xiv) failed to pay the trade payables
of the Business in the ordinary and normal course of the Business consistent
with past practice; (xv) failed to pay or discharge liabilities relating to the
Business as and when due and payable; (xvi) failed to keep in full force and
effect insurance covering the Acquired Assets, the Leased Personal Property and
the Business in adequate amounts; (xvii) entered into any contract other than in
the ordinary and normal course of the Business consistent with past practice nor
permitted any amendment or termination of any Contract or Real Estate Lease that
is material to the Business; and (xviii) had no material adverse change in the
properties, employee, customer or supplier relationships, business prospects,
assets, liabilities, financial position, results of operations or cash flows, of
the Business other than changes in the ordinary and normal course (none of which
individually or in the aggregate has had, or could reasonably be expected to
have, a Material Adverse Effect on the Business).
4.20 Litigation. Except as disclosed in Schedule 4.20, there is no litigation or
proceeding, in law or in equity, and there are no proceedings or governmental
investigations before any commission or other administrative authority, pending,
or, to Seller's Knowledge, threatened against or affecting the Business, the
consummation of the transactions contemplated by the Transaction Documents or
the use of the Acquired Assets and/or the Leased Personal Property. Schedule
4.20 contains a brief summary of all litigation or proceedings involving, or
related to, the Business or the operation thereof in the past three (3) years
including, asbestos claims, worker's compensation claims or discrimination
claims (including sex, age, race, national origin, handicap or veteran status
discrimination claims). To Seller's Knowledge, there are no facts that, if known
by a potential claimant or governmental authority, would give rise to a claim or
proceeding that, if asserted or conducted with results unfavorable to such
Seller, would have Material Adverse Effect on the Business, or materially and
adversely affect the consummation of the transactions contemplated hereby or the
use of the Acquired Assets and the Leased Personal Property by Seller or Buyer.
4.21 Insurance. Schedule 4.21 sets forth the following information with respect
to each insurance policy (including policies providing property, casualty,
liability, product liability and workers' compensation coverage and bond and
surety arrangements) to which Seller is a Party and which relate to the conduct
of the Business from the Facilities: (i) the name of the insurer, the name of
the policy holder and the name of each covered insured; (ii) the policy number
17
and the period of coverage and type of coverage; and (iii) a description of any
retroactive premium adjustments or other loss-sharing arrangements. Schedule
4.21 contains a summary of all material claims submitted, pending or paid under
such policies within the past three (3) years. With respect to each such
insurance policy, (a) the policy is legal, valid, binding, enforceable in
accordance with its terms and in full force and effect; (b) neither Seller nor
any other Party to the policy is in breach or default (including with respect to
the payment of premiums or the giving of notices), and no event has occurred
which, with notice or lapse of time, would constitute such a breach or default,
or permit termination, modification or acceleration, under the policy; (c) no
Party to the policy has repudiated any provision thereof; and (d) up to the
Closing Date, the policy and the insurance coverage provided by the policy will
be maintained in full force and effect and will not be canceled, modified or
changed without the prior written consent of Buyer.
4.22 Labor and Employment Matters. Except as set forth in Schedule 4.22, (i) to
Seller's Knowledge, none of Seller's employees ("Current Employees") or group of
Current Employees has any plans to terminate employment with Seller; (ii) Seller
is not a Party to or bound by any collective bargaining agreement; (iii) Seller
has not experienced any strikes, grievances, claims of unfair labor practices or
other collective bargaining disputes; (iv) there are no outstanding or pending
grievances, claims of unfair labor practices or other employee or collective
bargaining disputes; (v) Seller has not committed any unfair labor practice;
(vi) no organizational effort is presently being made or threatened by or on
behalf of any labor union with respect to any Current Employees; and (vii) no
charges of discrimination (relating to sex, age, race, national origin, handicap
or veteran status) are pending before any governmental or regulatory agency or
authority or any court relating to employees of Seller, nor, to Seller's
Knowledge, have any such charges been threatened. Schedule 4.22 sets forth a
correct and complete list (including the name, current annual salary rates and
other bonus or compensation and benefits payable to such persons) of all Current
Employees of Seller and any employee whose employment with Seller cannot be
terminated at the will of Seller without cause and without further liability or
obligation to such employee. Except with respect to Plans (as defined herein)
and as set forth on Schedule 4.22, Seller is not obligated to make payments to
any Employee under any written employment agreements, deferred compensation
agreements, bonus arrangements or severance plans.
4.23 Employee Benefit Plans and Arrangements. Schedule 4.23 sets forth a
complete and correct list of each "employee benefit plan", as such term is
defined in Section 3(3) of ERISA (as hereinafter defined), and each bonus,
incentive or deferred compensation, severance, termination, retention, change of
control, stock option, stock appreciation, stock purchase, phantom stock or
other equity-based, performance or other employee or retiree benefit or
compensation plan, program, arrangement, agreement, policy or understanding,
whether written or unwritten, that provides or may provide benefits or
compensation in respect of any employee or former employee employed or formerly
employed in the operation of Seller or the beneficiaries or dependents of any
such employee or former employee (such employees, former employees,
beneficiaries and dependents hereinafter collectively referred to as the "Seller
Employees") (collectively, the ("Plans")). With respect to each such Plan,
18
Seller has provided Buyer complete and correct copies of: all written Plan
documents; all trust agreements, insurance contracts or other funding
arrangements; the most recent actuarial reports; the three most recent Forms
5500 and all schedules thereto; the most recent IRS determination letter;
current summary plan descriptions; all material communications received from or
sent to the IRS, the Pension Benefit Guaranty Corporation or the Department of
Labor (including a written description of any oral communication); the most
recent actuarial study of any post-employment life or medical benefits provided
under such Plans, statements or other communications received by Seller
regarding withdrawal or Plan liabilities, if any; and all amendments and
modifications to any such document. Except as set forth in Schedule 4.23, Seller
has not communicated to any Seller Employee any intention or commitment to
modify any Plan or to establish or implement any other employee or retiree
benefit or compensation arrangement. For each Plan intended to be qualified
under Section 401(a) of the Code, Seller has received a favorable determination
letter from the IRS as to its qualification under the Code. No amendment to any
such Plan has been adopted since the date of such determination letter that
could adversely affect such qualification or tax-exempt status. There are no
operational defects or events that could adversely affect the qualification of
any such Plan which have not been fully disclosed to the IRS in connection with
an application for a VCR Compliance Statement or Closing Agreement with respect
to the continued qualification of such Plan. No liability has been or is
expected to be incurred by Seller or any Controlled Group Member (either
directly or indirectly, including as a result of an indemnification obligation)
under or pursuant to Title I or IV of ERISA or the penalty, excise tax or joint
and several liability provisions of the Code relating to employee benefit plans
that could, following the Closing, become a liability of Buyer, and, to Seller's
Knowledge, no event, transaction or condition has occurred or exists that could
result in any such liability to Seller or, following the Closing, Buyer. Each of
the Plans has been operated and administered in all respects in compliance with
all applicable laws, except for any failure so to comply that, individually or
together with all other such failures, has not and will not result in a material
liability or obligation on the part of Seller, or, following the Closing, Buyer.
There are no material pending or, to Seller's Knowledge, threatened claims by or
on behalf of any of the Plans, by any Seller Employee or otherwise involving any
such Plan or the assets of any Plan (other than routine claims for benefits).
All required reports and descriptions (including Form 5500 Annual Reports,
Summary Annual Reports, PBGC-1's, and Summary Plan Descriptions) have been filed
or distributed appropriately and in a timely manner with respect to each such
Plan maintained by Seller. Neither Seller, nor any Controlled Group Member now
has any obligation to contribute, or has had at any time in the past six (6)
years an obligation to contribute to, any Plan which is a "multiemployer plan"
within the meaning of Section 4001(a)(3) of ERISA. No Seller Employee has
elected or is being provided coverage under COBRA except as set forth in
Schedule 4.23. For purposes of this Agreement, the following definitions apply:
(i)"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of 1985;
(ii) "Controlled Group Member" means Seller and each other Person required to be
aggregated with Seller under Sections 414(b), (c), (m) or (o) of the Code; and
(iii) "ERISA" means Employee Retirement Income Security Act of 1974, as amended.
4.24 Warranties. Except as disclosed in Schedule 4.24, Seller has not made any
oral or written warranties with respect to the quality or absence of defects of
19
its Products or services that Seller has sold or performed, respectively, that
are in force as of the date hereof including, any warranties made or given to
any customer. Except as disclosed in Schedule 4.24, there are no material claims
pending or, to Seller's Knowledge, anticipated or threatened against Seller with
respect to the quality of or absence of defects in such Products or services,
and there have been no material claims against Seller with respect to the
quality of or absence of defects in such Products or services. All warranty or
product liability claims made by customers of Seller relating to services or
Products provided, held or sold by Seller and satisfied by Seller in the course
of Seller's conduct of the Business since December 31, 1997 are described on
Schedule 4.24. Set forth on Schedule 4.26 are correct and complete copies of all
standard product warranties given by Seller to any of its customers in the sale
and/or manufacture, production or assembly of the Products.
4.25 Compliance with Law. Seller and its Subsidiaries, and all tangible property
included in the Acquired Assets and Leased Personal Property are, in compliance
in all material respects with all applicable laws (including The Foreign Corrupt
Practices Act, as amended), orders, rules, Permits, Environmental Permits,
codes, rulings, decrees, regulations, ordinances and other requirements of all
federal, foreign, state, county and local governmental, administrative and
judicial authorities and agencies. Neither Seller nor its Subsidiaries are a
Party to, bound by or materially adversely affected by any decree, order or
arbitration award (or agreement entered into in any administrative, judicial or
arbitration proceeding with any governmental authority) with respect to the
Business, the Acquired Assets or the Leased Personal Property. Neither Seller
nor its Subsidiaries are in violation of, or delinquent in any material respect
to, any decree, order or arbitration award or law, statute, rule or regulation
of or agreement with, or Permit or Environmental Permit from, any federal,
foreign, state or local governmental authority (or to which the Business, the
Acquired Assets or the Leased Personal Property are subject or that it, itself,
is subject), arising out of, resulting from or in any way connected with the
operation of the Business, including federal, foreign, state, county or local
laws, statutes and regulations relating to equal employment opportunities, fair
employment practices, unfair labor practices, terms of employment, occupational
health and safety, wages and hours and discrimination, and zoning ordinances and
building codes. Copies of all notices of violation of any of the foregoing that
Seller has received since December 31, 1997 are set forth on Schedule 4.25.
4.26 Intellectual Property Matters. Schedule 4.26 sets forth all of the
following that are used in, useful, necessary, incidental or pertain to or
associated with the operation of the Business (collectively, "Proprietary
Rights"): (i) all trademarks, service marks, trade names, trade dress and the
like, including all common law marks specifically relating to the Products
(collectively, together with the associated goodwill of each, "Trademarks"),
together with information regarding all registrations and pending applications
to register any such rights; (ii) all patents on and pending applications to
patent any technology or design; (iii) all copyrights and all registrations of
and applications to register copyrights; (iv) all licenses of rights in software
(including all source codes with respect to such software that are available to
20
Seller), Trademarks, patents, copyrights and other intellectual property,
whether to or by Seller; and (v) all trade secrets and inventions. Seller is the
owner of the Intellectual Property, and all such Intellectual Property exists
and has been maintained in good standing. No other Person claims the right to
use in connection with similar or closely related goods and in the same
geographic area any ▇▇▇▇ that is identical or confusingly similar to any of the
Trademarks. No third party has asserted ownership rights in any of the
Intellectual Property (except to the extent that such Intellectual Property has
been properly licensed to or by Seller). Seller's use of the Intellectual
Property does not infringe upon any right of any third party and no third party
is infringing any of Seller's rights in any of the Intellectual Property.
Without limitation of the foregoing, Seller has the legal right to use all
copies of all computer software currently used by Seller. Seller will fully
cooperate with Buyer in the assignment and transfer of all of the Intellectual
Property of the Business to Buyer.
4.27 Permits. Schedule 4.27 sets forth a complete listing of all government and
non-government licenses, permits, franchises, consents, non-conforming uses,
variances, ordinances, approvals, authorizations, exemptions, classifications
and certificates, required for the lawful conduct or operation of the Business
and/or the continued lawful use, lease, occupancy and/or ownership of the
Acquired Assets and the Leased Personal Property (collectively, the "Permits").
Seller owns or has full rights under all Permits. Seller is in material
compliance with all Permits, all of which are in full force and effect. Except
as set forth in Schedule 4.27, the consummation of the transactions contemplated
hereby will not result in any revocation, cancellation or suspension of any of
the Permits and, each of the Permits is freely transferable or assignable to
Buyer on the Closing Date, without the consent of any third party. No actions or
proceedings to revoke or modify any Permit are pending or, to Seller's
Knowledge, threatened. Seller has not taken any action that, or, Knowingly
failed to take any action where such failure would, materially and adversely
impair or limit in any way Seller's right to operate the Business or to own the
Acquired Assets or lease the Leased Personal Property. There is no basis for any
action, suit, proceeding, hearing, investigation, charge, complaint, claim or
demand that would have the result of challenging the legality, validity or
enforceability of any of the Permits. Except as set forth in Schedule 4.27, no
registration, filing, application, notice, transfer, consent, approval, order,
qualification, waiver or other action of any kind (collectively, a "Filing")
will be required as a result of the transactions contemplated herein (i) to
avoid the loss of any Permit or the material violation, breach or termination
of, or any default under, or the creation of any Lien on any Asset or Leased
Personal Property pursuant to the terms of, any law, regulation, order or other
requirement or any contract or agreement binding upon Seller or its Subsidiaries
or to which any Asset or Leased Personal Property is subject; or (ii) to enable
Buyer to continue the operation of the Business substantially as conducted prior
to the Closing Date. Except as set forth in Schedule 4.27, all such Filings will
be duly filed, given, obtained or taken on or prior to the Closing Date and will
be materially in full force and effect as of the Closing Date.
4.28 Environmental Matters.
Except as set forth in Schedule 4.28:
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(a) No Hazardous Materials on Real Property. Seller has not engaged in
or permitted any operations or activities upon, or any use or occupancy of
the Facilities or any real property ever owned, operated or leased by
Seller or its Subsidiaries or the Business, or any portion thereof, for the
purpose of or in any way involving the treatment, storage, release,
discharge, dumping or disposal of any Hazardous Materials (as hereinafter
defined), under, in or about the Facilities or any real property ever
owned, operated or leased by Seller or the Business or any facility to
which Seller has sent any Hazardous Materials, except as in compliance with
applicable Environmental Requirements (as hereinafter defined), nor are any
Hazardous Materials, presently deposited, stored, or otherwise located on,
under, in or about the real property upon which the Facilities is located,
except as in compliance with applicable Environmental Requirements.
(b) Compliance with Environmental Requirements. The Facilities and
their existing uses and activities, including the use, maintenance and
operation of the real property upon which the Facilities are located, and
all activities and conduct of the Business, comply in all material respects
with all Environmental Requirements and all use, maintenance and operation
of any other real property previously owned, occupied or used by the
Business, and all activities and conduct of the Business thereon, complied
in all material respects with all Environmental Requirements.
(c) No Notice of Violation or Litigation. Seller has received no (i)
notice or other communication concerning any alleged material violation of
Environmental Requirements; or (ii) no notice or other communication
concerning alleged material liability related to the environmental
condition of the Facilities or any real property ever owned, operated or
leased by Seller, its Subsidiaries or the Business, and there exists no
writ, injunction, decree, order or judgment outstanding, nor any lawsuit,
claim, proceeding, citation, directive, summons or investigation, pending
or threatened, relating to the ownership, use, maintenance or operation of
the Facilities or any real property ever owned, operated or leased by
Seller, its Subsidiaries or the Business, by any Person, or from alleged
material violation of Environmental Requirements, or from the suspected
presence of material quantities of Hazardous Material on the real property
or any real property ever owned, operated or leased by Seller, its
Subsidiaries or the Business, upon which the Facilities or any real
property ever owned, operated or leased by Seller or its Subsidiaries or
the Business, is located, nor does there exist any basis for such lawsuit,
claim, proceeding, citation, directive, summons or investigation being
instituted or filed.
(d) Environmental Definitions.
"Hazardous Materials" means any substance: (i) the presence of which
requires investigation or remediation under any federal, foreign, state or
local statute, regulation, ordinance, order, action, policy or common law;
(ii) which is or becomes defined as a "hazardous waste," "hazardous
substance," pollutant or contaminant under any federal, state or local
statute, regulation, rule or ordinance or amendments thereto including,
without limitation, the Comprehensive Environmental Response, Compensation
and Liability Act (42 U.S.C. ss. 9601 et seq.) and/or the Resource
Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.); (iii) the
presence of which on the Facilities causes or threatens to cause a nuisance
upon the Facilities or to adjacent properties or poses or threatens to pose
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a hazard to the health or safety of persons on or about the real property
upon which the Facilities is located; or (iv) without limitation, which
contains petroleum, including crude oil or any fraction thereof.
"Environmental Requirements" means all applicable present and future
foreign, domestic, federal, state or local statutes, regulations, rules,
ordinances, codes, licenses, permits, orders, approvals, plans,
authorizations, concessions, franchises, and similar items, of all
governmental agencies, departments, commissions, boards, bureaus, or
instrumentalities of the United States, states and political subdivisions
thereof and all applicable judicial, administrative, and all regulatory
decrees, administrative interpretation, directives, decrees, orders,
judicial or administrative precedent, standards, official interpretation,
awards, permits, licenses or published policies or guidance, and judgments,
in effect at any time prior to the Closing Date and pertaining to Hazardous
Materials, toxic torts, occupational health and safety, or the environment,
including, without limitation, the following federal statutes: the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response
Compensation and Liability Act, the Clean Air Act, the Water Pollution
Control Act, the Safe Drinking Water Act, and the Toxic Substances Control
Act.
4.29 Reports. Except as set forth on Schedule 4.29, Seller and its Subsidiaries
have timely filed all reports, registrations and statements required to be filed
with any governmental authority, and has paid all fees and assessments due and
payable in connection therewith.
4.30 Affiliate and Certain Other Transactions. Schedule 4.30 describes all
Contracts and Real Estate Leases between Seller and any of Seller's Affiliates,
and between Seller and any officer, director, employee or shareholder of Seller,
and sets forth the material terms thereof. Except as set forth in Schedule 4.30,
no director, officer, stockholder or, to Seller's knowledge, employee of Seller
is (or is a director, officer, stockholder, employee, representative or
stockholder, excluding a less than 1% stockholder of a publicly held
corporation, of) any competitor, supplier, customer or lessor or lessee of
Seller.
4.31 Certain Indebtedness. Except as set forth on Schedule 4.31, Seller is not
indebted to any officer, director, stockholder or employee of Seller or its
Subsidiaries, except for amounts due as normal salaries, wages, benefits or
reimbursement of ordinary business expenses. No officer, director, stockholder
or employee of Seller or its Subsidiaries is now, or on the Closing Date will
be, indebted to Seller or its Subsidiaries, except for ordinary business expense
advances due from employees of Seller.
4.32 Undisclosed Liabilities. Neither Seller nor any of its Subsidiaries has
liabilities, obligations or commitments of any nature (whether absolute,
accrued, contingent or otherwise and whether matured or unmatured), including
Tax liabilities due or to become due, except (a) liabilities which are reflected
and reserved against on the Balance Sheet which have not been paid or discharged
since the date thereof; (b) accounts payable and accrued expenses incurred in
the ordinary course of the Business consistent with past practice which have not
23
caused the level of Seller's accounts payable or accrued expenses to increase
materially from the amounts reflected on the Balance Sheet; (c) liabilities
arising in the ordinary course of business consistent with past practice under
Contracts or Real Estate Leases (other than any liability resulting from,
arising out of, relating to, in the nature of, or caused by any breach of
contract, breach of warranty, tort, infringement or violation of law); and (d)
as set forth on Schedule 4.32.
4.33 Certain Payments. Neither Seller nor any Subsidiary nor any of their
respective directors, officers, agents or employees, nor any other Person
associated with or acting for or on behalf of Seller or any Subsidiary, has
directly or indirectly (a) made any contribution, gift, bribe, rebate, payoff,
influence payment, kickback, or other payment to any Person, private or public,
regardless of form, whether in money, property, or services (i) to obtain
favorable treatment in securing business, (ii) to pay for favorable treatment
for business secured, (iii) to obtain special concessions or for special
concessions already obtained, for or in respect of Seller or any Subsidiary, or
(iv) in violation of any applicable law, including the Foreign Corrupt Practices
Act, as amended; or (b) established or maintained any fund or asset that has not
been recorded in the books and records of Seller. The internal accounting
controls of Seller and its Subsidiaries are adequate to detect any of the
foregoing.
4.34 Disclosure. No representation or warranty by Seller contained in this
Agreement (including the Disclosure Schedule and the exhibits referred to
herein) or any Transaction Document contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements contained herein and therein, when considered
in light of the circumstances under which they were made, not misleading.
4.35 Private Placement of Securities Not Registered under Securities Law. Seller
and Selling Shareholder understand and acknowledge that with respect to the
Buyer Preferred Stock and the NewMarket Preferred Stock which will be issued as
part of the Purchase Price hereunder (i) that neither the U.S. Securities and
Exchange Commission (the "Commission") or the securities regulatory authority of
any state, nor any other regulatory or self-regulatory authority or body, has
passed upon the value of the aforementioned Preferred Stock, made any
recommendation as to their purchase, approved or disapproved this offering or
passed upon the adequacy or accuracy of this Agreement; and (ii) that the
aforementioned Preferred Stock (a) has not been registered under the Securities
Act of 1933 (the "Securities Act") or under the securities laws of any state or
foreign jurisdiction and may not be sold or transferred without compliance with
applicable federal, state or foreign securities laws; (b) has not been
registered or qualified for offer or sale under the Securities Act or the
securities laws of any state or any other jurisdiction; (c) is being offered and
sold by way of a "private placement" exempt from the registration requirements
of the Securities Act and applicable state securities laws pursuant to Rule 506
of Regulation D thereof and comparable state law exemptions; (d) may not be
transferred, except in transactions that are exempt from, or not subject to, the
registration requirements of the Securities Act and other applicable securities
laws; and (e) will not be listed on any securities market or exchange, and no
public or liquid market for the aforementioned Preferred Stock otherwise exists
or is likely to develop.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER AND NEWMARKET
Buyer and NewMarket represent and warrant to Seller and the Shareholder as
follows:
5.1 Corporate Existence. Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization with
full power and authority to own its properties and assets and to conduct its
business as now conducted or proposed to be conducted.
5.2 Corporate Authorization; Enforceability. Buyer has the full power and
authority to enter into and perform the Transaction Documents to which it is a
Party and to consummate the transactions contemplated therein in accordance with
their respective terms. Buyer has taken all necessary corporate and stockholder
actions to authorize and approve the execution, delivery and performance of the
Transaction Documents to which it is a Party and the transactions contemplated
thereby and the Transaction Documents constitute (or will constitute when
executed) a legal, valid and binding obligation of Buyer, enforceable against
Buyer in accordance with its respective terms.
5.3 No Conflict. Compliance with the terms and conditions hereof will not (i)
violate or conflict with any provision of any Buyer's charter documents or any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge or other restrictions of any government, governmental agency or
court to which such Buyer is subject or (ii) result in the breach or termination
of any provision of, result in the acceleration of, create in any Party the
right to accelerate, terminate, modify or cancel, require any notice under or
constitute a breach or default under any note, bond, indenture, lease, contract,
agreement or other instrument, or obligation to which such Buyer is a Party or
by which any of the properties or assets of Buyer may be subject, bound or
affected, except in each case where such violation, regulation or breach would
not have a Material Adverse Effect on Buyer. Buyer is not a Party to any
agreement or contract or subject to any other legal restriction that would
prevent or restrict the complete fulfillment by Buyer of all of the terms and
conditions of the Transaction Documents to which it is a Party or compliance
with any of its obligations under the Transaction Documents.
5.4 Required Consents. Except as may be required pursuant to the HSR Act, no
consents or approvals of any third party or public body or authority and no
consents or waivers from any other Parties to leases, licenses, franchises,
permits, indentures, contracts, agreements or other instruments or documents are
required for the lawful consummation by Buyer of the transactions contemplated
by the Transaction Documents to which it is a Party.
5.5 Broker's Fees. Buyer has not dealt with any Person who is or may be entitled
to a broker's commission, finder's fee, investment banker's fee or similar
payment for arranging the transaction contemplated hereby or introducing the
Parties to each other.
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5.6 Financial Statements. The Financial Statements of NewMarket, as filed with
the Securities and Exchange Commission, are in accordance with its books and
records and fairly present the financial position of NewMarket and its
Subsidiaries, as the case may be, as of the dates thereof, and the results of
operations and cash flows and changes in shareholders' equity of NewMarket or
its Subsidiaries, as the case may be, for the fiscal period or as of the
respective dates thereof.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Public Announcements. Except as otherwise required by applicable law or the
requirements of any regulatory authority, no Party shall, or shall permit any of
their respective Affiliates to, issue or cause the publication of any press
release or other public announcement with respect to, or otherwise make any
public statement concerning, the transactions contemplated by this Agreement or
any other Transaction Document, without the prior consent of the other Party,
which consent shall not be unreasonably withheld.
6.2 Bulk Transfer Laws. The Parties agree to waive compliance with the
requirements of any applicable bulk sales law provisions of the UCC of the
jurisdictions in which the Acquired Assets are situated or which may otherwise
be applicable to the transactions contemplated hereby; provided, however, that
Seller shall be liable for and shall pay and discharge any amount (including
Taxes) owed under or as a result of such laws, whether as a result of waiving
such compliance or otherwise.
6.3 Consents to Assignment; Release of Liens. In the event that consents,
approvals as effective waivers have not been obtained prior to Closing, Seller
shall use its commercially reasonable efforts after Closing to obtain the
consents or approvals (or effective waivers thereof) of assignment from those
Persons whose consents or approvals are required for the assignment of Seller's
rights under Assumed Liabilities or otherwise specified in this Agreement or the
Disclosure Schedules.
6.4 Third Party Consents. After Closing, to the extent that Seller's rights
under any Acquired Asset to be assigned to Buyer under this Agreement may not be
assigned without the consent of another Person which has not been obtained, this
Agreement shall not constitute an agreement to assign the same if an attempted
assignment would constitute a breach thereof or be unlawful, and Seller shall
use commercially reasonable efforts to obtain any such required consent as soon
as reasonably possible. If any such consent shall not be obtained or if any
attempted assignment would be ineffective or would impair Buyer's rights under
the Acquired Asset in question so that Buyer would not in effect acquire the
benefit of substantially all such rights, Seller, to the maximum extent
permitted by law and the Acquired Asset, shall, if Buyer so requests, cooperate
with Buyer in any reasonable arrangement designed to provide such benefits
thereunder to Buyer.
6.5 Further Assurances. Seller, from time to time after the Closing, at Buyer's
request, will execute, acknowledge and deliver to Buyer such other instruments
of conveyance and transfer and will take such other actions and execute and
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deliver such other documents, certifications and further assurances as Buyer may
reasonably require in order to vest more effectively in Buyer, or to put Buyer
more fully in possession of, any of the Acquired Assets, or to better enable
Buyer to complete, perform or discharge any of the Assumed Liabilities at the
Closing. Each of the Parties will cooperate with the other and execute and
deliver to the other Parties such other instruments and documents and take such
other actions as may be reasonably requested from time to time by any other
Party as necessary to carry out, evidence and confirm the intended purposes of
this Agreement.
6.6 Additional Financial Statements. After Closing, as soon as reasonably
practicable after they become available, Seller shall furnish to Buyer the
balance sheets and statements of operations and cash flows of the Business, for
all interim periods prior to the date of Closing. Such interim financial
statements will be prepared in conformity with GAAP.
6.7 Tax Matters.
(a) Seller shall be responsible for the preparation and filing of all
Tax Returns for all activities of the Business for all periods ending on or
before the Closing Date. Seller will make all payments required with
respect to any such Tax Return; provided, however, that Buyer will
reimburse Seller to the extent any payment Seller is making relates to the
operations of the Business for any period beginning after the Closing Date.
(b) Buyer will be responsible for the preparation and filing of all
Tax Returns for all activities of the Business for all periods beginning on
or after the Closing Date and for the period described in subsection (c)
below. Buyer will make all payments required with respect to any such Tax
Return; provided, however, that Seller will reimburse Buyer to the extent
any payment Buyer is making relates to the operations of the Business for
any period ending on or before the Closing Date.
(c) In the case of any real or personal property or other ad valorem
Tax imposed on the Acquired Assets for a tax period that includes, but does
not end on, the Closing Date, the portion of such Tax related to the
portion of such tax period ending on the Closing Date shall be deemed to be
the amount of such Tax for the entire tax period multiplied by a fraction,
the numerator of which is the number of days in the tax period ending on
the Closing Date and the denominator of which is the number of days in the
entire tax period. Seller shall be responsible for any such Tax relating to
the portion of such tax period ending on the Closing Date, and Buyer shall
be responsible for any such Tax relating to the portion of such Tax period
beginning after the Closing Date.
6.8 Collections. From and after the Closing, Seller shall promptly pay,
transfer, and deliver to Buyer all payments or property that Seller shall
receive (which payments and property shall be held in trust by Seller for Buyer)
that constitute a part of the Acquired Assets, including any payment received
under any Assumed Contract or Account Receivable.
6.9 Tax Clearances. Seller, at Seller's expense, shall obtain, as of the earlier
of the Closing Date or the date of transfer of any tangible property to Buyer,
all state sales and personal property tax clearances or similar clearances (and
any foreign equivalents) requested by Buyer.
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6.10 Confidentiality.
(a) Non-Disclosure by Seller and Shareholder. Seller and the
Shareholder shall, and they shall cause their respective officers,
directors, employees, agents, Affiliates and representatives (collectively,
"Related Persons") to, treat any data and other Confidential Information
(as defined below) received with respect to the Buyer Group (as defined in
Section 9.1), or from any books or records of the Buyer Group in connection
with the Transaction Documents, strictly confidential, and will not
disclose any such Confidential Information to third Persons or use such
Confidential Information. "Confidential Information" means all confidential
information, including proprietary information, technical information,
customer information, pricing information, marketing information and
personnel information relating to the Buyer Group or Seller Group (as
defined in Section 9.2), as the case may be, and their respective
customers, products and services.
(b) Non-Disclosure by Buyer. Prior to the Closing, Buyer shall, and it
shall cause its Related Persons to, treat any data and other Confidential
Information, received with respect to Seller Group, or from any books or
records of Seller Group in connection with the Transaction Documents,
strictly confidential and will not disclose any such Confidential
Information to third Persons or use such Confidential Information, except
as required in connection with the transactions contemplated by the
Transaction Documents.
6.11 Change of Name by Seller. Immediately after Closing, Shareholder and Seller
shall cause Seller to change its name from "Corsa Network Technologies, Inc." It
is understood and agreed by Seller that (i) Buyer shall acquire hereunder all
right, title and interest in said name; (ii) Buyer intends to use said name in
operating the Business after Closing; (iii) that Seller shall therefore, at
Closing, tender the requisite documentation indicating its new corporate name
and sufficient to effect a change of name by Seller to such new name; (iv)
Buyer, in its sole discretion, shall, prior to Closing, approve said new name;
and (v) Seller shall file said documentation immediately after Closing in order
to effect the change of name contemplated hereunder and shall thereafter provide
proof of such change of name by sending to Buyer a copy of such documentation,
duly filed and recorded with the appropriate government agency, promptly upon
said filing and recording thereof.
6.12 Employment Agreements. The Buyer shall use its best efforts to enter into
employment agreements with the Shareholder, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇,
substantially in the forms attached as Exhibits 6.12(i), (ii) and (iii), within
30 days from the Closing Date.
6.13 Non-Competition Agreements. The Seller shall use its best efforts to cause
each of the Shareholder, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇ to enter into a
Proprietary Rights, Non Compete, and Confidentiality Agreement in favor of the
Buyer, substantially in the form attached as Exhibit 6.13, within 30 days from
the Closing Date.
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ARTICLE VII
DELIVERIES AT THE
CLOSING BY SELLER AND SHAREHOLDER
At the Closing, upon execution and delivery of this Agreement by Buyer,
Seller and the Shareholder shall deliver to Buyer the following:
7.1 ▇▇▇▇ of Sale and Assignment. An executed ▇▇▇▇ of Sale and Assignment from
Seller in favor of Buyer, dated the date hereof, in a form reasonably acceptable
to Buyer.
7.2 Instruments of Transfer. Such other bills of sale, deeds, endorsements,
consents, estoppel certificates, and instruments of transfer or assignment as
shall be reasonably requested by Buyer to confirm and vest in Buyer good, valid,
complete, effective, rightful, indefeasible and marketable fee simple title to
the Acquired Assets, free and clear of all Liens except the Permitted Liens, and
the right to assume and perform the Assumed Liabilities.
7.3 Third Party Consents. To the extent that Seller's rights under any
agreement, contract, commitment, lease, authorization or other Asset to be
assigned to Buyer hereunder may not be assigned without the consent of another
Person which has not been obtained, this Agreement shall not constitute an
agreement to assign the same if an attempted assignment would constitute a
breach thereof or be unlawful, and Seller shall use commercially reasonable
efforts to obtain any such required consent as soon as reasonably practicable.
If any such consent shall not be obtained or if any attempted assignment would
be ineffective or would impair Buyer's rights under the Asset in question so
that Buyer would not in effect acquire the benefit of substantially all such
rights, Seller, to the maximum extent permitted by law and the Asset, shall, if
Buyer so requests, cooperate with Buyer in any reasonable arrangement designed
to provide such benefits thereunder to Buyer. Nothing in this Section 7.3 shall
be deemed a waiver by Buyer of its right to have received on or before the
Closing an effective assignment of all of the Acquired Assets.
7.4 Change of Name. In a form suitable for recording and filing, change-of-name
documentation, sufficient to effect the change of name of Seller to a name
different than "Corsa Network Technologies, Inc."; said new name to be
acceptable to Buyer in its sole discretion, all in accordance with Section 6.11
hereof.
7.5 Other Documents. Such other documents, instruments or assignments as shall
be reasonably requested by Buyer and its counsel or required to be delivered by
Seller pursuant to this Agreement or in any other instrument or document
delivered by any of the Parties hereto pursuant to this Agreement (the
"Ancillary Agreements").
ARTICLE VIII
DELIVERIES AT THE CLOSING BY BUYER
At the Closing, upon execution and delivery of this Agreement by Seller,
Buyer shall deliver to Seller the following:
29
8.1 The Purchase Price. The Purchase Price as required by Section 3.2.
8.2 Assumption Agreement. An executed Assumption Agreement from Buyer in favor
of Seller, dated the date hereof, in a form reasonably acceptable to Seller.
8.3 Other Documents. Such other documents, instruments or assignments as shall
be reasonably requested by Seller or its counsel or required to be delivered by
Buyer pursuant to this Agreement or the Ancillary Agreements.
ARTICLE IX
INDEMNIFICATION
9.1 Indemnification by Seller and Shareholder. From and after the Closing,
Seller and Shareholder jointly and severally, shall indemnify, defend and hold
harmless Buyer and Buyer's Affiliates and their respective employees, officers,
directors, stockholders and agents (collectively, "Buyer Group") from, against
and with respect to any claim, liability, obligation, loss, damage, assessment,
judgment, cost and expense (including reasonable attorney's and accountant's
fees and costs and expenses reasonably incurred in investigating, preparing,
defending against or prosecuting any litigation or claim, action, suit,
proceeding or demand) (collectively, "Losses"), of any kind or character arising
out of or in any manner incident, relating or attributable to (i) the inaccuracy
in any representation or breach of any warranty of Seller or the Shareholder
contained in any Transaction Document; (ii) any failure by Seller or the
Shareholder to perform or observe any covenant, agreement or condition to be
performed or observed by any of them under any Transaction Document; (iii) any
third-party claim that Seller's use of the Intellectual Property infringed upon
any right of any such third party; (iv) except for the Assumed Liabilities, any
liabilities, obligations, debts, contracts or other commitments of any kind or
nature whatsoever, whether known or unknown and whether accrued, fixed,
absolute, conditional, determined, determinable or otherwise, of Seller existing
on the Closing Date or arising out of, or resulting from, any transaction
entered into, or any state of facts existing, prior to or at the Closing Date
which are imposed on Buyer as result of the transactions contemplated in this
Agreement or any other Transaction Document; (v) any litigation or other
proceeding disclosed on Schedule 4.20; or (vi) any Excluded Liability. Provided
that they have not provided Buyer with an Objection Notice (as defined herein),
Seller and Shareholder, jointly and severally, shall reimburse Buyer for any
payment made by Buyer Group at any time after the Closing in respect of any
Losses to which the foregoing indemnity relates after the expiration of thirty
(30) days from the date of receipt by Seller of written demand for payment
thereof by Buyer specifying in reasonable detail and with supporting
documentation the nature and amount of such claim for Losses (a "Claim Notice").
If the indemnifying Party objects to the matters contained in the Claim Notice,
such Party shall advise the other Party seeking indemnification of such
objection in writing (an "Objection Notice") prior to the expiration of the
thirty (30) day period after the indemnifying Party's receipt of the Claim
Notice. The Objection Notice shall state in reasonable detail the indemnifying
Party's reasons for objecting to the matters contained in the Claim Notice.
9.2 Indemnity by Buyer. From and after the Closing, Buyer shall indemnify,
defend and hold harmless Seller employees, officers, directors, stockholders and
agents (collectively, the "Seller Group") from, against and with respect to any
30
Losses, of any kind or character arising out of or in any manner incident,
relating or attributable to (i) the inaccuracy in any representation or breach
of warranty of Buyer contained in any Transaction Document; or (ii) any failure
by any Buyer to perform or observe any covenant, agreement or condition to be
performed or observed by it under any Transaction Document. Provided that Buyer
has not provided Seller with an Objection Notice, Buyer shall reimburse Seller
for any payment made by Seller Group at any time after the Closing in respect of
any Losses to which the foregoing indemnity relates after the expiration of
thirty (30) days from the date of receipt by Buyer of the Claim Notice from
Seller. If the indemnifying Party objects to the matters contained in the Claim
Notice, such Party shall advise the other Party seeking indemnification of such
objection in writing an Objection Notice prior to the expiration of the thirty
(30) day period after the indemnifying Party's receipt of the Claim Notice. The
Objection Notice shall state in reasonable detail the indemnifying Party's
reasons for objecting to the matters contained in the Claim Notice.
9.3 Survival. All representations and warranties of each of the Parties set
forth in the Transaction Documents shall survive the transactions contemplated
herein and shall remain operative and in full force and effect, regardless of
any investigations at any time made by or on behalf of any Party hereto, for a
period of three years after the Closing Date. Any claim pending on the
expiration date of any applicable survival period for which a Claim Notice has
been given in accordance with this Article IX on or before such expiration date
may continue to be asserted and indemnified against until finally resolved. All
other covenants and agreements contained in this Agreement will survive the
Closing in accordance with their terms If the Parties cannot mutually settle
their dispute within ten (10) days after receipt of an Objection Notice, then
they shall be free to pursue any remedy available to them under this Agreement.
9.4 Limitation on Indemnification Obligation. Notwithstanding the provisions of
Section 9.1(i) to the contrary, the aggregate amount of any payments that shall
be payable by Seller and Shareholder as a result of any claims for
indemnification made by any of Buyer Group pursuant to the terms of Section
9.1(i) shall be limited to the Purchase Price (the "General Maximum
Limitation").
9.5 Third Party Claims. Subject to the provisions of Article IX hereof, if any
Party asserts a claim for Losses pursuant to this Article IX as a result of a
claim made by any third party (a "Third-Party Claim"), the indemnifying Party
shall have the right to elect to join in the defense, settlement, adjustment or
compromise of any such Third-Party Claim, and to employ counsel to assist such
indemnifying Party in connection with the handling of such claim, at the sole
expense of the indemnifying Party, and no such claim shall be settled, adjusted
or compromised, or the defense thereof terminated, without the prior consent of
the indemnifying Party unless and until the indemnifying Party shall have failed
after the lapse of a reasonable period of time, but in no event more than thirty
(30) days after written notice to it of the Third-Party Claim, to join in the
defense, settlement, adjustment or compromise of the same. An indemnified
Party's failure to give timely notice or to furnish the indemnifying Party with
any relevant data and documents in connection with any Third-Party Claim shall
31
not constitute a defense (in part or in whole) to any claim for indemnification
by such Party, except and only to the extent that such failure shall result in
any material prejudice to the indemnifying Party. If so desired by any
indemnifying Party, such Party may elect, at such Party's sole expense, to
assume control of the defense, settlement, adjustment or compromise of any
Third-Party Claim, with counsel reasonably acceptable to the indemnified Party,
insofar as such claim relates to the liability of the indemnifying Party,
provided that such indemnifying Party shall obtain the consent of all
indemnified Parties before entering into any settlement, adjustment or
compromise of such claims or ceasing to defend against such claims, if as a
result thereof, or pursuant thereto, there would be imposed on an indemnified
Parties any material liability or obligation not covered by the indemnity
obligations of the indemnifying Parties under this Agreement (including, without
limitation, any injunctive relief or other remedy). In connection with any
Third-Party Claim, the indemnified Party, or the indemnifying Party, if it has
assumed the defense of such claim pursuant to the preceding sentence, shall
diligently pursue the defense of such Third-Party Claim.
ARTICLE X
MISCELLANEOUS
10.1 Expenses. Except as otherwise herein provided, each of the Parties shall
pay its respective costs and expenses incurred or to be incurred by it in
connection with the negotiations respecting any of the Transaction Documents and
the transactions contemplated thereof, including preparation of documents,
obtaining any necessary regulatory approvals and the consummation of the other
transactions contemplated in the Transaction Documents.
10.2 Entire Agreement. The Transaction Documents contain the entire agreement
between the Parties hereto with respect to the transactions contemplated herein
and supersedes all other prior agreements, understandings and letters related
hereto.
10.3 Assignment. This Agreement may not be assigned prior to the Closing by any
Party without the prior written consent of the other Party; provided, however,
that Buyer may assign all or part of its rights or obligations hereunder to one
or more direct or indirect subsidiaries of Buyer; provided further, that any
such assignment will not relieve Buyer of any of its obligations hereunder. 10.4
Waiver. Any term or provision of this Agreement may be waived at any time by the
Party entitled to the benefit thereof by a written instrument duly executed by
such Party. The waiver by either Party of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent
breach.
10.5 Notices. Any notice or other communications required or permitted by this
Agreement and any other Transaction Documents shall be in writing and shall be
deemed to have been duly given (i) on the date sent, if delivered personally, by
e-mail or by confirmed telecopy and (ii) on the next business day, if mailed by
reputable overnight courier (postage pre-paid), to the Parties at the following
addresses (or at such other address for Party as shall be specified by like
notice, which notice will be effective only upon receipt):
32
(a) if to Seller or the Shareholder:
c/o ▇▇▇▇▇▇ ▇▇▇▇▇
Corsa Network Technologies, Inc. (or Successor thereto)
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(b) if to Buyer:
IPGlobal Voice, Inc. (d/b/a Xiptel)
Pier One - Bay Three
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
E-Mail: ▇▇▇▇▇▇▇@▇▇▇▇▇▇.▇▇▇
with a required copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇
NewMarket Technology, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
E-Mail: ▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
10.6 Amendment. This Agreement may be amended or supplemented by the Parties.
The Parties shall make such technical changes to this Agreement, not
inconsistent with the purposes hereof, as may be required to effect or
facilitate any governmental approval or acceptance of this Agreement or of this
Agreement or to effect or facilitate any filing or recording required for the
consummation of any of the transactions contemplated hereby. This Agreement may
not be amended except by an instrument in writing signed on behalf of each of
the Parties.
10.7 Governing Law. This Agreement shall be construed in accordance with the
laws of the State of Delaware without regard to any applicable conflicts of law.
10.8 Binding Effect; No Third Parties. The representations, warranties,
covenants and agreements contained in this Agreement are for the sole benefit of
the Parties and their respective successors and permitted assigns, and they
shall not be construed as conferring any rights on any other Persons.
10.9 Invalidity. In the event that any one or more of the provisions contained
in this Agreement or the other Transaction Documents shall, for any reason, be
held to be invalid, illegal or unenforceable in any respect, then to the maximum
extent permitted by law, such invalidity, illegality or unenforceability shall
not affect any other provision of this Agreement or the other Transaction
Documents.
10.10 Counterparts; Facsimile. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but such counterparts shall
together constitute one and the same instrument. The Agreement may be executed
and delivered by facsimile transmissions, and a facsimile signature of any Party
shall be effective as an original signature.
10.11 Construction. The Parties have participated jointly in the negotiation and
drafting of this Agreement and the other Transaction Documents. In the event an
ambiguity or question of intent or interpretation arises, this Agreement and the
33
other Transaction Documents shall be construed as if drafted jointly by the
Parties and no presumptions or burden of proof shall arise favoring or
disfavoring any Party by virtue of the authorship of any of the provisions of
this Agreement or the other Transaction Documents.
10.12 Cumulative Remedies. All rights and remedies of either Party are
cumulative of each other and of every other right or remedy such Party may
otherwise have at law or in equity, and the exercise of one or more rights or
remedies shall not prejudice or impair the concurrent or subsequent exercise of
other rights or remedies. In addition to any other remedies, the Parties
acknowledge that the other Party shall be entitled to enforce its rights under
Section 6.10 (confidentiality), specifically for any breach or threatened breach
of any provisions of Section 6.10, without the necessity of posting bond or
other security. The prevailing Party in any litigation or proceeding in
connection with this Agreement shall be entitled to recover its costs and
expenses, including reasonable attorneys' fees and auditors' fees.
[SIGNATURE PAGE FOLLOWS]
34
IN WITNESS WHEREOF, the Parties have duly executed this Asset Purchase
Agreement as of the date first written above.
IP GLOBAL VOICE, INC. (D/B/A XIPTEL) CORSA NETWORK TECHNOLOGIES, INC.
By: /s/▇▇▇▇▇ ▇▇▇▇▇▇ By:
--------------------------------- ---------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇ Name:
--------------------------------- ---------------------------------
Title: President & CEO Title:
--------------------------------- ---------------------------------
ATTEST: ATTEST:
By: By:
--------------------------------- ---------------------------------
Secretary Secretary
NEWMARKET TECHNOLOGY, INC. SHAREHOLDER
By: /s/▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
Name:▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------
Title: President & CEO
---------------------------------
ATTEST:
By:
---------------------------------
Secretary
COUNTY OF [____________]
STATE OF CALIFORNIA
I, , Notary Public, hereby certify that ▇▇▇▇▇▇ ▇▇▇▇▇, personally known to
me to be the same person whose name is signed to the foregoing Asset Purchase
Agreement, appeared before me this day in person and acknowledged that he signed
the foregoing instrument as his free and voluntary act, for the uses and
purposes therein set forth.
Given under my hand and official seal on this day of ___________ , 2005.
________________________________________
------------------------------------
Notary Public
My commission expires: _______________
35
E-18
CH02/ 22387112.6
EXHIBIT INDEX
Form of: Number
------- ------
Employment Agreements
▇▇▇▇▇▇ ▇▇▇▇▇ 6.12(i)
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 6.12(ii)
▇▇▇▇▇ ▇▇▇▇▇ 6.12(iii)
Proprietary Rights, Non-Compete, and 6.13
Confidentiality Agreement
36
Exhibit 6.12(i)
Form of Employment Agreement
________ __, 2005
▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇
Corsa Network Technologies, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Dear ▇▇▇▇▇▇:
We are pleased to offer you the position of _______title TBD________ with
Corsa Network Technologies, a division of IP Global Voice, Inc. dba Xiptel
("XIPTEL"). This letter agreement (the "Agreement") sets forth the basic terms
and conditions of your employment. Your effective date of hire (the "Hire Date")
by XIPTEL is _______ __, 2005. By signing this letter, you will be agreeing to
these terms.
1._______Salary, Bonuses. You will be paid an annual base salary of
$150,000 (payable in accordance with XIPTEL's usual payroll practices), which
covers all hours worked. Generally, your salary will be reviewed annually, but
XIPTEL reserves the right to change your compensation from time to time on
reasonable notice; however, for the first year of employment no change will be
made without mutual consent and approval. You will be paid a bonus of $100,000,
which will be paid at a rate of $25,000 at the end of each calendar quarter for
the first year of employment. The bonus payments will be guaranteed. The
performance basis for bonus payments will be mutually agreed upon and be
established within four (4) weeks following the effective date of employment.
Bonus payments will only be earned and paid while employed by XIPTEL, and will
not be paid or owed after the date you separate from the company for any reason,
subject to item #6 below.
2._______Duties. Your duties, responsibilities and authority shall be
appropriate to your position and assigned to you by the President of XIPTEL or
the President's designee. Throughout the term of your employment, you will
devote such business time and energies to the business and affairs of XIPTEL as
needed to carry out your duties and responsibilities, subject to the overall
supervision and direction of the President of XIPTEL or any other employee as
assigned by the President.
3._______Proprietary Information Agreement. You will be required to sign
XIPTEL's standard Proprietary Information and Inventions Agreement, which may be
incorporated into this Agreement by reference (Exhibit A), unless you have
already signed a copy of the Agreement. You are required to immediately notify
XIPTEL (through an appropriate officer or other employee of XIPTEL) regarding
any product, improvement or process which you shall discover, make, invent,
conceive, develop or design, solely or jointly with others, relating to any
product, equipment or process which is applicable to the subject matter of
XIPTEL's business, or which may be directly or indirectly utilized in connection
therewith, irrespective of whether or not said product, improvement or process
was discovered, made, invented, conceived, developed or designed on your time or
at the expense of XIPTEL.
37
4._______Immigration Documentation. Please be advised that your employment
is contingent on your ability to prove your identity and authorization to work
in the U.S. for XIPTEL. You must comply with the Immigration and Naturalization
Service's employment verification requirements.
5._______Employee Benefits. You will be eligible for paid vacation,
holidays, health benefits and other employee benefits, in accordance with
XIPTEL's employee policies as developed, adopted and modified from time to time,
which currently includes two (2) weeks of paid time off per year.
6._______At-Will Employment. Your employment with the Company is "at-will."
In other words, either you or XIPTEL can terminate your employment at any time
for any reason, with or without cause and with or without notice, and without
thereby incurring any liability under this Agreement or otherwise, except that
during the first year of employment, if your employment is terminated by XIPTEL,
XIPTEL will be required to pay for the remaining (unpaid) balance of the first
year salary plus bonus. If termination of employment is initiated by you, XIPTEL
will have no such liability and no money will be due to be paid to you,
including the bonus amount referenced in item #1, above. This term of employment
is not subject to change or modification of any kind except if in writing and
signed by you and the President of XIPTEL. XIPTEL reserves the right to
outsource payroll, benefit administration, and/or use the services of a PEO
(Professional Employer Organization), however, the company does not have the
obligation to utilize a PEO.
7._______Withholding. Anything to the contrary notwithstanding, all
payments made by XIPTEL hereunder to you or your estate or beneficiaries will be
subject to tax withholding pursuant to any applicable laws or regulations. In
lieu of withholding, XIPTEL may, in its sole discretion, accept other provision
for payment of taxes as allowed by law, provided it is satisfied that all
requirements of law affecting its responsibilities to withhold such taxes have
been satisfied.
8._______Dispute Resolution Procedure. You and XIPTEL (the "Parties") agree
that any dispute arising out of or related to the employment relationship
between them, including the termination of that relationship and any allegations
of unfair or discriminatory treatment arising under state or federal law or
otherwise, shall be tried and litigated exclusively in the State courts located
in the County of San Francisco, California or the United States Federal courts
for the Northern District of California. The aforementioned choice of venue is
intended by the Parties to be mandatory and not permissive in nature, thereby
precluding the possibility of litigation between the Parties with respect to or
arising out of this Agreement in any jurisdiction other than that specified in
this paragraph. Each Party hereby waives any right it may have to assert the
doctrine of forum non conveniens or similar doctrine or to object to venue with
respect to any proceeding brought in accordance with this paragraph, and
stipulates that the State and Federal courts specified above in this paragraph
shall have in personam jurisdiction and venue over each of them for the purpose
of litigating any dispute, controversy, or proceeding arising out of or related
to this Agreement.
9._______Attorneys' Fees. If either Party to this Agreement shall bring any
action, suit, counterclaim, appeal, arbitration, or mediation for any relief
against the other, declaratory or otherwise, to enforce the terms hereof or to
declare rights hereunder (collectively, an "Action"), the losing Party shall pay
to the prevailing Party a reasonable sum for attorneys' fees and costs,
38
including consulting and witness fees and expert fees incurred in bringing and
prosecuting such Action and/or enforcing any judgment, order, ruling, or award
(collectively, a "Decision") granted therein, all of which shall be deemed to
have accrued on the commencement of such Action and shall be paid whether or not
such Action is prosecuted to a Decision. Any Decision entered in such Action
shall contain a specific provision providing for the recovery of attorneys' fees
and costs incurred in enforcing such Decision. The court or arbitrator may fix
the amount of reasonable attorneys' fees and costs on the request of either
Party.
10.______Integrated Agreement. Please note that this Agreement supersedes
any prior agreements, representations or promises of any kind, whether written,
oral, express or implied between you and XIPTEL with respect to the subject
matters herein. It and any agreements incorporated by reference constitute the
full, complete and exclusive agreement between you and XIPTEL with respect to
the subject matters in this Agreement.
11.______Miscellaneous. No provision of this Agreement may be amended or
waived unless such amendment or waiver is agreed to by you and the President of
XIPTEL in writing. No waiver by you or by XIPTEL of the breach of any condition
or provision of this Agreement will be deemed a waiver of a similar or
dissimilar provision or condition at the same or any prior or subsequent time.
In the event any portion of this Agreement is determined to be invalid or
unenforceable for any reason, the remaining portions shall be unaffected thereby
and will remain in full force and effect to the fullest extent permitted by law.
All matters relating to the interpretation or enforcement of this Agreement
shall be governed by California law, without regard to its choice of law
provisions.
We hope that you will join us. This offer is valid for five (5) days from
the date of this letter. To facilitate matters, we would appreciate if you would
indicate your acceptance of this offer by signing below and returning a copy to
us. The other copy is for your records. If there are any questions related to
this letter, please do not hesitate to speak to me.
Sincerely,
---------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
President & CEO
IP Global Voice, Inc., dba XIPTEL
I agree to the terms of employment set forth in this Agreement.
Signature: ________________________________
Printed Name: ____________________________
Date: ___________________________________
39
Exhibit 6.12(ii)
Form of Employment Agreement
_______ __, 2005
▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Corsa Network Technologies, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Dear Paykar:
We are pleased to offer you the position of Chief Technical Officer (CTO)
of Corsa Network Technologies, a division of IP Global Voice, Inc. dba Xiptel
("XIPTEL"). This letter agreement (the "Agreement") sets forth the basic terms
and conditions of your employment. Your effective date of hire (the "Hire Date")
by XIPTEL is ______ __, 2005. By signing this letter, you will be agreeing to
these terms.
1._______Salary, Bonuses. You will be paid an annual base salary of
$116,000 (payable in accordance with XIPTEL's usual payroll practices), which
covers all hours worked. Generally, your salary will be reviewed annually, but
XIPTEL reserves the right to change your compensation from time to time on
reasonable notice; however, for the first year of employment no change will be
made without mutual consent and approval. You will be eligible to be paid an
incentive bonus of $20,000 at targeted performance, which will be paid at the
end of each calendar quarter for the first year of employment. The revenue
target, gross margin goals, and performance basis for bonus payments is defined
in Attachment ___ of this Agreement. Incentive bonus payments will only be
earned and paid while employed by XIPTEL, and will not be paid or owed after the
date you separate from the company for any reason, subject to item #7 below.
2._______Stock Options. Subject to approval by the Board, you will be
provided with an option to buy: 125,000 shares of IPGV's Common Stock under
IPGV's 2004 Stock Incentive Plan. The option shall vest at a rate of 25% of the
total (31,250) after your first 120 days of employment, and then 1/36th of the
balance of the total (93,750) option shares per month for 36 months. Option
vesting will accelerate based on company performance per the following schedule:
o ________Your options will have a strike price of $____ per share.
o You may be eligible for additional option grants as may be approved by
XIPTEL's Board of Directors from time to time, based on individual and
company performance.
3. Duties. Your duties, responsibilities and authority shall be appropriate
to your position and assigned to you by the President of XIPTEL or the
President's designee. Throughout the term of your employment, you will devote
such business time and energies to the business and affairs of Corsa Network
Technologies as needed to carry out your duties and responsibilities, subject to
the overall supervision and direction of the President of XIPTEL or any other
employee as assigned by the President.
4. Proprietary Information Agreement. You will be required to sign XIPTEL's
standard Proprietary Information and Inventions Agreement, which may be
incorporated into this Agreement by reference (Exhibit ), unless you have
already signed a copy of the Agreement. You are required to immediately notify
XIPTEL (through an appropriate officer or other employee of XIPTEL) regarding
any product, improvement or process which you shall discover, make, invent,
conceive, develop or design, solely or jointly with others, relating to any
product, equipment or process which is applicable to the subject matter of
XIPTEL's business, or which may be directly or indirectly utilized in connection
therewith, irrespective of whether or not said product, improvement or process
was discovered, made, invented, conceived, developed or designed on your time or
at the expense of XIPTEL.
5. Immigration Documentation. Please be advised that your employment is
contingent on your ability to prove your identity and authorization to work in
the U.S. for XIPTEL. You must comply with the Immigration and Naturalization
Service's employment verification requirements.
6. Employee Benefits. You will be eligible for paid vacation, holidays,
health benefits and other employee benefits, in accordance with XIPTEL's
employee policies as developed, adopted and modified from time to time, which
currently includes two (2) weeks of paid time off per year.
7. At-Will Employment. Your employment with XIPTEL is "at-will." In other
words, either you or XIPTEL can terminate your employment at any time for any
reason, with or without cause and with or without notice, and without thereby
incurring any liability under this Agreement or otherwise. If termination of
employment is initiated by XIPTEL, all incentive bonus amounts earned as of the
date of termination will be owed and due to be paid to you. If termination of
employment is initiated by you, XIPTEL will have no such liability and no money
will be due to be paid to you, including any and all bonus amounts referenced
above that have not already been paid or were due to be paid in the normal
course of business. XIPTEL reserves the right to outsource payroll, benefit
administration, and/or use the services of a PEO (Professional Employer
Organization), however, the company does not have the obligation to utilize a
PEO.
8. Withholding. Anything to the contrary notwithstanding, all payments made
by XIPTEL hereunder to you or your estate or beneficiaries will be subject to
tax withholding pursuant to any applicable laws or regulations. In lieu of
withholding, XIPTEL may, in its sole discretion, accept other provision for
payment of taxes as allowed by law, provided it is satisfied that all
requirements of law affecting its responsibilities to withhold such taxes have
been satisfied.
9. Dispute Resolution Procedure. You and XIPTEL (the "Parties") agree that
any dispute arising out of or related to the employment relationship between
them, including the termination of that relationship and any allegations of
unfair or discriminatory treatment arising under state or federal law or
otherwise, shall be tried and litigated exclusively in the State courts located
in the County of San Francisco, California or the United States Federal courts
for the Northern District of California. The aforementioned choice of venue is
intended by the Parties to be mandatory and not permissive in nature, thereby
precluding the possibility of litigation between the Parties with respect to or
40
arising out of this Agreement in any jurisdiction other than that specified in
this paragraph. Each Party hereby waives any right it may have to assert the
doctrine of forum non conveniens or similar doctrine or to object to venue with
respect to any proceeding brought in accordance with this paragraph, and
stipulates that the State and Federal courts specified above in this paragraph
shall have in personam jurisdiction and venue over each of them for the purpose
of litigating any dispute, controversy, or proceeding arising out of or related
to this Agreement.
10. Attorneys' Fees. If either Party to this Agreement shall bring any
action, suit, counterclaim, appeal, arbitration, or mediation for any relief
against the other, declaratory or otherwise, to enforce the terms hereof or to
declare rights hereunder (collectively, an "Action"), the losing Party shall pay
to the prevailing Party a reasonable sum for attorneys' fees and costs,
including consulting and witness fees and expert fees incurred in bringing and
prosecuting such Action and/or enforcing any judgment, order, ruling, or award
(collectively, a "Decision") granted therein, all of which shall be deemed to
have accrued on the commencement of such Action and shall be paid whether or not
such Action is prosecuted to a Decision. Any Decision entered in such Action
shall contain a specific provision providing for the recovery of attorneys' fees
and costs incurred in enforcing such Decision. The court or arbitrator may fix
the amount of reasonable attorneys' fees and costs on the request of either
Party.
11. Integrated Agreement. Please note that this Agreement supersedes any
prior agreements, representations or promises of any kind, whether written,
oral, express or implied between you and XIPTEL with respect to the subject
matters herein. It and any agreements incorporated by reference constitute the
full, complete and exclusive agreement between you and XIPTEL with respect to
the subject matters in this Agreement.
12. Miscellaneous. No provision of this Agreement may be amended or waived
unless such amendment or waiver is agreed to by you and the President of XIPTEL
in writing. No waiver by you or by XIPTEL of the breach of any condition or
provision of this Agreement will be deemed a waiver of a similar or dissimilar
provision or condition at the same or any prior or subsequent time. In the event
any portion of this Agreement is determined to be invalid or unenforceable for
any reason, the remaining portions shall be unaffected thereby and will remain
in full force and effect to the fullest extent permitted by law. All matters
relating to the interpretation or enforcement of this Agreement shall be
governed by California law, without regard to its choice of law provisions.
We hope that you will join us. This offer is valid for five (5) days from
the date of this letter. To facilitate matters, we would appreciate if you would
indicate your acceptance of this offer by signing below and returning a copy to
us. The other copy is for your records. If there are any questions related to
this letter, please do not hesitate to speak to me. Sincerely,
---------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
President & CEO
IP Global Voice, Inc., dba XIPTEL
I agree to the terms of employment set forth in this Agreement.
Signature: ________________________________
Printed Name: ____________________________
Date: ___________________________________
41
Exhibit 6.12(iii)
Form of Employment Agreement
______ __, 2005
▇▇. ▇▇▇▇▇ ▇▇▇▇▇
Corsa Network Technologies, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Dear ▇▇▇▇▇:
We are pleased to offer you the position of President, Corsa Network
Technologies, a division of IP Global Voice, Inc. dba Xiptel ("XIPTEL"). This
letter agreement (the "Agreement") sets forth the basic terms and conditions of
your employment. Your effective date of hire (the "Hire Date") by XIPTEL is
_______ __, 2005. By signing this letter, you will be agreeing to these terms.
1. Salary, Bonuses. You will be paid an annual base salary of $100,000
(payable in accordance with XIPTEL's usual payroll practices), which covers all
hours worked. Generally, your salary will be reviewed annually, but XIPTEL
reserves the right to change your compensation from time to time on reasonable
notice; however, for the first year of employment no change will be made without
mutual consent and approval. You will be eligible to be paid an incentive bonus
of $75,000 for targeted revenue and gross margin performance, which will be paid
at the end of each calendar quarter for the first year of employment. The
revenue target, gross margin goals, and performance basis for bonus payments and
bonus accelerators is defined in Attachment ___ of this Agreement. Bonus
payments will only be earned and paid while employed by XIPTEL, and will not be
paid or owed after the date you separate from the company for any reason,
subject to item #7 below.
2. Stock Options. Subject to approval by the Board, you will be provided
with an option to buy: 125,000 shares of IPGV's Common Stock under IPGV's 2004
Stock Incentive Plan. The option shall vest at a rate of 25% of the total
(31,250) after your first 120 days of employment, and then 1/36th of the balance
of the total (93,750) option shares per month for 36 months. Option vesting will
accelerate based on company performance per the following schedule:
o Your options will have a strike price of $____ per share.
o You may be eligible for additional option grants as may be approved by
XIPTEL's Board of Directors from time to time, based on individual and
company performance.
3. Duties. Your duties, responsibilities and authority shall be appropriate
to your position and assigned to you by the President of XIPTEL or the
President's designee. Throughout the term of your employment, you will devote
such business time and energies to the business and affairs of Corsa Network
Technologies as needed to carry out your duties and responsibilities, subject to
the overall supervision and direction of the President of XIPTEL or any other
employee as assigned by the President.
4. Proprietary Information Agreement. You will be required to sign XIPTEL's
standard Proprietary Information and Inventions Agreement, which may be
incorporated into this Agreement by reference (Exhibit ), unless you have
already signed a copy of the Agreement. You are required to immediately notify
XIPTEL (through an appropriate officer or other employee of XIPTEL) regarding
any product, improvement or process which you shall discover, make, invent,
conceive, develop or design, solely or jointly with others, relating to any
product, equipment or process which is applicable to the subject matter of
XIPTEL's business, or which may be directly or indirectly utilized in connection
therewith, irrespective of whether or not said product, improvement or process
was discovered, made, invented, conceived, developed or designed on your time or
at the expense of XIPTEL.
5. Immigration Documentation. Please be advised that your employment is
contingent on your ability to prove your identity and authorization to work in
the U.S. for XIPTEL. You must comply with the Immigration and Naturalization
Service's employment verification requirements.
6. Employee Benefits. You will be eligible for paid vacation, holidays,
health benefits and other employee benefits, in accordance with XIPTEL's
employee policies as developed, adopted and modified from time to time, which
currently includes two (2) weeks of paid time off per year.
7. At-Will Employment. Your employment with XIPTEL is "at-will." In other
words, either you or XIPTEL can terminate your employment at any time for any
reason, with or without cause and with or without notice, and without thereby
incurring any liability under this Agreement or otherwise. If termination of
employment is initiated by XIPTEL, all incentive bonus amounts earned as of the
date of termination will be owed and due to be paid to you. If termination of
employment is initiated by you, XIPTEL will have no such liability and no money
will be due to be paid to you, including any and all incentive bonus amounts
referenced above that have not already been paid or were due to be paid in the
normal course of business. XIPTEL reserves the right to outsource payroll,
benefit administration, and/or use the services of a PEO (Professional Employer
Organization), however, the company does not have the obligation to utilize a
PEO.
8. Withholding. Anything to the contrary notwithstanding, all payments made
by XIPTEL hereunder to you or your estate or beneficiaries will be subject to
tax withholding pursuant to any applicable laws or regulations. In lieu of
withholding, XIPTEL may, in its sole discretion, accept other provision for
payment of taxes as allowed by law, provided it is satisfied that all
requirements of law affecting its responsibilities to withhold such taxes have
been satisfied.
9. Dispute Resolution Procedure. You and XIPTEL (the "Parties") agree that
any dispute arising out of or related to the employment relationship between
them, including the termination of that relationship and any allegations of
unfair or discriminatory treatment arising under state or federal law or
otherwise, shall be tried and litigated exclusively in the State courts located
in the County of San Francisco, California or the United States Federal courts
for the Northern District of California. The aforementioned choice of venue is
intended by the Parties to be mandatory and not permissive in nature, thereby
precluding the possibility of litigation between the Parties with respect to or
42
arising out of this Agreement in any jurisdiction other than that specified in
this paragraph. Each Party hereby waives any right it may have to assert the
doctrine of forum non conveniens or similar doctrine or to object to venue with
respect to any proceeding brought in accordance with this paragraph, and
stipulates that the State and Federal courts specified above in this paragraph
shall have in personam jurisdiction and venue over each of them for the purpose
of litigating any dispute, controversy, or proceeding arising out of or related
to this Agreement.
10. Attorneys' Fees. If either Party to this Agreement shall bring any
action, suit, counterclaim, appeal, arbitration, or mediation for any relief
against the other, declaratory or otherwise, to enforce the terms hereof or to
declare rights hereunder (collectively, an "Action"), the losing Party shall pay
to the prevailing Party a reasonable sum for attorneys' fees and costs,
including consulting and witness fees and expert fees incurred in bringing and
prosecuting such Action and/or enforcing any judgment, order, ruling, or award
(collectively, a "Decision") granted therein, all of which shall be deemed to
have accrued on the commencement of such Action and shall be paid whether or not
such Action is prosecuted to a Decision. Any Decision entered in such Action
shall contain a specific provision providing for the recovery of attorneys' fees
and costs incurred in enforcing such Decision. The court or arbitrator may fix
the amount of reasonable attorneys' fees and costs on the request of either
Party.
11. Integrated Agreement. Please note that this Agreement supersedes any
prior agreements, representations or promises of any kind, whether written,
oral, express or implied between you and XIPTEL with respect to the subject
matters herein. It and any agreements incorporated by reference constitute the
full, complete and exclusive agreement between you and XIPTEL with respect to
the subject matters in this Agreement.
12. Miscellaneous. No provision of this Agreement may be amended or waived
unless such amendment or waiver is agreed to by you and the President of XIPTEL
in writing. No waiver by you or by XIPTEL of the breach of any condition or
provision of this Agreement will be deemed a waiver of a similar or dissimilar
provision or condition at the same or any prior or subsequent time. In the event
any portion of this Agreement is determined to be invalid or unenforceable for
any reason, the remaining portions shall be unaffected thereby and will remain
in full force and effect to the fullest extent permitted by law. All matters
relating to the interpretation or enforcement of this Agreement shall be
governed by California law, without regard to its choice of law provisions.
We hope that you will join us. This offer is valid for five (5) days from
the date of this letter. To facilitate matters, we would appreciate if you would
indicate your acceptance of this offer by signing below and returning a copy to
us. The other copy is for your records. If there are any questions related to
this letter, please do not hesitate to speak to me.
Sincerely,
---------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
President & CEO
IP Global Voice, Inc., dba XIPTEL
I agree to the terms of employment set forth in this Agreement.
Signature: ________________________________
Printed Name: ____________________________
Date: ___________________________________
43
Exhibit 6.13
Form of Proprietary Rights, Non-Compete
and Confidentiality Agreement
PROPRIETARY RIGHTS, NON COMPETE, AND CONFIDENTIALITY AGREEMENT
In return for new or continued employment/consulting engagement by Company,
individual acknowledges and agrees as follows:
1._______ For the purposes of this Agreement:
a. "Company" shall mean IP Global Voice Inc., a Delaware corporation, and any of
its subsidiaries, partners and affiliates.
b. "Employee" shall mean a direct employee of the company, or an independent
contractor engaged by the company.
c. "Confidential Information" shall mean any and all discoveries, facts, or any
other Confidential Information relating to the operation of the Company's
business, of whatever type and in whatever form, which is disclosed or otherwise
made available to Employee by Company identified by the Company as confidential,
including, but not limited to, (i) all information relating to personnel, sales,
customers and financial and scientific matters of Company, and (ii) any other
discoveries, business plans, or facts relating to any of the foregoing, whether
developed by Employee or by others. Confidential Information shall not include
any information which Employee can establish was publicly known and made
generally available in the public domain prior to the time of disclosure to
Employee by Company or becomes publicly known and made generally available after
disclosure to Employee by Company through no action or inaction of Employee.
d. "Trade Secret" shall mean any and all Confidential Information that derives
independent economic value, actual or potential, from not being generally known
to persons who can obtain economic value from its disclosure or use, and that is
the subject of reasonable efforts by Company to maintain its secrecy.
e. "Inventions" shall mean designs, trademarks, discoveries, formulae,
processes, manufacturing techniques, Trade Secrets, Confidential Information,
improvements, inventions or copyrightable works.
2._______Employee understands that any and all Confidential Information and
Trade Secrets are to be used only for the purposes for which they are provided.
During the term of Employee's employment with Company or thereafter, Employee
shall not, directly or indirectly, except as required by the normal business of
Company or expressly consented to in writing by the Board of Directors of
Company, or except as required pursuant to any statute, law, rule or regulation
of any governmental authority or pursuant to any order of any court of competent
jurisdiction:
_________a. disclose, publish or make available any Confidential Information or
Trade Secrets, other than to an employee, officer or director of Company who, in
the reasonable exercise of Employee's judgment, needs to know such Confidential
Information or Trade Secrets in order to perform his or her duties to Company;
_________b. sell, transfer or otherwise use or exploit or permit the sale,
transfer, use or exploitation of the Confidential Information or Trade Secrets
for any purposes other than those for which they were provided;
44
_________c. remove from Company's premises or retain upon termination any
tangible Confidential Information or Trade Secrets, any copies thereof or any
tangible or retrievable materials containing or constituting Confidential
Information or Trade Secrets.
3._______Upon termination of Employee's employment or upon request by
Company, Employee shall return to Company all tangible forms of Confidential
Information and Trade Secrets. All apparatus, computers, computer files and
media, data, documents, drawings, engineering log books, equipment, inventor
notebooks, programs, prototypes, records, samples, equipment and other
information and physical property, whether or not pertaining to Confidential
Information or Trade Secrets, furnished to Employee by the Company, or produced
by Employee or others in connection with Employee's employment, shall be and
remain the sole property of Company and shall be returned promptly to Company as
and when requested by Company. Should Company not so request, Employee shall
return and deliver all such property upon termination of employment for any
reason and Employee will not take any such property or any reproduction of such
property upon such termination. Employee further agree that any property
situated on Company's premises and owned by Company, including computers,
computer files, e-mail, voicemail, disks and other electronic storage media,
filing cabinets or other work areas, is subject to inspection by Company
personnel at any time with or without notice.
4._______As part of the consideration for the offer of employment by
Company and of Employee's employment or continued employment by Company,
Employee has not brought and will not bring to Company, or use or disclose in
the performance of Employee's responsibilities any equipment, supplies,
facility, electronic media, software, trade secret or other information or
property of any former employer or any other person or entity which are not
generally available to the public, unless Employee has obtained their written
authorization for its possession and use.
5._______Employee agrees that the Company has invested substantial time,
effort, and money in attracting and developing a customer base and assembling
Company's staff of personnel. Employee agrees that Employee shall not, for a
period of one year immediately following the termination of employment with
Company, other than involuntary termination without cause, either directly or
indirectly, solicit business, as to products or services competitive with those
of the Company, from any of the Company's customers and shall not seek to induce
any of the Company's customers to cease using Company's products or services.
Employee also agrees that during employment and for one year after termination
of employment, Employee shall not directly or indirectly induce or solicit any
of the Company's employees to leave their employment with Company.
6._______Employee agrees to disclose promptly to the Company any and all
Inventions, whether or not patentable and whether or not reduced to practice,
conceived or learned by Employee during the period of employee's employment,
either alone or jointly with others, which relate to or result from the actual
or anticipated business, work, research or investigations of the Company, or
which result, to any extent, from use of the Company's premises or property.
Employee agrees to deliver to Company any drawn, written or computer-generated
materials and any models relating to Inventions, to cooperate fully during and
45
after employment in the securing of patent or copyright protection or other
similar rights in any countries and in giving evidence and testimony and in
executing related papers as requested by Company. Employee understands that
Company is the sole owner of any and all property rights in Inventions,
including, but not limited to, the right to use, sell, license or otherwise
transfer or exploit the Inventions, and the right to make such changes in them
and the uses thereof as Company may from time to time determine. Employee agrees
to disclose and assign to Company, without further consideration, Employee's
entire right, title, and interest (throughout the United States and in all
foreign countries) free and clear of all liens and encumbrances, in and to all
Inventions, which shall be the sole property of Company, whether or not
patentable. Employee also agrees to cooperate with Company both during and after
employment in obtaining and enforcing patents, copyrights, and other protection
of Company's rights in Inventions. As provided in section 2870 of the California
Labor Code, this Section 6 does not apply to any Inventions:
a. for which no equipment, supplies, facility, or Trade Secrets of Company were
used;
b. which were developed entirely on Employee's own time; and
c. which do not relate at the time of conception or reduction to practice to
Company's current business or its actual or demonstrably anticipated research or
development, or which do not result from any work performed by Employee for
Company.
7._______Employee certifies that Employee has no continuing obligations
with respect to the assignment of Inventions or rights to Inventions, nor does
Employee claim any previous, unpublished Inventions within the scope of this
Agreement as Employee's own, except for the Inventions, if any, which Employee
has listed in Appendix A to this Agreement.
8._______Employee certifies that there is no other contract or duty on
Employee's part that would interfere with Employee's ability to provide services
to Company. Employee agrees that, in performing work for Company, Employee will
not knowingly use any patented inventions, trade secrets, confidential
information or proprietary information obtained from third Parties, including
any prior employer or any other organization or individual. Employee agrees not
to use copyrighted materials, nor any portion thereof, of any other company or
person while writing computer programs, manuals or any other materials for
Company, and that Employee will not bring onto the premises of Company any
unpublished document or other property containing proprietary information or
trade secrets belonging to Employee's former or concurrent employers or
companies, unless consented to in writing by said employers or companies.
9._______This Agreement does not constitute a contract of employment and
does not in any way restrict Employee's right or the right of Company to
terminate Employee's employment.
46
10.______If any provision of this Proprietary Rights and Confidentiality
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remaining provisions shall, nevertheless, continue in full
force and effect without being impaired or invalidated in any way.
Date:___________ ________ _____________________________
Printed Name:______________________________
Company officer:_______________________
Title:_________________________________
47
APPENDIX A
I have made or improved the following Inventions and claim sole right to
them. I include below the names of co-inventors or employers to whom I owe a
continuing obligation with respect to these Inventions.
S-26
CH02/ 22387112.6
Index of Schedules
Name Number
--------------------------- ------------
Assumed Liabilities 1.1(b)
Each Jurisdiction in which seller is currently licensed or 4.1(a)
qualified as foreign corporation
Subsidiaries 4.1(b)
Conflict Disclosure 4.3
Required Consents 4.4
Accounts Receivable 4.7
Prepaid Assets 4.9
Fixtures and Equipment 4.11
Real Estate 4.12
Leased Personal Property 4.13
Liens and Permitted Liens 4.15
Purchase Orders over $10,000 4.17
Material Contracts 4.18
Litigation 4.20
Insurance 4.21
Labor and Employment Disclosure 4.22
Employee Benefit Plans and Arrangements 4.23
Warranties 4.24
Proprietary Rights 4.26
Permits 4.27
Environmental Matters 4.28
Reports 4.29
Affiliate Transactions 4.30
Indebtedness 4.31
Undisclosed Liabilities 4.32
48
Schedule 1.1(b)
Assumed Liabilities
49
Schedule 4.1(a)
Each Jurisdiction in which seller is currently
licensed or qualified as foreign corporation
50
Schedule 4.1(b)
Subsidiaries
51
Schedule 4.3
Conflict Disclosure
52
Schedule 4.4
Required Consents
53
Schedule 4.7
Accounts Receivable
54
Schedule 4.9
Prepaid Assets
55
Schedule 4.11
Fixtures and Equipment
56
Schedule 4.12
Real Estate
57
Schedule 4.13
Leased Personal Property
58
Schedule 4.15
Liens and Permitted Liens
59
Schedule 4.17
Purchase Orders over $10,000
60
Schedule 4.18
Material Contracts
61
Schedule 4.20
Litigation
62
Schedule 4.21
Insurance
63
Schedule 4.22
Labor and Employment Disclosure
64
Schedule 4.23
Employee Benefit Plans and Arrangements
65
Schedule 4.24
Warranties
66
Schedule 4.26
Proprietary Rights
67
Schedule 4.27
Permits
68
Schedule 4.28
Environmental Matters
69
Schedule 4.29
Reports
70
Schedule 4.30
Affiliate Transactions
71
Schedule 4.31
Indebtedness
Schedule 4.32
Undisclosed Liabilities
72
