EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
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THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered into as
of the 29/th/ day of December, 1999 between International Exchange
Communications, Inc., a Delaware corporation ("Purchaser"), and NOSVA Limited
Partnership, a Maryland limited partnership ("Seller").
WHEREAS, Seller conducts business as a reseller of long distance
telecommunications services and has established a customer base and related
assets which it now desires to sell; and
WHEREAS, Purchaser desires to purchase the customer base and related assets
of Seller on the terms and subject to the conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises,
covenants, representations and warranties herein contained, it is hereby agreed
as follows:
1. Sale and Transfer of Assets
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1.1 Assets to be Sold
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Subject to the terms and conditions set forth in this Agreement,
Seller agrees to sell, convey, transfer, assign and deliver to Purchaser, and
Purchaser agrees to purchase from Seller, all of Seller's right, title and
interest in and to the following assets of Seller (the "Assets") excluding
accounts receivable, unbilled call records, cash, bank accounts, marketable
securities, corporate records, tax refunds and claims of Seller against others
for damages:
(a) the "Customer Related Assets," comprised of (1) Seller's international
operating division which markets under the brand names "International Plus" and
"011 Communications" (the "Business") and all residential (as defined by the
applicable local exchange carrier or the competitive local exchange carrier)
international end user long distance telecommunications customer accounts
thereof (but specifically excluding business customer accounts) which are listed
in an electronic format satisfactory to Purchaser (which electronic format shall
include all present and former customer accounts, whether currently active or
inactive, in existence as of the Closing Date) (the "Customer Accounts") (the
end users of the long distance telecommunications services that generate the
Customer Accounts shall be hereinafter referred to as the "Customers"); (2) all
of Seller's rights under any agreements, application forms, term contracts,
letters of agency and all other contractual instruments between Seller and any
and all Customers related to the Customer Accounts (collectively, the "Customer
Contracts"), including but not limited to Seller's right to assert claims and
take other rightful actions in respect of breaches, defaults and other
violations of such Customer Contracts; (3) all customer and other deposits held
or made by Seller related to the Customer Accounts; and (4) all relationships
and goodwill related to the Customer Accounts; and
(b) the following assets (the "Non-Customer Assets"):
(i) all of Seller's rights in those contracts set forth on Schedule
1.1(b)(i) (collectively, the "Non-Customer Contracts");
(ii) all of Seller's current toll-free numbers used by and in the
Business for customer service in accordance with Section 2.3(f);
(iii) the Intellectual Property (as hereinafter defined);
(iv) all leases, leasehold interests, equipment, furniture, fixtures,
computers, telephones and other tangible, intangible, real and personal property
occupied and/or utilized by and in the Business, to the extent set forth in
Schedule 1.1(b)(iv) and specifically including any and all lead lists utilized
in the Business;
(v) to the extent allowable under applicable laws, rules and
regulations, carrier identification code (CIC) number 210; and
(vi) the local service customer accounts of NOS Communications Inc.
which accompany certain of the long distance customer accounts of Seller ("the
Local Customers").
1.2 NOS
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Subject to the terms and conditions set forth in this Agreement,
Seller hereby agrees to cause NOS Communications, Inc. ("NOS") to sell, convey,
transfer, assign and deliver to Purchaser all of NOS's right, title and interest
in and to the Intellectual Property (as hereinafter defined) and the Local
Customers.
1.3 CIC Code
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Purchaser and Seller agree that in the event CIC number 210 cannot be
transferred to Purchaser as contemplated in Section 1.1(b)(v) above, then the
Cash Purchase Price (as hereafter defined) shall be reduced by an amount equal
to (a) $750,000.00 plus (b) the actual cost up to $200,000 of moving the
customers to another CIC number, which aggregate amount shall be deducted from
the payment due pursuant to Section 2.3(b)(iii) below.
2. The Closing
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2.1 Place and Date
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The closing of the purchase and sale of the Assets (the "Closing")
shall take place at the offices of Purchaser located at 000 Xxxxxxx Xxxxxxxxx,
Xxxxx 000, Xxxxxxxxxx, Xxxxxxxxxx 00000, at or before 10:00 a.m., local time, as
soon as reasonably practicable after the conditions set forth in Section 7
hereof have been satisfied but in no event later than March 31, 2000. The date
of the Closing is herein referred to as the "Closing Date."
2.2 Transfer of Assets
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(a) At the Closing and subject to the terms and conditions of this
Agreement, Seller shall deliver to Purchaser the following, and simultaneously
with such delivery, Seller shall take such action as may be necessary or
reasonably requested by Purchaser to place Purchaser in possession and control
of the Assets:
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(i) Such bills of sale, assignments, novation agreements, master
letters of agency or other instruments of transfer and assignment as shall be
necessary to vest in Purchaser title to the Assets sold and assigned under this
Agreement, free and clear of all liens, claims and encumbrances;
(ii) Copies of Seller's partnership resolutions authorizing the
execution, delivery and performance of this Agreement by Seller and a
certificate of Seller's general partner dated the Closing Date, that such
resolutions were duly adopted and are in full force and effect;
(iii) A current list (in electronic format) of the Customer Accounts
to be transferred and an aging report for all accounts receivable ("Accounts
Receivable") associated with and derived from such Customer Accounts; and
(iv) Such other certificates or other documents or instruments as the
Purchaser or Purchaser's counsel may reasonably request.
(b) At the Closing, as a condition to Seller's obligations under this
Agreement, Purchaser shall deliver to Seller the following:
(i) All instruments as may be reasonably necessary by which
Purchaser assumes the obligations and liabilities to be assumed by it hereunder;
(ii) Copies of resolutions of the Board of Directors of Purchaser
authorizing the execution, delivery and performance of this Agreement by
Purchaser, including, without limitation, the issuance (if applicable) of the
Purchase Price Shares (as hereinafter defined) by Pacific Gateway Exchange, Inc.
("PGE"), and a certificate of Purchaser's secretary, dated the Closing Date,
that such resolutions were duly adopted and are in full force and effect;
(iii) That portion of the Purchase Consideration (as hereinafter
defined) due on the Closing Date, including duly issued certificates
representing the Purchase Price Shares (if applicable);
(iv) Reimbursement of the Security Deposits set forth in Schedule
1.1(b)(i); and
(v) Such other certificates or other documents or instruments as
Seller or Seller's counsel may reasonably request.
2.3 Purchase Consideration; Adjustments; Earn-Out; Integration
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(a) The purchase consideration to be paid by Purchaser to Seller for the
Assets shall be:
(i) $21 million ($21,000,000.00) in cash (the "Cash Purchase Price");
and
(ii) The Purchase Price Shares described in Section 2.3(c) below.
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(iii) The purchase consideration described in this Section 2.3(a)
shall be referred to hereinafter, as adjusted, as the "Purchase
Consideration."
(b) The Cash Purchase Price shall be paid as follows:
(i) on or before January 3, 2000, Purchaser shall pay to Seller $3
million ($3,000,000.00) in cash (hereinafter, the "Breakup
Cash") which shall constitute a non-refundable deposit which
Seller shall retain sole and absolute ownership of
notwithstanding any termination of this Agreement;
(ii) at the Closing, Purchaser shall pay to Seller $5 million
($5,000,000.00) in cash;
(iii) on or before the close of business on the ninetieth (90/th/) day
following the Closing Date, Purchaser shall pay to Seller $8
million ($8,000,000.00) in cash; and
(iv) on or before the close of business on the one hundred eightieth
(180/th/) day following the Closing Date, Purchaser shall pay to
Seller $5 million ($5,000,000.00) in cash.
The Cash Purchase Price shall be payable in immediately available funds by wire
transfer in accordance with the instructions delivered in writing by Seller to
Purchaser.
(c) The Purchase Price Shares (as hereafter defined) shall be issued in
accordance with the following:
(i) on or before January 15, 2000, Purchaser shall issue to Seller
that number of shares (the "Breakup Shares") of common stock,
par value $.0001 per share, of PGE ("PGE Common Stock") in an
amount equal to $3 million ($3,000,000.00) (the "Breakup Share
Amount") in the event Purchaser, in the course of conducting its
due diligence review of the Business, from the date of this
Agreement through and including January 15, 2000, does not learn
of any gross misrepresentations of Seller contained herein
("Gross Misrepresentations"). In the event Purchaser does learn
of such Gross Misrepresentations, Purchaser shall elect to
either (i) provide written notice of the nature of the Gross
Misrepresentations to Seller and in such notice elect to
terminate this Agreement (the "Termination Notice") or (ii)
provide Seller with written notice waiving such Gross
Misrepresentations and elect to proceed with the transactions
contemplated by this Agreement (the "Waiver Notice"). In the
event Seller receives the Termination Notice, then this
Agreement shall terminate provided that Seller shall have the
right to dispute pursuant to Section 9.13 whether there were in
fact any such Gross Misrepresentations and if Seller
successfully disputes such fact then Purchaser shall forthwith
upon receipt of the final decision of the arbitrator cause the
Breakup Shares to be delivered to Seller. Termination of this
Agreement pursuant to the Termination Notice and retention of
the Breakup Shares shall be
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Purchaser's sole and exclusive remedy for a Gross
Misrepresentation and Purchaser shall have no other liability or
obligation to Seller under this Agreement. In the event (i)
Purchaser is satisfied with the due diligence review of the
Business, it shall provide Seller with a notice of satisfaction
on or before January 15, 2000 (the "Satisfaction Notice") or
(ii) Purchaser provides Seller with a Waiver Notice, then in
either such event Purchaser shall concurrently deliver the
Breakup Shares to Seller. In the event Purchaser receives the
Breakup Shares pursuant to the terms of this Agreement, then the
Breakup Shares shall constitute a non-refundable deposit which
Seller shall retain sole and absolute ownership of
notwithstanding any termination of this Agreement.
(ii) On or before the Closing Date, Purchaser shall issue to Seller
that number of shares PGE Common Stock in an amount equal to
$16.2 million ($16,200,000.00) (the foregoing amount plus the
Breakup Share Amount shall be referred to hereinafter as the
"Stock Purchase Price") minus (A) $3.855 million ($3,855,000.00)
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(the "Earn-Out Amount") and also minus (B) $1.2 million
($1,200,000.00) (the "Additional Amount").
(iii) That number of shares of PGE Common Stock representing the Earn-
Out Amount shall be referred to hereinafter as the "Earn-Out
Shares." Purchaser shall cause the Earn-Out Shares, as adjusted
pursuant to this Section 2.3(c)(iii), to be delivered to Seller
on September 15, 2000. Following the Closing, Seller is to
manage the Business for Purchaser pursuant to the Management
Agreement (as hereinafter defined). The amount of the Earn-Out
Shares to be delivered to Seller are to be reduced in the
following manner in the event the gross revenues of the Business
(as determined by generally accepted accounting principles) (the
"Gross Revenues") are less than Forty-Four Million Four Hundred
Thousand Dollars ($44,400,000) (the "Maximum Amount") in the
aggregate during the period of March 1, 2000 through and
including August 31, 2000 (the "Earn-Out Period"): (A) in the
event the Gross Revenues during the Earn-Out Period are less
than Thirty Million Six Hundred Ninety-Six Thousand Two Hundred
Ninety-Three Dollars ($30,696,293) (the "Minimum Amount") Seller
shall be entitled to no Earn-Out Shares and (B) in the event the
Gross Revenues during the Earn-Out Period are more than the
Minimum Amount but less than the Maximum Amount then the Earn-
Out Amount (and the corresponding number of Earn-Out Shares)
shall be reduced by an amount equal to (I) the Earn Out Amount
times (II) the Maximum Amount less the Gross Revenues, divided
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by (III) Thirteen Million Seven Hundred Three Thousand Seven
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Hundred Seven Dollars ($13,703,707) (the "Difference Amount").
Notwithstanding the foregoing, in the event the Closing Date
occurs prior to March 31, 2000 then the Maximum Amount shall be
Forty Million Five Hundred Thousand Dollars ($40,500,000), the
Minimum Amount shall be Twenty-Eight Million Dollars
($28,000,000), the Difference Amount shall be Twelve Million
Five Hundred Thousand Dollars ($12,500,000) and the
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Earn-Out Period shall commence on the Closing Date and end on
the date one hundred eighty (180) days later.
(iv) That number of shares of PGE Common Stock representing the
Additional Amount shall be referred to hereinafter as the
"Additional Shares." On or before the earlier of (A) the one
hundred eightieth (180/th/) day following the Closing Date or
(B) the fifteenth (15/th/) day occurring after completion of the
first full calendar month billing cycle (the "First Cycle")
following integration of the Purchaser's customer accounts
pursuant to Section 6.12 hereof, Purchaser shall pay to Seller
the Additional Shares; provided, however, in the event that in
respect of such customer accounts (excluding casual calling
traffic) Seller has billed during the First Cycle less than
seventy percent (70%) of the gross revenues (as determined
according to generally accepted accounting principles) billed by
Purchaser in respect of such accounts (excluding casual calling
traffic) during the last full billing cycle prior to the Closing
Date (the "Last Cycle") then the Additional Amount (and the
corresponding number of Additional Shares to be issued pursuant
to this paragraph) shall be reduced to an amount equal to (A)
$1.2 million ($1,200,000) times (B) (1) the actual gross
revenues billed during the First Cycle divided by (2) the actual
gross revenues billed during the Last Cycle.
(v) Purchaser hereby agrees to use its best efforts to register any
shares of PGE Common Stock issued to Seller pursuant to Sections
2.3(c)(i), (ii), (iii) or (iv) (collectively, the "Purchase
Price Shares"), at its sole cost and expense, under the
Securities Act of 1933, as amended (the "Securities Act"), as
soon as practicable after the respective dates of issuance of
the PGE Common Stock but in no event later than five (5)
business days after such issuance date. PGE agrees to use
reasonable commercial efforts to keep the registration statement
regarding the re-sale of such shares effective under the
Securities Act until the earliest to occur of the following: (A)
all shares received by Seller have been sold; (B) all shares can
be sold in a three (3) month period under Rule 144 of the
Securities Act; or (C) five hundred forty-five (545) days after
the Closing. Seller agrees to cooperate with PGE regarding the
sale of such shares.
(vi) The parties hereby agree that, in calculating the number of
Purchase Price Shares to be issued pursuant to Sections
2.3(c)(i), (ii), (iii) or (iv), the average of the closing bid
and ask price per share for the 20 trading days immediately
preceding the relevant date of issuance to Seller shall be used.
(vii) The parties hereby agree that Purchaser, in its sole discretion,
may substitute cash, in lieu of shares of PGE Common Stock, for
all or any portion of the Purchase Price Shares prior to the
issuance of those shares to Seller pursuant to the terms of this
Agreement. If Purchaser elects to so substitute cash for all of
the Purchase Price Shares, the parties shall be
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relieved of their obligations under the Stock Sale Agreement
(as hereafter defined). In addition, Purchaser shall have the
right at any time within the period of one hundred eighty (180)
days following (A) the date of delivery to Seller of the Earn-
Out Shares or the Additional Shares, in the case of such shares
or (B) the Closing Date, in the case of all other PGE Common
Stock constituting Purchase Consideration, to elect to
repurchase from Seller any such PGE Common Stock issued to
Seller. The repurchase price shall be calculated based on the
average of the closing bid and ask price per share for the 20
trading days immediately preceding the relevant repurchase date
(the "Average Price"). In the event the Average Price is equal
to or less than one hundred percent (100%) of the per share
portion of the Stock Purchase Price attributable to the PGE
Common Stock to be repurchased by Purchaser (the "Base Price")
then the repurchase price shall be the Base Price. In the event
the Average Price is equal to or more than one hundred twenty-
five percent (125%) of the Base Price then the repurchase price
shall be one hundred twenty-five percent (125%) of the Base
Price. In the event the Average Price is less than one hundred
twenty-five percent (125%) and more than one hundred percent
(100%) of the Base Price then the repurchase price shall be the
Average Price. The repurchase price shall be paid in cash and
shall be delivered to Seller within three (3) business days of
Purchaser's election to repurchase. Seller shall concurrently
deliver the relevant shares of PGE Common Stock to Purchaser.
(viii) The number of shares of PGE Common Stock received by Seller
shall not be subject to adjustment except if the Seller sells
such shares at any time within the period of one hundred eighty
days (180) following (A) the date of registration under the
Securities Act and delivery to Seller of the Earn-Out Shares or
the Additional Shares (in the case of such shares), or (B) the
Closing Date in the case of all other PGE Common Stock
constituting Purchase Consideration, then in the event (1) the
sale price for such shares is less than ninety percent (90%) of
the portion of the Stock Purchase Price attributable to those
particular shares, Purchaser shall pay to Seller an amount
equal to the difference between ninety percent (90%) of the
portion of the Stock Purchase Price attributable to the
particular shares sold by Seller and the sale price received by
Seller in respect of those shares and (2) the sale price for
such shares is more than one hundred twenty-five percent (125%)
of the portion of the Stock Purchase Price attributable to
those particular shares, Seller shall pay to Purchaser an
amount equal to the difference between one hundred twenty-five
percent (125%) of the portion of the Stock Purchase Price
attributable to the particular shares sold by Seller and the
sale price received by Seller in respect of those shares. The
parties shall effect such adjustments on weekly intervals
commencing one week after the Closing.
(ix) The 545 day period set forth in Section 2.3(c)(v), and the 180
day period set forth in Section 2.3(c)(vii), shall each be
extended by the length of any
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Delay Period (as such term is defined in the Stock Sale
Agreement, the form of which is attached hereto as Exhibit 6.8)
(d) A list of Non-Customer Contracts which Purchaser desires to acquire
from Seller and assume at Closing is set forth in Schedule 1.1(b)(i) attached
hereto. In the event the counterparty to any such Non-Customer Contract fails or
refuses to allow the transfer of same to Purchaser prior to the Closing Date,
then Seller shall, at Purchaser's sole option and in Purchaser's sole
discretion, provide the service or function which is the subject of such Non-
Customer Contract on the same terms and conditions as contained therein.
(e) Purchaser agrees to(i) service all Customer Accounts and (ii) perform
all Non-Customer Contracts acquired and assumed by Purchaser pursuant to this
Section 2.3(d) and Purchaser further agrees to indemnify and hold harmless
Seller from and against any claims relating to Purchaser's performance, or
failure to perform, such Customer Accounts and Non-Customer Contracts subsequent
to the Closing Date.
(f) Seller utilizes the toll-free numbers for its customer service set
forth on Schedule 2.3(f). At Closing, Seller shall assign to the Purchaser all
of Seller's right, title and interest in and to all such toll-free numbers, and,
to the extent that Seller is not the owner of the toll-free number which is
manned by any other entity, Seller shall utilize commercially reasonable efforts
to persuade such entity to assign its interests in such toll-free number to
Purchaser.
(g) Purchaser acknowledges that Seller does not maintain copies of all
verification records with respect to the Customer Accounts and that many of such
records may be in the possession of one or more companies that provide
verification services to Seller. In lieu of delivering all such verification
records to Purchaser at Closing, Purchaser agrees that Seller may provide at
Closing a letter addressed to each such verification company directing such
verification company to hold all verification records relating to Customer
Accounts at the direction of Purchaser.
(h) Two days prior to the Closing Date, Seller shall deliver to Purchaser
an aging of all accounts payable ("Accounts Payable") of the Business on an
itemized basis.
(i) Two days prior to the Closing Date, Seller shall deliver to Purchaser
an aging of all accounts receivable of the Business on an itemized basis.
(j) In the event applicable laws, rules or regulations require any
Authorizations to be transferred to Purchaser in order to consummate the
transactions contemplated herein, Seller shall have the option to elect to (i)
transfer such Authorizations or (ii) exclude from the Assets the Customer
Accounts derived from Customers located in the particular state(s) requiring the
transfer of such Authorizations. In the event Seller elects to exclude such
Customer Accounts, the Stock Purchase Price shall be reduced by an amount equal
to (A) Thirty-Five Million Dollars ($35,000,000), times (B) the portion of the
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gross revenues (determined by generally accepted accounting principles) of the
Business during the month immediately preceding the Closing Date derived from
Customers located in the state(s) requiring the transfer of such Authorizations,
divided by (C) the total gross revenues of the Business during such preceding
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month.
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(k) Purchaser agrees to use its best efforts to resolve any matters
necessary in order to obtain approval for the transactions contemplated herein
from the Federal Communications Commission ("FCC") and all applicable state
public service and/or utility commissions (collectively, "PSCs"), including,
without limitation, the payment of any fees or taxes in connection therewith,
provided however, that Seller shall forthwith pay any and all fees or taxes
relating to the Business which have accrued but have not been paid as of the
Closing Date.
(l) The allocation of the Purchase Consideration shall be determined prior
to the Closing Date. Following execution of this Agreement, Seller and
Purchaser shall exercise their best efforts to agree upon such allocation. In
the event Seller and Purchaser are unable to reach such agreement, then either
party shall be entitled to request that the allocation be determined by the
accounting firm of Xxxxxx Xxxxxxxx. The parties shall equally bear all costs,
expenses and charges of Xxxxxx Xxxxxxxx resulting from such determination;
provided however Purchaser shall pay any such costs, expenses and charges in
excess of Twenty Thousand Dollars ($20,000). Xxxxxx Xxxxxxxx shall provide each
of the parties written notice of its determination which shall be final and
binding unless one of the parties delivers written notice of dispute to the
other party within seven (7) days of receipt of such determination. In the
event of such dispute, the matter shall be referred to final and binding
arbitration pursuant to Section 9.13 of this Agreement.
(m) All payments received by Seller (whether in its capacity as manager
pursuant to the Management Agreement or otherwise) from Customers after the
Closing in respect of accounts receivable of the Business shall be allocated on
a first in first out basis in accordance with generally accepted accounting
principles.
2.4 Limitation on Assumption of Liabilities.
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Except for (i) the Customer Accounts and (ii) the Non-Customer
Contracts specifically assumed by Purchaser pursuant to Section 2.3(d) above,
Purchaser shall not be liable for any of the obligations or liabilities of
Seller of any kind or nature. Seller shall pay, perform and discharge all of
the other valid liabilities and obligations related to the Business which have
not been assumed by Purchaser pursuant to this Agreement and shall specifically
indemnify and hold harmless Purchaser from and against same. Purchaser shall
pay, perform and discharge all of the valid liabilities and obligations related
to the Business which have been assumed by Purchaser pursuant to this Agreement
and shall specifically indemnify and hold harmless Seller from and against same.
3. Representations and Warranties of Seller
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Seller represents and warrants to Purchaser as follows, which
representations and warranties are made as of the date hereof and as of the
Closing Date and shall survive the Closing for a period of one year (except with
respect to the representations and warranties in Section 3.6 which shall survive
for two years):
3.1 Organization
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(a) Except as set forth on Schedule 3.1(a) attached hereto Seller is a
limited partnership duly organized, validly existing and in good standing under
the laws of the State of Maryland, is duly qualified and in good standing as a
foreign limited partnership in the states set
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forth on Schedule 3.1(a) attached hereto with full requisite legal power and
authority to own its properties and assets and to carry on lawfully its business
as currently conducted, and is not required to be qualified to do business as a
foreign limited partnership in any other jurisdiction, except for those
jurisdiction(s) where the failure to be so qualified would not have a material
adverse effect on the Business.
(b) Seller does not have any subsidiaries and neither owns nor holds any
securities of, or any interest in, any other person or entity and is not a
partner or member in or subject to any joint venture, partnership, limited
liability company or other arrangement or contract that is or could be treated
as a partnership for federal income tax purposes, in each case, other than de
--
minimus interests in publicly traded entities.
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3.2 Authorization
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Seller has all requisite partnership power and authority to enter into
this Agreement and to carry out the transactions contemplated by this Agreement.
The execution, delivery and performance by Seller of this Agreement and the
other agreements and documents referred to herein and therein and the actions
contemplated hereby and thereby have been duly and validly authorized by all
necessary partnership action on the part of Seller, and this Agreement and such
other agreements and documents constitute valid and binding obligations of
Seller, enforceable in accordance with their terms, subject to (i) general
principles of equity, regardless of whether enforcement is sought in a
proceeding in equity or at law, and (ii) bankruptcy, reorganization, insolvency,
fraudulent conveyance, moratorium, receivership or other similar laws relating
to or affecting creditors' rights generally.
3.3 Liabilities
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Except as set forth in Schedule 3.3 attached hereto, and subject to
obtaining the Consents (as herein defined) and the consents of the counter
parties to the assignment of the Non-Customer Contracts, Seller has no
obligations or liabilities, whether direct or indirect, joint or several,
absolute or contingent, matured or unmatured, secured or unsecured, which could
be affected by the execution and delivery of this Agreement or consummation of
the transactions contemplated by this Agreement or which could affect the same.
3.4 Title to and Condition of Assets and Property
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At Closing, Seller shall deliver to Purchaser good and marketable
title to the Assets free and clear of all liens, claims, charges, security
interests, options, or other title defects or encumbrances except as otherwise
disclosed pursuant to this Agreement. Except as set forth in Schedule 1.1(b)(i)
attached hereto, the Assets contain no real or personal property currently
leased or otherwise occupied or used, but not owned, by Seller. All property
owned or leased by Seller in connection with the Business constitute all of the
assets currently used or needed in the ongoing operation of the Business as it
is currently operated other than the contracts listed on Schedule 3.6. Except
as set forth in Schedules 3.1(a) and 3.7 attached hereto, the operations which
constitute the Business conform with all applicable federal, state and local
laws, ordinances, rules and regulations except to the extent that any such non-
compliance does not have a material adverse effect on the Business.
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3.5 Intellectual Property
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Set forth on Schedule 3.5 hereto is a complete list of any and all
trade names and trademarks being transferred to Purchaser in respect of the
Business (the "Intellectual Property"). To the best of Seller's knowledge, the
use of the Intellectual Property by Seller does not infringe on the rights of
any person who has ever been employed by Seller since its inception.
3.6 Contracts
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Except for Customer Contracts, Non-Customer Contracts, contracts
between Seller and its affiliates, or as set forth in Schedule 3.6 attached
hereto, Seller is not a party to or bound by any contract or agreement, written
or oral with a person or entity which is material to the Business.
Neither Seller nor, to the best of Seller's knowledge any other party
to any Non-Customer Contract, has breached any provisions of, or is in violation
or default under the terms of, or has caused or permitted to exist any event
that with or without due notice or lapse of time or both would constitute a
default or event of default under, any such Non-Customer Contract. There are no
facts or circumstances which have arisen on or prior to the date hereof which
could lead to any additional obligation under any of the Non-Customer Contracts
(payment or otherwise) or to the violation, cancellation or other early
termination of one or more of the Non-Customer Contracts. All Non-Customer
Contracts are valid, binding and in full force and effect and will continue in
full force and effect to the benefit of Seller, its respective successors and
assigns, if such party so elects, without change following the consummation of
the transactions contemplated by this Agreement if assigned to Purchaser in
accordance with Section 2.3(d) hereof. The consummation of the transactions
contemplated by this Agreement will not violate or cause a default or event of
default under any provision of, or result in the acceleration of any obligation
under, or the termination of, any Contract.
3.7 Litigation and Compliance
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Except as set forth in Schedule 3.7 attached hereto: (i) There is no
pending or, to the knowledge of Seller, threatened claim, investigation, lawsuit
or administrative proceeding by or against Seller with respect to the Business;
(ii) the Business is in compliance with all federal, state, local and foreign
laws and regulations and administrative orders and all tariffs, rules and
regulations of local exchange carriers and inter-exchange carriers applicable
thereto except to the extent that any such non-compliance does not have a
material adverse effect on the Business, and (iii) there is no order, writ,
injunction or decree relating to or affecting the Business or the transactions
contemplated by this Agreement.
3.8 Non-Contravention
-----------------
Except as set forth in Schedule 3.3 attached hereto, neither the
execution of this Agreement nor the consummation of the transactions
contemplated hereby will result in the breach of any term or provision of,
constitute a default under, or accelerate or augment the performance otherwise
required under, any provision of the partnership agreement of Seller, or any
material agreement (including without limitation any loan agreement or
promissory note),
11
indenture, instrument, order, law or regulation to which Seller is a party or by
which it is bound, or will result in the creation of any lien or encumbrance
upon any of the Assets.
3.9 Licenses, Permits and Required Consents
---------------------------------------
Set forth on Schedule 3.9 attached hereto is a list of all material
federal, state, local and foreign franchises, tariffs, licenses, ordinances,
certifications, approvals, authorizations and permits (collectively, the
"Authorizations") necessary for Seller to conduct and operate the Business as
currently conducted. All Authorizations relating to the Business are in full
force and effect, no violations have been made in respect thereof, and, other
than those customer complaints and descriptions thereof set forth in Schedule
3.7 attached hereto, no proceeding is pending or, to the knowledge of Seller,
threatened which could have the effect of revoking or limiting any such
Authorizations, and the same will not cease to remain in full force and effect
by reason of the transactions contemplated by this Agreement. Seller shall
exercise its best efforts to file or obtain all FCC and PSC registrations,
filings, applications, notices, transfers, consents, approvals, orders,
qualifications, authorizations, certifications, waivers or other actions of any
kind required to be made, filed, given or obtained by or on behalf of Seller
with, to or from the FCC and PSCs in connection with the consummation of the
transactions contemplated by this Agreement ("Consents").
3.10 Disclosure
----------
No representation, warranty or statement made by or on behalf of
Seller in this Agreement or the Schedules attached hereto or in the certificates
or other materials furnished or to be furnished to Purchaser or its
representatives prior to the Closing in connection with this Agreement and the
transactions contemplated hereby or thereby, contains or will contain any untrue
statement of material fact or omits or will omit to state a material fact
required to be stated herein or therein or necessary to make the statements
contained herein or therein not misleading.
3.11 Brokers
-------
Seller has not engaged any investment banker, financial advisor or
broker of any kind with respect to the sale of the Assets and no fee or other
compensation shall become payable to any investment banker, financial advisor or
broker of any kind, engaged by Seller, upon the closing of the transactions
contemplated hereby.
3.12 Due Diligence
-------------
Seller shall use best efforts to comply in full in responding to the
due diligence requests of the Purchaser through and including January 15, 2000
(provided that Seller shall not be required to permit due diligence requests and
review which materially interfere with Seller's business).
3.13 Investment Representations
--------------------------
Seller represents and warrants to Purchaser that it is acquiring the
Purchase Price Shares registered in its name for its own account and not with a
view to dividing PGE Common Stock with others or participating directly or
indirectly in any resale, distribution or underwriting
12
thereof and will not transfer or assign PGE Common Stock in violation of the
Securities Act, applicable state securities laws or this Agreement. Seller
further represents and warrants that it is able to bear the economic risk of the
investment in PGE Common Stock and has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of such investment. Seller shall provide such information and execute such
documents as Purchaser may reasonably request in order to verify the foregoing.
Seller acknowledges that it has been provided an opportunity to ask questions
and receive answers from Purchaser and PGE concerning the terms and conditions
of the offering of PGE Common Stock and to obtain any additional information
which Purchaser possesses or can acquire without unreasonable effort or expense
that is necessary to verify the accuracy of any information furnished in
connection with said offering.
3.14 Customer Account Materiality
----------------------------
No single Customer Account comprises more than one percent (1%) of the
Business.
3.15 Disclaimer of Fraudulent Intent
-------------------------------
Seller represents and warrants that the transactions described in this
Agreement have been undertaken in good faith, considering their obligations to
any person or entity to whom Seller owes a right to payment, whether or not the
right is reduced to judgment, liquidated, unliquidated, fixed, contingent,
matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured
(collectively such persons with such claims are called "Seller Creditors" under
this paragraph), and has undertaken these transactions without any intent to
hinder, delay or defraud any such Seller Creditors, and either has disclosed in
the ordinary course of business or will undertake to disclose to all such Seller
Creditors (if required by applicable laws rules or regulations) the existence of
this transaction. Seller further represents and warrants that: (1) neither
Seller, nor any current or former employees of Seller or any of Seller's
corporate affiliates will retain possession or control of any of the property
transferred under this Agreement following the Closing, except as expressly
provided in this Agreement or any agreement executed in connection herewith and
then only for and on behalf of the account of the Purchaser; (2) Seller has not
been sued or threatened with suit by any Creditor relative to the Business prior
to the execution of this Agreement; (3) Seller has not removed or concealed any
assets from any Seller Creditors; and (4) Seller believes in good faith that, at
Closing, Seller will receive consideration reasonably equivalent to the value of
the Assets transferred under this Agreement.
3.16 Protection of Customer Accounts
-------------------------------
Seller represents and warrants that it has used its best efforts to
ensure that all information related to the Customer Accounts, including, but not
limited to, all customer lists, mailing lists, books, records, files, data, and
letters of agency, has not been disclosed to anyone other than employees,
directors and agents of Seller and any of Seller's corporate affiliates and that
no such employees, directors or agents will possess, control or otherwise have
any right to such information following the Closing of the transaction
contemplated hereby.
13
4. Representations and Warranties of Purchaser
-------------------------------------------
Purchaser represents and warrants to Seller as follows:
4.1 Corporate Status
----------------
Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware with full corporate power
and authority to carry on its business as now conducted.
4.2 Authority for Agreement
-----------------------
Purchaser has the power and authority to execute and deliver this
Agreement and to carry out its obligations hereunder. The execution, delivery
and performance by Purchaser of this Agreement and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of Purchaser. This Agreement has been
duly executed by Purchaser and the transactions contemplated by them constitute
the legal, valid and binding obligation of Purchaser enforceable against
Purchaser in accordance with its terms. No consent, approval, or authorization
of, or declaration, filing, or registration with, any federal or state
governmental or regulatory authority is required to be made or obtained by
Purchaser in connection with the execution, delivery, and performance of this
Agreement and the consummation of the transactions contemplated by this
Agreement, except approval of applicable public service commissions.
4.3 No Conflicts
------------
To the best of Purchaser's knowledge, the execution, delivery and
performance of this Agreement and the consummation of all of the transactions
contemplated hereby: (i) do not and will not with or without the giving of
notice or passage of time or both, violate, conflict with or result in a breach
or termination of any provision of, or constitute a default under, or accelerate
or permit the acceleration of the performance required by the terms of, or
result in a creation of any mortgage, security interest, claim, lien, charge or
other encumbrance upon any of its assets pursuant to, or otherwise give rise to
any liability or obligation under any agreement, mortgage, deed of trust,
license, permit or other agreement or instrument, or any order, judgment,
decree, statute, regulation or any other restriction of any kind or description
to which Purchaser is a party or by which Purchaser or its assets may be bound;
and (ii) will not terminate or result in the termination of any such agreement
or instrument, or in any way affect or violate the terms and conditions of, or
result in the cancellation, modification, revocation or suspension of, any
rights in or to its assets.
4.4 Disclosure
----------
The representations, warranties and statements made by Purchaser in
this Agreement and in the certificates and other documents delivered pursuant
hereto do not contain any untrue statement of a material fact, and, when taken
together, do not omit to state any material fact necessary to make such
representations, warranties and statements, in light of the circumstances under
which they are made, not misleading.
14
4.5 SEC Filings and Financial Information
-------------------------------------
PGE, the owner of 100% of the capital stock of Purchaser, has filed
with the Securities and Exchange Commission (the "Commission") its Annual Report
on Form 10-K for the year ended December 31, 1998, together with all schedules
and exhibits attached thereto, and Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1999, June 30, 1999 and September 30, 1999
(collectively, the "SEC Documents"). Each SEC Document, as of the date of its
filing thereof with the Commission, conformed in all material respects with the
requirements of the Exchange Act, and the rules and regulations thereunder. The
financial statements of PGE, including the notes thereto, included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the
Commission with respect thereto, have been prepared in accordance with GAAP
consistently applied (except as may be indicated in the notes thereto) and
present fairly the consolidated financial position of PGE at the dates thereof
and of its operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal audit adjustments). Since the date of
PGE's last Report on Form 10-Q, there have been no contracts, loss
contingencies, acquisitions or divestitures that are material to PGE that have
not been disclosed to Seller.
4.6 Purchase Price Shares
---------------------
If Purchase Price Shares are issued pursuant to this Agreement, said
Purchase Price Shares shall be (i) fully paid, nonassessable and free and clear
of all liens, encumbrances, pledges, charges and security interests, (ii) shall
be "restricted shares" under Rule 144 promulgated by the Securities Exchange
Commission under the Securities Act, (iii) not subject to any shareholder's
agreement, voting trust or other similar agreement, and (iv) are entitled to the
protections set forth in Section 6.8 hereof.
5. Seller's Obligations Before Closing
-----------------------------------
Seller covenants that from the date of this Agreement and until the Closing
Date:
(a) Through and including January 15, 2000, Purchaser and its counsel,
accountants and other representatives shall have full access to all properties,
books, accounts, records, contracts and documents of or relating to the Business
(including, but not limited to, billing records, customer service history,
verbal letters of agency tapes or written letters of agency where required), but
Purchaser shall not have access to any information not related to the Business.
Through and including January 15, 2000, Seller shall furnish or cause to be
furnished to Purchaser and its representatives all data and information
concerning the Business that may be reasonably requested.
(b) Seller will continue to operate the Business diligently and in
substantially the same manner as prior to this Agreement and shall not take any
actions that vary materially from those methods used by Seller in the operation
of the Business as of the date of this Agreement, without the prior written
consent of Purchaser.
15
6. Covenants
---------
6.1 Further Assurances
------------------
At any time and from time to time after the Closing Date, each party
shall, without further consideration, execute and deliver to the other such
other instruments of transfer and assumption and shall take such other action as
the other may reasonably request to carry out the transfer of the Assets and the
assumption of the specific liabilities contemplated by this Agreement; provided,
however, Purchaser shall pay the reasonable out of pocket expenses incurred by
Seller in taking any actions requested by Purchaser after the Closing.
6.2 Standstill; Public Announcement
-------------------------------
Prior to the Closing or termination of this Agreement, Seller agrees
not to directly or indirectly solicit, entertain or encourage offers or
negotiate with any other person or entity regarding the purchase or sale of the
Business. The foregoing shall not prohibit Seller from selling some or all of
its business and operations to a third party, provided that such third party
honors and fulfills all obligations, duties and commitments of Seller set forth
herein and in such other agreements executed in connection herewith. Seller
shall not make any public announcement with respect to the subject matter of
this Agreement. Purchaser shall not make any public announcement with respect
to the subject matter of this Agreement without Seller's prior consent, which
consent shall not be unreasonably withheld; provided however Seller shall be
entitled to withhold its consent to any press release that would have a material
adverse impact on Seller or the Business. Notwithstanding any provision of this
Section 6.2 to the contrary, Purchaser and PGE may make any public disclosure
about this Agreement to the extent required in the opinion of its counsel by
federal or state securities laws or NASDAQ rules, provided that Seller shall
have a reasonable opportunity to review such disclosures in advance.
6.3 Authorizations
--------------
Seller shall use commercially reasonable efforts to assist Purchaser
in obtaining all Authorizations necessary to consummate the transactions
contemplated hereby.
6.4 Compliance with Laws
--------------------
Seller understands that Seller's operation of the Business prior to
the Closing of this Agreement is subject to the rules and regulations of the FCC
and the PSCs, and Seller hereby agrees to be fully responsible for the acts and
omissions of all of Seller's agents, servants and representatives in the
connection with the operation of the Business prior to the Closing of this
Agreement which are in violation of all laws, rules, regulations, administrative
decisions and pronouncements of the FCC and the PSCs, including but not limited
to all applicable FCC and PSC rules regarding customer slamming and cramming,
the violation of which may result in severe penalties and adverse consequences
which the FCC or the PSCs agencies may attempt to impose upon Purchaser after
the Closing of this Agreement.
16
6.5 Bulk Sales
----------
Purchaser and Seller hereby agree to waive compliance with any and all
applicable bulk sales laws.
6.6 Continued Relationships
-----------------------
Up to the Closing Seller shall use commercially reasonable efforts to
preserve intact the Business and keep available the services of its officers and
employees and operate the Business in its ordinary course, and shall cause to be
taken no change in the business, condition or results of operations of Seller
which may have a material adverse effect on the Business.
6.7 Confidentiality
---------------
(a) The provisions of that certain Confidentiality Agreement executed by
and between Purchaser as of December 20, 1999 (the "Confidentiality Agreement")
are incorporated herein by reference. Notwithstanding the foregoing, the
Confidentiality Agreement shall survive any termination of this Agreement.
(b) Notwithstanding the foregoing, Purchaser or PGE may, at any time after
the date of this Agreement, file with the Securities and Exchange Commission
(the "Commission") a Report on Form 8-K pursuant to the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), with respect to the transactions
contemplated by this Agreement, which Report may include, among other things,
financial statements and pro forma financial information with respect to the
Business, and/or file with the Commission a registration statement under the
Securities Act which includes a prospectus containing any information required
to be included therein with respect to the transactions contemplated by this
Agreement, including but not limited to financial statements and pro forma
financial information with respect to the Business, and thereafter distribute
said prospectus in connection with the offer and sale of securities of Purchaser
or PGE. Purchaser or PGE also may include such information in any other
Exchange Act Report or in offering circulars or private placement memoranda
distributed in connection with the offer and sale of debt or equity securities.
Seller shall cooperate with Purchaser or and provide such information and
documents as may be required in connection with any such filings, registration
statements, offering circulars or Exchange Act Reports.
6.8 Stock Sale Agreement
--------------------
A Stock Sale Agreement, in substantially in the form attached hereto
as Exhibit 6.8 (the "Stock Sale Agreement") shall be executed by Purchaser,
Seller and PGE at the Closing.
6.9 Current Information
-------------------
From and after the Closing Date, and for so long as Seller or any
affiliate of Seller hold shares of PGE Common Stock, Purchaser agrees to use its
best efforts to ensure that PGE files all reports required to be filed by it
under the reporting requirement of Section 13 or 15(d), as applicable, of the
Securities Exchange Act of 1934, as amended (the "Act"); or, if PGE is not
subject to Section 13 or 15(d) of the Act, PGE shall make publicly available, on
a current basis,
17
the information specified in Rule 144(c)(2) promulgated under the Securities
Act. As used in this section, the term "affiliate" shall have the same meaning
as in Rule 501 promulgated under the Securities Act.
6.10 Bringdown Certificate
---------------------
As of the Closing, Seller shall deliver to Purchaser a Bringdown
Certificate with respect to Seller's representations and warranties set forth in
this Agreement. In the event that such Bringdown Certificate does not set forth
facts or circumstances which have a material adverse impact on the Assets, then
Seller's representations and warranties shall be deemed modified as set forth in
such Certificate. In the event that such Bringdown Certificate sets forth facts
or circumstances which have a material adverse impact on the Assets, then
Purchaser's sole and exclusive remedy shall be to elect to terminate this
Agreement; provided in the event (i) Seller took some action between January 15,
2000 and the Closing which results in regulatory consequences having a material
adverse effect on the Business or (ii) there is a twenty five percent (25%)
reduction in the gross revenues of the Business between January 15, 2000 and
the Closing, then Purchaser shall also be entitled to the return of the Breakup
Shares. In the event that Purchaser closes the transactions contemplated by
this Agreement following receipt of such Bringdown Certificate, then Purchaser
shall be deemed to have waived any claims with respect to the matters set forth
in such Bringdown Certificate.
6.11 Due Diligence
-------------
Purchaser shall have completed, to its satisfaction, a due diligence
review of the Business and delivered to Seller by January 15, 2000 either a
Satisfaction Notice or a written notice terminating this Agreement. In the
event Purchaser fails to deliver such notice, then this Agreement shall be
deemed to have terminated. In the event of such termination or deemed
termination, this Agreement shall be of no further force and effect and Seller
shall be entitled to retain the Breakup Cash and, except as otherwise expressly
provided herein, the Breakup Shares.
6.12 Integration
-----------
On or before the Closing, Purchaser shall provide Seller with all
necessary information and data to integrate all of Purchaser's long distance
customer accounts and casual calling traffic into the Business (other than the
Customer Accounts). The scope, extent and nature of such accounts and casual
calling traffic shall be substantially as set forth on Schedule 6.12 attached
hereto. Following the Closing, Seller shall on a best efforts basis integrate
such customer accounts into the Business. Purchaser shall fully cooperate with
such integration. Upon integration of such customer accounts, Seller shall
commence billing such customer accounts pursuant to the Management Agreement.
6.13 SOHO Agreement
--------------
The parties may, but are not obligated to agree in the future to form
a joint venture for the purpose of marketing telecommunications services to
small office/home office customers.
18
7. Conditions Precedent
--------------------
7.1 Conditions to Obligations of Purchaser
--------------------------------------
The obligation of Purchaser to pay the Purchase Consideration to
Seller and to satisfy its other obligations hereunder shall be subject to
fulfillment (or waiver by Purchaser) at or prior to the Closing, of the
following additional conditions, which Seller agrees to use its best efforts to
cause to be fulfilled:
(a) Representations, Performance
----------------------------
The representations and warranties of Seller contained in Section 3
hereof shall be true in all material respects at and as of the Closing Date
(except as otherwise provided herein or as affected by the transactions
contemplated hereby) and Seller shall have duly performed and complied with all
agreements and conditions required by this Agreement to be performed, or
complied with, by it prior to or on the Closing Date.
(b) Partnership Proceedings
-----------------------
All partnership and other proceedings of Seller in connection with the
transactions contemplated by this Agreement and all document and instruments
incident to such partnership proceedings, shall be reasonably satisfactory in
substance and form to Purchaser, and Purchaser shall have received all such
documents and instruments or copies thereof.
(c) Approval of FCC and States
--------------------------
The FCC and the PUCs shall have granted any and all consents and
approvals necessary to consummate the transactions contemplated hereby and any
required notice period(s) shall have expired.
(d) Consents
--------
Seller shall have successfully arranged for the Consents necessary to
assign the Contracts being assumed by Purchaser from Seller to Purchaser.
(e) Non-Competition Agreement
-------------------------
Seller shall have executed a non-competition agreement, substantially
in the form attached hereto as Exhibit 7.1(e) (the "Non-Competition Agreement").
(f) Stock Sale Agreement
--------------------
Seller shall have executed the Stock Sale Agreement referred to in
Section 6.8 above.
(g) Expense Sharing
---------------
Seller shall share on an equal basis the monthly expenses set forth on
Schedule 7.1(g) attached hereto (the "Expense Sharing Arrangement"). The
Expense Sharing
19
Arrangement shall continue for an initial period of six (6) months from the
Closing Date (the "Initial Period") and shall automatically be renewed for
consecutive additional periods of six (6) months, provided however that either
party (the "Terminating Party") may terminate the Expense Sharing Arrangement at
any time after the Initial Period upon providing the other party (the "Non-
Terminating Party") with sixty (60) days prior written notice of the Terminating
Party's intent to so terminate effective as of the expiration of such sixty (60)
day period. In conjunction therewith Purchaser shall utilize the Los Angeles
telemarketing and support operations center located at 0000 Xxxxxxxx Xxxxxxxxx,
Xxx Xxxxxxx, Xxxxxxxxxx (which lease is subject to a Non Customer Contract) (the
"L.A. Center") during nights and weekends and Seller shall utilize the L.A.
Center during the weekdays. All other expenses related to the L.A. Center shall
be borne by Purchaser pursuant to the lease in respect of the L.A. Center.
(h) Due Diligence
-------------
Purchaser shall have completed, to its satisfaction, a due diligence
review of the Business by January 15, 2000.
(i) License Agreement
-----------------
Seller shall have executed and delivered to Purchaser a License
Agreement substantially in the form of Exhibit 7.1(i) attached hereto (the
"License Agreement").
(j) Management Agreement
--------------------
Seller shall have executed and delivered to Purchaser a Management
Agreement substantially in the form of Exhibit 7.1(j) attached hereto (the
"Management Agreement").
7.2 Conditions to Obligations of Seller
-----------------------------------
The obligations of Seller to deliver the xxxx of sale, assignments,
endorsements and other instruments of transfer relating to the Assets and to
satisfy Seller's other obligations hereunder shall be subject to the
fulfillment, on or prior to the Closing Date (or waiver by Seller), of the
following conditions, which Purchaser agrees to use its best efforts to cause to
be fulfilled:
(a) Representations, Performance
----------------------------
The representations and warranties of Purchaser contained in Section 4
hereof shall be true at and as of the Closing Date. Purchaser shall have duly
performed and complied in all material respects with all agreements and
conditions required by this Agreement to be performed, or complied with, by it
prior to or on the Closing Date.
(b) Corporate Proceedings
---------------------
All corporate and other proceedings of Purchaser in connection with
the transactions contemplated by this Agreement, and all documents and
instruments incident thereto, shall be satisfactory to Seller and Seller shall
have received all such documents and instruments, or copies thereof.
20
(c) No Material Changes
-------------------
No material changes in the financial position of Purchaser or material
changes in the written information previously disclosed to Seller shall have
occurred.
(d) Delivery of Purchase Consideration
----------------------------------
Seller shall have been paid the Cash Purchase Price in accordance with
Section 2.3 hereof and shall have received bona fide certificates evidencing the
Purchase Price Shares (if applicable) executed by the person or persons required
to so execute such certificates in accordance with the formative corporate
documents of PGE.
(e) Adequate Security
-----------------
Purchaser shall provide Seller with adequate security for the (i)
delivery of the Earn-Out Shares, (ii) delivery of the Additional Shares, (iii)
payment of any portion of the Cash Purchase Price which is to be paid subsequent
to the Closing Date and (iv) payment of the funds to Seller pursuant to Section
2.3 (viii) of this Agreement, which security may, in Purchaser's sole and
absolute discretion, be in the form of any combination of the following: (i) an
irrevocable letter of credit from a national bank; or (ii) escrowed cash; or
(iii) a first priority perfected security interest in the Assets and all new and
replacement assets comprising the Business as owned by Purchaser after the
Closing (such security interest shall be reflected in security documents in form
and substance acceptable to Seller). In the event Seller is provided a security
interest as set forth in item (iii) above and there is a default by Purchaser in
the obligations secured thereby then Seller shall be entitled to elect, in its
sole and absolute discretion, to receive the assets secured by such security
interest (the "Secured Assets") in full satisfaction of such obligations. In
the event of such election Seller shall be entitled to retain all stock, cash or
other consideration received by Seller pursuant to the terms of this Agreement
prior to the date of such election; provided, however, if on the date of such
election Seller shall have received more than sixty percent (60%) of the
Purchase Consideration then upon receipt by Seller of good and marketable title
to the Secured Assets free and clear of all liens, claims, charges, security
interests, options or other title defects or encumbrances Seller shall pay to
Purchaser the difference between (A) the Purchase Consideration actually
received by Seller and (B) sixty percent (60%) of the Purchase Consideration.
(f) License Agreement
-----------------
Purchaser shall have executed and delivered the License Agreement to
Seller.
(g) Management Agreement
--------------------
Purchaser shall have executed and delivered the Management Agreement
to Seller.
21
8. Indemnification; Manner of Claims
---------------------------------
8.1 Indemnification
---------------
(a) Indemnification by Seller
-------------------------
From and after the Closing Date, Seller will indemnify Purchaser
against, and hold Purchaser harmless from, any and all liability, damage,
deficiency, loss, cost or expense (including reasonable attorneys fees')
(collectively "Losses") that is based upon or that arises out of (i) any
misrepresentation or breach of any representation, warranty or agreement made by
Seller herein, (ii) any obligation, debt or liability of Seller to the extent
that the same is not expressly assumed herein by Purchaser, or (iii) the use and
ownership of the Assets on or prior to the Closing Date (other than those
liabilities specifically assumed by Purchaser hereunder or liabilities which
Purchaser or its affiliates are responsible for pursuant to various contracts
and agreements entered into between Purchaser and its affiliates on the one hand
and Seller and is affiliates on the other hand), provided that Purchaser may
not receive recoveries in excess of the amount of Loss.
(b) Indemnification by Purchaser
----------------------------
From and after the Closing Date, Purchaser will indemnify Seller
against, and hold Purchaser harmless from, any and all Losses based upon or that
arising out of (i) any misrepresentation or breach of any representation,
warranty or agreement made by Purchaser herein, (ii) the use and ownership of
the Assets subsequent to the Closing Date(other than those liabilities which
Seller or its affiliates are responsible for pursuant to various contracts and
agreements entered into between Seller and its affiliates on the one hand and
Purchaser and is affiliates on the other hand), and (iii) any obligation, debt,
liability or Contract of Seller assumed by Purchaser pursuant hereto.
(c) Cap and Floor
-------------
Notwithstanding anything to the contrary in this Agreement, Seller
shall have no liability or obligation to Purchaser with respect to that portion
of the Losses which are (a) less than Five Hundred Thousand Dollars ($500,000)
in the aggregate or (b) greater than Six Million Dollars ($6,000,000) in the
aggregate.
(d) Exclusive Remedy
----------------
Except as otherwise expressly provided for in this Agreement, the
rights under this Section 8.1 shall constitute Purchaser's exclusive rights
against Seller for the matters set forth in this Agreement.
8.2 Manner of Claims
----------------
Any notice of a claim by reason of any of the representations and
warranties contained in this Agreement shall state specifically the
representation or warranty with respect to which the claim is asserted, and the
amount of liability asserted against the other party by reason of the claim.
22
9. Miscellaneous
-------------
9.1 Consents of Third Parties
-------------------------
This Agreement shall not constitute an agreement to assign any
interest in any instrument, Contract, lease, permit, Authorization or other
agreement or arrangement of Seller, or any claim, right or benefit arising
thereunder or resulting therefrom, if any assignment without the consent of a
third party would constitute a breach or violation thereof or adversely affect
the rights of the Purchaser or Seller thereunder. If a consent of a third party
which is required in order to assign any instrument, Contract, lease, permit,
Authorization or other agreement or arrangement or any claim, right or benefit
arising thereunder or resulting therefrom, which consent Seller shall use its
best efforts to assist Purchaser in obtaining prior to the Closing, is not
obtained prior to the Closing, or if an attempted assignment would be
ineffective or would adversely affect the ability of Seller to convey its
interest to the Purchaser, Seller will cooperate with Purchaser in any lawful
and economically feasible arrangement to provide that Purchaser shall receive
Seller's interest in the benefits under any such instrument, Contract, lease,
permit, Authorization or other agreement or arrangement; and any transfer or
assignment to Purchaser by Seller of any interest under any such instrument,
Contract, lease, permit, Authorization or other agreement or arrangement that
requires the consent of a third party shall be made subject to such consent or
approval being obtained.
9.2 Expenses
--------
Subject to the terms of Sections 8 and 10 hereof, each of the parties
hereto shall bear its own expenses, costs and fees (including attorney's fees)
in connection with the transactions contemplated hereby, including the
preparation and execution of this Agreement and compliance herewith, whether or
not the transactions contemplated hereby shall be consummated.
9.3 Severability
------------
If any term or provision of this Agreement shall be held or deemed to
be, or shall in fact be, inoperative or unenforceable as applied in any
particular case because it conflicts with any other provision or provisions
hereof or any constitution or statute or rule of public policy, or for any other
reason, such circumstances shall not have the effect of rendering the term or
provision in question inoperative or unenforceable in any other case or
circumstance, or of rendering any other provision or provisions herein contained
invalid, inoperative, or unenforceable to any extent whatever, but such term or
provision shall be deemed modified or deleted as or to the extent required by
applicable law. The invalidity of any one or more phrases, sentences, clauses,
sections, or subsections of this Agreement shall not affect the remaining
portions of this Agreement.
9.4 Notices
-------
Any notices or other communications required under this Agreement
shall be in writing, shall be deemed to have been given when delivered in
person, when delivered to a recognized next business day courier, or, if mailed,
when deposited in the United States first
23
class mail, registered or certified, return receipt requested, with proper
postage prepaid, addressed as follows or to such other address as notice shall
have been given pursuant hereto:
If to Seller:
NOSVA Limited Partnership
Attn: Xxxxxxx Xxxxx
0000 Xxxxxxx Xxxxxxx
Xxx Xxxxx, XX 00000
With a copy to:
Xxxxxx X. Xxxxxx, Esq.
Xxxxxx Xxxx & Xxxxxx LLP
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxx, XX 00000
If to Purchaser:
International Exchange Communications, Inc.
Attn: Xxxx X. Xxxxxxx
000 Xxxxxxx Xxxx., Xxxxx 000
Xxxxxxxxxx, XX 00000
With a copy to:
Xxxxxxxx X. Xxxxxxxx, Esq.
Nowalsky, Bronston & Xxxxxxx
A Professional Limited Liability Company
0000 X. Xxxxxxxx Xxxx.
Xxxxx 0000
Xxxxxxxx, XX 00000
9.5 Amendment
---------
This Agreement may not be amended except by an instrument in writing,
duly executed and delivered on behalf of each of the parties hereto.
9.6 Waiver
------
Any party may waive compliance by another with any of the provisions
of this Agreement. No waiver of any provisions shall be construed as a waiver
of any other provision. Any waiver must be in writing.
24
9.7 Counterparts
------------
This Agreement may be executed in multiple counterparts, each of which
shall be deemed an original agreement, and all of which taken together shall
constitute one agreement, notwithstanding that all of the parties are not
signatories to the original or to the same counterpart.
9.8 Assignment
----------
Any assignment of this Agreement or the rights or obligations
hereunder by any party without the prior written consent of the nonassigning
parties shall be void. Notwithstanding the foregoing, either party may assign
all or any part of its rights and/or obligations to one or more affiliates,
subsidiaries, parent companies or shareholders of said party. No such
assignment shall relieve the assigning party of any of its obligations or duties
under this Agreement.
9.9 Costs
-----
In the event any action is instituted to enforce or interpret the
terms of this Agreement or arises out of this Agreement, the party prevailing in
such action shall be entitled to recover its reasonable attorney's fees and
costs as determined by the court.
9.10 Entire Agreement; Applicable Law, etc.
--------------------------------------
This Agreement, the Confidentiality Agreement and the other documents
or agreements executed contemporaneously herewith or pursuant hereto constitutes
the entire agreement and supersedes all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof. This Agreement shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of California applicable to
contracts made and to be performed in California.
9.11 Industry Terms and Phrases
--------------------------
All terms and phrases unique to the telecommunications industry and
used within this Agreement shall be defined in accordance with the everyday
meaning assigned to such terms and phrases within the industry.
9.12 Stock Legend
------------
Each of the certificates of PGE Common Stock issued to Seller pursuant
to the transactions hereunder, shall bear the following legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE MAY NOT BE
SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF BY THE HOLDER EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT FILED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, WITH RESPECT THERETO OR IN ACCORDANCE WITH AN OPINION OF COUNSEL IN
FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER THAT AN EXEMPTION FROM
25
SUCH REGISTRATION IS AVAILABLE. THE SHARES OF COMMON STOCK REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO CERTAIN PROVISIONS OF THAT CERTAIN ASSET PURCHASE
AGREEMENT, DATED AS OF DECEMBER ___, 1999 BETWEEN INTERNATIONAL EXCHANGE
COMMUNICATIONS, INC. AND NOSVA LIMITED PARTNERSHIP AND THE STOCK SALE AGREEMENT
BETWEEN INTERNATIONAL EXCHANGE COMMUNICATIONS, INC. AND NOSVA LIMITED
PARTNERSHIP, DATED AS OF DECEMBER ___, 1999.
9.13 Arbitration
-----------
The parties agree that any controversy or claim arising under this
Agreement shall be resolved through alternative dispute resolution means in the
following manner:
(a) Initially, the parties will engage in nonbinding mediation. Mediation
shall be held in Los Angeles, California or such site as is mutually agreeable
to both parties. The mediator shall be jointly appointed by the parties and
shall have expertise in commercial dispute resolution.
(b) In the event that the dispute of claim is not satisfactorily resolved
through mediation within forty-five (45) days of notice of such claim or dispute
by a party, the parties agree to submit such dispute or claim to binding
arbitration. Arbitration shall be held in Los Angeles, California, or such
other site that is mutually agreeable to the parties. Any judgement, decision
or award by the arbitrator shall be final and binding on the parties and may be
enforced in any court having jurisdiction over a party against whom any such
judgement, decision or award is to be enforced. The parties specifically and
knowingly waive any rights under State or Federal constitutions or statutes
which grant a party the right to trial by jury for any claim that might arise
under this Agreement or which purports to give a party the right to appeal an
arbitrator's judgement, decision or award. The rules and procedures of the
American Arbitration Association shall apply.
(c) The parties shall bear their own costs and expenses, including, but
not limited to, attorney's fees, for any mediation or arbitration, unless
otherwise directed by the mediator or arbitrator.
10. Termination
-----------
10.1 Mutual Consent
--------------
This Agreement may be terminated at any time prior to the Closing by
mutual consent of Seller and Purchaser, expressed by action of their respective
Boards of Directors.
10.2 Automatic Termination
---------------------
This Agreement shall automatically terminate and, except as otherwise
set forth in Section 10.3 below, the obligations of the parties hereunder shall
be discharged if the Closing does not occur on or prior to April 15, 2000.
26
10.3 Remedies on Termination
-----------------------
In the event Purchaser, without the right to do so under this
Agreement, shall fail or refuse to consummate the transactions contemplated by
this Agreement, or if any default under, or breach of, any representation,
warranty, covenant or condition of this Agreement on the part of Purchaser shall
have occurred that results in the failure to consummate the transactions
contemplated hereby, then Seller's sole and exclusive remedy shall be to obtain
a termination fee in the form of the Breakup Cash (as described in Section
2.3(b)(i) above) plus the Breakup Shares (as described in Section 2.3(c)(i)
----
above) (or any cash which Purchaser may have substituted in lieu of all or any
portion of the Breakup Shares pursuant to Section 2.3(c)(vii)). In the event
Seller, without the right to do so under this Agreement, shall fail or refuse to
consummate the transactions contemplated by this Agreement, or if any default
under, or breach of, any representation, warranty, covenant or condition of this
Agreement on the part of Seller shall have occurred that results in the failure
to consummate the transactions contemplated hereby, then subject to the
limitations and exceptions set forth in this Agreement, Purchaser shall be
entitled to obtain from Seller reasonable costs and attorneys fees incurred in
connection with this Agreement and the right to seek specific performance of
Seller's obligations under this Agreement.
10.4 AS-IS SALE; DISCLAIMERS
-----------------------
EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, IT IS UNDERSTOOD AND
AGREED THAT SELLER IS NOT MAKING AND HAS NOT AT ANY TIME MADE ANY WARRANTIES OR
REPRESENTATIONS OF ANY KIND OR CHARACTER, EXPRESS OR IMPLIED, WITH RESPECT TO
THE ASSETS OR THE BUSINESS, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OR
REPRESENTATIONS AS TO HABITABILITY, MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE.
PURCHASER ACKNOWLEDGES AND AGREES THAT UPON CLOSING SELLER SHALL SELL
AND CONVEY TO PURCHASER AND PURCHASER SHALL ACCEPT THE ASSETS "AS IS, WHERE IS,
----------------
WITH ALL FAULTS" EXCEPT AS OTHERWISE SET FORTH HEREIN. EXCEPT AS EXPRESSLY SET
---------------
FORTH IN THIS AGREEMENT, PURCHASER HAS NOT RELIED AND WILL NOT RELY ON, AND
SELLER IS NOT LIABLE FOR OR BOUND BY, ANY EXPRESS OR IMPLIED WARRANTIES,
GUARANTIES, STATEMENTS, REPRESENTATIONS OR INFORMATION PERTAINING TO THE ASSETS
OR THE BUSINESS OR RELATING THERETO, MADE OR FURNISHED BY SELLER OR ANY AGENT
REPRESENTING OR PURPORTING TO REPRESENT SELLER, TO WHOMEVER MADE OR GIVEN,
DIRECTLY OR INDIRECTLY, ORALLY OR IN WRITING. PURCHASER ALSO ACKNOWLEDGES THAT
THE PURCHASE PRICE REFLECTS AND TAKES INTO ACCOUNT THAT THE ASSETS ARE BEING
SOLD "AS-IS."
PURCHASER REPRESENTS TO SELLER THAT PURCHASER HAS CONDUCTED, OR WILL
CONDUCT PRIOR TO CLOSING, SUCH INVESTIGATIONS OF THE ASSETS AND THE BUSINESS, AS
PURCHASER DEEMS NECESSARY OR DESIRABLE TO SATISFY ITSELF AS TO THE CONDITION OF
THE ASSETS AND THE
27
BUSINESS, AND WILL RELY SOLELY UPON SAME AND THE EXPRESS REPRESENTATIONS AND
WARRANTIES SET FORTH IN THIS AGREEMENT AND NOT UPON ANY INFORMATION PROVIDED BY
OR ON BEHALF OF SELLER OR SELLER'S AFFILIATES, EMPLOYEES OR AGENTS WITH RESPECT
THERETO. UPON CLOSING, PURCHASER SHALL ASSUME THE RISK THAT ADVERSE MATTERS MAY
NOT HAVE BEEN REVEALED BY PURCHASER'S INVESTIGATIONS.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first written above.
International Exchange Communications,
Inc.
By:_______________________________
Name:_____________________________
Title:____________________________
NOSVA Limited Partnership
NOS Communications of Virginia, Inc.,
Its General partner
By:_____________________________
Name:___________________________
Title:__________________________
INTERVENTION
------------
And now comes Pacific Gateway Exchange, Inc., a Delaware corporation, for
purposes of intervening into this Asset Purchase Agreement and agreeing to be
bound by the terms of Sections 2.2(b)(ii), 2.2(b)(iii), 2.3(a), 2.3(c), 4.5,
6.8, 6.9, 7.2(d), 7.2(e) and 10.3, but not any other provisions hereof.
Pacific Gateway Exchange, Inc.
By:___________________________
Name:_________________________
Title:________________________
28
And now comes NOS Communications, Inc., a Maryland corporation, for
purposes of intervening into this Asset Purchase Agreement and agreeing to be
bound by the terms of Sections 1.2 but not any other provisions hereof.
NOS Communications, Inc.
By:________________________
Name:______________________
Title:_____________________
29
