July 10, 1998
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT (this "Agreement"), entered into
this 10th day of July, 1998, by and among AMERICAN UNITED
GLOBAL, INC., a Delaware corporation ("AUGI"), CONNECTSOFT
COMMUNICATIONS CORPORATION, a Delaware corporation ("CCC"),
CONNECTSOFT HOLDING CORP., a Washington corporation
("Connectsoft") and EXECUTIVE TELECARD, LTD., a
Delaware corporation ("EXTEL") and C-SOFT ACQUISITION
CORP., a Delaware corporation, and a wholly-owned
subsidiary of EXTEL (the "Buyer).
W I T N E S S E T H :
WHEREAS, CCC is engaged in the business of
developing a unified, intelligent communications system
which it markets under the name FreeAgentT (the "FreeAgent
Technology"); and
WHEREAS, Connectsoft owns and (through an
affiliate, InterGlobe Networks, Inc. ("InterGlobe"))
operates a central telecommunications network center
(the "CNOC") located in Seattle, Washington and the
hardware networking equipment, computers and software
associated therewith (the "CNOC Business"); and
WHEREAS, the Buyer is interested in acquiring
substantially all of the assets and business associated
with the FreeAgent Technology and the CNOC Business
(collectively, referred to herein as the "Businesses");
and
WHEREAS, each of CCC and Connectsoft
(hereinafter individually and collectively referred to as
the "Seller") has agreed to sell (a) all or substantially
all of the tangible and intangible assets of CCC,
including without limitation, all software, engineering,
developments and technology associated with the
FreeAgent Technology, and (b) the hardware networking
equipment, computers and software relating to the CNOC
Business (collectively, the "Assets"), and the Businesses,
to the Buyer, and the Buyer has agreed to purchase
such Assets and the Businesses, all upon the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and
of the mutual covenants and agreements herein set forth, the
sufficiency of which is hereby acknowledged, the parties
hereby covenant and agree as follows:
1. ASSETS.
1.1 Acquired Assets. Subject to the terms and
conditions
of this Agreement, on the Closing Date (as such term is
hereinafter defined), the Seller shall sell, transfer
and deliver to the Buyer, and the Buyer shall purchase and
receive from the Seller, the Assets, including, but not
limited to, the following:
(a) All items of tangible fixed
assets, furniture, fixtures, machinery, equipment,
computers, computer systems and vehicles of CCC and
Connectsoft which are used in the operation of the
Businesses, and which are set forth on Schedule 1.1(a)
hereto (collectively, the "Fixed Assets"), all of which
are presently held by CCC other than the CNOC, which is
presently held by Connectsoft;
(b) All inventory and supplies of the
Seller; (c) All trade names,
trademarks, patents,
copyrights, customer lists, supplier lists, trade
secrets,
computer software programs, engineering, technical
information, and other such knowledge and information
constituting the "know how" of the Seller;
(d) The goodwill of the Businesses and
their value as going concerns;
(e) To the extent assignable, all
licenses and permits of the Seller;
(f) All books, records,
printouts, drawings, data, files, notes, notebooks,
accounts, invoices, correspondence and memoranda of
the Seller; and
(g) All other rights and assets
of any kind, tangible or intangible, of the
Seller (including the Material Contracts listed on
Schedule 5.8 hereto, which Buyer specifically
assumes the obligations thereunder) whether or not
reflected in their internal financial statements
or on their books and
records.
On the Closing Date, the Seller shall execute and
deliver to the Buyer a xxxx of sale in respect of the
Assets, all in the form of Exhibit A annexed hereto
and made a part hereof.
1.2 Excluded Assets. Notwithstanding anything in
this Agreement to the contrary, the Assets shall not
include, and the Seller shall retain (a) all cash,
marketable securities, accounts receivable and notes
receivable of the Seller, (b) those specific assets
of the Seller relating to the Businesses which
are identified on Schedule 1.2 to this Agreement,
(c) all bank accounts of the Seller, (d) all rights
to any tax refunds of the Seller, (e) the Seller's
stock record books, minute books, and tax returns,
(f) all of the Seller's rights under this Agreement,
and (g) those miscellaneous other assets or
properties of each of CCC and Connectsoft which are
not related to either the FreeAgent Technology or
the CNOC Business and which are identified on
Schedule 1.2 (collectively, the "Excluded Assets").
2. LIABILITIES.
2.1 Assumed Liabilities. Subject to the terms and
conditions of this Agreement, on the Closing Date,
the Seller shall assign to the Buyer, and the Buyer
shall assume and agree to pay and perform when
due, only the specific liabilities, obligations and
indebtedness, including without limitation trade
payables and obligations under capitalized leases of
CCC relating to the Assets, which are listed on
Schedule 2.1 to this Agreement, as same are
constituted on the Closing Date (collectively,
the "Assumed Liabilities") and the Material
Contracts listed on Schedule 5.8. On the Closing
Date, the Buyer shall execute and deliver to the
Seller an assumption agreement in respect of the
Assumed Liabilities and the Material Contracts, all
in the form of Exhibit B annexed hereto.
2.2 Limitation on Amount and Timing of Payment
of
Assumed Liabilities.
(a) Notwithstanding the provisions of Section 2.1
above or any other provision of this Agreement it
is expressly understood
and agreed by and among the parties hereto that (i)
the Buyer shall not assume more than $4,500,000 in
the aggregate principal amount of Assumed
Liabilities, and (ii) the Buyer shall not be
required to pay more than $500,000 in the
aggregate principal amount of Assumed Liabilities on
or before April 30, 1999.
(b) In the event the Buyer is required to pay
more than $500,000 in the aggregate principal amount
of Assumed Liabilities on or before April 30, 1999,
then Buyer, as its sole remedy for any breach under
Section 2.2(a)(ii), shall have the right to
borrow from AUGI the positive difference of (i)
the amount the Buyer is required to pay of the
Assumed Liabilities on or before April 30, 1999,
less (ii) $500,000. The obligation of AUGI to loan
such funds to Buyer shall be conditioned upon a
certificate of the Buyer's Chief Financial Officer
representing
the amount the Buyer is required to pay in cash of
the Assumed Liabilities on or before April 30,
1999. The loan shall be evidenced by a
promissory note in the form attached hereto as
Exhibit C. Buyer shall have no remedy for a breach
of Section 2.2(a)(ii) if Buyer waives extension
of the UPS Note as a condition to Closing under
Section 10.1(i) herein.
2.3 Excluded Liabilities. Except for the
Assumed
Liabilities and the Material Contracts, the Buyer
shall not assume, and shall have no liability for,
any debts, liabilities, executory obligations,
claims or expenses of the Seller of any kind,
character or description, whether accrued,
absolute, contingent or otherwise, including,
without limitation, any liabilities relating to
the Seller's conduct of the Businesses prior to
the Closing Date (the "Excluded Liabilities"). The
Seller shall be solely liable and responsible to
make timely payment when due of all such Excluded
Liabilities.
3. CONSIDERATION.
3.1 Consideration to the Seller. The entire
purchase
price for the Assets (the "Consideration") shall
consist of (i) the assumption by the Buyer of the
Assumed Liabilities, and the Buyer's payment and
performance, when due, of all such Assumed
Liabilities, subject only to the provisions of
Section 2.2 of this Agreement, and (ii) the
rights granted under the Letter Agreement to be
delivered at the Closing in the form annexed hereto
as Exhibit E.
3.2 Allocation of Purchase Price. The fair
market
values of the Assets and the allocation of the
Purchase Price among the Assets for purposes of
Section 1060 of the Internal Revenue Code shall be
as agreed between Buyer and Seller on or before
the Closing Date and included as Schedule 3.2 and
Buyer and Seller agree to
be bound by such fair market value
determination and allocation and to complete and
attach Internal Revenue Service Form 8594 to
their respective tax returns accordingly. If
Buyer and Seller can not agree on the
allocation, the Purchase Price shall be allocated
among the Assets by Seller's outside accountants
which determination shall be final.
4. REPRESENTATIONS AND WARRANTIES OF THE SELLER AND
AUGI. In connection with the sale of the Assets to
the Buyer and in order to induce the Buyer to
enter into this Agreement, each of CCC, Connectsoft
and AUGI hereby jointly and severally represents and
warrants to the Buyer, as of the date of this
Agreement (unless otherwise indicated), as follows:
4.1 Organization, Good Standing and
Qualification.
CCC is a corporation duly organized, validly existing
and in good standing under the laws of the State of
Delaware, Connectsoft is a corporation duly
organized, validly existing and in good standing
under the laws of the State of Washington, and AUGI
is a corporation duly organized, validly existing and
in good standing under the laws of the State of
Delaware, each with full corporate power and
authority to execute and deliver this Agreement and
to consummate the transactions contemplated hereby,
and to own its assets and conduct its business as
owned and conducted on the date hereof. The
Seller is duly qualified to operate its
respective businesses as a foreign corporation under
the laws of each jurisdiction where the nature of
its businesses or the location of its properties
makes such qualification necessary and the failure
to be so qualified would have a material adverse
effect on the subject Seller or its assets,
properties, businesses or financial condition (a
"Material Adverse Effect"). 4.2 Authorization of
Agreement. The execution, delivery
and performance of this Agreement and the
consummation of the transactions contemplated hereby
by the Seller and AUGI have been duly and validly
authorized by the Board of Directors of
the Seller, and by AUGI (as the sole stockholder of
each of CCC and Connectsoft). No further
corporate authorization is required on the part
of each Seller or AUGI to consummate the
transactions contemplated hereby.
4.3 Valid and Binding Agreements. This
Agreement,
and, when executed, all other agreements, instruments
of transfer or
assignment, documents and other instruments
delivered,
constitute and will constitute the legal, valid
and binding obligation of the Seller and AUGI
(to the extent a party thereto), enforceable
against the Seller and AUGI in accordance with
their respective terms, except to the extent
limited by bankruptcy, insolvency, reorganization
and other laws affecting creditors' rights
generally, and except that the remedy of
specific performance or similar equitable relief
is available only at the discretion of the court
before which enforcement is sought.
4.4 Disclosure and Duty of Inquiry. No
representation
or warranty by the Seller or AUGI in this
Agreement and no statement or information contained
in the schedules hereto or any certificate furnished
or to be furnished to the Buyer hereunder contains
or will contain any untrue statement of a material
fact or omits or will omit to state any material
fact necessary, in light of the circumstances under
which it was made, in order to make the statements
herein or therein not misleading. The Buyer is not
nor will it be required to undertake any
independent investigation to determine the truth,
accuracy and completeness of the representations and
warranties made by the Seller and AUGI pursuant to
this Article 4.
5. ADDITIONAL REPRESENTATIONS AND WARRANTIES OF AUGI
AND
THE SELLER. In connection with the sale of the
Assets to the Buyer and in order to induce the
Buyer to enter into this Agreement, each of CCC,
Connectsoft and AUGI hereby jointly and severally
represents and warrants to the Buyer, as of the date
of this Agreement (unless otherwise indicated), as
follows:
5.1 No Breach of Statute or Contract. Neither
the
execution and delivery of this Agreement by the
Seller, nor compliance with the terms and provisions
of this Agreement, will: (a) violate any statute
or regulation of any governmental authority,
domestic or foreign, affecting the Seller, (b)
except as set forth in Schedule 5.1 to this
Agreement, require the issuance of any
authorization, license, consent or approval of any
federal or state governmental agency or any other
person; or (c) except as set forth in Schedule
5.1 to this Agreement, conflict with or result
in a breach of any of the terms, conditions or
provisions of the certificate of incorporation or by-
laws of the Seller or any judgment, order,
injunction, decree, agreement or instrument to
which the Seller is a party, or by which the Seller
is bound, or constitute a default thereunder. 5.2
Title to and Condition of Purchased Assets. The
Seller owns, or leases the Assets listed on Schedule 1.1(a) as
being leased, and as of the Closing Date will
have good and marketable title in and to, or a
valid leasehold interest in, all of the Assets, free
and clear of all liens, liabilities, charges, claims,
options, restrictions on transfer or other
encumbrances of any nature whatsoever, except for
(a) liens or encumbrances disclosed in Section 5.2
to this Agreement; and (b) miscellaneous
materialmen's or mechanics liens or liens for current
taxes not yet due and payable or which are being
contested in good faith by appropriate proceedings
and which are listed on Schedule 5.2
(collectively, "Permitted Liens"). All material
item of machinery, equipment, vehicles, and other
personal property owned or leased by the Seller
are listed in Schedule 5.2 to this Agreement and,
except as and to the extent disclosed in Schedule
5.2 to the Agreement, all such personal property is
included in
the Assets and is in good operating condition
and repair (reasonable wear and tear excepted) and
is adequate for its use in the Seller's
Businesses as presently conducted. The Assets
constitute all of the assets and properties which
are required for the Seller's Businesses as
presently conducted and as proposed to be
conducted by the Seller as of the date hereof.
5.3 Ownership of Businesses. No portion of
the
Businesses is owned or operated by any person or
entity other than the Seller, except that InterGlobe
operates the CNOC.
5.4 Form SB-2 Information; Financial Statements.
CCC has furnished to EXTEL a copy of the Form SB-
2 Registration Statement of CCC, as filed with
the Securities and Exchange Commission ("SEC") on
September 4, 1997 (the "Registration Statement"),
which Registration Statement has not, as yet, been
declared effective by the SEC. On or before the
closing of the transactions contemplated by this
Agreement, such Registration Statement shall be
withdrawn. Annexed hereto as Schedule 5.4 is an
unaudited balance sheet of CCC as at April 30, 1998
and the unaudited statement of income (loss) of CCC
for the nine months ended April 30, 1998
(collectively, the "April 1998 Financial
Statements"). The April 1998 Financial Statements
were prepared by management of CCC, fairly set forth
the assets and liabilities and financial conclusion
of CCC and its results of operations as at April
30, 1998 and for the fiscal period then ended, and
were prepared in accordance with generally
accepted accounting principles, consistent with
those of prior periods, subject only to the absence
of financial statement footnotes (which would not
differ materially from those of the most recent
audited financial statements) and year end audit
adjustments (which would not be material). The
financial statements included in the
Registration Statement (a copy of which has been
provided to the Buyer) present fairly, in all
material respects, the financial condition of CCC
as of July 31, 1997 and the results of
operations and cash flows for the respective periods
then ended and have been prepared in accordance
with generally accepted accounting principles
applied on a consistent basis throughout the
periods involved. The financial statements referred
to in this Section 5.4 do not reflect the operations
of any business or any portion of Seller's
Businesses not included in the Assets. Except as
expressly set forth in the April 1998 Financial
Statements and those financial statements
included in the
Registration Statement, as disclosed pursuant to this
Agreement, or non-material liabilities arising in
the normal course of the Seller's Businesses since
April 30, 1998, except for the Assumed Liabilities,
there are no liabilities or obligations (including,
without limitation, any tax liabilities or
accruals) of the Seller, including any contingent
liabilities, that are, in the aggregate, material
to the Seller.
5.5 No Material Changes. Except as otherwise
described in Schedule 5.5 to this Agreement, since
July 31, 1997, there
has been no material adverse change in the
financial condition, operations, or Businesses of
the Seller, or any damage, destruction, or
loss (whether or not covered by
insurance) of the Assets materially and adversely
affecting the financial condition, operations, or
Businesses of the Seller, provided, that the
offering of the Businesses and the Assets for sale,
the preparation for such sale pursuant to the terms
and conditions of this Agreement, and the public
disclosure of the same shall not constitute such a
material adverse change.
5.6 Insurance Policies. Schedule 5.6 to this
Agreement contains a true and correct schedule of all
insurance coverages held by the Seller concerning the
Businesses and the Seller's assets and properties.
To the Seller's knowledge, the Seller
is not in violation of any requirements of any
its insurance carriers, and the Seller has received
no written notice of any default or violation under
or in respect of any of the foregoing.
5.7 Permits and Licenses. Except as set
forth in
Schedule 5.7, the Seller possesses (and there are
included in the
Assets being transferred to the Buyer) all
required permits, licenses and/or franchises,
from whatever governmental authorities or
agencies (domestic and/or foreign) requiring the
same and having jurisdiction over the Seller,
necessary in order to operate the Businesses in the
manner presently conducted, all of which permits,
licenses and/or franchises are valid, current and in
full force and effect, except where the failure to
have or maintain any such permit, license and/or
franchise would not have or could not reasonably be
expected to have a material adverse effect on the
Assets or the Businesses. The Seller has
heretofore conducted the Businesses in compliance in
all material respects with the requirements of such
permits, licenses and/or franchises, and the Seller
has not received written notice of any default or
violation in respect of or under any of such permits,
licenses and/or franchises, except where such
default would not have or could not reasonably be
expected to have a Material Adverse Effect on the
Assets or the Businesses.
5.8 Contracts and Commitments.
(a) Schedule 5.8 to this Agreement
lists all material contracts, leases, commitments,
technology agreements, software development
agreements, software licenses, indentures and
other agreements to which the Seller is a
party (collectively, "Material Contracts"), all of
which are included in the Assets except as
indicated in Schedule 5.8 except that Schedule 5.8
need not list any such agreement that is listed on
any other schedule hereto, or was entered into in
the ordinary course of the Businesses of the Seller
and that, in any case: (i) is for the purchase of
supplies or other inventory items in the ordinary
course of the Businesses; (ii) is related to
the purchase or lease of any capital asset
involving aggregate payments of less than
$25,000 per annum; or (iii) may be terminated
without penalty, premium or liability by the Seller
on not more than thirty (30) days' prior written
notice; provided however, that Schedule 5.8 shall
list all technology agreements, software development
agreements and software licenses involving the
Seller and all Assumed Liabilities, regardless
of the duration thereof or the amount of payments
called for or required thereunder, other than
standard software licenses of software products
available to the Businesses' customers generally.
(b) Except as set forth in Schedule
5.8 to this Agreement, all Material Contracts are in
full force and effect, and the Seller is in
compliance in all material respects with all of the
Material Contracts and with all Assumed Liabilities,
and has not received any written notice that any
party to any Material Contract is in material
breach or default of such Material Contract or
is now subject to any condition or event which has
occurred and which, after notice or lapse of time
or both, would constitute a material default by any
party under any such Material Contract. Except as
set forth in Schedule 5.8 to this Agreement, none
of the Material Contracts will be voided, revoked
or terminated, or voidable, revocable or terminable,
upon and by reason of the assignment thereof to the
Buyer pursuant to this Agreement. The Seller
has delivered true and correct copies of all
Material Contracts to the Buyer.
(c) To the best of each Seller's
knowledge, no purchase commitment by the Seller
relating to the Businesses is materially in
excess of the normal, ordinary and usual
requirements of the Businesses.
(d) Except as set forth in Schedule
5.8 to this
Agreement, the Seller does not have any
outstanding contracts with or commitments to
officers, employees, technicians, agents, consultants
or advisors relating to the Businesses that are not
cancelable by the Seller without penalty, premium
or liability (for severance or otherwise) on less
than thirty (30) days' prior written notice.
5.9 Customers and Suppliers. Except as set forth
in
Schedule 5.9 to this Agreement, the Seller has not
received any written notice of any claim by or
dispute with, or any existing, announced or
anticipated changes in the policies of, any material
clients, customers, referral sources or suppliers of
the Seller which would have a Material Adverse
Effect on the Businesses as presently conducted.
5.10 Labor, Benefit and Employment Agreements.
(a) Except as set forth in Schedule
5.10 to this Agreement, the Seller is not a party to
and does not have any commitment or obligation
in respect of (i) any collective bargaining
agreement or other labor agreement relating to any
employees of the Seller, or (ii) any agreement with
respect to the employment or compensation of any non-
hourly and/or non-union employee(s) of the
Businesses. Schedule 5.10 sets forth the amount
of all compensation or remuneration (including
any discretionary bonuses) paid by the Seller
during the 1997 calendar year to employees or
consultants of the Seller who presently receive
aggregate compensation or remuneration at an annual
rate in excess of $35,000.
(b) No union is now certified or, to
the best of the Seller's knowledge, claims to be
certified, as a collective bargaining agent to
represent any employees of the Seller, and there
are no labor disputes existing or, to the best of
the Seller's knowledge, threatened, involving
strikes, slowdowns, work stoppages, job actions or
lockouts of any employees of the Seller.
(c) With respect to any
"multiemployer plan" (as defined in Section 3(37)
of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) to which the Seller or
any of its past or present affiliates has at any
time been required to make contributions, neither
the Seller nor any of its past or present affiliates
has, at any time on or after April 29, 1980,
suffered or caused any "complete withdrawal" or
"partial withdrawal" (as such terms are respectively
defined in Sections 4203 and 4205 of ERISA)
therefrom on its part.
(d) Except as disclosed in Schedule 5.10, the
Seller does not maintain, or have any liabilities
or Assumed Liabilities of any kind with respect
to, any bonus, deferred compensation, pension,
profit sharing, retirement or other such benefit
plan, and does not have any potential or
contingent liability in respect of any actions or
transactions relating to any such plan other than to
make contributions thereto if, as and when due in
respect of periods subsequent to the date hereof.
Without limitation of the foregoing, (i) the Seller
has made all required contributions to or in
respect of any and all such benefit plans,
(ii) no "accumulated funding deficiency" (as
defined in Section 412 of the Internal Revenue Code
of 1986, as amended (the "Code")) has been incurred
in respect of any of such benefit plans, and the
present value of all vested accrued benefits
thereunder does not, on the date hereof, exceed
the assets of any such plan allocable to the vested
accrued benefits thereunder, (iii) there has been no
"prohibited transaction" (as defined in Section
4975 of the Code) with respect to any such plan,
and no transaction which could give rise to any
tax or penalty under Section 4975 of the Code or
Section 502 of ERISA,
and (iv) there has been no "reportable event" (within
the meaning of Section 4043(b) of ERISA) with
respect to any such plan. All of such plans which
constitute, are intended to constitute, or have
been treated by the Seller as "employee pension
benefit plans" or other plans within Section 3
of ERISA have been determined by the Internal
Revenue Service to be "qualified" under Section
401(a) of the Code, and have been administered and
are in compliance with ERISA and the Code; and the
Seller does not have any knowledge of any state
of facts, conditions or occurrences such as would
impair the "qualified" status of any of such plans.
All of the matters listed on Schedule 5.10 shall
constitute Excluded Liabilities.
(e) Except for the group
insurance programs listed in Schedule 5.10, the
Seller does not maintain any medical, health,
life or other employee benefit insurance
programs or any welfare plans (within the meaning of
Section 3(1) of ERISA) for the benefit of any
current or former employees, and, except as
required by law, the Seller does not have any
liability, fixed or contingent, for health or medical
benefits to any former employee.
5.11 Accounts Payable. Except as set forth in
Schedule 5.11,
the Seller is current in its payment of all
accounts payable relating to the Businesses, and has
received no notice, not subsequently withdrawn or
cured, from any vendor, supplier or other person
with respect to non-payment or late payment of any
accounts payable of the Businesses, or any
threatened suspension or termination of the
provision of goods or services to the Businesses,
which suspension or termination would have a Material
Adverse Effect on the financial condition,
operations, or Businesses of the Seller.
5.12 Compliance with Laws.
(a) To the Seller's knowledge, the Seller is in
compliance in all material respects with all laws,
statutes, regulations, rules and ordinances
applicable to the conduct of its Businesses as
presently constituted; and the Seller has received
no written notice of any default or violation under
or in respect of any of the foregoing.
(b) Without limitation of Section 5.12(a) above,
except as set forth on Schedule 5.12 to this
Agreement, to the best of the Seller's knowledge
the Seller has not, at any time during the three
(3) year period prior to the date hereof,
(i)handled, stored, generated, processed or
disposed of any hazardous substances in
violation of any federal, state or local
environmental laws or regulations, or (ii)
otherwise committed any material violation of
any federal, state or local environmental laws
or regulations (including, without limitation, the
provisions of the Environmental Protection Act,
the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, and
other applicable environmental statutes and
regulations) or any material violation of the
Occupational Safety and Health Act.
(c) Except as set forth in Schedule
5.12 to this Agreement, neither the Seller nor, to
the best of the Seller's knowledge, any of the
Seller's directors or officers has received any
written notice of default or violation, nor, to the
best of the Seller's knowledge, is the Seller or any
of its directors or officers in default or
violation, with respect to any judgment, order,
writ, injunction, decree, demand or assessment issued
by any court or any federal, state, local,
municipal or other governmental agency, board,
commission, bureau, instrumentality or department,
domestic or foreign, relating to any aspect of the
Seller's Businesses, affairs, properties or assets.
Neither the
Seller nor, to the best of the Seller's knowledge,
any of its directors or officers, has received
written notice of, been charged with, or is
under investigation with respect to, any violation
of any provision of any federal, state,
local, municipal or other law or administrative
rule or regulation, domestic or foreign,
relating to any aspect of the Seller's Businesses,
affairs, properties or assets, which violation would
have a Material Adverse Effect on the financial
condition, operations, or Businesses of the Seller
or upon any material portion of the Assets.
(d) Schedule 5.12 sets forth the
date(s) of the last known audits or inspections (if
any) of the Seller conducted by or on behalf of
the Environmental Protection Agency, the
Occupational Safety and Health Administration,
the federal
Department of Health and Human Services and/or any
agency thereof (including, without limitation,
the Health Care Financing Administration) or
intermediary acting on its behalf, any
corresponding or comparable state or local
governmental department, agency or authority, and
any other governmental and/or quasi-governmental
agency (federal, state and/or local).
5.13 Litigation. Except as disclosed in Schedule
5.13
to this Agreement, there is no suit, action,
arbitration, or legal, administrative or other
proceeding, or governmental investigation
(including, without limitation, any claim alleging
the invalidity, infringement or interference of
any patent, patent application, or rights thereunder
owned or licensed by the Seller) pending, or to
the best knowledge of the Seller, threatened, by
or against the Seller that relates in any material
way to the Businesses or any of the Assets. All of
the matters listed on Schedule 5.13 shall
constitute Excluded Liabilities. The Seller is not
aware of any state of facts, events, conditions or
occurrences which might properly constitute grounds
for or the basis of any suit, action,
arbitration, proceeding or investigation against
or with respect to the Seller or that relate in
any material way to the Businesses or any of the
Assets, which, if adversely determined, would have
a Material Adverse Effect on the financial
condition, operations, or Businesses of the
Seller or upon any material portion of the Assets.
5.14 Intellectual Property.
(a) Schedule 5.14 to this Agreement
sets forth a list and brief description of the
nature and ownership of: (i) all patents, patent
applications, copyright registrations and
applications, registered trade names, and trademark
registrations and applications, both domestic and
foreign, which are presently owned, filed or held by
the Seller and/or any of its directors, officers,
stockholders or employees and which in any material
way relate to or are used in the Businesses; (ii) all
licenses, both domestic and foreign, which are owned
or controlled by the Seller and/or any of its
directors, officers, stockholders, or employees and
which in any material way relate to or are used
in the Businesses; and (iii) all franchises,
licenses and/or similar arrangements granted to the
Seller by others and/or to others by the Seller.
None of the patents, patent applications, copyright
registrations or applications, registered trade
names, trademark registrations or applications,
franchises, licenses or other arrangements set
forth or required to be set forth in Schedule 5.14
is subject to any pending challenge known to the
Seller.
(b) Schedule 5.14 also lists
(i) the
jurisdictions in which such intellectual property has
been issued or registered or in which any
application for such issuance and registration has
been filed, (ii) licenses, sublicenses and other
agreements as to which the Seller is a party and
pursuant to
which any person is authorized to use any
Intellectual Property (as defined herein), and
(iii) licenses, sublicenses and other agreements
as to which the Seller is a party and pursuant to
which the Seller is authorized to use any third
party patents, trademarks or copyrights,
including software ("Third Party
Intellectual Rights") which are incorporated in, are
or form a part of any product of the Seller.
(c) Schedule 5.14 lists all
hardware, computer software, identifiable know-how
(and the manner in which such know-how is
memorialized) and other identifiable technology
(collectively, the "Seller Technology") which the
Seller owns or licenses and is included in the
Assets, and the nature of the Seller's rights in
each item of Seller Technology. Schedule 5.14
also describes the technology design and
development that is currently ongoing or planned
for 1998.
(d) The Seller owns, or is licensed
or otherwise possesses all necessary rights to use
all patents, trademarks, trade names, service
marks, copyrights and any applications therefor,
maskworks, net lists, schematics, technology, know-
how, trade secrets, inventory, ideas, algorithms,
processes, computer software programs and
applications (in both source code and object
code form), and tangible or intangible
proprietary information or material ("Intellectual
Property") that are used or marketed in its
business as presently conducted and as proposed
to be conducted or included or proposed to be
included in its products or proposed products.
(e) To the knowledge of the Seller,
there is no unauthorized use, disclosure,
infringement or misappropriation of any Intellectual
Property rights of the Seller, any trade secret
material to the Seller or any Intellectual Property
right of any third party to the extent licensed by
or through the Seller by any third party, including
any employee or former employee of the Seller.
Except as set forth in Schedule 5.14, the Seller
has
never entered into any agreement to indemnify any
other person against any charge of infringement of
any Intellectual Property. Except as set forth in
Schedule 5.14, there are no royalties, fees or
other payments payable by the Seller to any person
by reason of the ownership, use, sale or disposition
of Intellectual Property.
(f) The Seller is not, nor will it be
as a result of the execution and delivery of
this Agreement or the performance of its
obligations under this Agreement, in material breach
of any license, sublicense or other agreement
relating to the Intellectual Property or Third
Party Intellectual Property Rights.
(g) The Seller has not (i) been
served with process, or is aware that any person
is intending to serve process on the Seller, in
any suit, action or proceeding which involves a
claim of infringement of any patents, trademarks,
service marks, copyrights or violation of any trade
secret or other proprietary right of any third
party and (ii) brought any action, suit or
proceeding for infringement of Intellectual
Property against any third party. To the
knowledge of the Seller, the business of the Seller
as presently conducted and as proposed to be
conducted, the Seller's products or proposed
products do not infringe any patent, trademark,
service xxxx, copyright, trade secret or other
proprietary right of any third party.
(h) The Seller has made available
to the Buyer copies of all agreements executed by
officers, employees and consultants of the Seller
regarding the protection of proprietary information
and the assignment to the Seller of any Intellectual
Property arising from services performed for the
Seller by such persons.
(i) The Seller has, to the extent
it deemed necessary and appropriate, obtained or
entered into written agreements with third parties
in connection with the disclosure to, or use or
appropriation by, third parties, of trade secret or
proprietary Intellectual Property owned by the
Seller and not otherwise protected by a patent, a
patent application, copyright, trademark, or other
registration or legal scheme ("Confidential
Information"), and does not know of any situation
involving such third party use, disclosure or
appropriation of Confidential Information where the
lack of such a written agreement is likely to
result in any material adverse effect on the Seller
or the Assets.
5.15 Sensitive Payments. To the best of the
Seller's
knowledge, the Seller has not (a) made any
contributions, payments or gifts to or for the
private use of any governmental official, employee
or agent where either the payment or the purpose
of such contribution, payment or gift is illegal
under the laws of the United States or the
jurisdiction in which made, (b) established or
maintained any unrecorded fund or asset for any
purpose or made any false or artificial entries on
its or their books, or (c) made any payments to
any person with the intention that any part of
such payment was to be used for any purpose other
than that described in the documents supporting the
payment.
5.16 Real Property. Except as set forth in
Schedule
5.16 to this Agreement, the Seller neither owns
or has any interest of any kind (whether ownership,
lease, or otherwise) in any real property except to
the extent of the Seller's leasehold interests under
the leases for its Businesses premises, true and
complete copies of which leases (including all
amendments
thereto) are annexed to Schedule 5.16 (the
"Leases"). The
Seller, and to the knowledge of the Seller,
the landlords thereunder, are presently in
compliance with all of their respective Assumed
Liabilities under the Leases, and the premises leased
thereunder are in good condition (reasonable wear and
tear excepted) and are adequate for the operation
of the Seller's Businesses as presently conducted.
5.17 Status of Payment Obligations in Respect
of
Assumed Liabilities. Schedule 5.17 annexed hereto
sets forth the current status of all payment
obligations of the Seller and/or AUGI in respect
of each of the Assumed Liabilities set forth on
Schedule 2.1 annexed hereto.
5.18 Disclosure and Duty of Inquiry. Sellers have
filed all tax returns required to be filed (except
for returns that have
been properly extended) and have paid all taxes
shown as owing (other than taxes currently being
contested in good faith by appropriate proceedings,
for which amounts have been reserved in accordance
with generally accepted accounting principles
("GAAP")). No tax returns are currently the subject
of audit and there has been no extension of time for
assessment of taxes or waiver of the statute of
limitations with respect to taxes. Neither Seller
is party to any tax sharing or allocation
agreement and neither has ever been a member of an
affiliated group filing a consolidated federal income
tax return. The Buyer is not nor will it be
required to undertake any independent investigation
to determine the truth, accuracy and completeness of
the representations and warranties made by the Seller
pursuant to this Article 5.
6. ADDITIONAL REPRESENTATIONS AND WARRANTIES
OF AUGI. In
connection with the sale of the Assets to the Buyer
and in order to induce the Buyer to enter into
this Agreement, AUGI hereby represents and
warrants to the Buyer, as of the date of this
Agreement (unless otherwise indicated), as follows:
6.1 Absence of Undisclosed Liabilities.
Except as
expressly set forth in the Registration Statement or
as disclosed pursuant to schedules to this Agreement,
or arising in the normal course of the Seller's
Businesses since July 31, 1997, to the best of
AUGI's knowledge there are no liabilities or
obligations (including, without limitation, any tax
liabilities or accruals) of either Seller, including
any contingent liabilities, that are, in the
aggregate, material to the Businesses or which could
have Material Adverse Effect on the Assets, other
than the Assumed Liabilities identified on
Schedule 2.1. To the best of AUGI's knowledge,
the amount of each of the Assumed Liabilities is
correctly set forth on Schedule 2.1 in all material
respects and, subject to obtaining an extension of
the UPS Note (as herein described), not more
than $500,000 of such Assumed Liabilities will be
payable on or before April 30, 1999.
6.2 Disclosure and Duty of Inquiry. The Buyer is
not
nor will it be required to undertake any independent
investigation to determine the truth, accuracy and
completeness of the representations and warranties
made by AUGI pursuant to this Article 6.
7. REPRESENTATIONS AND WARRANTIES OF EXTEL AND THE
BUYER
In connection with the purchase of the Assets from
the Seller hereunder, EXTEL and the Buyer hereby
jointly and severally represent and warrant to the
Seller and AUGI as follows:
7.1 Organization, Good Standing and Qualification.
Each of EXTEL and the Buyer is a corporation duly
organized, validly existing and in good standing
under the laws of the State of Delaware and has all
necessary power and authority to execute and deliver
this Agreement, to perform the Assumed Liabilities
hereunder, and to consummate the transactions
contemplated
hereby. Each of EXTEL and the Buyer has all
requisite corporate power and authority to own its
properties and to conduct its business as
currently conducted, and to execute, deliver and
perform its Assumed Liabilities under this Agreement.
The Buyer is a wholly-owned subsidiary of EXTEL.
7.2 Authorization of Agreement. The execution,
delivery
and performance of this Agreement and the
consummation of the transactions contemplated hereby
by EXTEL and the Buyer have been duly and validly
authorized by all necessary and appropriate
action by the respective Board of Directors and
stockholders of EXTEL and the Buyer; and EXTEL and
the Buyer each have the full legal right, power and
authority to execute and deliver this Agreement,
to perform the Assumed Liabilities hereunder, and to consummate
the transactions contemplated
hereby. No further corporate authorization is
necessary on the part of EXTEL or the Buyer
to consummate the transactions contemplated hereby.
7.3 Valid and Binding Agreement. This Agreement
and,
when executed and delivered, all other agreements,
instruments of transfer or assignment,
documents, and other instruments, constitute and
will constitute the legal, valid and binding
obligation of EXTEL and the Buyer, enforceable
against EXTEL and the Buyer in accordance with
their respective terms, except, in each case, to
the extent limited by bankruptcy, insolvency,
reorganization and other laws affecting
creditors' rights
generally, and except that the remedy of specific
performance or similar equitable relief is
available only at the discretion of the court before
which enforcement is sought.
7.4 No Breach of Statute or Contract. Neither the
execution and delivery of this Agreement, nor
compliance with the terms and provisions of this
Agreement or such other agreements on the part of
EXTEL or the Buyer will: (a) violate any statute or
regulation of any governmental authority, domestic or
foreign, affecting EXTEL or the Buyer; (b) require
the issuance of any authorization, license,
consent or approval of any federal or state
governmental agency (except to the extent that EXTEL
or the Buyer may be required to be qualified as a
foreign corporation in certain jurisdictions in
which it is not currently so qualified, and to the
extent that EXTEL or the Buyer may be required to
reapply for any permits, licenses and/or franchises
which are not assignable as part of the Assets and
any consent of EXTEL's current lenders as may be
required); or (c) conflict with or result in a
breach of any of the terms, conditions or provisions
of any judgment, order, injunction, decree, note,
indenture, loan agreement or other agreement or
instrument to which EXTEL or the Buyer is a party,
or by which EXTEL or the Buyer is bound, or
constitute a default thereunder.
7.5 Disclosure. EXTEL and the Buyer have
previously delivered to the Seller and AUGI a true
and correct copy of the Annual Report on Form 10-K
for the year ended March 31, 1998, as filed by
EXTEL with the SEC, including therein audited
and unaudited financial information (the "EXTEL
Public Filings"). The EXTEL Public Filings
comply with the SEC disclosure requirements
applicable thereto and do not contain any untrue
statement of a material fact or omit to state any
material fact necessary in light of the
circumstances under which it was made, in order to
make the statements therein not misleading. Since
the date of the most recent EXTEL Public Filings,
(a) there has been no material change in the
capitalization of EXTEL or the Buyer, (b) the
businesses of EXTEL, the Buyer and their
respective subsidiaries have been operated in the
normal course, and (c) there has been no
material adverse change in the financial
condition, operations or businesses of EXTEL,
the Buyer, or their respective subsidiaries (taken
as a consolidated whole) from that reflected in such
report.
7.6 Litigation. There is no suit, action,
arbitration, or legal, administrative or other
proceeding, or governmental investigation pending,
or to the knowledge of EXTEL or the Buyer,
threatened, against EXTEL or the Buyer (i) which
challenges EXTEL's or the Buyer's ability to
consummate the transactions provided for herein, or
(ii) materially restricts or affects the business
operations of EXTEL or the Buyer either before or
after the Closing.
7.7 Disclosure and Duty of Inquiry. No
representations or warranties by Buyer or EXTEL in
this Agreement and no statement or information
contained in the schedules hereto or any certificate
furnished or to be furnished to Seller or AUGI
hereunder contains or will contain any untrue
statement of a material fact or omits or will
omit to state any material fact necessary, in light
of the circumstances under which it was made, in
order to make the statements herein or therein not
misleading. The Seller and AUGI are not and will not
be required to undertake any independent
investigation to determine the truth, accuracy and
completeness of the representations and warranties
made by EXTEL and the Buyer in this Article 7.
8. PRE-CLOSING COVENANTS. Each of the Seller and
AUGI covenants and agrees that, from April 15,
1998 (the date of execution of a letter of
intent regarding the transactions contemplated
hereby) through and including the Closing Date:
8.1 Representations and Warranties. The
representations and
warranties contained in Articles 4 and 5 of this
Agreement shall be true and correct in all material
respects as of the Closing Date as if made on such
date.
8.2 Access to Information.
(a) The Seller shall permit the
Buyer and its counsel, accountants and other
representatives, upon reasonable advance notice to
the Seller, during normal business hours and
without undue disruption of the Businesses of the
Seller, to have reasonable access to all
properties, books, accounts, records, contracts,
documents and information relating to the Businesses
and, to the extent reasonably required by the Buyer
for its due diligence, the Seller. The Buyer and
its representatives shall also be permitted to
freely consult with the Seller's counsel concerning
the Businesses.
(b) Each of the Seller and AUGI
will make available to the Buyer and its accountants
all financial records relating to the Seller and
the Businesses, and shall cause the Seller's
accountants to cooperate with the Buyer's
accountants and make available to the Buyer's
accountants all work papers and other materials
developed by or in the possession of the Seller's
accountants, for the purpose of assisting the Buyer's
accountants in the performance of an audit of the
Businesses for all periods subsequent to January 1,
1996.
8.3 Conduct of Businesses in Normal Course. The
Seller shall carry on the Businesses in
substantially the same manner as heretofore
conducted and as provided under the Management
Agreement dated April 15, 1998, and shall not make
or institute any unusual or novel methods of
service, sale, purchase, lease, management,
accounting or operation that will vary materially
from those methods used by the Seller as of the date
hereof, without in each instance obtaining the prior
written consent of the Buyer.
8.4 Preservation of Businesses and Relationships.
The
Seller shall, without making or incurring any unusual
commitments or expenditures, use all reasonable
efforts to preserve its business organization
intact, and preserve its present relationships
with referral sources, clients, customers, suppliers
and others having business relationships with
the Seller.
8.5 Maintenance of Insurance. The Seller
shall continue to carry its existing insurance,
to the extent obtainable upon reasonable terms.
8.6 Corporate Matters. The Seller shall not,
without the prior written consent of the Buyer:
(a) amend, cancel or modify any
Material Contract or enter into any material
new agreement, commitment or transaction except,
in each instance, in the ordinary course of
business;
(b) modify in any material
respect (i) any material agreement relating to the
Businesses to which the Seller is a party or by
which it may be bound, or (ii) any policies,
procedures or methods of doing business
relating to the Businesses, except in each case
in the ordinary course of business;
(c) except pursuant to commitments
in effect on the date hereof (to the extent
disclosed in this Agreement or in any schedule
hereto), make any capital expenditure(s)or
commitment(s), whether by means of purchase, lease or
otherwise, or any operating lease commitment(s), in
excess of $50,000 in the aggregate;
(d) dispose of or transfer any Asset
outside of
the ordinary course of business, or sell, assign or
dispose of any capital asset(s) with a net book
value in excess of $15,000 as to any one item or
$50,000 in the aggregate;
(e) materially change its method of
collection of accounts or notes receivable, or
accelerate or slow in any material respect its
payment of accounts payable;
(f) forgive any obligation or
performance (past, present or future) owed to
the Businesses, except for any intercompany
obligation owed by AUGI or its Affiliates to the
Seller;
(g) incur any material liability or
indebtedness except, in each instance, in the
ordinary course of business;
(h) subject any of the assets or
properties of the Businesses to any further liens
or encumbrances, other than Permitted Liens;
(i) make any payments to any
Affiliate of the Seller; or
(j) agree to do, or take any
action in
furtherance of, any of the foregoing.
9. ADDITIONAL AGREEMENTS OF THE PARTIES.
9.1 Confidentiality. Notwithstanding anything to
the contrary contained in this Agreement, and subject
only to any disclosure requirements which may be
imposed upon any party under applicable state or
federal securities or antitrust laws, it is
expressly understood and agreed by the parties that,
except with respect to matters or information
which are publicly available other than by reason
of a breach of this Section 9.1, (i) this
Agreement, the schedules hereto, and the
conversations, negotiations and transactions relating
hereto and/or contemplated hereby, and (ii) all
financial information, business records and other
non-public information concerning either party which
the other party or its representatives has received
or may hereafter receive, shall be maintained in the
strictest confidence by the recipient and its
representatives, and shall not be disclosed to any
person that is not associated or affiliated
with the recipient and involved in the transactions
contemplated hereby, without the prior written
approval of the party which provided the
information. The parties hereto shall use their best
efforts to avoid disclosure of any of the foregoing
or undue disruption of any of the business
operations or personnel of the parties, and no
party shall issue any press release or
other public
announcement regarding the transactions
contemplated hereby without the prior approval of
each other party (such approval not to be
unreasonably withheld or delayed) unless otherwise
required under applicable laws and regulations,
including SEC rules and regulations.
In the event that the transactions contemplated
hereby shall not be consummated for any reason,
each party covenants and agrees that neither it
nor any of its
representatives shall retain (other than
information which is
publicly available other than by reason of a
breach of this Section 9.1) any documents,
lists or other writings of any other
party which it may have received or obtained in
connection herewith or any documents incorporating
any of the information contained in any of the
same (all of which, and all copies thereof in
the possession or control of the recipient or its
representatives, shall be returned to the party
which provided the information).
9.2 Exclusivity. From the date hereof through
any termination of this Agreement in
accordance with Section 13
below, the Seller and AUGI shall not (and shall not
permit any of their stockholders, directors,
officers, Affiliates, agents or
representatives to) negotiate with or enter into
any other commitments, agreements or understandings
with any person, firm or corporation (other than its
Affiliates) in respect of any sale of
capital stock or assets of the Seller,
any merger,
consolidation or corporate reorganization, or any
other such transaction relating to the Seller or the
Businesses.
9.3 Xxxx of Sale; Transfer Documents;
Assumption
Agreement.
(a) On the Closing Date, the Seller
shall execute and deliver to the Buyer a xxxx of
sale in respect of the Assets in substantially the
form of Exhibit A annexed hereto (the "Xxxx of
Sale"). In addition, to the extent that specific
assignments may be necessary or appropriate in
respect of any of the Assets, and/or to the extent
that any of the Assets are represented by
certificates of title or other documents, then the
Seller shall execute and deliver to the Buyer any
and/or additional transfer documents, and shall
endorse to and in the name of the Buyer all
certificates of title and other such documents,
as may be necessary or appropriate in order to
effect the full transfer to the Buyer or its
designee(s) of all of the Assets.
(b) On the Closing Date, the Seller
and the Buyer shall execute and deliver to one
another an assignment and assumption agreement
in respect of the Assumed Liabilities in
substantially the form of Exhibit B annexed
hereto (the "Assumption Agreement"). In
addition, to the extent that specific
assignments may be required in order to effect
the assignment to and assumption by the Buyer of
any particular Assumed Liabilities, the Seller and
the Buyer shall execute and deliver to one another
such additional assignment and assumption documents.
9.4 Additional Agreements and Instruments. On
or
before the Closing Date, the Seller, AUGI, EXTEL,
and the Buyer shall execute, deliver and file
all exhibits, agreements, certificates,
instruments and other documents, not inconsistent
with the provisions of this Agreement, which, in the
opinion of counsel to the parties hereto, shall
reasonably be required to be executed, delivered
and filed in order to consummate the
transactions contemplated by this Agreement.
9.5 Non-Interference. Neither EXTEL, the Buyer,
the
Seller, nor AUGI shall cause to occur any act, event
or condition which would cause any of their
respective representations and warranties made in
this Agreement to be or become untrue or incorrect
in any material respect as of the Closing Date,
or would interfere with, frustrate or render
unreasonably expensive the satisfaction by the other
party or parties of any of the conditions
precedent set forth in Sections 10 and 11 below.
9.6 Management Agreement. On the Closing Date,
the
Management Agreement dated April 15, 1998, as
amended June 22, 1998, shall terminate as
provided in Section
5.2(ii) of the
Management Agreement; provided however, within 13
months of the Closing Date, EXTEL or Buyer shall
pay AUGI in the amount of $150,000 as
reimbursement for advances of expenses by AUGI to
CCC. The obligation shall be evidenced by a
promissory note to be delivered at the Closing
in the form attached hereto as Exhibit D.
9.7 Letter Agreement. On the Closing Date, AUGI
and
the Seller, on the one hand, and EXTEL and the
Buyer, on the other hand, shall execute and
deliver to each other the letter agreement in the
form annexed hereto as Exhibit E.
10. CONDITIONS PRECEDENT
10.1 Conditions to Obligations of EXTEL and Buyer.
The obligations of EXTEL and the Buyer to consummate
the transactions contemplated by this Agreement
are further subject to the satisfaction, at or
before the Closing Date, of all the following
conditions, any one or more of which may be waived in
writing by
the Buyer:
(a) Accuracy of Representations and
Warranties.
All representations and warranties made by the Seller
and/or AUGI in this Agreement shall be true and
correct in all material respects on and as of
the Closing Date as though
such
representations and warranties were made on and as of
that date. (b) Performance. The
Seller and AUGI shall have
performed, satisfied and complied in all material
respects with all covenants, agreements and
conditions required by this Agreement to be
performed, satisfied or complied with by them on
or before the Closing Date.
(c) Certification. The Buyer shall
have received a certificate, dated the Closing Date,
signed by the Seller and AUGI, certifying, in such
detail as the Buyer and its counsel may reasonably
request, that the conditions specified in Sections
10.1(a) and 10.1(b) above have been fulfilled.
(d) Resolutions. The Buyer shall
have received
certified resolutions of the Board of Directors
and the sole stockholder of the Seller and of the
Board of Directors of AUGI, in form reasonably
satisfactory to counsel for the Buyer,
authorizing the Seller's and AUGI's execution,
delivery and performance of this Agreement and all
actions to be taken by the Seller and AUGI
hereunder.
(e) Absence of Litigation. No
action, suit or
proceeding by or before any court or any
governmental body
or
authority, against either the Seller or AUGI or
pertaining to the transactions contemplated by
this Agreement or their
consummation, shall have been instituted on or before
the Closing Date, which action, suit or proceeding
would, if determined adversely, have a Material
Adverse Effect.
(f) Due Diligence. The Buyer
shall have completed, to its satisfaction, due
diligence of the properties and assets of the
Businesses, contracts, agreements, books, records
and documents relating to the Seller and the Assets.
(g) Consents. All necessary
consents of third
parties required for the consummation of this
Agreement and the proposed transaction, including:
(i) any parties to any Material Contracts
(including, without limitation, contracts
with
customers of the Businesses), and any licensing
authorities which are material to the Businesses,
and (ii) any governmental authorities or agencies
to the extent required to be obtained prior to the
Closing in connection with the transactions
contemplated by this Agreement, shall have been
obtained and true and complete copies thereof
delivered to the Buyer.
(h) Material Adverse Effect. On
the Closing
Date, there shall not have occurred any event
or condition materially and adversely affecting the
Assets or the financial condition, operations or
Businesses of the Seller, except as
disclosed in this Agreement or the schedules hereto
on the date hereof.
(i) Extension of UPS Note. AUGI
shall have
obtained prior to the Closing Date, an extension
until not
earlier than November 1999 of the $1.5
million note of
Connectsoft and AUGI payable to UPS, which is
currently due and payable on April 30, 1999 (the
"UPS Note").
(j) Intercompany Obligations. The
Buyer shall
have received from AUGI and its Affiliates written
releases or
other assurances, in form and substance reasonably
satisfactory to the Buyer, that AUGI and its
Affiliates will not assert against the Buyer or
the Assets or any of Buyer's Affiliates any
claims in respect of obligations owed by the Seller
to AUGI and its Affiliates, except for the Note
to be delivered at the Closing in the form
annexed hereto as Exhibit D.
(k) Additional Working Capital.
EXTEL shall have obtained a minimum of $1.0 million
of additional working capital financing for the
Businesses upon such terms and conditions as shall
be reasonably acceptable to EXTEL.
(l) Xxxx of Sale. On or before the
Closing Date, the Seller shall have executed and
delivered the Xxxx of Sale to the Buyer.
(m) Keyman Agreement. On or before
the Closing Date, Xxxxxx Xxxx shall have entered into
an employment agreement with EXTEL on terms and
conditions mutually agreeable to Xxxxxx Xxxx and
EXTEL.
(n) Non-Disclosure Agreements. All
employees of CCC shall have executed and delivered
to CCC (and Buyer shall have received copies
thereof) Non-Disclosure Agreements in form and
substance reasonably satisfactory to Buyer.
10.2 Conditions to Obligations of AUGI and
Seller. The
obligations of AUGI and the Seller to consummate the
transactions contemplated by this Agreement are
further subject to the satisfaction, at or before
the Closing Date, of all the following conditions,
any one or more of which may be waived in writing by
AUGI:
(a) Accuracy of Representations and
Warranties. All representations and warranties made
by EXTEL and the Buyer in this Agreement shall be
true and correct in all material respects on and as
of the Closing Date as though such representations
and warranties were made on and as of that date.
(b) Performance. EXTEL and the
Buyer shall have performed, satisfied and complied
in all material respects with all covenants,
agreements and conditions required by this
Agreement to be performed, satisfied or complied
with by EXTEL and the Buyer on or before the
Closing Date.
(c) Certification. The Seller and
AUGI shall have received a certificate, dated the
Closing Date, executed by EXTEL and the Buyer,
certifying, in such detail as the Seller and AUGI
and their counsel may reasonably request, that the
conditions specified in Sections 10.2(a) and 10.2(b)
above have been fulfilled.
(d) Resolutions. The Seller and
AUGI shall have received certified resolutions of the
Board of Directors and sole stockholder of the Buyer
and of the Board of Directors of EXTEL, in form
reasonably satisfactory to counsel for the Seller
and AUGI, authorizing the Buyer's and EXTEL's
execution, delivery and performance of this Agreement
and all actions to be taken by the Buyer and EXTEL
hereunder.
(e) Consents. All necessary
consents of third parties required for the
consummation of this Agreement and the proposed
transaction, including: (i) any parties to any
Material Contracts (including,
without limitation, contracts with
customers of the Businesses), and any licensing
authorities which are material to the Businesses,
and (ii) any governmental authorities or
agencies to the extent required to be obtained
prior to the Closing in connection with the
transactions contemplated by this Agreement, shall
have been obtained and true and complete copies
thereof delivered to the Buyer.
(f) Assumption Agreement. The
Buyer shall have executed and delivered to the Seller
the Assumption Agreement.
(g) Promissory Note. The Buyer and
EXTEL shall
have executed and delivered to AUGI the Note in the
form annexed hereto as Exhibit D.
(h) Letter Agreement. The Buyer and
EXTEL shall have executed and delivered to AUGI and
the Seller the letter agreement in the form annexed
hereto as Exhibit E.
11. CLOSING.
11.1 Place and Date of Closing. Unless this
Agreement shall be terminated pursuant to
Section 13 below, the consummation of the
transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of the
Buyer, or such other location as is agreed to
between the parties, at 10:00 A.M. local time on the
date that is three (3) business days after the
satisfaction of all conditions to Closing set forth
herein, it being understood that the parties hereto
shall use their best efforts to satisfy the
conditions precedent to Closing, in each case on
or before July 15, 1998 (the date of the Closing
being referred to in this Agreement as the
"Closing Date"). If,
notwithstanding the parties' best efforts, such
conditions shall not have been satisfied by such
date, then the Closing Date shall be extended to the
date that is three (3) Businesses days after the
satisfaction of all such conditions, but which shall
not in any case be later than July 31, 1998
("Outside Closing Date"), unless the parties hereto
agree in writing otherwise.
11.2 Deliveries at Closing. At the Closing, the
Seller and the
Buyer, respectively, will deliver the following
documents: (a) The Seller and AUGI
will deliver or cause to
be delivered to EXTEL and to the Buyer:
(i) a copy of the by-laws of the Seller and
resolutions adopted by the Seller's Board of
Directors and sole stockholder approving the
transactions contemplated by this Agreement,
certified by the Secretary of the Seller as of the
Closing Date; (ii) a copy of the
certificate of incorporation of the Seller, with
all amendments thereto, together with
a long form good standing certificate and tax
clearance certificate, certified by the Secretary of
State of the Seller's state of incorporation as of a
date no later than five (5) days before the Closing
Date;(iii) certificate(s) by the Secretaries of the
Seller and of AUGI, dated as of the Closing
Date, attesting to the authority and verifying the
signature of each person who signed this
Agreement or any other agreement, instrument or
certificate delivered in connection with the
transactions contemplated hereby on behalf of the
Seller and AUGI, respectively;(iv) all agreements,
authorizations, exemptions, waivers and consents of
any third persons or entities required to be
obtained by the Seller or AUGI hereunder or
generally necessary for the consummation by the
Seller and AUGI of the transactions contemplated by
this Agreement;(v) sufficient, original, executed
copies of assignments of patents, trademarks and/or
copyrights, in form and substance acceptable to the
Buyer, such that there is one original version
for each group of patents, trademarks and
copyrights;
(vi) certificate(s), dated the Closing Date, signed
by the chief financial officer of each of the Seller
and AUGI that the conditions specified in Section
10.2(a) and (b) hereof have been fulfilled in all
respects; (vii)assignment of leases for each
Lease; and (viii) such other specific instruments of
sale, conveyance, assignment, transfer, and
delivery as are required to vest good and
marketable title to the Assets in the Buyer.
(b) EXTEL and the Buyer will deliver
or cause to be delivered to the Seller and to AUGI:
(i) a copy of the by-laws of the
Buyer and resolutions adopted by the Buyer's Board
of Directors and sole stockholder approving the
transactions contemplated by this Agreement,
certified by the Secretary of the Buyer as of the
Closing Date;
(ii) a copy of the
certificate of incorporation of the Buyer, with all
amendments thereto, together
with a long form good standing certificate and
tax clearance certificate, certified by the
Secretary of State of the Buyer's state of
incorporation as of a date no later than five (5)
days before the Closing Date;
(iii) certificate(s) by the
Secretaries of EXTEL and of the Buyer, dated as
of the Closing Date, attesting to the authority
and verifying the signature of each person who signed this
Agreement or any other agreement,
instrument or certificate delivered in
connection with the transactions contemplated
hereby on behalf of EXTEL and the Buyer,
respectively;
(iv) certificate(s), dated the
Closing Date, signed by the chief financial officer
of each of EXTEL and the Buyer that the conditions
specified in Section 10.1(a) and (b) hereof have
been fulfilled in all respects; and
(v) such other specific
instruments of conveyance, assignment, transfer, and
delivery as are required to confirm that the Buyer
shall have assumed the payment and performance of
the Assumed Liabilities and the performance of the
Material Contracts.
12. TERMINATION OF AGREEMENT.
12.1 General. This Agreement may be terminated and
the transactions contemplated hereby may be
abandoned at any time prior to the Closing: (a)
by the mutual written consent of the parties
hereto; (b) by EXTEL and the Buyer, on the one hand,
or by the Seller and AUGI, on the other hand, if:
(i) a material breach shall exist with respect to
the written representations and warranties made by
the other party or parties, as the case may be,
which breach shall not have been cured within thirty
(30) days after notice thereof to such other party
or parties; (ii) the other party or parties, as the
case may be, shall take any action prohibited by
this Agreement, if such actions shall or may have a
Material Adverse Effect on the financial
condition, operations, or Businesses of the Seller
or on any material portion of the Assets and/or
the consummation of the transactions contemplated
hereby, and such breach shall not have been cured,
if the same is capable of cure, within thirty (30)
days after notice thereof to the breaching party,
(iii) the other party or parties, as the case
may be, shall not have furnished, upon reasonable
notice therefor, such certificates and documents
required in connection with the transactions
contemplated hereby and matters incidental thereto
as it or they shall have agreed to furnish, and it
is reasonably unlikely that the other party or
parties will be able to furnish such item(s) prior to
the Outside Closing Date specified below, or (iv)
any consent of any third party to the transactions
contemplated hereby (whether or not the necessity of
which is disclosed herein or in any schedule hereto)
is reasonably necessary to prevent a default
under any outstanding material obligation of EXTEL,
the Buyer, AUGI or the Seller, and such consent
is not obtainable, after good faith efforts to
obtain the same, without material cost or penalty
(unless the party or parties not seeking to
terminate this Agreement agrees or agree to pay such
cost or penalty); or (c) by EXTEL or the Buyer, on
the one hand, or by the Seller and AUGI, on the
other hand, at any time on or after the Outside
Closing Date, if the transactions contemplated hereby
shall not have been consummated prior thereto, and
the party directing termination shall not then be in
breach or default of any obligations imposed upon
such party by this Agreement.
12.2 Effect of Termination. In the event of
termination by either party as above provided in this
Section 12, prompt written notice shall be given
to the other party. Termination of this Agreement
shall not relieve any party of any
of its obligations pursuant to Section 9.1 above,
and shall not relieve any breaching party from
liability for any breach of this Agreement.
13. INDEMNIFICATION. It is expressly understood and
agreed by and among all parties to this
Agreement that the indemnification provisions set
forth in this Article 13 are in addition to, and
not in lieu of, the respective indemnification
obligations of each of EXTEL and AUGI as are set
forth in Article 14 herein. In the event and to the
extent that there shall be any inconsistency between
the rights and obligations contained in this
Article 13 and to Article 14, the terms and
conditions of Article 14, shall, in all respects,
govern.
13.1 General.
(a) Without prejudice to any rights
of contribution as between the Seller and AUGI, from
and after the Closing Date, the Seller and AUGI
shall jointly and severally defend, indemnify
and hold harmless the Buyer and its
stockholders, affiliates, officers, directors,
employees and agents (each a "Buyer Indemnified
Person") from, against and in respect of any and
all claims, losses, costs, expenses,
obligations, liabilities, damages, recoveries and
deficiencies, including
costs of investigation, interest, penalties
and
reasonable attorneys' fees, that the Buyer may incur,
sustain or suffer ("Losses") as a result of (i) any
breach of, or failure by the Seller or AUGI to
perform, in any material respect, any of the
representations, warranties, covenants or agreements
of the Seller or AUGI contained in this Agreement,
or (ii) any failure by the Seller to pay or
perform when due (or any imposition on the Buyer
or EXTEL) any of its retained liabilities (including
any liabilities of the Business or the Seller
which are not Assumed Liabilities).
(b) Without prejudice to any
rights of
contribution as between the Buyer and EXTEL, from and
after the Closing Date, the Buyer and EXTEL shall
jointly and severally defend, indemnify and hold
harmless the Seller and AUGI, and their
respective stockholders, affiliates, officers,
directors, employees and agents (each a "Seller
Indemnified Person") from, against and in respect
of any and all claims, losses, costs, expenses,
obligations, liabilities, damages, recoveries and
deficiencies, including costs of investigation,
interest, penalties and reasonable attorneys' fees,
that the Seller or AUGI may incur, sustain or suffer
as a result of (i) any breach of, or failure by the
Buyer or EXTEL to perform, in any material
respect, any of the representations, warranties,
covenants or agreements of the Buyer or EXTEL
contained in this Agreement, or (ii) any failure
by the Buyer to pay or perform (or any
imposition on the Seller or AUGI) when due any of
the Assumed Liabilities.
13.2 Limitations on Certain Indemnity.
(a) Notwithstanding any other
provision of this Agreement to the contrary, the
Seller and AUGI shall not be liable to the Buyer
with respect to Losses unless and until, and then
only to the extent that, the aggregate amount of all
Losses incurred by the Buyer shall exceed the sum
of $50,000 (the "Basket"); provided, however,
that the Basket shall not be available with
respect to any Losses involving proven fraud by the
Seller or AUGI. The Seller and AUGI shall
thereafter be liable for all Losses in excess of the
Basket, provided that the Seller's and AUGI's
maximum aggregate liability in respect of all Losses
shall not, in the absence of proven fraud by the
Seller or AUGI in respect of any particular Losses,
in any event exceed the limitations set forth in
Section 13.2(b) below.
(b) Except with respect to any
Losses involving proven fraud by the Seller or
AUGI, the Seller and AUGI shall only be required,
in the aggregate, to pay indemnification
hereunder, after application of the Basket, up to
a maximum amount equal to the Consideration.
(c) The Buyer shall be
entitled to indemnification by the Seller and AUGI
for Losses only in respect of claims for which
notice of claim shall have been given to the Seller
and AUGI on or before June 30, 1999, or, with respect
to Losses relating to a breach of any warranties
in respect of taxes, the expiration of the final
statute of limitations for those tax returns
covered by the tax warranties contained herein;
provided, however, that the Buyer shall not be
entitled to indemnification from the Seller or AUGI
in the event that the subject claim for
indemnification relates to a third-party claim and
the Buyer delayed giving notice thereof to the
Seller and AUGI to such an extent as to cause
material prejudice to the defense of such third-
party claim. This Section 13.2(c) shall not apply
to any failure by the Seller to pay when due any of
its retained liabilities.
13.3 Claims for Indemnity. Whenever a claim
shall
arise for which any party shall be entitled to
indemnification hereunder, the indemnified party
shall notify the indemnifying party in writing
(which may include facsimile transmission) within
three (3) Business days of the indemnified party's
first receipt of notice of, or the indemnified
party's obtaining actual knowledge of, such claim,
and in any event within such shorter period as may
be necessary for the indemnifying party or parties to
take appropriate action to resist such claim. Such
notice shall specify all facts known to the
indemnified party giving rise to such indemnity
rights and shall estimate (to the extent reasonably
possible) the amount of potential liability arising
therefrom. If the indemnifying party shall be duly
notified of such dispute, the parties shall attempt
to settle and compromise the same or may agree to
submit the same to arbitration or, if unable or
unwilling to do any of the foregoing, such dispute
shall be settled by appropriate litigation, and any
rights of indemnification established by reason
of such settlement, compromise, arbitration or
litigation shall promptly thereafter be paid and
satisfied by those indemnifying parties obligated to
make indemnification hereunder.
13.4 Right to Defend. If the facts giving rise to
any
claim for indemnification shall involve any actual
or threatened action or demand by any third party
against the indemnified party or any of its
Affiliates, the indemnifying party or parties shall
be entitled (without prejudice to the indemnified
party's right to participate at its own expense
through counsel of its own choosing), at their
expense and through counsel of their own choosing,
to defend or prosecute such claim in the name of
the indemnifying party or parties, or any of them,
or if necessary, in the name of the indemnified
party. In any event, the indemnified party
shall give the indemnifying party advance written
notice of any proposed compromise or settlement of
any such claim. If the remedy sought in any such
action or demand is solely money damages, the
indemnifying party shall have five (5) Business
Days after receipt of such notice of settlement
to object to the proposed compromise or settlement,
and if it does so object, the indemnifying party
shall be required to undertake, conduct and control,
though counsel of its own choosing and at its sole
expense, the settlement or defense thereof, and
the indemnified party shall cooperate with the
indemnifying party in connection therewith.
14. INDEMNIFICATION - ASSUMED LIABILITIES/MATERIAL
CONTRACTS
14.1. Indemnification of the Seller and AUGI. Each
of EXTEL and Buyer does hereby jointly and
severally,
irrevocably, absolutely and unconditionally
indemnify, defend and hold harmless the Seller and
AUGI, and each of them, individually and severally,
to the fullest extent permitted by law, from and
against any claim against the Seller or AUGI in
respect of (i) any act, omission, neglect, breach
or failure by EXTEL and/or Buyer, or either of
them, to timely and fully pay and perform each and
every one of the Assumed Liabilities and
Material Contracts, when due, and (ii) as a result
of, arising from or in connection with any claim by
any taxing authority for Taxes of or relating to
EXTEL or Buyer, including (but not limited to) all
Taxes attributable to the business and operations of
any of them after the Closing Date (all of the
foregoing being referred to collectively as the
"AUGI Group Indemnified Amounts"), except to the
extent provided in Sections 2.2(b) and 14.2. Each
of the Buyer and EXTEL jointly and severally
covenants and agrees to fully pay and reimburse
each of the Seller and AUGI, within twenty-four
(24) hours of written demand therefor, for any
payments made or amounts which the Seller or AUGI
becomes legally obligated to pay in connection
with any of the AUGI Group Indemnified Amounts,
except to the extent provided in Sections 2.2(b)
and 14.2.
14.2 Indemnification of the Buyer and EXTEL. Each
of AUGI, Connectsoft and CCC does hereby jointly
and severally, irrevocably, absolutely and
unconditionally indemnify, defend and holds
harmless the Buyer and EXTEL, and each of
them, individually and severally, to the fullest
extent permitted by law, from and against any
claim against the Buyer or EXTEL in respect of (i)
any act, omission, neglect, breach or failure by
AUGI, Connectsoft and/or CCC, or any of them, to
timely and fully pay and perform (a)
each and every one of the Excluded
Liabilities, when due, and (b) any of the Assumed
Liabilities, but only to the extent that the
aggregate principal amount of all such Assumed
Liabilities shall exceed $4,500,000 and (ii) as a
result of, arising from or in connection with any
claim by any taxing authority for Taxes of or
relating to AUGI, Connectsoft or CCC, including (but
not limited to) all Taxes attributable to the
business and operations of any of them prior to the
Closing Date (all of the foregoing being referred
to collectively as the "EXTEL Group Indemnified
Amount"). For purposes of this Agreement,
"Taxes" shall mean all federal, state, county, local
and other taxes, including, without limitation,
income taxes, estimated taxes, withholding taxes,
excise taxes, sales taxes, use taxes, gross
receipt taxes, franchise taxes, employment and
payroll related taxes, property taxes and import
duties, whether or not measured in whole or in
part by net income, and all deficiencies or other
additions to tax, interest and penalties owed by
it in connection with any such taxes. Each of
AUGI, Connectsoft and CCC jointly and severally
covenants and agrees to fully pay and reimburse
each of the Buyer and EXTEL, within twenty-four
(24) hours of written demand therefor, for any
payments made or amounts which the Buyer or EXTEL
becomes legally obligated to pay in connection
with any of the EXTEL Group Indemnified Amount.
14.3 Claims for Indemnity. Whenever a claim
shall
arise for which any party shall be entitled to
indemnification hereunder, the indemnified party
shall promptly notify the indemnifying party in
writing (which may include facsimile
transmission) following the indemnified party's
receipt of notice of, or the indemnified party's
obtaining actual knowledge of, such claim. Such
notice shall specify all facts known to the
indemnified party giving rise to such indemnity
rights and shall estimate (to the extent
reasonably possible) the amount of potential
liability arising therefrom.
14.4 Right to Defend. If the facts giving rise to
any
claim for indemnification shall involve any actual
or threatened action or demand by any third party
against the indemnified party or any of its
affiliates, the indemnifying party or parties shall
be entitled (without prejudice to the indemnified
party's right to participate at its own expense
through counsel of its own choosing), at their
expense and through counsel of their own choosing,
to defend or prosecute such claim in the name of
the indemnifying party or parties, or any of them,
or if necessary, in the name of the indemnified
party. In any event, the indemnified party
shall give the indemnifying party advance written
notice of any proposed compromise or settlement of
any such claim. If the remedy sought in any such
action or demand is solely money damages, the
indemnifying party shall have three (3) days after
receipt of such notice of settlement to object to
the proposed compromise or settlement, and if it does
so object, the indemnifying party shall be required
to undertake, conduct and control, though counsel
of its own choosing and at its sole expense, the
settlement or defense thereof, and the indemnified
party shall cooperate with the indemnifying party in
connection therewith.
15. POST-CLOSING EVENTS. The parties hereby further
agree that, from and after the Closing:
15.1 Books and Records. At any time and from time
to
time from and after the Closing Date, the Buyer shall
permit the Seller and/or AUGI to have access,
during normal business hours and without undue
disruption of the Buyer's Businesses, to those books
and records transferred to the Buyer as part of the
Assets, for purposes of preparing any tax filings or
any other legitimate purpose of the Seller and/or
AUGI. Such books and records may be made available
at any location where the Buyer maintains same, and
all costs and expenses relating to such access and
inspection shall be the responsibility of the Seller
and/or AUGI. In the
event that, at any time and from time to time after
the Closing Date, the Buyer shall determine to
destroy or dispose of any such books and records,
the Buyer shall give notice thereof to the Seller
and/or AUGI not less than thirty (30) days prior to
such disposition, and the Seller and/or AUGI shall
have the right, at their own cost and expense, to
take possession of such books and records prior to
their disposition.
15.2 Employees. The Buyer hereby confirms its
intention to retain, as of the Closing Date, the
employees of the Businesses identified on Schedule
15.2, provided that the Buyer shall at all times
retain the absolute discretion to terminate, dismiss,
reassign or otherwise modify the terms of employment
of any or all of such employees. The Buyer
shall retain full discretion as to the nature and
extent of benefits to be provided to employees for
periods from and after the Closing Date.
15.3 Further Assurances. From time to time from
and after the Closing Date, the parties will take
any and all such action and execute and deliver to
one another any and all further agreements,
instruments, certificates and other documents, as may
reasonably be requested by any other party in order
more fully to consummate the transactions
contemplated hereby, and to effect an orderly
transition of the ownership and operations of
the
Businesses.
16 COSTS.
16.1 Finder's or Broker's Fees. The Buyer and EXTEL
(on
the one hand) and the Seller and AUGI (on the
other hand) represents and warrants that neither
they nor any of their respective Affiliates have
dealt with any broker or finder in connection
with any of the transactions contemplated by this
Agreement, and no broker or other person is
entitled to any commission or finder's fee in
connection with any of these transactions.
16.2 Expenses. The Buyer, the Seller and AUGI
shall each pay all of their own respective costs and
expenses incurred or to
be incurred by them, respectively, in negotiating
and preparing this Agreement and in closing and
carrying out the transactions contemplated by this
Agreement.
17. FORM OF AGREEMENT.
17.1 Effect of Headings. The Section headings used
in this Agreement and the titles of the
schedules hereto are included for purposes of
convenience only, and shall not affect the
construction or interpretation of any of the
provisions hereof or of the information set forth in
such schedules.
17.2 Entire Agreement; Waivers. This Agreement
(including the schedules and exhibits hereto)
constitutes the entire agreement between the parties
pertaining to the subject matter hereof, and
supersedes all prior agreements or
understandings as to such subject matter. No party
hereto has made any representation or warranty or
given any covenant to the other except as set forth
in this Agreement and the schedules and exhibits
hereto. No waiver of any of the provisions of
this Agreement shall be deemed, or shall constitute,
a waiver of any other provisions, whether or not
similar, nor shall any waiver constitute a
continuing waiver. No waiver shall be binding
unless executed in writing by the party making the
waiver.
17.3 Counterparts. This Agreement may be executed
in any
number of counterparts, each of which shall be
deemed an original, but all of which together shall
constitute one and the same instrument.
18. PARTIES.
18.1 Parties in Interest. Nothing in this
Agreement, whether expressed or implied, is intended
to confer any rights or remedies under or by reason
of this Agreement on any persons other than the
parties to it and their respective successors and
permitted assigns, nor is anything in this Agreement
intended to relieve or discharge the Assumed
Liabilities or liability of any third persons to
any party to this Agreement, nor shall any
provision give any third persons any right of
subrogation or action over or against any party to
this Agreement.
18.2 Notices. All notices, requests, demands and
other communications under this Agreement shall be in
writing and shall be deemed to have been duly
given on the date of service if served personally
on or telecopied to the party to whom notice is to
be given (telecopy confirmation received by the
transmitting party), one day after being deposited
for overnight delivery with a recognized overnight
courier service in a properly addressed package with
all charges prepaid or billed to the account of the
sender, or on the third day after mailing if mailed
to the party to whom notice is to be given, by first
class mail, registered or certified, postage prepaid,
and properly addressed as follows:
(a) If to the Seller or AUGI:
Connectsoft, Inc.
c/o American United
Global, Inc. 00000
XX 00xx Xxxxx, Xxxxx
000 Xxxxxxxx,
Xxxxxxxxxx 00000
Attn: Xx. Xxxxxx X.
Xxxxx
Fax No.: (425)
822-
9095
and
(516)
254-
2136
with a copy sent
concurrently to:
Xxx X.
Xxxxxxxxx, Esq.
Gersten, Savage,
Xxxxxxxxx &
Xxxxxxxxxx,
LLP
000 Xxxx 00xx
Xxxxxx
Xxx Xxxx, Xxx
Xxxx 00000
Fax No.:(212)980-
5192
(b) If to the
Buyer:
Executive TeleCard, Ltd.
0000 Xxxx Xxxxx Xxxxxx Xxxxxx, Xxxxxxxx 00000 Attn:
Xxxxxxxxxxx Xxxxx Fax No.: (000) 000-0000
with a copy sent concurrently to:
Xxxxxxx Xxxxxxx, Esq.Xxxxx & Xxxxxxx, LLP
000 Xxxxxxxxxx Xxxxxx, X.X. Xxxxxxxxxx, X.X. 00000-
1109 Fax No.: (000) 000-0000
or to such other address or telecopier number as any
party shall have specified by notice in writing given
to all other parties.
19. MISCELLANEOUS.
19.1 Amendments and Modifications. No amendment
or modification of this Agreement or any exhibit or
schedule hereto shall be valid unless made in
writing and signed by the party to be charged
therewith.
19.2 Non-Assignability; Binding Effect. Neither
this Agreement, nor any of the rights or liabilities
of the parties hereunder, shall be assignable by
any party hereto without the prior written consent
of all other parties hereto, except that the Buyer
may, without requirement of any consent of AUGI or
the Seller, assign the Buyer's rights to
indemnification hereunder to any secured lender to
the Buyer from time to time. Otherwise, this
Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their
respective successors and permitted assigns.
19.3 Governing Law; Jurisdiction. This Agreement
shall be construed and interpreted and the rights
granted herein governed in accordance with the
laws of the State of Delaware applicable to
contracts made and to be performed wholly within
such State. Except as otherwise provided in
Section 13.3 and Section 14.3 above, any claim,
dispute or controversy arising under or in
connection with this Agreement or any actual or
alleged breach hereof shall be settled exclusively by
arbitration in accordance with the commercial
arbitration rules of the American Arbitration
Association then obtaining. As part of his or her
award, the arbitrator shall make a fair allocation of
the fee of the American Arbitration Association,
the cost of any transcript, and the parties'
reasonable attorneys' fees, taking into account the
merits and good faith of the parties' claims and
defenses. Judgment may be entered on the award so
rendered in any court having jurisdiction. Any
process or other papers hereunder may be served
by registered or certified mail, return receipt
requested, or by personal service, provided that
a reasonable time for appearance or response is
allowed.
[Signatures on following page]
IN WITNESS WHEREOF, the parties have executed this
Agreement on and as of the date first set forth above.
AMERICAN UNITED GLOBAL, INC.
By:______________________________
___________
Name:
Title:
CONNECTSOFT COMMUNICATIONS CORPORATION
By:______________________________
___________
Name:
Title:
CONNECTSOFT HOLDING CORP.
By:______________________________
___________
Name:
Title:
C-SOFT ACQUISITION CORP.
By:______________________________
_________
Name:
Title:
EXECUTIVE TELECARD, LTD.
By:______________________________
_________
Name:
Title:
EXHIBIT A
XXXX OF SALE
XXXX OF SALE dated as of July ___, 1998, from
CONNECTSOFT COMMUNICATIONS CORPORATION, a Delaware
corporation and CONNECTSOFT HOLDING CORP., a
Washington corporation (collectively "Seller"), to
C-SOFT ACQUISITION CORP., a Delaware corporation
("Buyer").
Buyer, Seller, American United Global, Inc., a
Delaware corporation, and Executive TeleCard, Ltd.,
a Delaware corporation, are parties to an Asset
Purchase Agreement dated July ___, 1998 (the
"Purchase Agreement"). Seller desires to sell,
transfer, convey, assign and deliver, and Buyer
desires to purchase and acquire, the assets of
Seller identified in the Purchase Agreement. The
execution and delivery of this Xxxx of Sale is a
condition to Purchaser's obligations under the
Purchase Agreement.
NOW, THEREFORE, for good and valuable
consideration, the receipt and sufficiency of which
is hereby acknowledged, Seller hereby agrees as
follows:
1. Capitalized terms used herein but not defined
herein shall have the meanings assigned such
terms in the Purchase Agreement.
2. For good and valuable consideration, the
receipt and
sufficiency of which are hereby acknowledged, Seller,
for
itself and its successors and assigns, hereby
sells, transfers, conveys, assigns and delivers to
Buyer, and Buyer hereby accepts, free and
clear of all liens or other encumbrances,
except Permitted Liens, all or substantially all of
the tangible and intangible assets of Seller,
including without limitation, all software,
engineering, developments and
technology associated with the FreeAgent
Technology, and the hardware networking equipment,
computers and software relating to the CNOC
Business, including, but not limited to, the
following: (a) all items of tangible fixed
assets, furniture, fixtures, machinery, equipment,
computers, computer systems and vehicles of CCC and
Connectsoft which are used in the operation of
the Businesses, and which are set forth on
Schedule A-1 hereto (collectively, the "Fixed
Assets"), all of which are presently held by CCC
other than the CNOC, which is presently held by
Connectsoft; (b) all inventory and supplies of the
Seller; (c) all trade names, trademarks, patents,
copyrights, customer lists, supplier lists, trade
secrets, computer software programs, engineering,
technical information, and other such knowledge and
information constituting the "know-how" of the
Seller; (d) the goodwill of the Businesses and
their value as going concerns; (e) to the extent
assignable, all licenses and permits of the Seller;
(f) all books, records, printouts, drawings, data,
files, notes, notebooks, accounts, invoices,
correspondence and memoranda of the Seller; and
(g) all other rights and assets of any kind,
tangible or intangible, of the Seller (including
the Material Contracts listed on Schedule A-2
hereto, which Buyer specifically assumes the
obligations thereunder) whether or not reflected in
their internal financial statements or on their books
and records ("Transferred Assets"); excluding only
the Excluded Assets.
3. Seller hereby covenants and agrees to execute
and deliver
to Buyer such instruments of sale, transfer,
conveyance, assignment and delivery, and such
consents, assurances, powers of attorney and other
instruments, including separate
assignments for intellectual property rights, as may
be reasonably requested by Buyer or its counsel in
order to vest in Buyer all right, title and
interest of Seller in and to the Transferred
Assets and otherwise in order to carry out the
purpose and intent of this Xxxx of Sale and
the Purchase Agreement.
4. Notwithstanding Section 2 hereof, the
Transferred Assets shall not include any assets other
than the Transferred Assets, including (a) all
cash, marketable securities, accounts receivable
and notes receivable of the Seller, (b) those
specific assets of the Seller relating to the
Businesses which are identified on Schedule 1.2 to
the Purchase Agreement, (c) all bank accounts of the
Seller, (d) all rights to any tax refunds of the
Seller, (e) the Seller's stock record books, minute
books, and tax returns, (f) all of the Seller's
rights under the Purchase Agreement, and (g) those
miscellaneous other assets or properties of each of
CCC and Connectsoft which are not related to either
the FreeAgent Technology or the CNOC Business and
which are identified on Schedule 1.2 to the Purchase
Agreement.
5. Notwithstanding any other provision of this
Xxxx of Sale to the contrary, nothing contained in
this Xxxx of Sale shall in any way supersede,
modify, replace, amend, change, rescind, waive,
exceed, expand, enlarge or in any way affect the
provisions, including the warranties, covenants,
agreements, conditions, representations or, in
general any of the rights and remedies, and any
of the obligations and indemnifications of Seller
set forth in the Purchase Agreement nor shall this
Xxxx of Sale expand or enlarge any remedies under
the Purchase Agreement including without
limitation any limits on indemnification
specified therein. This Xxxx of Sale is intended
only to effect the transfer of certain property to
be transferred pursuant to the Purchase Agreement
and shall be governed entirely in accordance
with the terms and conditions of the Purchase
Agreement.
6. This Xxxx of Sale shall be governed by and
construed in accordance with the internal laws of
the State of Delaware.
[Signatures on following page]
IN WITNESS WHEREOF, Seller has caused this Xxxx of
Sale to be executed and delivered on the date and
year first written above.
CONNECTSOFT COMMUNICATIONS CORPORATION
By:_______________________________________
Name:
Its:
CONNECTSOFT HOLDING CORP.
By:_______________________________________
Name:
Its:
EXHIBIT B
ASSIGNMENT AND ASSUMPTION AGREEMENT
ASSIGNMENT AND ASSUMPTION AGREEMENT dated as of July
___,
1998, between C-SOFT ACQUISITION CORP., a Delaware
corporation ("Buyer"), and CONNECTSOFT
COMMUNICATIONS
CORPORATION, a Delaware corporation, and CONNECTSOFT
HOLDING CORP., a Washington corporation (collectively
"Seller").
Buyer, Seller, American United Global, Inc., a
Delaware corporation, and Executive TeleCard Ltd., a
Delaware corporation are parties to an Asset Purchase
Agreement dated as of July ___, 1998 (the "Purchase
Agreement"). It is a condition precedent to Seller's
obligations under the Purchase Agreement that Buyer
execute and deliver this Assignment and Assumption
Agreement.
NOW, THEREFORE, for good and
valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, Buyer hereby agrees as
follows:
1. Capitalized terms used herein but not defined
herein shall have the meanings assigned such terms
in the Purchase Agreement.
2. Seller hereby assigns to Buyer each of the
contracts, agreements and instruments set forth on
Schedule B-1 hereto
(the "Seller Contracts") and the Assumed Liabilities
set forth on Schedule B-2 hereto ("Assumed
Liabilities").
3. Buyer hereby assumes all liabilities arising (i)
under the Seller Contracts and (ii) under the
Assumed Liabilities, in each case from and after the
Closing Date, and hereby assumes, and agrees to be
bound by, pay and fully and faithfully discharge and
perform, all obligations of Seller of continued
performance under the Seller Contracts and Assumed
Liabilities from and after the date hereof in
accordance with the terms of the Purchase Agreement;
provided that Buyer shall not assume more than
$4,500,000 in the aggregate principal amount of
Assumed Liabilities.
4. Notwithstanding anything contained in Sections 2
or 3 hereof to the contrary, Buyer does not assume,
and shall not be responsible for any liabilities or
obligations of Seller or any affiliate of Seller,
whether fixed or contingent, known or unknown,
threatened, pending or unasserted, other than the
Seller Contracts and Assumed Liabilities. Seller does
retain and shall remain responsible for in accordance
with the terms and conditions of the Purchase
Agreement, all of Seller's debts, liabilities and
obligations of any nature whatsoever, other than
the Assumed Liabilities and Seller Contracts,
whether accrued, absolute or contingent, whether known
or unknown, whether due or to become due and whether
related to the Assets or otherwise, and
regardless of when asserted, including, without
limitation, the following liabilities or
obligations of Seller (none of which will
constitute Assumed
Liabilities):
(a) all liabilities and
obligations of any kind existing as of the Closing of
a nature characterized as an intercompany liability,
and any similar item otherwise owed between Seller
and American United Global, Inc. or any of its
affiliates;
(b) any liabilities with
respect to any bonus, deferred compensation, pension,
profit sharing, retirement or other such benefit plan;
(c) all liabilities and
obligations of Seller for Taxes; and
(d) any of the obligations
and claims required to be set forth in Schedule
5.13 of the Purchase Agreement.
5. From time to time after the date hereof, each of
Buyer and Seller will execute and deliver to the other
such instruments
as may be reasonably requested by Buyer or its
counsel or Seller or its counsel, as the case may be,
in order to carry out the purpose and intent of
this Assignment and Assumption Agreement and
the Purchase Agreement.
6. Notwithstanding any other provision of this
Assignment and Assumption Agreement to the contrary,
nothing contained in this Assignment and Assumption
Agreement shall in any way supersede, modify,
replace, amend, change, rescind, waive, exceed,
expand, enlarge, or in any way affect the
provisions, including the warranties, covenants,
agreements, conditions, representations or, in general
any of the rights and remedies, and any of the
obligations and indemnifications of Buyer or Seller
set forth in the Purchase Agreement nor shall this
Assignment and Assumption Agreement expand or enlarge
any remedies under the Purchase Agreement
including without
limitation any limits on indemnification specified
therein. This Assignment and Assumption Agreement is
intended only to effect the transfer of certain
liabilities assumed pursuant to the Purchase
Agreement and shall be governed entirely in accordance
with the terms and conditions of the Purchase
Agreement.
7. This Assignment and Assumption Agreement shall
be
governed by and construed in accordance with the
internal laws of the State of Delaware.
[Signatures on following page]
IN WITNESS WHEREOF, Buyer and Seller have caused this
Assignment and Assumption Agreement to be executed and
delivered on the date and year first written above.
CONNECTSOFT COMMUNICATIONS CORPORATION
By:
Name:
Its:
CONNECTSOFT HOLDING CORP.
By:
Name:
Its:
C-SOFT ACQUISITION CORP.
By:
Name:
Its:
EXHIBIT C
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED
OR QUALIFIED UNDER ANY STATE SECURITIES LAWS.
EXECUTIVE TELECARD, LTD.
C-SOFT ACQUISITION CORP. Promissory Note Denver,
Colorado April 30, 1999
Executive TeleCard, Ltd, a Delaware
corporation, and C Soft Acquisition Corp., a Delaware
corporation (collectively "Co maker"), for value
received, promises to pay, jointly and severally,
subject to the terms and conditions of this Note,
to AMERICAN UNITED GLOBAL, INC., a Delaware
corporation (the "holder"), the principal sum
of ___________________________ DOLLARS ($_________)
with interest on the outstanding unpaid principal
amount hereof from the date hereof until paid in
full at the annual rate of eight percent
(8.00%). All interest payment calculations
required hereunder shall be computed on the basis
of the actual number of days elapsed over a year
comprised of 365 days.
This Note is issued by Co-maker pursuant
to the Asset Purchase Agreement, dated as of July
___, 1998, among Co-maker, the holder,
Connectsoft Holding Corp. and Connectsoft
Communications Corporation (the "Asset Purchase
Agreement"). All capitalized terms used and not
otherwise defined herein shall have the meanings
assigned to them in the Asset Purchase
Agreement.
1. Payments
1.1. Principal and any accrued but unpaid interest
shall be due and payable on the earlier of:
(a) ten (10) business days following
the closing of one or more private or public
offerings of any equity or
debt securities of either Co-maker raising gross
proceeds of at least $5,000,000 in the aggregate;
provided, however, that the Co-maker's first private
offering of equity or debt securities hereafter
shall not trigger a repayment of principal
and/or interest hereunder; or
(b) one year from the date hereof.
1.2. Payments of principal and accrued interest of
this Note shall be made to the holder at 00 Xxxxxxxx
Xxxx., Xxx Xxxxx, Xxx Xxxx 00000, or such other
place or places within the United States as may be
specified by the holder of this Note in a
written notice to Co-maker at least 10 business
days before a given payment date.
1.3. Payments of principal and accrued interest of
this Note
shall be made in lawful money of the United States
of America by mailing Co-maker's good check in the
proper amount to such holder at least three days
prior to the due date of such payment or otherwise
transferring funds so as to be received by such
holder on the due date of such payment.
1.4. If any payment on this Note becomes due and
payable on a Saturday, Sunday or other day on which
commercial banks in New York City are authorized or
required by law to close, the maturity thereof
shall be extended to the next succeeding
business day, and no interest on the principal
amount shall be payable during such extension.
1.5. In no event shall the amount of interest due or
payable hereunder exceed the maximum rate of
interest allowable by applicable law, and in the
event any such payment is inadvertently paid by Co-
maker, or inadvertently received by the holder,
then such excess shall be credited as a payment
of principal. It is the express intent hereof that
Co-maker not pay, and the holder not receive,
directly or indirectly in any manner whatsoever,
interest in excess of that which may be legally
paid by Co-maker under applicable law.
2. Cancellation of Note.
Upon payment in full in accordance with Section 1
hereof of all outstanding obligations under this
Note, Co-maker's obligations in respect of payment
of this Note shall terminate and the holder shall
surrender this Note to Co-maker.
3. Events of Default.
3.1 In the event that:
(a) Co-maker defaults for more than ten (10)
Business Days after receipt of written notice of
failure to make any payment
of principal or interest required to be made on
this Note
or any other note issued by either Co-maker in favor
of
holder; or
(b) Either Co-maker: (i) commences any case,
proceeding or other action (x) under any existing or
future law of any jurisdiction, domestic or
foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to
have an order for relief entered with respect to it,
or
seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement,
composition or other relief with respect to it or
its debts or (y) seeking appointment
of a receiver, trustee, custodian or other
similar official for it or for all or any
substantial part of its assets, or shall make a
general assignment for the benefit of its
creditors; or (ii) is the debtor named in any
other
case, proceeding or other action of a nature
referred to in clause (i) above which (x) results
in the entry of an order for relief or any such
adjudication or
appointment or (y) remains undismissed, undischarged
or unbonded for a period of sixty (60) days; or
(iii) takes any action in furtherance of, or
indicating its consent to, approval
of, or acquiescence in, any of the facts set forth
in clause (i) or (ii) above; or (iv) shall
generally not, or shall be unable to, or shall
admit in writing its inability to, pay its debts
as they become due; then, and in any such event (an
"Event of Default"), and at any time thereafter,
if such Event of Default shall then be
continuing, any holder of this Note may, by written
notice to Comaker, declare this Note due and
payable, whereupon this Note shall be due and
payable without presentment, demand, protest or
other notice of any kind, all of which are hereby
expressly waived. It is hereby
expressly agreed that should any Event of Default
exist and be continuing then, in such event,
simple interest shall accrue on the outstanding
principal balance of this Note from the date of
any Event of Default at the rate of twelve percent
(12.0%) percent per annum.
4. Investment Representation.
Each holder of this Note hereby acknowledges that
this Note has not been and will not be registered
under the Securities Act of 1933, as amended (the
"Act") or under any applicable state securities
law; and that Co-maker's reliance on the Section
4(2) exemption of the Act and on applicable state
securities laws is predicated in part on the
representations hereby made to Co-maker by the
holder that it is acquiring the Note for
investment for its own account and not for resale
or distribution.
5. Miscellaneous.
5.1 Upon receipt of evidence reasonably
satisfactory
to Co-maker of the loss, theft, destruction or
mutilation
of this Note and of a letter of indemnity reasonably
satisfactory to Co-maker and upon surrender or
cancellation of the Note, if mutilated, Co-maker
will make and deliver a new Note of like tenor in
lieu of such lost, stolen, destroyed or
mutilated Note.
5.2 In the event that one of the Events of
Default specified in Section 3 hereof has
occurred and is continuing, the holder of this
Note shall be reimbursed by Co maker for the
payment of its costs including reasonable
attorneys' fees relating to the enforcement of
any of the provisions of this Note.
5.3 This Note and the rights and obligations of Co-
maker and any holder hereunder shall be
construed in accordance with and be governed by the
internal laws of the State of Delaware.
5.4 Time is of the essence of this Note. If any
provisions of this Note or the application thereof to
any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this
Note and the application of such provisions to other
persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent
permitted by law.
IN WITNESS WHEREOF, each Co-maker has executed
this Note as of the day and year first above written.
EXECUTIVE TELECARD, LTD
By:___________________________ _____
Name:
Title:
C-SOFT ACQUISITION CORP.
By:___________________________ _____
Name:
Title:
EXHIBIT D
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED
OR QUALIFIED UNDER ANY STATE SECURITIES LAWS.
EXECUTIVE TELECARD, LTD.
C-SOFT ACQUISITION CORP.
Promissory Note
Denver,
Colorado
July 15,1998
Executive TeleCard, Ltd, a Delaware corporation, and
CSoft Acquisition Corp., a Delaware corporation
(collectively "Co maker"), for value received,
promises to pay, jointly and
severally, subject to the terms and conditions of
this Note, to AMERICAN UNITED GLOBAL, INC., a
Delaware corporation (the "holder"), the
principal sum of ONE HUNDRED FIFTY THOUSAND
DOLLARS ($150,000) with interest on the
outstanding unpaid principal amount hereof from the
date hereof until paid in full at the annual
rate of eight percent (8.00%). All interest
payment calculations required hereunder shall be
computed on the basis of the actual number of days
elapsed over a year comprised of 365 days.
This Note is issued by Co-maker pursuant to the
Asset Purchase Agreement, dated as of July ___, 1998,
among Co-maker, the holder, Connectsoft Holding
Corp. and Connectsoft Communications Corporation
(the "Asset Purchase Agreement"). All capitalized
terms used and not otherwise defined herein shall
have the meanings assigned to them in the
Asset Purchase Agreement.
1. Payments
1.1. Principal and any accrued but unpaid interest
shall be due and payable on the earlier of:
(a) ten (10) business days following
the closing of one or more private or public
offerings of any equity or debt securities of
either Comaker raising gross proceeds of at least
$5,000,000 in the aggregate; provided, however,
that the Co-maker's first private offering of
equity or debt securities hereafter shall not
trigger a repayment of principal and/or interest
hereunder; or
(b) July 15, 1999 ("Maturity Date")
which principal and accrued interest shall be
payable in twelve equal monthly installments
commencing on the Maturity Date.
1.2. Payments of principal and accrued interest of
this Note shall be made to the holder at 00 Xxxxxxxx
Xxxx., Xxx Xxxxx,
Xxx Xxxx 00000, or such other place or places within
the United States as may be specified by the holder
of this Note in a written notice to Co-maker at
least 10 business days before a given payment
date.
1.3. Payments of principal and accrued interest of
this Note shall be made in lawful money of the
United States of America by mailing Co-maker's good
check in the proper amount to such holder at least
three days prior to the due date of such payment
or otherwise transferring funds so as to be received
by such holder on the due date of such payment.
1.4. If any payment on this Note becomes due and
payable on a Saturday, Sunday or other day on which
commercial banks in New
York City are authorized or required by law to
close, the maturity thereof shall be extended to
the next succeeding business day, and no interest on
the principal amount shall be payable during such
extension.
1.5. In no event shall the amount of interest due or
payable hereunder exceed the maximum rate of
interest allowable by applicable law, and in the
event any such payment is inadvertently paid by Co-
maker, or inadvertently received by the holder,
then such excess shall be credited as a payment
of principal. It is the express intent hereof that
Co-maker not pay, and the holder not receive,
directly or indirectly in any manner whatsoever,
interest in excess of that which may be legally
paid by Co-maker under applicable law.
2. Cancellation of Note.
Upon payment in full in accordance with Section 1
hereof of all outstanding obligations under this
Note, Co-maker's obligations in respect of payment
of this Note shall terminate and the holder shall
surrender this Note to Co-maker.
3. Events of Default.
3.1 In the event that:
(a) Co-maker defaults for more than ten (10)
Business
Days after receipt of written notice of failure
to make any payment of principal or interest
required to be made on this Note or any other note
issued by either Co-maker in favor of holder; or (b)
Either Co-maker: (i) commences any case, proceeding
or other action (x) under any existing or future
law of any jurisdiction, domestic or foreign,
relating to bankruptcy, insolvency, reorganization
or relief of debtors, seeking to have an order for
relief entered with respect to it, or seeking to
adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, composition or other
relief with respect to it or its debts or (y)
seeking appointment
of a receiver, trustee, custodian or other
similar official for it or for all or any
substantial part of its assets, or shall make a
general assignment for the benefit of its
creditors; or (ii) is the debtor named in any
other
case, proceeding or other action of a nature
referred to in clause (i) above which (x) results
in the entry of an order for relief or any such
adjudication or appointment or (y) remains
undismissed, undischarged or unbonded for a period of
sixty (60) days; or (iii) takes any action in
furtherance of, or indicating its consent
to, approval of, or acquiescence in, any of the
facts set forth in clause (i) or (ii) above; or
(iv) shall generally not, or shall be unable to,
or shall admit in writing its inability to, pay its
debts as they become due;
then, and in any such event (an "Event of Default"),
and at any time thereafter, if such Event of
Default shall then be continuing, any holder of
this Note may, by written notice to Company,
declare this Note due and payable, whereupon this
Note shall be due and payable without presentment,
demand, protest or other notice of any kind, all
of which are hereby expressly waived. It is
hereby expressly agreed that should any Event of
Default exist and be continuing then, in such
event, simple interest shall accrue on the
outstanding principal balance of this Note from
the date of any Event of Default at the rate of
twelve percent (12.0%) percent per annum.
4. Investment Representation.
Each holder of this Note hereby acknowledges that
this Note has
not been and will not be registered under the
Securities Act of 1933, as amended (the "Act") or
under any applicable state securities law; and that
Co-maker's reliance on the Section 4(2) exemption
of the Act and on applicable state securities laws
is predicated in part on the representations
hereby
made to Co-maker by the holder that it is acquiring
the Note for investment for its own account.
5. Miscellaneous.
5.1 Upon receipt of evidence reasonably
satisfactory to Co-maker of the loss, theft,
destruction or mutilation of this Note and of a
letter of indemnity reasonably satisfactory to Co-
maker and upon surrender or cancellation of the
Note, if mutilated, Co-maker will make and deliver a
new Note of like tenor in lieu of such lost,
stolen, destroyed or mutilated Note.
5.2 In the event that one of the Events of
Default specified in Section 3 hereof has
occurred and is continuing, the holder of this
Note shall be reimbursed by Co maker for the
payment of its costs including reasonable
attorneys' fees relating to the enforcement of
any of the provisions of this Note.
5.3 This Note and the rights and obligations of Co-
makerand
any holder hereunder shall be construed in
accordance with and be governed by the internal laws
of the State of Delaware.
5.4 Time is of the essence of this Note. If any
provisions of this Note or the application thereof to
any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this
Note and the application of such provisions to other
persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent
permitted by law.
IN WITNESS WHEREOF, each Co-maker has executed
this Note as of the day and year first above written.
EXECUTIVE TELECARD, LTD
By:________________________
________
Name:
Title:
C-SOFT ACQUISITION CORP.
By:________________________
________
Name:
Title:
July 10, 1998
Executive TeleCard, Ltd.
C-Soft
Acquisition
Corp. 0000
Xxxxx
Xxxxxxxx
Xxxxxx, XX
00000
Gentlemen:
This letter is being entered into by AMERICAN
UNITED GLOBAL, INC., a Delaware corporation ("AUGI"),
CONNECTSOFT COMMUNICATIONS CORP., a Delaware
corporation ("CCC"), CONNECTSOFT HOLDING
CORP., a Washington corporation ("Connectsoft"),
and EXECUTIVE TELECARD, LTD., a Delaware corporation
("EXTEL"), and C SOFT ACQUISITION CORP., a Delaware
corporation and a wholly owned subsidiary of EXTEL
("Buyer"), in connection with the Asset Purchase
Agreement (the "Purchase Agreement") dated as of
July 10, 1998, by and among each of the parties
hereto.
The Purchase Agreement contemplates that Buyer
will acquire from CCC and Connectsoft various assets
associated with the FreeAgent Technology and the
CNOC in return for the assumption of the Assumed
Liabilities (in each case as defined in the Purchase
Agreement).
The parties hereto would like to provide
additional consideration to AUGI and to provide an
incentive for AUGI to cooperate with Buyer in
Buyer's development of the FreeAgent Technology by
allowing for the payment of an additional amount
to AUGI if one of the following (a "Triggering
Event") occurs:(i) the Fair Market Value (as defined
below) exceeds the Initial Valuation (as defined
below), on the date (the "Valuation Date") that
is two years after the closing of the purchase
and sale contemplated by the Purchase Agreement
(a "Value Appreciation Event"), or (ii) sale of
substantially
all of the assets or dissolution of Buyer or a
merger or consolidation of Buyer where the
stockholders of Buyer receive cash, property or
securities of a company other than Buyer in return
for their stock of Buyer (a "Business Sale") on a
date (the "Sale Date") that is prior to the date that
is two years after the closing of the purchase and
sale contemplated by the Purchase Agreement, and
the consideration paid to EXTEL or Buyer for the
Business Sale is an amount in excess of the
Initial Valuation (a "Sale Appreciation Event").
In consideration of the foregoing, the parties
hereto agree as follows:
1. Determination of Fair Market Value or Sale
Value of the Business Sale. As soon as practicable
after the Valuation Date, (i) if the common stock of
Buyer is Listed (as defined below), EXTEL and Buyer
shall determine the Fair Market Value
of the Buyer as provided in Section 3(i), or (ii) if
the common stock of Buyer is not Listed, the Fair
Market Value of the Buyer shall be determined by the
appraisal process as described in Section 3(ii).
As soon as practicable after the Sale Date, the Sale
Value of the Business Sale shall be determined
as provided in Section 4. If based upon the Fair
Market Value or Sale Value a Valuation
Appreciation Event is determined to have occurred,
EXTEL, Buyer and AUGI shall be notified promptly.
2. Additional Consideration. If a Triggering
Event is determined to have occurred, EXTEL and
Buyer shall, within 10 business days after the
determination of Fair Market Value or Sale Value of
the Business, pay to AUGI as follows: (i) an amount
equal to 7.5% of the difference of the Fair Market
Value or Sale Value less the Initial Valuation,
if the Fair Market Value or Sale Value is less
than $10 million; (ii) an amount equal to 7.5% of
the Fair Market Value or Sale Value, if the Fair
Market Value is $25 million or more; (iii) if the
Fair Market Value or Sale Value is $10 million or
more but less than $25 million, an amount equal
to the sum of (A) 7.5% of the difference of Fair
Market Value or Sale Value less the Initial
Valuation, plus (B) 7.5% multiplied by the
Initial Valuation multiplied by the quotient of (x)
the Fair Market Value or Sale Value divided by (y)
$25 million. Such payment may be made, at the
option of EXTEL and Buyer, (a) in cash or (b) if
EXTEL common
stock is then Listed, in common stock of EXTEL
valued as of the average for the ten trading days
prior to the date of payment at its Market Price
(as defined below) as of such value date, or (c))
if Buyer common stock is then Listed, in common
stock of Buyer valued as of the average for the ten
business days prior to the date of payment at its
Market Price as of such value date.
3. Fair Market Value. For purposes of this
letter, the term "Fair Market Value" of the
Buyer shall be determined as follows: (i) If on
the Valuation Date the common stock of Buyer is
Listed (as defined below), the Fair Market Value
shall be the Market Capitalization (as defined
below). (ii) If the common stock of Buyer is not
Listed, Fair Market Value of the Buyer shall be as
determined as of the Valuation Date by appraisal in
the manner set forth in Section 7 below.
4. Sale Value. "Sale Value" shall mean all
consideration received upon a Business Sale by Buyer
(in the case of an asset sale) or the stockholders of
Buyer (in the case of a stock sale, merger or
consolidation). In determining the "Sale Value" of
the Business, if any of the consideration paid to
Buyer or the stockholders of Buyer in the sale of the
Buyer consists of property other than cash, such
consideration shall be valued (i) at the Market
Price, if the property consists of securities that
are Listed, or (ii) at the value determined by
appraisal in the manner set forth in Section 7
below, in each case as of the Sale Date.
5. Market Price. The "Market Price" of stock
means (i) if the stock is Listed throughout the
period of 15 consecutive trading days consisting
of the day as of which the Market Price is being
determined and the 14 consecutive trading days
prior to such day (the "Pricing Period"), the closing
price of the stock
averaged over the 15 consecutive trading
constituting the Pricing Period, or (ii) if the
stock is not Listed throughout the Pricing
Period, the value of the stock determined by
agreement of EXTEL (and Buyer) and AUGI or, if they
are unable to reach agreement within 30 days after
the date as of which Market Price is to be
determined, the value of the stock as determined by
appraisal in the manner set forth in Section 7
below.
6. Definitions of "Listed," "Market
Capitalization" and
Initial Valuation. (i) Stock shall be considered
"Listed" when the stock of the applicable company or
any successor company is listed on an established
national regional stock exchange or is admitted to
quotation on the Nasdaq Stock Market. (ii) The
"Market Capitalization" of Buyer as of the
Valuation Date shall mean the sum of (x) the number
of shares of Buyer common stock outstanding, plus
the number of shares of Buyer common stock
issuable upon conversion of other Buyer capital
stock that is convertible into Buyer common stock
without the
payment of additional consideration, multiplied by
the Market Price of Buyer common stock as of such
date, plus (y) the number of shares of Buyer common
stock issuable upon exercise of "in the money"
rights to acquire Buyer capital stock (where the
consideration payable to exercise such rights is
less than the value of such Buyer capital stock
received upon exercise), multiplied by the Market
Price of Buyer common stock as of such date, less
the aggregate consideration paid if all such rights
were exercised. (iii) "Initial Valuation" shall
mean the sum of (x) the principal amount of the
Assumed Liabilities plus (y) the gross proceeds
from the proposed offering by Buyer described in
the private placement memorandum of Buyer dated on
or about July 15, 1998, plus all costs incurred by
Buyer related
to the offering (estimated at $300,000).
7. Appraisal. Any appraisal required to be
conducted hereunder shall be conducted by an
investment banking firm mutually selected by EXTEL,
Buyer and AUGI. If such parties cannot agree upon
an appraiser within 30 days after the date as of
which value is to be determined, EXTEL and Buyer
shall choose one appraiser and AUGI shall choose
another appraiser within 10 days after such 30-
day period, and these two appraisers shall select a
third appraiser, which third appraiser shall perform
the appraisal. The costs of the appraiser performing
the appraisal shall be shared equally by EXTEL
(together with Buyer in such proportions as they
may agree) and AUGI, and any appraisers engaged
separately by EXTEL (and Buyer) or AUGI shall be
borne by EXTEL (and Buyer) or AUGI, respectively.
Prompt notice of the appraiser's determinations
shall be given to EXTEL, Buyer and AUGI. The
determinations of the appraiser shall be final and
binding on the parties hereto.
8. Miscellaneous. This letter shall be subject to
the same
provisions as are set forth in Articles 17, 18 and 19
of the Agreement to the same extent as if such
Articles were set forth fully herein.
9. Governing Law. This letter, the rights and
obligations of the parties hereto, and any claims
or disputes relating thereto, shall be governed
by and construed in
accordance with the laws of the State of
Delaware (but not including the choice of law rules
thereof).
10. Fairness. Buyer shall not take any actions
that would unfairly reduce the value of the rights
granted to AUGI hereunder and that would not be
permissible under applicable law if AUGI were a
common stockholder of Buyer.
11. Assignment. AUGI may assign all or any part of
its rights under this Agreement, subject to
compliance with any applicable securities laws.
AUGI understands that the rights under this
Agreement have not been registered under the
Securities Act of 1933, as amended, or applicable
blue sky laws and is acquiring such rights (to
the extent they may be determined to constitute
securities) without a view to resale or
distribution.
12. Counterparts. To facilitate execution, this
letter may be executed in as many counterparts
as may be required; and it shall not be necessary
that the signatures of, or on behalf of, each
party, or that the signatures of all persons
required to bind any party, appear on each
counterpart; but it shall be sufficient that the
signature of, or on behalf of, each party, or that
the signatures of the persons required to bind
any party, appear on one or more of the counterparts.
All counterparts shall collectively constitute a
single agreement. It shall not be necessary in
making proof of this letter to produce or
account for more than a number of counterparts
containing the respective signatures of, or on behalf
of, all of the parties hereto.
By signing below, each of the parties indicates its
agreement with the foregoing, as of the date first
set forth above.
AMERICAN UNITED GLOBAL, INC.
By:
Name:
Title:
CONNECTSOFT COMMUNICATIONS
CORP.
By:
Name:
Title:
CONNECTSOFT HOLDING CORP.
By:
Name:
Title:
EXECUTIVE TELECARD, LTD.
By:
_________________________
_______ Name:
Title:
C-SOFT ACQUISITION CORP.
By:
_________________________
_______ Name:
Title:
