Exhibit 2.8
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is entered into
effective as of July 26, 1999, by and among Telenetics Corporation, a California
corporation (the "Buyer"), Sierra Digital Communications, Inc., a California
corporation (the "Seller"), T. Xxxxx Xxxxxxxxx, an individual ("Xxxxxxxxx"),
Xxxxxx XxXxxx, an individual ("XxXxxx"), Xxxx Xxxxx, an individual ("Xxxxx") and
Xxx Xxxxxx, an individual ("Xxxxxx," and together with XxXxxx and Xxxxx, the
"Management Employees"). This Agreement contemplates a transaction in which the
Buyer will purchase certain assets and assume certain liabilities and contracts
from the Seller in return for the consideration described herein.
RECITALS
A. The Seller is engaged in the business of designing and manufacturing
microwave communications devices.
B. The Seller is experiencing financial difficulties and is unable to
obtain the funds necessary to complete certain of Seller's contracts with its
customers. As a result, Seller is unable to pay its debts in full as they come
due.
C. Because of the Seller's financial difficulties, the Seller has
determined that it is in the best interests of the Seller's shareholders and the
Seller's creditors to proceed with an orderly liquidation of the Business (as
hereinafter defined). The Seller has been attempting to find new financing,
investor money or other buyers for some or all of the assets of the Seller. The
price and terms set forth herein reflect the fair market value of the Acquired
Assets (as hereinafter defined) and provides the Seller with sufficient
consideration to pay Xxxxxxxxx, the secured creditor, satisfy wage claims of the
Management Employees and other employees of the Seller, as well as resolve the
claims of the unsecured creditors of the Seller.
X. Xxxxxxxxx is the sole secured creditor of the Seller, under the
terms of that certain Loan and Security Agreement dated March 8, 1997, and the
UCC-1 Financing Statement filed with the California Secretary of State on April
17, 1998, File No. 9811060212, pursuant to which Xxxxxxxxx has a perfected
security interest in all of the assets of the Seller, securing a loan with a
current balance of principal and interest in excess of $200,000.
E. The Seller desires to sell and the Buyer desires to purchase
substantially all of the assets of the Seller, and assume certain liabilities
and contracts of the Seller pursuant to the terms of this Agreement, including
the condition that Xxxxxxxxx release his lien on the assets of the Seller
including the Acquired Assets (as hereinafter defined).
F. In addition, the Seller desires to satisfy certain of its payroll
obligations to the Management Employees by directing the Buyer to pay over a
portion of the consideration for the Acquired Assets that otherwise would be
payable to the Seller directly to the Management Employees.
NOW, THEREFORE, in consideration of the premises and the mutual
promises made in this Agreement, and in consideration of the representations,
warranties and covenants contained in this Agreement, the parties agree as
follows.
1. DEFINITIONS.
"ACCOUNTS RECEIVABLE" means all of the Seller's accounts
receivable, including the proceeds thereof held in trust in that certain
interest bearing account maintained at Roseville First National Bank (Account
No. 00000000), as more particularly described on EXHIBIT A attached hereto.
"ACQUIRED ASSETS" means the following assets of the Seller:
(a) All right, title and interest in and to the Technology.
(b) All Intellectual Property associated with the Technology.
(c) All rights under all Assumed Contracts and Assumed
Liabilities.
(d) All software, firmware, codes, documents and other
personal property or information owned by the Seller in connection with the
Technology.
(e) All marketing plans, sales leads and customer lists.
(f) All Accounts Receivable.
(g) All licenses used in the Business, including without
limitation, the Seller's license issued by the Federal Communications
Commission.
(h) All right, title and interest in and to the name Sierra
Digital Communications.
"ASSUMED CONTRACTS" means the contracts described in Section
3(e) below and identified in the Disclosure Schedule to be assigned to the
Buyer.
"ASSUMED LIABILITIES" means the liabilities of the Seller
identified in the Disclosure Schedule to be assumed by the Buyer.
"BUSINESS" means the existing and prospective business and
operations of the Seller.
"CLOSING" and "CLOSING DATE" have the meanings set forth in
Section 2(d) below.
"COMMON STOCK" means the common stock, no par value per share,
of the Buyer.
"DISCLOSURE SCHEDULE" has the meaning set forth in Section 3
below.
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"XXXXXXXXX XXXX" means the perfected security interest of
Xxxxxxxxx in the Acquired Assets as described in Recital D of this Agreement.
"INTELLECTUAL PROPERTY" means (a) patents, patent
applications, patent disclosures, and improvements thereto, (b) trademarks,
service marks, trade dress, logos, trade names and corporate names and
registrations and applications for registration thereof, (c) copyrights and
registrations and applications for registration thereof, (d) mask works and
registration and applications for registration thereof, (e) trade secrets and
confidential business information (including ideas, formulas, compositions,
inventions (whether patentable or unpatentable and whether or not reduced to
practice), know-how, manufacturing and production processes and techniques,
research and development information, drawings, specifications, designs, plans,
proposals, technical data, copyrightable works, financial, marketing and
business data, pricing and cost information, business and marketing plans, and
customer and supplier lists and information), (f) other proprietary rights, and
(g) copies and tangible embodiments thereof (in whatever form or medium).
"ORDINARY COURSE OF BUSINESS" means the ordinary course of
business consistent with past custom and practice.
"PURCHASE PRICE" has the meaning set forth in Section 2(c)
below.
"REGISTRATION RIGHTS AGREEMENT" has the meaning set forth in
Section 2(c) below.
"RENTED PREMISES" has the meaning set forth in Section 3(l)
below.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHARES" has the meaning set forth in Section 2(c) below.
"TECHNOLOGY" has the meaning set forth in EXHIBIT B attached
hereto.
2. BASIC TRANSACTION.
(a) PURCHASE AND SALE OF THE ACQUIRED ASSETS. On and subject
to the terms and conditions of this Agreement, the Buyer agrees to purchase from
the Seller, and the Seller agrees to sell, transfer, convey, and deliver to the
Buyer, free and clear of any claims or liens, all of the Acquired Assets at the
Closing for the consideration specified below in this Section 2.
(b) ASSUMPTION OF LIABILITIES. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to assume and become responsible
for all of the Assumed Contracts and Assumed Liabilities at the Closing. The
Buyer will not assume or have any responsibility, however, with respect to any
other obligations or liabilities of the Seller which are not Assumed Contracts
or Assumed Liabilities.
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(c) PURCHASE PRICE AND REGISTRATION RIGHTS. At the Closing,
the Buyer shall purchase the Acquired Assets from the Seller, in exchange for
$110,000 in cash and an aggregate of 110,594 shares (the "Shares") of Common
Stock which shall have a market value of $190,000 as of the date hereof based
upon the closing bid price per share of the Buyer's Common Stock as reported by
the OTC Electronic Bulletin Board (the "Purchase Price"). The Purchase Price
shall be payable at the Closing as follows: (i) $10,000, by cashier's check to
the account of the Seller, (ii) $100,000, by cashier's check and 58,207 shares
of Common Stock having a market value of $100,000 as of the date hereof to
Xxxxxxxxx in consideration for a full release of the Xxxxxxxxx Xxxx, (iii) 3,932
shares of Common Stock having a market value of $6,753 as of the date hereof to
XxXxxx, (iv) 33,313 shares of Common Stock having a market value of $57,234 as
of the date hereof to Xxxxx and (v) 15,142 shares of Common Stock having a
market value of $26,013 as of the date hereof to Xxxxxx. In connection with the
delivery of the Shares as part of the consideration for the Purchased Assets,
the Buyer shall provide the Seller, Xxxxxxxxx and each of the Management
Employees with certain registration rights as contained in the form of
Registration Rights Agreement (the "Registration Rights Agreement") attached
hereto as EXHIBIT C. The parties agree that in the event the Buyer fails to file
a registration statement with the Securities and Exchange Commission in
accordance with the Buyer's registration rights obligations under the
Registration Rights Agreement and have such registration statement be declared
effective by November 1, 1999, Henderson, McLean, Xxxxx and Xxxxxx shall each be
obligated to return their respective portions of the Shares and in exchange
therefor shall be paid, by cashier's check, $100,000, $6,753, $57,234 and
$26,013, respectively. In the event the registration statement is not declared
effective by November 1, 1999, the cash payments required by the preceding
sentence shall not be diminished due to a decrease in the value of the Shares
subsequent to the Closing Date.
(d) THE CLOSING. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of the Seller,
or such other place as mutually agreed by the Seller and the Buyer.
(e) CLOSING AND POST-CLOSING DELIVERIES. At the Closing, to be
not later than July 30, 1999 (the "Closing Date"), (i) the Seller shall deliver
to the Buyer a Xxxx of Sale for the Acquired Assets in the form attached hereto
as EXHIBIT D, (ii) the Buyer shall deliver to the Seller the cash consideration
as described in Section 2(c) and shall deliver to Xxxxxxxxx Buyer's letter
instructing its transfer agent, American Stock Transfer, to issue the shares of
Common Stock and the cash consideration as described in Section 2(c); (iii) the
Buyer shall deliver to each of the Management Employees Buyer's letter
instructing its transfer agent, American Stock Transfer, to issue the shares of
Common Stock as described in Section 2(c); (iv) the Buyer shall deliver to the
Seller a document of Assignment and Assumption of Contracts and Assumed
Liabilities in the form attached hereto as EXHIBIT E, (v) the Buyer will deliver
to each of the Seller, Xxxxxxxxx and the Management Employees the Registration
Rights Agreement, and (vi) Xxxxxxxxx shall deliver to Buyer an original executed
acknowledgment that all amounts due and owing to Xxxxxxxxx by the Seller have
been paid and satisfied in full, and that Xxxxxxxxx releases any and all lien
claims in the Acquired Assets, and (vii) Buyer shall cause the share
certificates evidencing the shares of common stock described in section 2(c) to
be delivered to Xxxxxxxxx and each of the Management Employees as expeditiously
as possible but in no event later than August 15, 1999, and (viii) each party
shall deliver to the other all such agreements, documents and instruments
contemplated by this Agreement or necessary for the conveyance of the Acquired
Assets to the Buyer and the assumption of the Assumed Contracts and Assumed
Liabilities by the Buyer.
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(f) ALLOCATION. The parties agree to allocate the Purchase
Price (and all other capitalizable costs) among the Acquired Assets for all
purposes (including financial accounting and tax purposes) in accordance with
the allocation of the Purchase Price set forth on the Disclosure Schedule.
3. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller (and
Xxxxxxxxx and the Management Employees with respect to Section 3(x) only)
represents and warrants to the Buyer that the statements contained in this
Section 3 are correct and complete as of the date of this Agreement, except as
set forth in the Disclosure Schedule and initialed by the parties.
(a) ORGANIZATION OF THE SELLER. The Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
State of California.
(b) AUTHORIZATION OF TRANSACTION. The Seller has full power
and authority to execute and deliver this Agreement and to perform its
obligations hereunder. Without limiting the generality of the foregoing, the
Seller has taken all actions required for the execution, delivery and
performance of this Agreement by the Seller and the sale of the Acquired Assets
as provided herein. This Agreement constitutes the valid and legally binding
obligation of the Seller, enforceable in accordance with its terms except as
enforceability may be limited by the effect of bankruptcy, insolvency,
reorganization, moratorium or other similar laws generally affecting creditors'
rights and the application of general principles of equity including, but not
limited to, the inability to exercise the right to specific performance in
certain circumstances. The person or persons who have executed this Agreement on
behalf of the Seller are duly authorized to do so by the Board of Directors of
the Seller.
(c) NONCONTRAVENTION. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any statute, regulation, rule, judgment, order, decree,
stipulation, injunction, charge or other restriction of any government,
governmental agency or court to which the Seller is subject or any provision of
the articles or bylaws, as amended, of the Seller or (ii) conflict with, result
in a breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify or cancel, or
require a notice under any contract, lease, sublease, license, sublicense,
franchise, permit, indenture, agreement or mortgage for borrowed money,
instrument of indebtedness, security interest or other arrangement to which the
Seller is a party or by which the Seller is bound or to which any of the
Seller's assets is subject. The Seller need not give any notice to, make any
filing with, or obtain any authorization, consent or approval of any government
or governmental agency in order for the parties to consummate the transactions
contemplated by this Agreement.
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(d) TITLE TO THE ACQUIRED ASSETS. Except for the Xxxxxxxxx
Xxxx which shall be released as of the Closing, the Seller has good and
marketable title, free and clear of all mortgages, liens, pledges, claims,
easements, rights of way, conditions, security interests, encumbrances,
restrictions, charges, imperfections of title or equities of any nature
whatsoever, to all of the Acquired Assets, respectively, real and personal,
tangible and intangible, to be sold, conveyed, transferred and delivered
hereunder. At the Closing, the Buyer will obtain good and marketable title to
the Acquired Assets, free and clear of all liens, security interests, charges or
encumbrances of any kind.
(e) ASSUMED CONTRACTS AND ASSUMED LIABILITIES. Set forth in
the Disclosure Schedule is a list of all written agreements, leases, contracts
and commitments relating to the Acquired Assets to which the Seller is a party
or is otherwise bound as of the date of this Agreement and which the Buyer shall
assume (collectively, the "Assumed Contracts'). The Disclosure Schedule also
sets forth the Assumed Liabilities. To the knowledge of the Seller, the Seller
has, in all material respects, performed all obligations required to be
performed by it under the Assumed Contracts. Each of the other parties to the
Assumed Contracts has, in all material respects, performed all the obligations
required to be performed by them to date thereunder. Each Assumed Contract (i)
is valid, binding and enforceable in accordance with its terms, (ii) is in full
force and effect with no default or dispute existing or, to the knowledge of the
Seller, threatened with respect thereto, and (iii) will not be terminated or
otherwise affected by the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby. Except as set forth on the
Disclosure Schedule, no consent of any third party is required for the
assignment of any Assumed Contract to the Buyer.
(f) INTELLECTUAL PROPERTY. The Disclosure Schedule contains a
true and complete list of all Intellectual Property that is applicable to or
held or used by the Seller in connection with the Acquired Assets. The
Disclosure Schedule includes the following information (to the extent
applicable) for each such item of Intellectual Property: date first used,
whether or not registered, and registration number. To the knowledge of the
Seller, none of the Acquired Assets or any Intellectual Property held or used by
the Seller in connection with the Acquired Assets infringes the Intellectual
Property or other proprietary rights of any other party. All Intellectual
Property developed for the Seller was so developed under agreements with
employees, consultants or others that provide that the Intellectual Property so
developed is a "work made for hire" or otherwise providing for the assignment of
all rights thereto to the Seller.
(g) PATENTS AND PATENT RIGHTS. The Seller has no patents or
applications for patents. To the knowledge of the Seller, the manufacture, use,
sale, marketing or distribution of the Acquired Assets does not violate or
infringe on any patent or any proprietary or personal right of any person or
firm.
(h) COMPLIANCE WITH LAWS. To the knowledge of the Seller, the
business of the Seller has been operated in compliance with all federal, state,
local and foreign laws, regulations and orders, the violation of which would
have a material adverse effect upon any of the Acquired Assets. To the knowledge
of the Seller, all reports and filings required to be made by the Seller with
respect to the Acquired Assets under foreign, federal, state and local statutes,
laws, regulations, rules and ordinances relating to health, safety and
protection of the environment have been filed in a timely manner, and no such
reports or filings are currently required that have not been made.
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(i) CONSENTS. No approvals or consents of or assignments by
any person (including, without limitation, any federal, state or local
governmental or administrative authorities) are necessary in connection with the
execution, delivery or performance of this Agreement.
(j) TAX MATTERS. Except as set forth on the Disclosure
Schedule, all taxes, including, without limitation, income, excise, property,
sales, transfer, use, franchise, payroll, employees' income withholding and
social security taxes imposed or assessed by the United States or by any foreign
country or by any state, municipality, subdivision or instrumentality of the
United States or of any foreign country, or by any other taxing authority, which
are due or payable by the Seller with respect to the Acquired Assets, and all
interest, penalties and additions thereon, whether disputed or not, have been
paid in full; all tax returns or other documents required to be filed in
connection therewith have been accurately prepared and duly and timely filed. No
issues have been raised (or are currently pending) by the Internal Revenue
Service or any other taxing authority in connection with any of the returns and
reports referred to above, and no waivers of statutes of limitations have been
given or requested with respect to the Seller in connection therewith.
(k) LITIGATION. There is no claim, dispute, action, proceeding
(including arbitration), suit, appeal or investigation, at law or in equity,
pending (other than those, if any, with respect to which service of process or
similar notice has not yet been made and which are not within the knowledge of
the Seller) or, to the knowledge of the Seller, threatened against the Seller
involving the Technology or any of the Acquired Assets before any court, agency,
authority, arbitration panel or other tribunal. The Seller is not subject to or
in default with respect to any notice, order, writ, injunction or decree of any
court, agency, authority, arbitration panel or other tribunal involving the
Technology or any of the Acquired Assets other than as set forth on the
Disclosure Schedule.
(l) REAL PROPERTY MATTERS. The Seller owns no real property in
connection with the Business and is not obligated under any lease for real
property in connection with the Business. The Disclosure Schedule contains a
list describing and specifying the location of all real property rented by, or
on behalf of, the Seller (collectively, the "Rented Premises"). The rental
agreements described on the Disclosure Schedule are in full force and effect and
there is no existing default and there is no event that, with the passage of
time, would constitute an event of default under any of such rental agreements
on the part of the landlord or tenant thereunder. Such rental agreements consist
only of the documents described on the Disclosure Schedule, true and complete
copies of which have been delivered to the Buyer.
(m) ENVIRONMENTAL COMPLIANCE.
(i) As of the Closing, except as set forth on the
Disclosure Schedule, no Hazardous Material (as defined in paragraph (iv) below),
underground storage tanks, pipes or sumps are present on the Leased Premises,
and to the best of the Seller's knowledge, no reasonable likelihood exists that
any Hazardous Material present on other property will come to be present on the
Leased Premises. The Seller has conducted no Hazardous Materials Activity in
connection with the Business or at the Leased Premises.
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(ii) The Seller has obtained no Environmental Permits
(as defined in paragraph (iv) below) in connection with the conduct of the
Business, and none are required.
(iii) The Seller has delivered to Purchaser all
records concerning activities of the Seller and all environmental audits and
environmental assessments of the Leased Premises conducted at the request of, or
otherwise possessed by, the Seller. The Seller has complied with all
environmental disclosure obligations imposed upon it with respect to the
Business or the transactions contemplated herein under any applicable law.
(iv) For purposes of this Section 3(m), the following
capitalized terms shall have the following meanings:
(A) "Environmental Laws" shall mean all laws,
rules, regulations, orders, treaties, statutes and codes of any federal, state,
or local governmental authority relating to human health, safety, or the
environment.
(B) "Environmental Permit" shall mean any
approval, permit, license, clearance or consent required to be obtained from any
private person or any governmental authority pursuant to any Environmental Law.
(C) "Hazardous Material" shall mean any material
or substance that is prohibited or regulated by any Environmental Law or that
has been designated by any governmental authority to be radioactive, toxic,
hazardous or otherwise a danger to health, reproduction or the environment.
(D) "Hazardous Materials Activity" shall mean
the transportation, transfer, recycling, storage, use, treatment, manufacture,
investigation, removal, remediation, release, exposure of others to, sale,
handling, or distribution of any Hazardous Material or any product containing a
Hazardous Material.
(n) USE OF THE RENTED PREMISES. No portion of the Rented
Premises is now being or has ever been used by Seller or any of its predecessors
in interest for any of the following:
(i) In a manner requiring the issuance of a permit
covering the discharge or disposal of a pollutant or waste into any waters,
groundwaters or aquifer of the State of California or waters of the United
States pursuant to applicable federal, state or local laws;
(ii) For the treatment, collection, storage or
disposal of any refuse or objectionable waste or material in a manner
inconsistent with, or so as to require a permit or approval pursuant to,
applicable federal, state or local laws;
(iii) For the generation, transport, treatment,
storage or disposal of any hazardous waste subject to federal or state
regulation;
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(iv) For the manufacture, processing, distribution in
commerce, use or disposal of any toxic substance subject to federal or state
regulation;
(v) For storage, handling or processing in any
underground storage tank system subject to federal, state or local regulation;
(vi) For any injection well, dry well or any similar
facility subject to federal, state or local regulation; or
(vii) As a sanitary landfill, open dump or other
waste storage, treatment, disposal, transfer or handling facility subject to
federal, state or local regulation.
(o) COMPLIANCE WITH CONTRACTUAL OBLIGATIONS. Except as
described in the Disclosure Schedule, the Seller is not in default and there is
no event that, with the passage of time or the giving of notice, would
constitute an event of default in the performance, observance or fulfillment of
any of the obligations, covenants or conditions contained in (a) any evidence of
indebtedness, or any agreement or instrument under or pursuant to which any
evidence of indebtedness has been issued, or (b) any other agreement or
instrument to which the Seller is a party or by which the Seller, any of the
properties of the Seller, or the Business is affected, nor has any third party
raised any claim, dispute or controversy with respect to any such evidence of
indebtedness, agreement or instrument. The execution, delivery or performance of
this Agreement does not (i) conflict with or result in a breach of any of the
terms, conditions or provisions of, or constitute a default under, any evidence
of indebtedness or other agreement or instrument referred to in this Section
3(o), or (ii) require the consent of or other action by any trustee or any
creditor of, or investor in, Seller. All of such evidences of indebtedness,
instruments and agreements are valid, binding and in full force and effect.
(p) EMPLOYEES. The Disclosure Schedule contains a list of the
names, current annual rates of salary, bonus, employee benefits, accrued
vacation times, sick pay and other compensation of all the present employees of
the Seller who are intended to be employed by the Buyer on the Closing Date.
There are no employment or consulting contracts or arrangements, including
pensions, bonus or profit sharing plans, or other severance or termination
contracts or arrangements which constitute contractual obligations of the Seller
not terminable on 30 days' notice. There are no collective bargaining agreements
with any union or other bargaining group for any of the Seller's employees.
(q) LABOR MATTERS. To the knowledge of the Seller, the Seller
is in compliance with all federal and state laws respecting employment and
employment practices, terms and conditions of employment, and wages and hours,
and is not engaged in any unfair labor practices.
(r) EMPLOYEE BENEFITS. The Seller does not maintain nor has it
ever maintained an "employee benefit plan" as defined by Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended.
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(s) ENVIRONMENTAL PROTECTION. Except with respect to
environmental matters which are addressed in Section 3(m), to the knowledge of
the Seller, the Seller has obtained all material permits, licenses and other
authorizations which are required under federal, state and local laws relating
to pollution or protection of the environment, including laws relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants or hazardous or toxic materials or wastes into ambient air, surface
water, ground water, or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants or hazardous or toxic materials or wastes.
The Seller is in compliance with all terms and conditions of the required
permits, licenses and authorizations, except when the failure to comply will
not, in the aggregate with all other failures, have a material adverse effect on
the Seller. The Seller is in compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in those laws or contained in any regulation,
code, plan, order, decree, judgment, notice or demand letter issued, entered,
promulgated or approved thereunder all as in effect on the date hereof, except
when the failure to comply will not, in the aggregate with all other failures,
have a material adverse effect on the Seller. There are no past or present
events, conditions, circumstances, activities, practices, incidents, actions or
plans which may interfere with or prevent continued compliance, or which may
give rise to any common law or legal liability of the Seller, or otherwise form
the basis of any claim, action, suit, proceeding, hearing or investigation,
against or involving the Seller based on or related to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling, or the emission, discharge, release or threatened release into the
environment, of any pollutant, contaminant, or hazardous or toxic material or
waste.
(t) RELATED PARTIES. No officer, director or other affiliate
of the Seller, directly or indirectly, is party to any material arrangement with
any third party affecting the design, development, marketing, distribution or
use of the Technology or the Acquired Assets.
(u) UNDERLYING DOCUMENTS. Copies of all documents listed or
described in the Disclosure Schedule have been furnished or made available to
the Buyer. All such documents are true and complete copies, and there are no
amendments or modifications thereto, except as expressly noted in the Disclosure
Schedule.
(v) BROKERS' FEES. The Seller has no liability or obligation
to pay any fees or commissions to any broker, finder or agent with respect to
the transactions contemplated by this Agreement for which the Buyer could become
liable or obligated.
(w) DISCLOSURE. Neither this Agreement nor any of the
schedules or exhibits hereto contains any untrue statement of a material fact or
omits a material fact necessary to make the statements contained herein or
therein, in light of the circumstances in which they were made, not misleading,
and to the best of the Seller there is no fact which has not been disclosed to
the Buyer that materially affects adversely or could reasonably be anticipated
to materially affect adversely the Technology.
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(x) INVESTMENT REPRESENTATIONS. The Seller, Xxxxxxxxx and each
of the Management Employees hereby represent and warrant to the Buyer, severally
and not jointly, with respect to the acquisition of the Shares as follows:
(i) INVESTMENT EXPERIENCE. Each of the Seller,
Xxxxxxxxx and Management Employees has substantial experience in evaluating and
investing in private placement transactions of securities in companies similar
to the Buyer so that each of the Seller, Xxxxxxxxx and Management Employees is
capable of evaluating the merits and risks of its or his respective investment
in the Buyer and has the capacity to protect its or his own respective
interests.
(ii) ACCREDITED INVESTOR. Each of the Seller,
Xxxxxxxxx and Management Employees is either (i) an "accredited investor" as
that term is defined in Securities and Exchange Commission Rule 501 of
Regulation D, as presently in effect, or (ii) has a preexisting personal or
business relationship with the Buyer or any of its officers, directors or
controlling persons, or by reason of the Seller's, Xxxxxxxxx'x or the Management
Employees' business or financial experience or the business or financial
experience of the Seller's, Xxxxxxxxx'x or the Management Employees'
professional advisors who are unaffiliated with and who are not compensated by
the Buyer or any affiliate or selling agent of the Buyer, directly or
indirectly, has the capacity to protect the Seller's, Xxxxxxxxx'x or the
Management Employees' own interests in connection with the acquisition of the
Shares.
(iii) INVESTMENT. Each of the Seller, Xxxxxxxxx and
the Management Employees is acquiring the Shares for investment, not as a
nominee or agent, and not with the view to, or for resale in connection with,
any distribution thereof. Each of the Seller, Xxxxxxxxx and the Management
Employees understands that the Shares have not been registered under the
Securities Act of 1933 ("Securities Act") by reason of a specific exemption from
the registration provisions of the Securities Act, the availability of which
depends upon, among other things, the bona fide nature of the investment intent
and the accuracy of the Seller's representations as expressed herein.
(iv) RULE 144. Each of the Seller, Xxxxxxxxx and the
Management Employees acknowledges that the Shares must be held indefinitely
unless subsequently registered under the Securities Act or unless an exemption
from such registration is available. Each of the Seller, Xxxxxxxxx and the
Management Employees understands and hereby acknowledges that the Buyer is the
only entity that can register the Shares under the Securities Act and that the
Buyer is under no obligation to register the Shares under the Securities Act
with the exception of certain registration rights contained in the form of
Registration Rights Agreement attached hereto. Each of the Seller, Xxxxxxxxx and
the Management Employees is aware of the provisions of Rule 144 promulgated
under the Securities Act which permit limited resale of shares purchased in a
private placement subject to the satisfaction of certain conditions, including,
among other things, the existence of a public market for the shares, the
availability of certain cur rent public information about the Buyer, the resale
occurring not less than a specified number of years after a party has purchased
and paid for the security to be sold, the sale being effected through a
"broker's transaction" or in transactions directly with a "market maker" and the
number of shares being sold during any three-month period not exceeding
specified limitations.
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(v) ACCESS TO DATA. Each of the Seller, Xxxxxxxxx and
the Management Employees has had an opportunity to discuss the Buyer's business,
management and financial affairs with its management. Each of the Seller,
Xxxxxxxxx and the Management Employees also has had an opportunity to ask
questions of officers of the Buyer, which questions were answered to its or his
satisfaction. Each of the Seller, Xxxxxxxxx and the Management Employees
understands that such discussions, as well as any written information issued by
the Buyer, were intended to describe certain aspects of the Buyer's business and
prospects but were not a thorough or exhaustive description. Each of the
Seller's, Xxxxxxxxx'x and the Management Employees' decision to enter into the
transactions contemplated hereby is based on its or his own evaluation of the
risks and merits of the purchase and the Buyer's proposed business activities.
Without limiting the generality of the foregoing, each of the Seller, Xxxxxxxxx
and the Management Employees has had the opportunity to obtain and to review the
following documents of the Buyer: (1) Form 10-QSB for the quarter ended March
31, 1999; (2) Form 10-KSB for the nine month transition period ended December
31, 1998; (3) Form 10-QSB/A for the quarter ended September 30, 1998; and (4)
Form 10-QSB/A for the quarter ended June 30, 1998, in each case as filed with
the SEC. Each of the Buyer, Xxxxxxxxx and the Management Employees understands
that its or his investment in the Shares involves a high degree of risk.
(vi) TAX LIABILITY. Each of the Seller, Xxxxxxxxx and
the Management Employees has reviewed with its or his own tax advisors the
federal, state, local and foreign tax consequences of this investment and the
transactions contemplated by this Agreement. With respect to such tax
consequences, each of the Seller, Xxxxxxxxx and the Management Employees relies
solely on such advisors and not on any statements or representations of the
Buyer or any of its agents. Each of the Seller, Xxxxxxxxx and the Management
Employees understands and agrees that it and he (and not the Buyer) shall be
responsible for any of its or his own tax liability that may arise as a result
of this investment or the trans actions contemplated by this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents
and warrants to the Seller, Xxxxxxxxx and the Management Employees that the
statements contained in this Section 4 are correct and complete as of the date
of this Agreement.
(a) ORGANIZATION AND CAPITALIZATION OF THE BUYER. The Buyer is
a corporation duly incorporated, validly existing and in good standing under the
laws of the State of California. As of July 15, 1999, the authorized capital
stock of the Company consisted of (a) 25,000,000 shares of Common Stock, without
par value, (b) 1,500,000 shares of Series A 7.0% Convertible Redeemable
Preferred Stock, without par value, (c) 128,571 shares of Series B Convertible
Preferred Stock, without par value, (d) 400,000 shares of Series C Convertible
Preferred Stock, without par value and (e) 2,971,429 shares of undesignated
Preferred Stock, of which 9,527,165 shares of Common Stock, 734,284 shares of
Series A 7.0 % Convertible Redeemable Preferred Stock, 128,571 shares of Series
B Convertible Preferred Stock and 400,000 shares of Series C Convertible
Preferred Stock were issued and outstanding.
-12-
(b) AUTHORIZATION OF TRANSACTION. The Buyer has all necessary
corporate power and corporate authority to execute and deliver this Agreement
and to perform its obligations hereunder. Without limiting the generality of the
foregoing, the Buyer has taken all actions required for the execution, delivery
and performance of this Agreement by the Buyer, the purchase of the Acquired
Assets and the issuance of the Shares to the Seller, Xxxxxxxxx and the
Management Employees as provided herein. This Agreement constitutes the valid
and legally binding obligation of the Buyer, enforceable in accordance with its
terms except as enforceability may be limited by the effect of bankruptcy,
insolvency, reorganization, moratorium or other similar laws generally affecting
creditors' rights and the application of general principles of equity including,
but not limited to, the inability to exercise the right to specific performance
in certain circumstances. The person or persons who have executed this Agreement
on behalf of the Buyer have been duly authorized to do so by the Buyer.
(c) NONCONTRAVENTION. Neither the execution and the delivery
of this Agreement, nor the consummation of the actions contemplated hereby, will
(i) violate any statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge or other restriction of any government, governmental agency
or court to which the Buyer is subject or any provision of its charter or bylaws
or (ii) conflict with, result in a breach of, constitute a default under, result
in the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any contract, lease, sublease,
license, sublicense, franchise, permit, indenture, agreement or mortgage for
borrowed money, security interest, or other arrangement to which the Buyer is a
party or by which it is bound or to which any of its assets is subject in a
manner or to an extent that would materially and adversely affect the validity
or enforceability of, or the authority or ability of the Buyer to perform its
obligations under, this Agreement or any of the other documents contemplated by
this Agreement. Other than federal and state securities law notices in
connection with the issuance of the Shares, the Buyer does not need to give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order for the parties to
consummate the transactions contemplated by this Agreement.
(d) CONCERNING THE SHARES. The Shares have been duly
authorized and, when issued in accordance with this Agreement, will be duly and
validly issued, fully paid and non-assessable and will not subject the holder
thereof to personal liability by reason of being such holder. There are no
preemptive rights of any stockholder of the Buyer, as such, to acquire any of
the Shares.
(e) APPROVALS. No authorization, approval or consent of or
filing with any court, governmental body, regulatory agency, self-regulatory
organization, or stock exchange or market or the shareholders of the Buyer is
required to be obtained by the Buyer for the issuance and sale of the Shares
other than the requirements of any applicable blue sky laws. The Buyer has taken
or will take all actions necessary to satisfy the requirements of applicable
blue sky laws.
(f) LITIGATION. There is no action, suit, proceeding, inquiry
or investigation before or by any court, public board or body pending or, to the
knowledge of the Buyer or any of its subsidiaries, threatened against or
affecting the Buyer or any of its subsidiaries, wherein an unfavorable decision,
ruling or finding would materially and adversely affect the validity or
enforceability of, or the authority or ability of the Buyer to perform its
obligations under, this Agreement or any of the other documents contemplated by
this Agreement.
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(g) BROKERS' FEES. The Buyer has no liability or obligation to
pay any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement for which the Seller could become
liable or obligated.
5. COVENANTS AND AGREEMENTS. The parties agree as follows:
(a) GENERAL. If at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the parties will take such further action (including the execution and
delivery of such further instruments and documents) as the other party may
reasonably request, all at the sole cost and expense of the requesting party
(except as set forth in paragraph (c) below).
(b) CONDITION TO TRANSFER OF CERTAIN CONTRACTS. At the
Closing, the Buyer may elect to close the transactions contemplated hereby
notwithstanding the fact that the Seller may have failed to obtain consents to
the transfer of one or more Assumed Contracts which by their terms require the
consent of any other contracting party thereto to the assignment thereof to the
Buyer. The terms of this paragraph (b) shall govern the transfer of the benefits
of each such Assumed Contract. Notwithstanding anything herein to the contrary,
the parties acknowledge and agree that at the Closing the Seller will not assign
to the Buyer any Assumed Contract which by its terms requires the consent of any
other contracting party thereto unless each consent has been obtained prior to
the Closing Date. With respect to each such unassigned Assumed Contract, after
the Closing Date the Seller shall continue to deal with the other contracting
party(ies) to that Assumed Contract as the prime contracting party and shall use
its best efforts to obtain the consent of all required parties to the assignment
of such Assumed Contract, but the Buyer shall be entitled to the benefits of
such Assumed Contract accruing after the Closing Date to the extent that the
Seller may provide the Buyer with such benefits without violating the terms of
such Assumed Contract; and the Buyer agrees to perform at its sole expense all
of the obligations of the Seller to be performed under such Assumed Contract the
benefits of which the Buyer is receiving after the Closing Date.
(c) EMPLOYEES. The Seller acknowledges that the Buyer intends
to hire some of the Seller's current employees, as the Buyer's employees. The
Seller will cooperate fully in providing the necessary information or to perform
any other duties as may be reasonably requested by the Buyer to accomplish this
result. Any current employee of the Seller who is hired by the Buyer shall be
terminated by the Seller prior to the Closing Date and deemed a "new hire" by
the Buyer on the Closing Date and the Buyer shall have no liability whatsoever
on account of such hired employee's previous employment by the Seller, nor shall
the Buyer assume or otherwise be responsible for any past or future obligation
of the Seller to such employees; PROVIDED, HOWEVER, that with respect to any
such employee of the Seller that is hired by the Buyer, the Buyer agrees that,
in determining vacation and sick leave accrual rates after the date of hire by
Buyer, such employee shall be given credit for the time employed by the Seller.
The Seller acknowledges that it shall be solely responsible for discharging any
such liability to such employees including, but not limited to, any payment,
compensation or benefit under any severance, vacation, sick pay, employee
benefit, worker's compensation, medical, insurance, bonus or similar plan or
arrangement and shall indemnify and hold harmless the Buyer with regard to such
liabilities, subject to and in accordance with the procedures set forth in
Section 6.
-14-
(d) CONDITION OF ACQUIRED ASSETS. Buyer acknowledges that it
has been afforded the opportunity to inspect and has conducted due diligence
investigations of the Acquired Assets, and accordingly is purchasing the
Acquired Assets in their "AS IS" condition.
6. INDEMNIFICATION.
(a) INDEMNIFICATION OF LOSSES. The Seller hereby indemnifies
the Buyer against Losses (as defined below), and the Buyer hereby indemnifies
the Seller, Xxxxxxxxx and each of the Management Employees against Losses, as
set forth in this Section 6. If the Buyer shall have suffered a Loss by reason
of (i) the breach of any of the representations or warranties or covenants made
by the Seller herein, or (ii) any liability or claim arising prior to the
Closing with respect to the Acquired Assets or Assumed Contracts (except Losses
related to Assumed Liabilities) the Buyer shall be indemnified for such Loss by
the Seller as set forth in this Section 6. If the Seller, Xxxxxxxxx or any of
the Management Employees shall have suffered a Loss by reason of (x) the breach
of any of the representations or warranties or covenants made by the Buyer
herein, (y) the Assumed Contracts, or (z) the Assumed Liabilities the Seller,
Xxxxxxxxx and the Management Employees shall be indemnified for such Loss by the
Buyer as set forth in this Section 6. The party who is requested to provide
indemnity is herein referred to as "Indemnitor" and the party requesting
indemnity is herein referred to as "Indemnitee." "Loss" shall mean any losses,
liabilities, claims, damages and expenses incurred including, without
limitation, penalties, fines, interest, amounts paid in settlement and
reasonable fees and disbursements of counsel, and reasonable expenses incurred
in connection with any investigation, action, suit or proceeding instituted
against Indemnitee.
(b) PAYMENT. At such time as the indemnifiable amount of a
Loss has been determined in accordance with this Section 6 (a "Liquidated
Claim"), (A) if resulting from a claim made by the Buyer, the Seller shall
immediately pay the Buyer the amount of the Liquidated Claim, or (B) if
resulting from a claim made by the Seller, Xxxxxxxxx or the Management
Employees, the Buyer shall immediately pay the Seller, Xxxxxxxxx and/or the
Management Employees the amount of the Liquidated Claim, as the case may be. No
forbearance of Indemnitee in demanding payment from an Indemnitor shall act as a
waiver of any right of Indemnitee to receive payment from Indemnitor, nor shall
it relieve Indemnitor of any obligation to Indemnitee under this Agreement.
(c) NOTICE OF CLAIMS. If Indemnitee has any claim for a Loss
(a "Claim"), it will give prompt written notice thereof to Indemnitor, including
in such notice a brief description of the facts upon which Claim is based and
the amount thereof.
(d) THIRD PARTY CLAIMS. If Indemnitee becomes aware of a third
party claim that it believes may result in a Claim (a "Third Party Claim"),
Indemnitee shall promptly notify Indemnitor of such Third Party Claim, and
Indemnitor shall be entitled, at the expense of Indemnitor, to defend such Third
Party Claim.
(e) DISPUTED CLAIMS. If Indemnitor objects to any Claim or
Third Party Claim, it shall give written notice of such objection and brief
statement of the grounds of such objection to Indemnitee within 20 business days
after notice is received. If no such notice is given, such claim shall be a
Liquidated Claim. If such objection is made, Indemnitor and Indemnitee shall
meet and use their best efforts to settle the dispute in writing which, when
resolved, shall be a Liquidated Claim.
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(f) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations, warranties and indemnity obligations of the parties set forth
in this Agreement will continue for a period of three years after the Closing
Date.
7. MISCELLANEOUS.
(a) PRESS RELEASES AND ANNOUNCEMENTS. Neither the Seller nor
Xxxxxxxxx shall issue any press release or announcement relating to the subject
matter of this Agreement without the prior written approval of the Buyer;
provided, however, that each of Seller and Xxxxxxxxx may make any public
disclosure it or he believes in good faith is required by law or regulation (in
which case the Seller and Xxxxxxxxx will advise the Buyer prior to making the
disclosure).
(b) NO THIRD PARTY BENEFICIARIES. This Agreement shall not
confer any rights or remedies upon any person other than the parties and their
respective successors and permitted assigns.
(c) ENTIRE AGREEMENT. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the parties and
supersedes any prior understandings, agreements, or representations by or
between the parties, written or oral, that may have related in any way to the
subject matter hereof, including, without limitation, the Letter Agreement dated
June 18, 1999 entered into by and between the Buyer and the Seller.
(d) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the parties named herein and their respective
successors and permitted assigns. No party may assign either this Agreement or
any of its rights, interests or obligations hereunder without the prior written
approval of the other party.
(e) COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) HEADINGS. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) NOTICES. All notices, requests, demands, claims and other
communications hereunder shall be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly given three business days
after mailing if sent by registered or certified mail, return receipt requested,
postage prepaid and addressed to the intended recipient as set forth below:
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If to the Seller:
Sierra Digital Communications, Inc.
0000 Xxxxxx Xxxxxx, Xxxxx 0
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxxx
If to Xxxxxxxxx:
T. Xxxxx Xxxxxxxxx
0000 Xxxx Xxxxxx Xxxxx
Xxxxxx Xxxxxxx, Xxxxxxxxxx 00000-0000
If to XxXxxx:
Xxxxxx XxXxxx
0000 Xxxxxxxxxxx Xxx
Xxxxxxx Xxx, Xxxxxxxxxx 00000
If to Xxxxx:
Xxxx Xxxxx
X.X. Xxx 0000
Xxxxx Xxxx, Xxxxxxxxxx 00000
If to Xxxxxx:
Xxx Xxxxx
0000 Xxxxxx Xxxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
If to the Buyer:
Telenetics Corporation
00000 Xxxxx Xxxxxxx Xxxxx
Xxxx Xxxxxx, Xxxxxxxxxx 00000
Attn: President
-17-
With a copy to:
Xxxxx & Xxxxxx, LLP
000 Xxxxx Xxxxxxxxx, Xxxxx 0000
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx, Esq.
Any party may give any notice, request, demand, claim, or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim or other communication shall be deemed to
have been duly given unless and until it any is received by the person for whom
it is intended. Any party may change the address to which notices, requests,
demands, claims and other communications hereunder are to be delivered by giving
the other party notice in the manner herein set forth.
(h) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws (and not the law of conflicts) of
the State of California.
(i) AMENDMENTS AND WAIVERS. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
the Buyer and the Seller.
(j) EXPENSES. Each of the Buyer, the Seller and Xxxxxxxxx will
bear its or his own costs and expenses (including legal fees and expenses)
incurred in connection with this Agreement and the transactions contemplated
hereby.
(k) CONSTRUCTION. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rule of strict construction shall be applied against any party. Any
reference to any federal, state, local or foreign statute or law shall be deemed
also to refer to all rules and regulations promulgated thereunder, unless the
context requires otherwise.
(l) INCORPORATION OF EXHIBITS AND SCHEDULES. The exhibits and
schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
(m) BULK TRANSFER LAWS. The Buyer acknowledges that the Seller
will not comply with the provisions of any bulk transfer laws of any
jurisdiction in connection with the transactions contemplated by this Agreement.
The Seller shall indemnify the Buyer for any liability with respect to any such
non- compliance except any liability related to the Assumed Liabilities.
(n) TRANSFER TAXES. Any and all sales, use or other transfer
taxes arising from the transactions contemplated by this Agreement will be paid
by the Buyer.
(o) NO JOINT VENTURE OR PARTNERSHIP. This Agreement shall not
be construed to create a joint venture or partnership relationship among the
parties hereto.
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(p) STATUS OF XXXXXXXXX. It is acknowledged that except for
the representations and warranties of Xxxxxxxxx set forth in Section 3(x), the
joinder of Xxxxxxxxx in this Agreement is solely with regard to his status as
the secured creditor of the Seller and to enable the Buyer to be assured that
the sale and transfer of the Acquired Assets will be free of the Xxxxxxxxx Xxxx.
The joinder of Xxxxxxxxx shall not be construed as an assertion that he is the
owner or seller of the Acquired Assets, that he has any liability or
responsibility for any obligations of the Seller, or that his status is other
than as a secured creditor in connection with the Xxxxxxxxx Xxxx.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.
TELENETICS CORPORATION,
a California corporation
By: /S/ XXXXXXX X. ARMANI
------------------------------------
Xxxxxxx X. Armani, President
SIERRA DIGITAL COMMUNICATIONS, INC.,
a California corporation
By: /S/ XXXX XXXXX
------------------------------------
Xxxx Xxxxx, Chief Executive Officer
/S/ XXXXX XXXXXXXXX
----------------------------------------
T. Xxxxx Xxxxxxxxx
/S/ XXXXXX X. XXXXXX
----------------------------------------
Xxxxxx XxXxxx
/S/ XXXX XXXXX
----------------------------------------
Xxxx Xxxxx
/S/ XXX XXXXXX
----------------------------------------
Xxx Xxxxxx
-19-
EXHIBIT A
---------
Accounts Receivable
EXHIBIT B
---------
Technology
Short-range microwave radio transmission (18, 23,24 and 31 Ghz) for
application of data and video information.
EXHIBIT C
---------
Registration Rights Agreement
EXHIBIT D
---------
Xxxx of Sale
EXHIBIT E
---------
Assignment and Assumption Agreement
DISCLOSURE SCHEDULE
-------------------
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