ASSET PURCHASE AGREEMENT
among
PRO NOTES, INC.,
XXXX XXXXXXX
and
PRONOTES ACQUISITION CORP.
-----------------------
October __, 1996
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TABLE OF CONTENTS
Page
I. PURCHASE AND SALE OF ASSETS.........................................1
1.1 Assets to be Transferred..................................1
1.2 Excluded Assets...........................................3
1.3 Liabilities to be Assumed.................................3
1.4 Excluded Liabilities......................................4
II. PURCHASE PRICE......................................................5
2.1 Purchase Price............................................5
2.2 Payment of Purchase Price.................................5
2.3 Allocation of Purchase Price..............................7
III. CLOSING.............................................................7
3.1 Closing...................................................7
IV. REPRESENTATIONS AND WARRANTIES OF SELLER
AND COSTILO.........................................................8
4.1 Organization; Standing; Authority.........................8
4.2 Authorization; Conflicts..................................8
4.3 Consents..................................................8
4.4 Financial Statements......................................9
4.5 Contracts.................................................9
4.6 Acquired Receivables.....................................10
4.7 Title to Property and Assets.............................10
4.8 Intellectual Properties..................................10
4.9 Compliance with Applicable Laws..........................11
4.10 Absence of Certain Events................................11
4.11 Employees................................................13
4.12 Employee Relations.......................................13
4.13 Suppliers and Customers, Etc.............................14
4.14 Benefit Plans............................................14
4.15 Inventory................................................15
4.16 Insurance................................................15
4.17 Environmental Matters....................................15
4.18 Capital and Advertising Expenditures.....................16
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Page
4.19 Brokers..................................................16
4.20 Litigation...............................................16
4.21 Arrangements with IBM....................................16
4.22 Bank Accounts; Powers of Attorney........................17
4.23 Capital Stock............................................17
4.24 Complete Business; Assets................................17
4.25 Taxes....................................................17
4.26 No Misrepresentation by Seller or Costilo; Disclosure....17
V. REPRESENTATIONS AND WARRANTIES OF BUYER............................18
5.1 Organization; Standing; Authority........................18
5.2 Authorization; Conflicts.................................18
5.3 Consents.................................................18
5.4 No Misrepresentation.....................................18
VI. CERTAIN AGREEMENTS OF SELLER, COSTILO AND BUYER....................19
6.1 Expenses of Sale.........................................19
6.2 Publicity................................................19
6.3 Post-Closing Access......................................19
6.4 Non-Competition, Non-Solicitation and Non-Disclosure.....20
VII. CERTAIN EMPLOYEE MATTERS...........................................21
7.1 Employment of Costilo....................................21
7.2 Severance Obligations....................................21
VIII. CLOSING DELIVERIES.................................................21
8.1 Deliveries of Seller.....................................21
8.2 Deliveries of Buyer......................................22
IX. SURVIVAL AND INDEMNIFICATION.......................................23
9.1 Survival of Representations and Warranties...............23
9.2 Indemnification by Seller and Costilo....................23
9.3 Indemnification by Buyer.................................23
9.4 Notice and Defense of Third Party Claims.................24
9.5 Right of Offset; Claims..................................24
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Page
X. MISCELLANEOUS......................................................25
10.1 Certain Definitions......................................25
10.2 Notices..................................................26
10.3 Brokers..................................................27
10.4 Entire Agreement.........................................27
10.5 Waivers and Amendments; Preservation of Remedies.........27
10.6 No Third-Party Beneficiaries.............................27
10.7 Governing Law............................................27
10.8 Bulk Transfer Laws.......................................27
10.9 Binding Effect; Assignment; Parties in Interest..........28
10.10 Counterparts.............................................28
10.11 Further Assurances.......................................28
10.12 Schedules................................................29
10.13 Captions.................................................29
10.14 Guarantee................................................29
SCHEDULES
SCHEDULE 1.1(g) Assumed Contracts
SCHEDULE 1.4(a) Seller's Existing Liabilities
SCHEDULE 2.3 Purchase Price Allocation Procedures
SCHEDULE 4.1 Foreign Qualifications
SCHEDULE 4.3 Seller Consents
SCHEDULE 4.4 Balance Sheet Items
SCHEDULE 4.5 Contracts
SCHEDULE 4.6 Acquired Receivables
SCHEDULE 4.7 Real Property
SCHEDULE 4.8 Intellectual Properties
SCHEDULE 4.9 Compliance with Laws
SCHEDULE 4.10 Absence of Certain Events
SCHEDULE 4.11 Employees, Salaries and Severance Obligations
SCHEDULE 4.13 Suppliers and Customers, Etc.
SCHEDULE 4.14 Benefit Plans
SCHEDULE 4.16 Insurance
SCHEDULE 4.17 Environmental Matters
SCHEDULE 4.18 Capital and Advertising Expenditures
SCHEDULE 4.20 Litigation
SCHEDULE 4.21 Certain IBM Matters
SCHEDULE 4.22 Bank Accounts and Powers of Attorney
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Page
SCHEDULE 4.23 Capital Stock
SCHEDULE 4.25 Certain Tax Matters
SCHEDULE 5.3 Buyer Consents
EXHIBITS
EXHIBIT A Form of Employee Non-Disclosure Agreement
EXHIBIT B Form of Costilo Employment Agreement
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT dated as of October __, 1996 among PRO
NOTES, INC., a Pennsylvania corporation having offices at 0000 Xxxxx Xxxxxx,
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000 ("Seller"), XXXX XXXXXXX, an individual
residing at 0000 Xxxxx Xxxxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000 ("Costilo"), and
PRONOTES ACQUISITION CORP., a Pennsylvania corporation, with offices c/o Global
Intellicom, Inc., 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 ("Buyer").
W I T N E S S E T H:
WHEREAS, Seller is engaged in the business of developing, marketing,
selling and distributing speech recognition computer software, including,
without limitation, related developer's tools and voice command control
applications (collectively, the "Business"); and
WHEREAS, Seller wishes to sell, and Buyer wishes to purchase, all of
the business and substantially all of the properties and assets of Seller, all
upon the terms and subject to the conditions set forth in this Agreement; and
WHEREAS, as a condition to consummating the transactions contemplated
by this Agreement, Buyer has required that Costilo, as the owner of
approximately 53% of the issued and outstanding shares of the capital stock of
Seller as well as certain Intellectual Property (as defined in Section 1.1(f))
used in Seller's business or relating to the Business, join with Seller in
making representations and warranties to Buyer concerning Seller and agree to
various other matters with Buyer concerning the transactions contemplated
hereunder, and, as the foregoing transactions and the transactions contemplated
hereunder provide benefit to Costilo, Costilo is willing to make such
representations, warranties and agreements;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
I. PURCHASE AND SALE OF ASSETS.
1.1 Assets to be Transferred. Upon the terms and subject
to the conditions of this Agreement, Seller hereby sells, assigns, transfers and
conveys to Buyer, and Buyer hereby purchases and accepts from Seller, all of
Seller's right, title and interest in and to all of its assets and properties,
real and personal, tangible and intangible, of every kind and wherever situated,
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except as set forth in Section 1.2 hereof (collectively, the "Assets"),
including, without limitation, the following:
(a) all interests in real property, whether
owned or leased (including, without limitation, Seller's leasehold interest in
the real property located at 0000 Xxxxx Xxxxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx
19149), and the following rights relating to each such property: all tenements,
rights, hereditaments, easements and appurtenances belonging or in any way
appertaining thereto or to the reversion or remainder thereof, together with any
buildings and improvements erected thereon and fixtures appurtenant thereto, and
all right, title and interest in any rights-of-way, public places, appendages,
alleys, gores and strips of land adjoining or appurtenant thereto which are now
or hereafter used in connection therewith and awards made or to be made in lieu
of any of the foregoing;
(b) all personal property, whether owned or
leased, including, without limitation, machinery, equipment, furniture and
furnishings, motor vehicles, maintenance and operating supplies, tools and spare
parts, including, all accessions, accessories, additions, parts and replacements
and, in each case, whether or not affixed to any of the foregoing;
(c) all inventories, including, without
limitation, raw materials, work- in-process, finished goods, supplies, labels
and sales and promotional materials and brochures;
(d) all trade and other accounts and notes
receivable, and all royalties, advertising receivables and all other amounts due
Seller under all license, royalty and other similar agreements, in each case,
unpaid at the time of the Closing (as defined in Section 3 hereof)
(collectively, the "Acquired Receivables");
(e) all claims, causes of action and similar
rights, whether xxxxxx or inchoate, fixed or contingent, including, without
limitation, unliquidated rights under manufacturers' and vendors' warranties;
(f) all trademarks and trade names (including,
without limitation, the trademark and/or trade name "Pro Notes" and any
derivatives thereof), patents, copyrights, service marks, brand names, logos,
characters, fictitious business names and other marks, know-how, recipes,
processes, inventions, trade secrets, formulas, technical information, processed
technology, plans, drawings, specifications and prints, computer software
(including, without limitation, the source and object codes thereto) and all
other proprietary rights and intangible property, including, in each case, all
pending applications with respect thereto (collectively, "Intellectual
Property"), as well as all Intellectual Property developed or owned by Costilo,
whether or not developed on behalf of Seller and whether or not used in Seller's
business or relating to the Business;
(g) to the extent not included in Section
1.1(d) hereof, all rights under all contracts, agreements (including, without
limitation, license, royalty and other similar
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agreements), understandings, open sales and purchase orders and commitments,
supply contracts, bids, leases, rental agreements and licenses, whether oral or
written, indicated on Schedule 1.1(g) as being assumed by Buyer hereunder
(collectively, the "Assumed Contracts");
(h) all certificates of occupancy and other
licenses, permits and authorizations of governmental agencies and authorities to
the extent assignable and transferable;
(i) all books, records, files, computer
programs and software, data storage and retrieval systems, financial and other
records, whether or not incorporated with the records of a third party,
including, without limitation, all customer, distributor, dealer, and supplier
lists, written specifications and work standards;
(j) all other assets, properties and rights of
any kind or nature whatsoever; and
(k) all proceeds and products of any and all of
the foregoing items.
1.2 Excluded Assets. There shall be excluded from the
Assets to be transferred to Buyer hereunder the following assets of Sellers (the
"Excluded Assets"):
(a) all of Sellers' prepaid income taxes and
deferred tax assets;
(b) all of Seller's cash and cash equivalents,
including, without limitation, the consideration delivered to Seller pursuant to
this Agreement for the Assets delivered to Buyer hereunder;
(c) the certificate of incorporation, corporate
seal, minute books, stock books and other corporate records relating exclusively
to the corporate organization and capitalization of Seller;
(d) all Contracts (as defined in Section 4.5
hereof) other than the Assumed Contracts;
(e) all of Seller's respective insurance
policies; and
(f) all of Seller's tax records.
1.3 Liabilities to be Assumed. Upon the terms and subject
to the conditions of this Agreement, Buyer hereby assumes, and shall hereafter
pay, satisfy and discharge the following (and only the following) liabilities
and obligations of Seller to the extent the same exists on the date hereof
(individually, an "Assumed Liability" and, collectively, the "Assumed
Liabilities"):
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(a) Seller's liability to Xxxx Land and Xxxxx
Xxx (collectively, the "Finders") in the aggregate amount of $160,000 for
finders fees (the "Assumed Finders Fee") incurred in connection with the
transactions contemplated by this Agreement (originally in the amount of
$200,000, of which Buyer is contemporaneously herewith paying $40,000 to the
Finders), which Assumed Finders Fee shall be paid by Buyer to the Finders,
subject to the limitations and other provisions of Section 2.2(d)(ii), in twelve
(12) consecutive equal quarterly installments in the amount of $13,333.33 on
January 15, April 15, July 15, and October 15, of each year, commencing on
January 15, 1997 (each, a "Finders Fee Installment"); and
(b) all liabilities and obligations of Seller
under the Assumed Contracts; provided, however, that Buyer is not assuming any
payment obligations under any of the Assumed Contracts existing as of the
Closing Date.
1.4 Excluded Liabilities. Buyer shall not assume or take
title to the Assets subject to, or in any way be liable or responsible for, any
liability or obligation of Seller which is not an Assumed Liability (whether or
not referred to in any Exhibit or Schedule hereto) (each, an "Excluded
Liability" and, collectively, the "Excluded Liabilities"), including, without
limitation, the following:
(a) any of Seller's liabilities, including
without limitation, accounts payable (a true, accurate and complete list of
which liabilities of Seller as of the Closing Date is set forth on Schedule
1.4(a) hereto).
(b) any liability or obligation of Seller for
any product liability;
(c) any liability or other obligation of any
Seller arising out of (i) any Environmental Claim (as defined in Section 10.1
hereof), (ii) any incomplete, incorrect, expired or missing license,
registration or other permit required under any Environmental Law (as defined in
Section 10.1 hereof) or other applicable Law (as defined in Section 4.9 hereof),
or (iii) any violation of any applicable Law, in any such case respecting any
act, omission, condition, circumstance or other event occurring or existing on
or before the date hereof and relating in any way to (A) any of the Assets, (B)
any other aspect of the Business, (C) the import, procurement, storage,
manufacture, use, shipment, sale or disposal of any product or Environmental
Substance (as defined in Section 10.1 hereof), or (D) any conduct of Seller or
any of its Affiliates (as defined in Section 10.1 hereof), employees, officers,
directors, shareholders, agents and other representatives;
(d) any liability or other obligation for any
action, suit, investigation or proceeding at law, in equity, in arbitration or
by or before any authority threatened, pending, decided or settled, whether
prior to or after the Closing Date, involving or affecting Seller, the Business
or any Asset, whether or not disclosed;
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(e) any liability or other obligation of Seller
or any of its Affiliates in respect of any Plan (as defined in Section 4.15
hereof);
(f) any liability or other obligation of Seller
for any foreign, federal, state, county or local taxes of any kind or nature, or
any interest or penalties thereon, accrued for, applicable to or arising from
any period, whether prior to or after the Closing Date, or relating to the sale
of the Assets hereunder;
(g) any liability or other obligation to make
any payment to any employee of Seller or any of its Affiliates, whether relating
to salary, wages, commissions, benefits, severance, accrued vacation or any
other amounts and whether required under any agreement, applicable Law or
otherwise;
(h) any liability or other obligation of Seller
to present or past officers, directors (acting in such capacity) or shareholders
of Seller or any of its Affiliates;
(i) any liability or obligation of Seller under
any Contract other than the Assumed Contracts;
(j) except as provided in Section 1.3 hereof,
any liability or other obligation (including, without limitation, claims not
covered by insurance and claims to the extent they exceed applicable insurance
policy limits) relating to the operation of the Business prior to the date
hereof; and
(k) any liability or other obligation of Seller
for legal, accounting or other professional fees and disbursements of such
professionals in connection with the transactions contemplated by this
Agreement.
II. PURCHASE PRICE
2.1 Purchase Price. The aggregate purchase price for the
Assets (the "Purchase Price") shall be $325,000, plus the amount of any Earn-Out
Payments (as defined in Section 2.2(d) hereof) to which Seller may hereafter
become entitled, all payable as provided in Section 2.2 hereof, plus the
assumption by Buyer of the Assumed Liabilities.
2.2 Payment of Purchase Price. In consideration for the
transfer of the Assets in accordance with the terms and conditions of this
Agreement, Buyer is paying to Seller the Purchase Price as follows:
(a) $188,426.01 is being delivered
contemporaneously herewith to Xxxxxx, Xxxxxxxx Xxxxxxxx & Xxxxx, counsel to
Seller and Costilo, as escrow agent ("HKG&V"), by wire transfer of immediately
available funds, to be held by HKG&V in escrow and out of
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which (i) Seller is immediately repaying to Global Intellicom, Inc., a Nevada
corporation of which Buyer is a wholly-owned subsidiary ("Global"), the
aggregate sum of $10,170, representing the principal amount of $10,000
previously loaned by Global to Seller pursuant to a Promissory Note dated August
12, 1996 (the "Working Capital Loan"), plus accrued interest through and
including the date hereof in the amount of $170, (ii) $99,149.67 is to be
disbursed by HKG&V following the Closing in accordance with the irrevocable
disbursement instructions being delivered by Seller to HKG&V at the Closing and
described in Section 8(j) hereof, and (iii) the balance is to be disbursed by
HKG&V hereafter as instructed from time to time by Seller.
(b) Contemporaneously herewith, (i) $3,074.63
is being paid by Buyer directly to the Pennsylvania Department of Revenue in
satisfaction of Seller's outstanding obligation for employee withholding taxes,
(ii) $3,635.41 is being paid by Buyer directly to the Pennsylvania Unemployment
Compensation Fund in satisfaction of Seller's outstanding obligation for
employee unemployment insurance taxes and (iii) $4,863.95 is being paid by Buyer
directly to the City of Philadelphia in satisfaction of Seller's outstanding
obligation for City of Philadelphia wage taxes.
(c) $125,000 shall be paid by Buyer to Seller
in four (4) consecutive equal quarterly installments in the amount of $31,500 on
January 15, 1997, April 15, 1997, July 15, 1997 and October 15, 1997; and
(d) (i) Subject to the provisions contained in
clauses (ii) and (iii) below, Seller shall also be entitled to receive from
Buyer an amount (the "Earn-Out Amount") equal to 3% of the gross sales of
Products (as defined in Section 10.1) by Buyer or any of its affiliates to an
unaffiliated third party purchaser during the five-year period following the
Closing Date (the "Earn-Out Period"). The Earn-Out Amount shall be paid by Buyer
to Seller within 45 days following the last day of each calendar quarter in each
year (except for the quarter ending December 31, which shall be paid within 90
days), commencing with the quarter ending December 31, 1996, with respect to
sales occurring during the then most recently ended calendar quarter (the
"Earn-Out Payments"), and be accompanied by a statement setting forth Buyer's
calculation of the amount of the Earn-Out Payment; provided that the initial
Earn-Out Payment shall be made with respect to the period from the Closing Date
through December 31, 1996. In the event that Seller does not notify Buyer within
ten (10) days of its receipt of such statement that it objects to the
computation of the amount of the Earn-Out Payment set forth therein, the
statement shall be binding and conclusive for the purposes of this Agreement.
Seller shall have reasonable access to Buyer's books and records during regular
business hours to verify Buyer's computation of the amount of the Earn-Out
Payment.
(ii) Notwithstanding the provisions
of Sections 1.3(b) and 2.2(d)(i) above, each Earn-Out Payment and each Finders
Fee Installment shall only be payable to Seller to the extent of Buyer's then
aggregate cumulative net earnings before interest and taxes as measured during
the period from the Closing Date through the date of determination ("Available
EBIT"). In addition, each Earn-Out Payment due Seller and each Incentive
Compensation Payment (as
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defined in the Employment Agreement (as defined in Section 7.1)) due Costilo
with respect to any calendar quarter shall be paid by Buyer and deducted from
the amount of Available EBIT before the payment of any Finders Fee Installment
due to the Finders. Notwithstanding the first sentence of this clause (ii), in
the event that, with respect to any calendar quarter hereafter, the aggregate
amount of (A) the Earn-Out Payment due Employee plus (B) the Incentive
Compensation Payment due Costilo (the sum of (A) plus (B), the "Contingent
Payment Amount") exceeds the amount of Available EBIT, the Earn-Out Payment
shall only then be paid to Seller to the extent of such amount equal to the
product of (I) the full amount of the Earn-Out Payment then due Seller and (II)
a fraction, the numerator of which shall be the amount of Available EBIT and the
denominator of which shall be the Contingent Payment Amount. The amount of any
Earn-Out Payment to which Seller shall become entitled and the amount of any
Finders Fee Installment payable to the Finders, but which is not paid to Seller
or the Finders, as the case may be, due to insufficient Available EBIT
(collectively, the "Deferred Amount"), shall accrue and be deferred, in whole or
in part, into each subsequent calendar quarter, including, if necessary, beyond
the Earn-Out Period, until such time as Buyer has sufficient Available EBIT;
provided, however, that in no event shall the Deferred Amount be deferred beyond
October 15, 2006, at which time any remaining unpaid portion of the Deferred
Amount shall be forfeited by Seller, to the extent of the deferred portion of
any Earn-Out Payments, and shall no longer constitute an Assumed Liability or be
an obligation of Buyer, to the extent of the deferred portion, if any, of the
Assumed Finders Fee.
(iii) Seller shall be entitled to
receive minimum aggregate Earn-Out Payments with respect to the Earn-Out Period
in an amount equal to $195,000 (the "Guaranteed Minimum Earn-Out Amount"). In
the event that the aggregate amount of the Earn-Out Payments to which Seller
shall become entitled is less than the Guaranteed Minimum Earn-Out Amount, Buyer
shall pay to Seller the amount of such deficiency (the "Earn-Out Deficiency
Amount") within 45 days following the end of the next ending calendar quarter
(except for the quarter ending December 31, which shall be paid within 90 days)
following the end of the Earn-Out Period. In addition, in the event that the sum
of (I) $525,000, plus (II) the aggregate amount of all Earn-Out Payments to
which Seller shall have become entitled with respect to the Earn-Out Period
(collectively referred to as the "Buyer Payments") is less than $1,950,000,
Seller shall continue to receive, and Buyer shall continue to pay to Seller,
Earn-Out Payments for an additional period, not to exceed five (5) years, until
such time as the aggregate amount of all of the Buyer Payments reaches
$1,950,000. Any such additional Earn-Out Payments shall be payable at such
times, and subject to Buyer having sufficient Available EBIT, as Earn-Out
Payments are to made to Seller during the Earn-Out Period in accordance with the
provisions of clause (ii) above.
2.3 Allocation of Purchase Price. The Purchase Price shall
be allocated among the Assets in accordance with Schedule 2.3. Seller and Buyer
agree to report, pursuant to Section 1060 of the Internal Revenue Code of 1986,
as amended (the "Code"), an allocation of the Purchase Price in accordance with
Schedule 2.3 and agree to act in accordance therewith in the preparation and
filing of all income tax returns.
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III. CLOSING
3.1 Closing. The closing of the purchase and sale of the
Assets and the assumption of the Assumed Liabilities (the "Closing") shall take
place at the offices of Xxxxxx Xxxxxx Flattau & Klimpl, 0000 Xxxxxx xx xxx
Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000 at 10:00 A.M. on the date hereof (the
"Closing Date").
IV. REPRESENTATIONS AND WARRANTIES OF SELLER AND COSTILO
To induce Buyer to enter into this Agreement and the other
documents and instruments contemplated hereby, to purchase the Assets and to
assume the Assumed Liabilities, Seller and Costilo hereby, jointly and
severally, represent and warrant to Buyer as follows:
4.1 Organization; Standing; Authority. Seller is a
corporation presently subsisting under the laws of the Commonwealth of
Pennsylvania and has full power and authority to carry on its business, and to
own, lease and operate its properties and assets, including, without limitation,
the Assets. Seller is duly qualified as a foreign corporation to transact
business in all jurisdictions where such qualification is necessary, a list of
which jurisdictions is set forth on Schedule 4.1 hereto. Seller has full power
and authority, and Costilo has full power and legal capacity, to enter into this
Agreement and the other documents and instruments contemplated hereby to which
it or he are party or parties (all such documents and instruments being
sometimes collectively referred to herein as the "Purchase Documents"), to
perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby.
4.2 Authorization; Conflicts. The execution and delivery
of this Agreement by Seller and Costilo and the other Purchase Documents to
which each of them is a party, the performance by each of its obligations
hereunder and thereunder and the consummation of the transactions contemplated
hereby and thereby (a) have been duly authorized by all necessary corporate and
other action, (b) will not conflict with, or result in a violation of, or a
default under (i) the certificate of incorporation, by-laws or other governing
documents of Seller or (ii) any contract, mortgage, indenture, lease, agreement,
instrument, permit, conversion, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Seller or Costilo or
their respective properties and assets, or (c) create or result in any Lien (as
defined in Section 10.1 hereof) on any of their respective properties or assets,
including, without limitation, the Assets. This Agreement constitutes, and each
other Purchase Document will, when executed, constitute, a legal, valid and
binding obligation of Seller and Costilo, as the case may be, enforceable
against each of them in accordance with its terms.
4.3 Consents. Except as set forth on Schedule 4.3, no
consent, license, approval, order or authorization of, or registration,
declaration or filing with, any governmental authority or other person is
required as a condition to or otherwise in connection with the
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execution, delivery and performance by Seller or Costilo of this Agreement, the
other Purchase Documents, the transactions contemplated hereby and thereby or
the legality, validity, binding effect or enforceability hereof or thereof.
4.4 Financial Statements.
(a) Financials. Seller's most recent financial
projections delivered to Buyer and Global are reasonable and neither Seller nor
Costilo knows of any currently existing facts or circumstances that could
reasonably be expected to result in an inability by Buyer to achieve any of such
financial projections following the Closing.
(b) Absence of Undisclosed Liabilities. Since
December 31, 1995, Seller has not incurred any liabilities or obligations other
than in the ordinary course of business. Each of such liabilities and
obligations is set forth on Schedule 4.4.
4.5 Contracts. Schedule 4.5 sets forth a complete and
correct list of all aterial oral and written contracts, agreements,
understandings, arrangements, purchase orders, sales orders, supply contracts,
bids, leases, rental arrangements and licenses to which Seller is a party or by
which Seller or the Assets may be bound, complete and correct copies of which
(including all amendments thereto) have been delivered to Buyer (collectively,
the "Contracts"), including, without limitation, the following: (a) contracts
with any current or former officer, director, employee, consultant or
shareholder, (b) contracts with any labor union or organization or other
organization representing any employee, (c) contracts for the sale of materials,
supplies, equipment, merchandise or services, (d) contracts for the purchase or
acquisition of materials, supplies, equipment, merchandise or services, (e)
licenses, royalty agreements or similar agreements (indicating on such schedule
whether Seller is the licensor or licensee thereunder), (f) warehousing,
distributorship, representative, management, marketing, sales agency, printing
or advertising contracts, (g) contracts for the sale of any of the Assets or for
the grant to any person of any preferential rights to purchase any of the
Assets, (h) joint venture contracts, (i) contracts under which Seller agrees to
indemnify any party, to guarantee or otherwise be responsible for the
obligations of any other party, to share the tax liability of any party or to
refrain from competing with any party, (j) loan and credit agreements,
mortgages, indentures, security agreements and other agreements relating to the
borrowing of money or representing deferred purchase price, (k) all agreements,
arrangements, commitments and understandings of any kind or nature with any
government, its agencies or departments, (l) contracts under which any current
or previous employee of Seller has agreed to refrain from competing with Seller
or disclosing any confidential or proprietary information concerning Seller or
the Business, or (m) any other contracts relating to the Business whether or not
made in the ordinary course of business. All Contracts are valid, binding,
enforceable and in full force and effect. Seller is not in default, no notice of
a default has been received by Seller, and there exists no condition or event
which, with notice or lapse of time or both, would constitute a default by
Seller, under or with respect to any of such Contracts. No other party to any of
the Contracts is in default under any of the Contracts, and there exists no
condition or event which, with notice or lapse of time or both, would constitute
a default by any
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other party to any such Contract. Except as set forth on Schedule 4.5, each of
the Contracts may be assigned to Buyer without the consent of any person.
4.6 Acquired Receivables. Schedule 4.6 sets forth a
complete and correct list and aging by month of each Acquired Receivable. Each
Acquired Receivable arose in the ordinary course of business in a bona fide
arm's-length transaction, has been reflected on Seller's books and records in
accordance with generally accepted accounting principles consistently applied,
and is represented by a written invoice or other written document that: (a) is
legal, valid, binding and enforceable against the obligor in accordance with its
terms and provisions, (b) does not violate or conflict with any provision of
applicable Law, (c) has not been amended or modified in any respect, (d)
reflects all agreements and understandings with the obligor thereof, and (e) is
assignable to Buyer without the consent of the obligor.
4.7 Title to Property and Assets. Schedule 4.7 sets forth
a complete and rect list of the real property owned or leased by each Seller.
Seller has good and marketable title to such property in fee simple absolute
(except for leasehold interests, in which event Seller has a valid leasehold
interest), free and clear of all Liens except Permitted Liens (as defined in
Section 10.1 hereto). Seller has good and marketable title to all of its other
Assets, free and clear of all Liens. The Assets being transferred to Buyer
pursuant to this Agreement and the other Purchase Documents constitute all of
the assets and properties necessary to the operation of the Business. No person
or entity has any rights in any of the Assets that could have an adverse effect
upon, or otherwise interfere with the continued use of, any of the Assets by
Buyer following the Closing.
4.8 Intellectual Properties.
(a) Schedule 4.8 contains a complete and
accurate list of each item of Intellectual Property licensed to, owned or
otherwise used at any time by Seller and all Intellectual Property developed or
owned by Costilo, whether or not developed on behalf of Seller and whether or
not used in Seller's business or relating to the Business. Except as set forth
on Schedule 4.8, each item of Intellectual Property (i) has been maintained and
used in accordance with all applicable Laws, (ii) is assignable to Buyer in
accordance with the terms and provisions hereof and thereof, and (iii) to the
best knowledge of Seller and Costilo, is not and has not been infringed in any
way by any other person.
(b) No item of Intellectual Property infringes
any trademark, service xxxx, trade name, copyright or patent (or similar right)
of others in any jurisdiction and either Seller or Costilo has all right and
authority to use each item of Intellectual Property, whether in Seller's
business or otherwise. Neither Seller nor Costilo has received any notification
from any person that the use of any item of Intellectual Property by Seller,
Costilo or anyone claiming any right from Seller or Costilo to use any item of
Intellectual Property infringes the rights of any third party.
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(c) Except as set forth on the schedule to this
Section, all technical information, procedures, processes, trade secrets,
formulae, methods, practices, techniques, information, bills of parts, diagrams,
drawings, specifications, blueprints, lists of materials, labor and general
costs, production manuals and data relating to the design, manufacture,
production, inspection and testing of products (collectively, the "Know-How")
developed, sold or used by Seller is owned by Seller, may be utilized by Seller
without the consent or license of any third party, is free and clear of all
liens and Seller does not pay royalties to any third party in respect of the use
by it of the Know-How. Seller has not received any notification of infringement
by it or other adverse claim with regard to any Know-How used by it. No Know-How
used by Seller infringes upon or otherwise violates any rights of others.
(d) Each current and former employee of Seller
has assigned to Seller all of such employee's rights to, and benefits to be
derived from, each item of Intellectual Property and Know-How developed by such
employee while employed by Seller.
4.9 Compliance with Applicable Laws. Except as set forth
on Schedule 4.9, Seller and its operation of the Business is in material
compliance with and conforms in all material respects to (a) all applicable
judgments, orders, injunctions, awards and decrees, and (b) all foreign,
federal, state and local laws, statutes, ordinances, codes, rules and
regulations and all other requirements of governmental bodies, courts and
arbitrators (collectively, "Laws") that are applicable to Seller, the Business
or the Assets (including, without limitation, the Federal Occupational Safety
and Health Act of 1970, as amended, and the rules and regulations issued
thereunder). Except as set forth on Schedule 4.9, Seller has remedied or caused
to be remedied in all respects all violations of any such Laws of which Seller
or Costilo has knowledge. Schedule 4.9 sets forth a list of all certificates of
occupancy and other permits, licenses, authorizations, consents and approvals of
governmental agencies and authorities necessary or desirable for the conduct of
the Business. All such certificates of occupancy, and other permits, licenses,
authorizations, consents and approvals are in full force and effect, are
assignable to Buyer without the consent of any person and, except as set forth
on Schedule 4.9, no notice has been served upon Seller (other than a notice
subsequently withdrawn or with regard to a violation subsequently cured) from
any governmental authority or other person claiming, nor does there currently
exist, any violation of any applicable Law in connection with any of such
activities.
4.10 Absence of Certain Events. Except as set forth on
Schedule 4.10, since December 31, 1995, Seller has not:
(a) incurred any obligations or liabilities,
whether direct or contingent, or made any guarantees, endorsements or other
assumptions of liabilities other than in the ordinary course of business (which,
in no event, has included liabilities for borrowed money or extensions of
credit);
(b) mortgaged, pledged or subjected to any Lien
any of its properties or assets, tangible or intangible (including, without
limitation, the Assets);
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(c) acquired or disposed of any assets or
properties, or, except in connection with the transactions contemplated by this
Agreement and the other Purchase Documents, entered into any agreement or other
arrangement for any such acquisition or disposition, other than in the ordinary
course of business;
(d) forgiven or canceled debts or claims or
waived any rights of material value;
(e) conducted its business or entered into any
transaction, other than in the ordinary course of business;
(f) granted any rights or licenses under any of
its Intellectual Properties or entered into any licensing or distributorship
arrangements with respect thereto;
(g) entered into or amended any employment
agreement, entered into any agreement with any labor union or association
representing any employees or entered into or amended any Plan;
(h) made any wage or salary increase, or paid
any bonuses or any dividends, or made any increase in any other direct or
indirect compensation, for or to any director, officer or employee of Seller;
(i) made any change in any accounting principle
or method of election for federal income tax purposes used by it;
(j) prepaid any of its obligations, except in
the ordinary course of business;
(k) made any material change in any assumption
underlying any method of calculation of bad debts, contingencies or other
reserves from those reflected in Seller's financial statements;
(l) written down the value of any inventory
having an aggregate value in excess of $1,000 or written off as uncollectible
any trade, account or note receivable on any amount due to Seller under any
license, royalty or other similar agreement having a value, individually or in
the aggregate, in excess of $1,000;
(m) made any change in any material respect in
the business policies or practices of Seller or suffered any other event which
had or may have the effect of materially impairing the business relationship of
Seller with, and the goodwill of, any of its customers, suppliers or licensees;
or
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(n) entered into any agreement or committed to
take any action set forth in subsections (a) through (m) of this Section 4.10.
4.11 Employees. Schedule 4.11 sets forth a complete and
correct list of the mes of all employees of Seller and, for each such employee,
the total compensation rate (annual or hourly), years or other period of service
and each wage or salary increase or bonus paid to such employee since January 1,
1995. Schedule 4.11 also sets forth, for each such employee, the (a) number of
sick days and personal days to which the employee was entitled, on an annual
basis, immediately prior to such employee's termination on the Closing Date and
the number of sick days and personal days used by such employee during the
annual period in which such termination occurred, and (b) salaries, wages,
commissions, benefits, severance payments ("Severance Payments"), accrued
vacation pay and/or any other amounts that were payable to such employee on the
Closing Date, whether relating to the termination or alleged termination of such
employee's employment by reason of the transfer of the Assets, the consummation
of the transactions contemplated by this Agreement and the other Purchase
Documents or otherwise (collectively, "Termination Amounts"). Schedule 4.11 also
sets forth all such payments made to any former employees of Seller terminated
since December 31, 1995. To the best knowledge of Seller and Costilo, no
employee listed on Schedule 4.11 has made any threat, or otherwise revealed an
intent, to cancel or otherwise terminate his relationship with Seller or the
Business.
4.12 Employee Relations. There is not, nor, to the best
knowledge of Seller and Costilo, is there now threatened, any strike, organized
slowdown, picketing, organized work stoppage or labor trouble or other
occurrence, event or condition of a similar character in which any of the
employees of Seller are participating or, to the best knowledge of Seller and
Costilo, have threatened to participate. To the best knowledge of Seller and
Costilo, during the past five (5) years, there have been no union organizing
efforts conducted with respect to any of the employees of Seller.
4.13 Suppliers and Customers, Etc. Schedule 4.13 sets
forth a complete and orrect list of (a) the ten (10) largest suppliers and/or
vendors of Seller (identified, in each case by the dollar amount of purchases
from such party) and (b) all of the customers of Seller (identified, in each
case, by the dollar amount of all purchase orders submitted by such party to
Seller, in each case, for the seven-month period ended July 31, 1996 and the
twelve-month period ended December 31, 1995. The Seller's relationships with
such suppliers, vendors and customers are satisfactory and, except as set forth
on Schedule 4.13, no such supplier, vendor or customer has canceled or otherwise
terminated, or, to the best knowledge of Seller and Costilo, made any threat to
cancel or, otherwise terminate, its relationship with Seller. Except as set
forth on Schedule 4.13, no such supplier, vendor or customer has during such
period decreased materially, or, to the best knowledge of Seller and Costilo,
made any threat to decrease materially, its services or supplies to, or
purchases from, Seller. Except as set forth on Schedule 4.13, during such period
or thereafter, no breach or default or event of default occurred or was alleged
to have occurred, and no event occurred which with notice or lapse of time or
both would have constituted a breach or default or event of default, in
connection with any contractual or other
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arrangements between Seller and any of its suppliers, vendors or customers.
Schedule 4.13 also sets forth a list of all license, royalty and other similar
agreements to which Seller was a party that was terminated by Seller or the
other party or parties thereunder during the past three (3) years.
4.14 Benefit Plans.
(a) Neither Seller nor any Affiliate of Seller
has maintained or maintains, contributes or is required to contribute to, any
employee pension benefit plans (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")). Schedule 4.14
sets forth each employee welfare benefit plan (as defined in Section 3(1) of
ERISA), bonus, stock purchase, stock ownership, stock option, deferred
compensation, incentive, severance, termination or other compensation plan or
arrangement, fringe benefit plan or other benefit plan, agreement or arrangement
presently maintained by, or contributed to by Seller or any Affiliate of Seller
(each, a "Plan" and, collectively, the "Plans").
(b) Seller and each of the Plans are in
compliance with the applicable provisions of ERISA and those provisions of the
Code applicable to the Plans.
(c) Except as set forth on Schedule 4.14, all
premium payments or other contributions to, and payments from, the Plans which
may have been required to be made in accordance with the Plans have been timely
made. All such premiums or other contributions to the Plans, and all payments
under the Plans, except those to be made by an insurer, for any period ending
before the Closing Date that are not yet, but will be, required to be made are
properly set forth on Schedule 4.14.
(d) Except as set forth on Schedule 4.14, all
reports, returns and similar documents with respect to the Plans required to be
filed with any government agency or distributed to any Plan participant have
been duly and timely filed or distributed.
(e) Seller has complied with the notice and
continuation coverage requirements of Section 4980B of the Code and the
regulations thereunder with respect to each Plan that is, or was during any
taxable year of Seller for which the statute of limitations on the assessment of
federal income taxes remains open, by consent or otherwise, a group health plan
within the meaning of Section 4980B(g) of the Code.
(f) At no time has (i) Seller or (ii) any other
employer that is, or, at any relevant time, was together with Seller, treated as
a "single employer" under Section 414(b), 414(c) or 414(m) of the Code, incurred
any liability which could subject Buyer or Seller to any liability under Section
4062, 4063 or 4064 of ERISA.
(g) At no time has Seller or any Affiliate of
Seller contributed, or been required to contribute, to any "multiemployer
pension plan" within the meaning of Section 3(37) of ERISA, and no liability is
owing on account of any withdrawal therefrom.
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(h) Seller has not incurred or is reasonably
likely to incur any liability with respect to any Plan, including, without
limitation, any plan or arrangement that would be included within the definition
of "Plan" hereunder but for the fact that such plan or arrangement was
terminated before the date of this Agreement.
(i) Neither Seller nor any Affiliate of Seller
maintains or ever has maintained or contributes, ever has contributed, or ever
has been required to contribute, to any Plan providing post-employment medical,
health or life insurance or other welfare benefits for current or future retired
or terminated employees, their spouses or their dependents, except as may be
required by applicable Law.
4.15 Inventory. Seller maintains no inventory other than
office supplies.
4.16 Insurance. Schedule 4.16 sets forth a brief
description (showing the policy umber, name of carrier, coverage, deductible
amounts, term, expiration date and annual premium) of all policies of fire,
casualty, liability and other forms of insurance owned by or for the benefit of
Seller and relating to the Business or the Assets, and all self-insurance
programs maintained for the Business and the Assets. All such policies are in
full force and effect, all premiums due thereon have been paid in full, and are
adequate in amount, scope and coverage to protect Seller against any loss (less
the deductible set forth on Schedule 4.16 with respect to such policy) in
connection with the Business or of the Assets.
4.17 Environmental Matters. Except as set forth on
Schedule 4.17, neither Seller nor any other person for whose conduct Seller is
or may be held responsible (a) has incurred any loss, expense, liability or
responsibility for any Environmental Claim related in any way to the Business or
any of the Assets, (b) has procured, stored, contained, manufactured,
distributed, removed or disposed of any inventory or other Environmental
Substance in violation of any applicable Environmental Law, (c) knows of any
spill, leakage, emission, escape, discharge, dumping, leaching or other release
or disposition into the environment of any Environmental Substance, or of any
circumstance or condition that could lead thereto, related in any way to the
Business or any of the Assets.
4.18 Capital and Advertising Expenditures. Set forth on
Schedule 4.18 is a omplete and correct list of and amount spent in cash for each
capital expenditure by Seller in excess of $1,000 individually or $2,500 in the
aggregate for the period commencing on January 1, 1995 through the date hereof
for equipment received during such period. Schedule 4.18 also sets forth the
location of such equipment. Complete and correct copies of all Contracts
relating to each such capital expenditure have previously been delivered to
Buyer.
4.19 Brokers. Seller has not paid or become obligated to
pay any fee or commission to any broker, finder, investment banker or other
intermediary in connection with this Agreement or the transactions contemplated
hereby other than to Xxxx Land and Xxxxx Xxx.
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Since December 31, 1995, Seller has not incurred (whether by payment or accrual)
any such fee or commission.
4.20 Litigation. Except as set forth on Schedule 4.20,
there are no actions, suits, investigations or proceedings (whether or not
purportedly on behalf of Seller) pending or, to the best knowledge of Seller and
Costilo, threatened or contemplated, at law, in equity, in arbitration or by or
before any other authority involving or affecting: (a) Seller, any part of the
Assets or any of the Assumed Liabilities; or (b) any of the transactions
contemplated by this Agreement and the Purchase Documents, nor, to the best
knowledge of Seller and Costilo, is there any basis for the institution of any
such action, suit, investigation or proceeding. Without limiting the generality
of the preceding sentence, Schedule 4.20 sets forth a list and description
(including the status) of each claim, action, suit, investigation and proceeding
involving Seller and any employee of Seller. Seller is in compliance with each
judgment, order, writ, injunction, decree or consent of any court or other
judicial authority relating to, binding or affecting Seller, any part of the
Business or the Assets, or any of the Assumed Liabilities, each of which is set
forth an Schedule 4.20.
4.21 Arrangements with IBM. Schedule 4.21 hereto sets
forth a complete and ccurate list of all agreements, contracts or commitments
(whether oral or written) between International Business Machines Corporation
("IBM") and Seller (collectively, the "IBM Agreements"). Complete and accurate
copies of all of the IBM Agreements have been delivered by Seller to Buyer.
Schedule 4.21 sets forth the amount and due date of each account receivable due
Seller from IBM. Seller is not in default under any of the IBM Agreements, and
there is no default or event known to Seller or Costilo that, with notice or
lapse of time, or both, would constitute a default by any party to any of the
IBM Agreements. Neither Seller nor Costilo has received notice from IBM that IBM
intends to cancel or terminate any of the IBM Agreements, to exercise or not to
exercise any options or rights under any of the IBM Agreements, or to not accept
any of the products previously developed or to be developed in the future by
Seller pursuant to the IBM Agreements, and there are no facts or circumstances
of which Seller or Costilo has knowledge that could reasonably be expected to
result in any such non-acceptance by IBM. No dispute exists between IBM and
Seller under any of the IBM Agreements. Seller has not waived or failed to
exercise any options or rights under any of the IBM Agreements. To the best
knowledge of Seller and Costilo, there has not occurred any event, and Seller
and Costilo are not aware of any facts or circumstances, with respect to the
matters that are the subject of the IBM Agreements, that could have an adverse
effect upon the Business as it is proposed to be conducted by Buyer following
the Closing.
4.22 Bank Accounts; Powers of Attorney. Schedule 4.22 sets
forth a complete nd correct list of the location of and the persons authorized
to sign with respect to each of the bank accounts of Seller or which relate to
any of the Assets or the Business. Schedule 4.22 also sets forth a complete and
correct list of all powers of attorney, proxies and other like instruments to
act on behalf of Seller or any other party in connection with the Business, any
of the Assets or any of the Assumed Liabilities.
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4.23 Capital Stock. The authorized capital stock of Seller
consists of 10,000 shares of common stock, no par value per share, of which
9,500 shares are issued and outstanding and are owned beneficially and of record
by the persons and in the respective amounts as set forth on Schedule 4.23
hereto. Seller has no other class of authorized capital stock.
4.24 Complete Business; Assets. Except for the Excluded
Assets, the Assets and Assumed Contracts represent all of the Assets and
contract rights used by Seller to conduct its business in the manner in which it
has previously been conducted by it. Neither Seller, Costilo nor any of their
respective Affiliates directly or indirectly presently conducts, or has
previously conducted, any operations relating to the Business other than by or
through Seller. Except for the Intellectual Property owned by Costilo and being
sold, assigned and transferred to Buyer hereunder as part of the Assets, none of
the business conducted by Seller utilizes any Assets or rights of any person or
entity other than those included in the Assets and the Assumed Contracts.
4.25 Taxes. Except as set forth on Schedule 4.25, Seller
has filed all tax returns required to be filed by Seller on or before the date
hereof and has duly and timely paid all taxes (including any interest and
penalties) due and payable in respect of all periods up to and including the
date hereof. Except as set forth on Schedule 4.25, Seller has duly and timely
withheld or collected, paid over and reported all taxes required to be withheld
or collected by Seller on or before the date hereof.
4.26 No Misrepresentation by Seller or Costilo;
Disclosure. No representation or warranty of Seller or Costilo made or contained
in this Agreement or any other Purchase Document, and no report, statement,
certificate, schedule or other document or information furnished or to be
furnished by or on behalf of Seller or Costilo in connection with the
transactions contemplated by this Agreement and the other Purchase Documents,
contains or will contain a misstatement of a material fact or omits or will omit
to state a material fact required to be stated therein in order to make it, in
the light of the circumstances under which made, not misleading. In addition,
the parties acknowledge that Seller and Costilo make no representation or
warranty herein as to the marketability of any of Seller's products.
V. REPRESENTATIONS AND WARRANTIES OF BUYER
To induce Seller to enter into this Agreement and the other documents
and instruments contemplated hereby, Buyer represents and warrants to Seller as
follows:
5.1 Organization; Standing; Authority. Buyer hereby is a
corporation presently subsisting under the laws of the Commonwealth of
Pennsylvania and has full power and authority to carry on its business as now
conducted. Buyer has full corporate power and authority to enter into this
Agreement and the other Purchase Documents to which it is a party, to perform
its obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby.
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5.2 Authorization; Conflicts. The execution and delivery
of this Agreement and the Purchase Documents by Buyer, the performance by Buyer
of its obligations hereunder and thereunder and the consummation of the
transactions contemplated hereby and thereby (a) have been duly authorized by
all necessary corporate action, (b) will not conflict with, or result in a
violation of or a default under (i) the certificate of incorporation or by-laws
of Buyer or (ii) any contract, mortgage, indenture, lease, agreement,
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Buyer. This Agreement
constitutes, and each other Purchase Document to which Buyer is a party will,
when executed, constitute, a legal, valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms.
5.3 Consents. Except as set forth on Schedule 5.3, no
consent, license, approval, order or authorization of, or registration,
declaration or filing with, any governmental authority or other person is
required as a condition to or otherwise in connection with the execution,
delivery and performance of the Agreement, the other Purchase Documents or the
transactions contemplated hereby and thereby or the legality, validity, binding
effect or enforceability hereof or thereof.
5.4 No Misrepresentation. No representation or warranty of
Buyer made or contained in this Agreement or any other Purchase Document, and no
report, statement, certificate, schedule or other document furnished or to be
furnished by or on behalf of Buyer in connection with the transactions
contemplated by this Agreement and the other Purchase Documents contains or will
contain a misstatement of a material fact or omits or will omit to state a
material fact required to be stated therein in order to make the statement
contained therein, in light of the circumstances under which it is made, not
misleading.
VI. CERTAIN AGREEMENTS OF SELLER, COSTILO AND BUYER
6.1 Expenses of Sale. Except as expressly provided in
Section 1.3(b) and as set forth below in this Section 6.1, Seller and Buyer
shall each bear their own direct and indirect expenses incurred in connection
with the negotiation and preparation of this Agreement, the other Purchase
Documents and the consummation and performance of the transactions contemplated
hereby and thereby. Any excise, sales, use, gross receipts or similar taxes (but
not including the real estate taxes referred to in the next succeeding sentence
of this Section 6.1), whether imposed on Buyer or Seller, arising solely out of
the transfer of the Assets shall be paid by Seller (and any refund of such taxes
shall likewise be paid to, and shall be deemed to be the property of Seller).
Any real estate transfer or similar taxes with respect to the transfer of the
real property and leasehold interests constituting part of the Assets and any
taxes based on income recognized or realized by Seller as a result of the
transfer and sale of any or all of the Assets shall be paid by Seller (and any
refund of such taxes shall be paid to, and shall be deemed to be the property
of, Seller). Buyer and Seller will cooperate with one another in filing any
required tax returns and in
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seeking any applicable exemption from the payment of any excise, sales, use,
gross receipts or similar tax with respect to the transfer of the Assets
hereunder.
6.2 Publicity. Seller and Costilo agree that they shall
not issue any publicity, release or announcement concerning the transactions
contemplated hereby. Buyer and each of its Affiliates shall have the right to
issue any publicity, releases or announcements that are required by law or that
any such party, in its reasonable discretion, deems appropriate. Buyer shall
provide to Seller a copy of each such publicity, release and/or announcement
promptly after its issuance.
6.3 Post-Closing Access. After the Closing, Seller shall
give, or cause to be given, to the officers, employees, attorneys, accountants
and other authorized representatives of Buyer (collectively, "Buyer's
Representatives"), reasonable access during normal business hours to all of the
tax and other records (including, without limitation, the right to make copies
and take extracts therefrom), plants, properties and personnel of Seller as
Buyer may from time to time reasonably request, in connection with Buyer's
conduct of its business, including, without limitation, its preparation of
financial statements and filing of required tax returns and reports and filings
by Buyer, Global or any of their respective Affiliates with the Securities and
Exchange Commission or any securities exchange or in connection with any of the
transactions contemplated by this Agreement or any of the other Purchase
Documents. Seller and Seller's Representatives shall furnish or cause to be
furnished such information and cooperation as may be reasonably requested by
Buyer in connection with the foregoing. Seller shall also cause to promptly be
prepared and promptly provide to Buyer, at Seller's expense, any financial
statements concerning Seller and its business as Buyer, Global or any of their
respective Affiliates may from time to time request in connection with any
filings required to be made by Buyer, Global or any of their respective
Affiliates with the Securities and Exchange Commission or any securities
exchange.
6.4 Non-Competition, Non-Solicitation and Non-Disclosure.
(a) Seller covenants and agrees that, for a
period of five (5) years following the Closing Date, it will not, directly or
indirectly, alone or as a partner, joint venturer, officer, director, employee,
lender, consultant, agent, independent contractor, stockholder or otherwise, or
knowingly permit any company or business organization directly or indirectly
controlled by Seller or any of its Affiliates to, engage in the Business or any
other business that is competitive with the business conducted by Buyer. The
passive ownership by Seller of not more than one percent (1%) of the shares of
stock of any corporation having a class of equity securities actively traded on
a national securities exchange or in the over-the-counter market shall not be
deemed, in and of itself, to violate the prohibitions of this paragraph. In
addition, Seller is contemporaneously herewith delivering to Buyer
non-disclosure agreements (the "Non-Disclosure Agreements") in favor of Buyer
from each of Seller's employees, other than Xxxx Xxxxxxx and Ori Pessach, the
form of which is annexed hereto as Exhibit A. Seller and Costilo each covenants
and agrees to use its best efforts to deliver to Buyer Non-Disclosure Agreements
executed by each of Xxxx Xxxxxxx and Ori Pessach within thirty (30) days
following the Closing.
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(b) Seller covenants and agrees that, for a
period of five (5) years following the Closing Date, it will not, directly or
indirectly, employ, hire, engage or be associated with, or attempt to employ,
hire, engage or be associated with, or knowingly permit any company or business
organization directly or indirectly controlled by Seller or any of its
Affiliates to employ, hire, engage or be associated with, or attempt to employ,
hire, engage or be associated with, any person who was employed by Seller during
the six (6) months prior to the Closing Date or is employed by Buyer at any time
after the Closing Date.
(c) Seller covenants and agrees that it will
not, at any time following the Closing Date, disclose, directly or indirectly,
or make available to any person, or in any manner use for its own benefit, any
confidential information or trade secrets relating to Seller, Buyer or the
Business, or any information concerning Seller's or Buyer's financial condition,
prospects, customers, licensees, suppliers, sources of leads and methods of
developing products, obtaining new business, manufacturing and distribution
methods or any other methods of doing and operating the Business, except to the
extent that such information is a matter of public knowledge or is required to
be disclosed by law (in which case prior to such disclosure the disclosing party
shall promptly provide prior written notice of such required disclosure to Buyer
in order to afford Buyer the opportunity to seek an appropriate protective order
preventing such disclosure).
(d) Seller acknowledges and agrees that a
breach by it of any of the provisions of this Section 6.4 will cause irreparable
harm and damage to Buyer and that, in the event of such breach, Buyer shall
have, in addition to any and all remedies at law, the right to an injunction,
specific performance or other equitable relief to prevent the violation of the
obligations of Seller hereunder, without the necessity of proving such
irreparable harm or damage or the inadequacy of remedies at law and without the
necessity of posting any bond.
(e) Seller acknowledges and agrees that each
provision of this Section 6.4 shall be treated as a separate and independent
clause, and the unenforceability by any one clause shall in no way impair the
enforceability of any of the other clauses herein. Furthermore, if one or more
of the provisions contained in this Section 6.4 shall for any reason be held to
be excessively broad as to geographical scope, duration, activity or otherwise
so as to be unenforceable at law, such provision or provisions shall be
construed by the appropriate judicial body by limiting and reducing it or them,
as the case may be, so as to be enforceable to the maximum extent compatible
with the applicable Law as it shall then appear.
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VII. CERTAIN EMPLOYEE MATTERS
7.1 Employment of Costilo. Contemporaneously herewith,
Buyer and Costilo are entering into an Employment Agreement, the form of which
is annexed hereto as Exhibit B (the "Employment Agreement"), pursuant to which
Costilo will be employed by Buyer following the Closing.
7.2 Severance Obligations. Seller shall terminate all of
its employees contemporaneous with the Closing. Seller shall be responsible for
and has fully paid, prior to the Closing, all Termination Amounts, including,
without limitation, all Severance Payments, if any, that shall have been payable
to all of Seller's past and present employees.
VIII. CLOSING DELIVERIES
8.1 Deliveries of Seller. Contemporaneously herewith or
prior hereto, Seller is delivering or has previously delivered to Buyer each of
the following documents:
(a) Opinion of Counsel. An opinion of HKG&V,
counsel to Seller and Costilo, dated as of the Closing Date, in form and
substance satisfactory to Buyer.
(b) Employment Agreement. The Employment
Agreement, executed by Costilo.
(c) Non-Disclosure Agreements. The
Non-Disclosure Agreements, executed by each of Seller's employees, other than
Costilo, Xxxx Xxxxxxx and Ori Pessach.
(d) Certificate of Secretary. A certificate of
the Secretary of Seller setting forth (i) a copy of the resolutions adopted by
its Board of Directors and shareholders approving the execution and delivery of
this Agreement and each of the other Purchase Documents to which it is a party
and the consummation of the transactions contemplated hereby and thereby, (ii)
Seller's certificate of incorporation, as amended to date, (iii) Seller's
by-laws, as amended to date, and (iv) the incumbency of Seller's officers and
including such officers' signatures.
(e) Corporate Records and Financial Statements.
Such books, records and financial statements of Seller as has been reasonably
requested by Buyer, including, without limitation, the financial statements
described in Section 4.4(a).
(f) Instruments of Transfer. General
assignments, bills of sale, consents and other instruments of transfer, in form
and substance satisfactory to Buyer, to vest in Buyer good and marketable right,
title and interest in the Assets, free and clear of all Liens.
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(g) Name Change. An amendment to Seller's
Certificate of Incorporation, changing Seller's name to a name not including the
words "Pro Notes" or any derivation thereof, and any other documents and
instruments necessary to effectuate the foregoing.
(h) Consents. Copies of consents from each
party listed on Schedule 4.3 hereto.
(i) Releases. A general release in favor of
Buyer and Global from each shareholder of Seller and from CaddTech Productivity,
Inc., a creditor of Seller.
(j) Disbursement Instructions. Irrevocable
written instructions to HKG&V with respect to the disbursement by HKG&V,
following the Closing, of the cash portion of the Purchase Price being delivered
to HKG&V contemporaneously herewith pursuant to Section 2.2(a) hereof.
8.2 Deliveries of Buyer. Contemporaneously herewith or
prior hereto, Buyer is delivering or has previously delivered to Seller each of
the following documents:
(a) Employment Agreement. The Employment
Agreement, executed by Buyer.
(b) Certificate of Secretary. A certificate of
the Secretary of Buyer setting forth (i) a copy of the resolutions adopted by
its Board of Directors and shareholders approving the execution and delivery of
this Agreement and each of the other Purchase Documents to which it is a party
and the consummation of the transactions contemplated hereby and thereby, (ii)
Buyer's certificate of incorporation, as amended to date, (iii) Buyer's by-laws,
as amended to date, and (iv) the incumbency of Buyer's officers and including
such officers' signatures.
(c) Instruments of Assumption. Assumptions and
other similar instruments of assignment, in form and substance satisfactory to
Seller, to evidence Buyer's assumption of the Assumed Liabilities.
IX. SURVIVAL AND INDEMNIFICATION
9.1 Survival of Representations and Warranties.
Notwithstanding any right of Buyer fully to investigate the affairs of Seller or
any other party and notwithstanding any knowledge of the facts determined or
determinable by Buyer pursuant to such investigation or right of investigation,
Buyer has the right to rely fully upon the representations, warranties,
covenants and agreements of Seller and Costilo contained in this Agreement and
the other Purchase Documents. All such representations, warranties, covenants
and agreements of Seller,
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Costilo and Buyer made in this Agreement and the other Purchase Documents or in
any certificate delivered pursuant hereto shall survive the execution and
delivery hereof and the Closing.
9.2 Indemnification by Seller and Costilo. Seller and
Costilo, jointly and severally, agree to indemnify, defend and hold Buyer and
its Affiliates harmless from and against any and all losses, diminution of
value, claims, demands, damages, costs and expenses (including, without
limitation, reasonable attorneys' fees and disbursements) of every kind, nature
and description (collectively, "Claims") based upon, arising out of or otherwise
in respect of (a) any inaccuracy in or any breach of any representation,
warranty, covenant or agreement of Seller or Costilo contained in this Agreement
or in any other Purchase Document, and (b) the Excluded Liabilities (including,
without limitation, Claims based upon, arising out of or otherwise relating to
(i) workmen's compensation, disability, discrimination, wage and hour and other
matters in respect of past or present employees of Seller and (ii) the operation
of the Business in respect of all periods on or prior to the Closing Date).
9.3 Indemnification by Buyer. Buyer agrees to indemnify,
defend and hold Seller and its Affiliates harmless from and against any and all
Claims based upon, arising out of or otherwise in respect of (a) any inaccuracy
in or any breach of any representation, warranty, covenant or agreement of Buyer
contained in this Agreement or in any other Purchase Document, and (b) any
failure to pay or fulfill any and all Assumed Liabilities in accordance with the
terms of this Agreement.
9.4 Notice and Defense of Third Party Claims. If any
claim, action, suit, investigation or proceeding shall be brought or asserted
under Section 9.2 or 9.3 against Buyer or any of its Affiliates or Seller or any
of its Affiliates, respectively (each an "Indemnified Person"), in respect of
which indemnity may be sought under either such Section from the relevant
indemnifying person (the "Indemnifying Person"), the Indemnified Person shall
give prompt written notice of such action, suit, investigation or proceeding to
the Indemnifying Person, who shall assume the defense thereof (including the
employment of counsel reasonably satisfactory to the Indemnified Person) and the
payment of all expenses related thereto; provided, however, that any delay or
failure to so notify the Indemnifying Person shall relieve the Indemnifying
Person of its obligations hereunder only to the extent, if at all, that the
Indemnifying Person is materially prejudiced by reason of such delay or failure.
The Indemnified Person shall have the right to employ separate counsel in any
such action, suit, investigation or proceeding and to participate in the defense
thereof, but the fees and disbursements of such separate counsel shall be borne
by the Indemnified Person unless both the Indemnified Person and the
Indemnifying Person are named as parties and the Indemnified Person shall in
good faith determine that representation by the same counsel is inappropriate
(in which later case the fees and disbursements of such separate counsel shall
be at the expense of the Indemnifying Person). In the event that the
Indemnifying Person, within ten (10) days after notice of any such action, suit,
investigation or proceeding, fails to assume the defense thereof, the
Indemnified Person shall have the right to undertake the defense, compromise or
settlement of such action, suit, investigation or proceeding for the account of
the Indemnifying Person, and all costs, fees and expenses thereof shall be
deemed Claims for which
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the Indemnifying Person shall be responsible. Anything in this Section to the
contrary notwithstanding, the Indemnifying Person shall not, without the
Indemnified Person's prior written consent, settle or compromise any action,
suit, investigation or proceeding or consent to the entry of any judgment or
order thereunder.
9.5 Right of Offset; Claims. Buyer shall have the right to
give notice of any and all Claims under this Agreement or any other Purchase
Document and to be reimbursed for the amount of any and all such Claims by
offsetting such amounts against any amounts payable by Buyer to Seller or
Costilo pursuant to this Agreement or any of the other Purchase Documents,
including, without limitation, any Earn-Out Payments to which Seller may
hereafter become entitled. Neither the giving of nor failure to give any such
notice of a Claim under this Agreement or any other Purchase Document nor the
offsetting of any amounts nor failure to offset any amounts in respect of any
Claim by Buyer, shall constitute an election of remedies nor limit Buyer in any
manner in the enforcement of any other remedies that may be available to it.
X. MISCELLANEOUS
10.1 Certain Definitions. As used in this Agreement, the
following terms have the following meanings:
(a) "Affiliate" with respect to any person or
entity, means and includes any person or entity directly, or through one or more
intermediaries, controlling, controlled by or under common control with such
person or entity; "control" means the possession, directly or indirectly, of the
power, by share ownership, contract or otherwise, to direct the management and
policies of a person or entity.
(b) "Environmental Claim" means any claim
alleging (i) any responsibility, liability or unlawful act or omission under any
Environmental Law (ii) any tortious act or omission or breach of contract
pertaining to any Environmental Substance, or (iii) any other violation or claim
under any Environmental Law or in respect of any Environmental Substance.
(c) "Environmental Law" means any applicable
Law pertaining to (i) any emission, discharge, release, runoff, disposal or
presence in the environment of any Environmental Substance, (ii) any cleanup,
containment, manufacturing, treatment, handling, transportation, storage or sale
of or other activity pertaining to any Environmental Substance, or (iii) any
other peril to public or occupational health or safety or to the Environment
that may be posed by an Environmental Substance.
(d) "Environmental Substance" means any toxic
substance, hazardous material, contaminant, waste, pollutant or other similar
product or substance that may be, or pose, a threat to public or occupational
health or safety or to the environment.
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(e) "Lien" means and includes any lien, pledge,
negative pledge, mortgage, security interest, claim, lease, charge, option,
restriction on use, right of first refusal, or other encumbrance of any kind or
nature whatsoever, and shall include, without limitation, with respect to real
property, any easement, restrictive covenant, encroachment or other defect.
(f) "Permitted Lien" means (i) carriers',
warehousemen's, mechanics', or other like Liens arising in the ordinary course
of business for sums not due and payable, (ii) with respect to real property,
easements, rights-of-way, restrictive covenants, encroachments, zoning and other
governmental ordinances and other like encumbrances incurred in the ordinary
course of business, none of which are substantial in amount or materially
detract from the value of such property or impair the present or anticipated
future use of such property, and (iii) Liens on real property for taxes not yet
due and payable or which are being contested in good faith by appropriate
proceedings.
(g) "Products" means any computer related
products designed, developed or manufactured by Buyer, including, without
limitation, any software products which comprise, contain or are derived from,
Seller's proprietary software existing or in the process of design or
development by Seller on the date hereof.
10.2 Notices. Any notice, request, demand or other
communication permitted or required to be given hereunder shall be in writing,
shall be sent by one of the following means to the addressee and shall be deemed
conclusively to have been given: (a) on the first business day following the day
timely deposited with Federal Express (or other equivalent national overnight
carrier) or United States Express Mail, with the cost of delivery prepaid; (b)
on the fifth business day following the day duly sent by certified or registered
United States mail, postage prepaid and return receipt requested; or (c) when
otherwise actually delivered to the addressee, at the following addresses:
(i) if to Seller or Costilo:
c/o Xxxx Xxxxxxx, D.C.
0000 Xxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
with a copy to:
Xxxxxx, Xxxxxxxx Xxxxxxxx & Xxxxx
000 Xxxxxxxxxx Xxxx
Xxxxx 000
Xxxx Xxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxx Xxxxx, Esq.
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(ii) if to Buyer:
ProNotes Acquisition Corp.
c/o Global Intellicom, Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Johan de Muinck Keizer, Esq.,
General Counsel
with a copy to:
Xxxxxx Xxxxxx Flattau & Klimpl, LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
Any party may, by notice given in accordance with this Section 10.2 to the other
party, designate another address or person for receipt of notices hereunder.
Copies may be sent by regular first-class mail, postage prepaid, to such
person(s) as a party may direct from time to time by notice to the others, but
failure or delay in sending copies shall not affect the validity of any such
notice, request, demand or other communication so given to a party.
10.3 Brokers. Seller and Costilo, jointly and severally,
agree that, except as expressly provided in Section 1.3(b) hereof, they shall
(a) solely be responsible for and shall pay the fees, commissions and expenses
of each broker, finder, investment banker and other intermediary in connection
with this Agreement and the transactions contemplated hereby, including, without
limitation, the fees, commissions and expenses of Xxxx Land and Xxxxx Xxx and
their respective Affiliates, and (b) indemnify Buyer and its Affiliates in
accordance with Article IX hereof with respect to all such fees, commissions and
expenses.
10.4 Entire Agreement. This Agreement (including the
Schedules and Exhibits annexed hereto or referred to herein) and the other
Purchase Documents executed in connection with the consummation of the
transactions contemplated hereby contain the entire agreement between the
parties with respect to the transfer of the Assets to Buyer and the assumption
by Buyer of the Assumed Liabilities and supersedes all prior agreements, written
or oral, with respect thereto. 10.5 Waivers and Amendments; Preservation of
Remedies. This Agreement and the other Purchase Documents may be amended,
superseded, canceled, renewed or extended, and the terms hereof may be waived,
only by a written instrument signed by all parties to this Agreement or, in the
case of a waiver, by the party waiving compliance. No delay on the part of any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any waiver on the part of any party of any such right,
power or privilege, or any single or partial exercise of any such right, power
or privilege, preclude any further exercise thereof or the exercise of any other
such right, power or privilege. The rights and remedies herein provided are
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cumulative and shall not preclude any party from seeking any other remedy
available, whether pursuant to applicable law or otherwise.
10.6 No Third-Party Beneficiaries. Except as expressly
contemplated hereby, this Agreement and the other Purchase Documents are
intended for the exclusive benefit of the parties hereto and shall not be
enforceable by an other person or entity.
10.7 Governing Law. This Agreement and the other Purchase
Documents shall be governed by, and construed and enforced in accordance, with
the laws of the State of New York, without regard to principles of conflicts or
choice of law (or any other law that would make the laws of any state other than
the State of New York applicable hereto).
10.8 Bulk Transfer Laws. Buyer and Seller hereby waive
compliance with all applicable bulk sales and similar laws. Seller and Costilo,
jointly and severally, agree to bear all costs and expenses associated with any
and all claims, losses, liabilities, costs and expenses that Seller or Buyer may
incur as a consequence of any bulk transfer laws, including the waiver of
compliance therewith.
10.9 Binding Effect; Assignment; Parties in Interest.
(a) Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assignable by any of the
parties hereto without the prior written consent of the other party, except that
the rights of Buyer hereunder may be assigned, without the consent of the other
parties hereto, to any corporation all of the outstanding capital stock of which
is owned or controlled, directly or indirectly, by Global; provided that (i) the
assignee shall assume in writing all of Buyer's obligations hereunder, and (ii)
Buyer shall not be released from any of its obligations hereunder by reason of
such assignment. This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective permitted successors and assigns.
Nothing in this Agreement is intended to confer, expressly or by implication,
upon any other person any rights or remedies under or by reason of this
Agreement.
(b) Notwithstanding the foregoing, Buyer
(including each subsequent assignee of Buyer) shall have the right to assign any
or all of their rights and obligations hereunder to any other person who
acquires all or substantially all of the assets and business of Buyer (or a
subsequent assignee of Buyer); provided that the assignor shall not be released
from any of its obligations hereunder by reason of any such assignment.
(c) Notwithstanding any provision of this
Agreement to the contrary, Seller and Costilo each hereby acknowledges and
agrees that all of the covenants, representations, warranties and indemnities of
Seller and Costilo under this Agreement, and under any other Purchase Document,
may be collaterally assigned to any and all lenders to Buyer or Global or any of
their respective affiliates, any and all of whom may enforce their rights and
remedies in
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connection with any such collateral assignment or realization thereon to the
extent provided in the applicable security agreements and other debt instruments
or at law or in equity.
10.10 Counterparts. This Agreement and the other Purchase
Documents may be executed by the parties hereto in separate counterparts, each
of which when so executed and delivered shall be an original, but all such
counterparts shall together constitute one and the same instrument.
10.11 Further Assurances. Seller and Costilo shall, at the
request of Buyer, at any time and from time to time following the Closing,
promptly execute and deliver, or cause to be executed and delivered, to Buyer
all such further documents and instruments and take all such further action as
may be reasonably necessary or appropriate to more effectively transfer to
Buyer, or to perfect or record Buyer's title to or interest in, or to enable
Buyer to use, the Assets and the Business or otherwise to confirm or carry out
the provisions and intent of this Agreement and the other Purchase Documents.
Furthermore, Seller and Costilo shall use their best efforts to promptly obtain
any and all consents, approvals and waivers necessary to permit the assignment
to, and assumption by, Buyer of all of the Assumed Contracts with respect to
which a third-party consent, approval or waiver is required and has not been
obtained prior to the Closing.
10.12 Schedules. All Schedules referred to herein are
hereby incorporated in and made a part of this Agreement as if set forth in full
herein.
10.13 Captions. All section titles or captions contained
in this Agreement or in any Schedule annexed hereto or referred to herein, and
the table of contents to this Agreement, are for convenience only, shall not be
deemed a part of this Agreement and shall not affect the meaning or
interpretation of this Agreement.
10.14 Guarantee. Global, as the direct or indirect owner
of all of the issued and outstanding shares of capital stock of Buyer, does
hereby guarantee to Seller the payment and performance by Buyer of its
obligation to pay to Seller the Earn-Out Deficiency Amount in accordance with
the provisions of Section 2.2(d) hereof and that such guarantee shall constitute
a guarantee of payment and not a guarantee of collection; provided, that Global
shall be entitled to assert, and Global's liabilities and obligations hereunder
shall be subject to, all of Buyer's defenses and other rights under this
Agreement, the other Purchase Documents (as defined in the Agreement) and
applicable law and all defenses, counterclaims and discharges, whether legal or
equitable, of a surety or guarantor under applicable law.
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IN WITNESS WHEREOF, the parties have executed this Agreement or
caused this Agreement to be executed by their respective duly authorized
officers on the date first written above.
PRO NOTES, INC.
By:___________________________________
Name:
Title:
______________________________________
XXXX XXXXXXX
PRONOTES ACQUISITION CORP.
By:___________________________________
Name:
Title:
ACCEPTED AND AGREED TO, solely with respect to Section 10.14 hereof (and
Sections 10.2, 10.4 through 10.7, 10.9 through 10.11 and 10.13 as they relate to
such Section):
GLOBAL INTELLICOM, INC.
By:___________________________________
Name:
Title:
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