Stock and Asset Purchase Agreement - Teltran International Group Ltd., Internet Protocols Ltd. and NCT Networks Inc.
STOCK AND ASSET PURCHASE AGREEMENT
This STOCK AND ASSET PURCHASE AGREEMENT ("Agreement") made as of January
23, 2001, by and among TELTRAN INTERNATIONAL GROUP, LTD., a Delaware corporation
("Teltran"), INTERNET PROTOCOLS LTD. ("IPL"), a corporation formed under the
laws of England and Wales and NCT NETWORKS, INC., a Delaware corporation
("NCTN").
INTRODUCTION
WHEREAS, Teltran is engaged in the telecommunication and internet business;
WHEREAS, Teltran owns all the capital stock of Teltran Web Factory Limited
(the "Acquired Company") and IPL;
WHEREAS, the Acquired Company and IPL are engaged in the internet business;
WHEREAS, NCTN desires to acquire all the shares the Acquired Company
("Acquired Company Shares") and certain assets of IPL, and;
WHEREAS, Teltran, IPL and NCTN desire to effect the aforesaid transactions;
NOW, THEREFORE, in consideration of the premises, and the representations,
warranties and covenants hereinafter set forth the parties hereby agree as
follows:
ARTICLE I.
DEFINITIONS
1.1 "Defined Terms" As used in this Agreement, the following terms shall have
the meanings indicated below:
"Assignment and Assumption Agreement" shall mean that Assignment and
Assumption Agreement dated no less than one day prior to the Closing Date by
which the Acquired Company shall assign and Teltran and IPL shall
unconditionally assume, and indemnify and hold the Acquired Company harmless
from, the Excluded Liabilities in the form attached hereto as Exhibit A.
"Acquired Assets" or "Assets" shall mean those assets of IPL specifically
identified on Schedule 1 attached hereto, and such assets shall be free and
clear of any Liabilities associated therewith whether arising in contract, by
operation of law or otherwise.
"Balance Sheet" shall refer to the Balance Sheet of the assets and
liabilities of the Acquired Company dated December 20, 2000, including any notes
thereto.
"Certificate of Designations" shall refer to the Certificate of
Designations setting forth the terms of the Preferred Stock hereinafter defined
and filed with the Secretary of the State of Delaware no later than the Closing
Date (as herein defined).
"Closing Date" shall be that date on which the closing occurs as provided
in Section 2.1 herein.
"Consents" shall refer to the consents or approval of any third party
including any governmental agency or registered securities association or stock
exchange required in connection with the Transactions including, but not limited
to, any consent required in connection with the transfer of the Acquired Company
Shares or resulting from a change in beneficial ownership of the Acquired
Company.
"Enforceability Exceptions" shall mean the extent to which enforceability
of an obligation may be limited by applicable bankruptcy, insolvency,
re-organization or other similar laws affecting the enforcement of creditors'
rights generally and by principles of equity regarding the availability of
remedies.
"Exchange Rate" shall mean for purposes of comparing the relative value of
one U.S. dollar to one British pound sterling, the value of one dollar and fifty
cents ($1.50) to one pound sterling ((pound)1.00).
"Excluded Liabilities" shall mean subject to the provision of Section 5.4
all Liabilities of the Acquired Company not specifically reflected, noted or
specifically reserved against on the Balance Sheet, including without limitation
any Liabilities of the Acquired Company that together with the Liabilities so
specifically reflected, noted or specifically reserved against would exceed the
sum of the amount of the Liability disclosed in the footnote thereto plus
(pound)679,078.39, but in any event not including any of the Ordinary Course
Liabilities.
"GAAP" shall refer to generally accepted accounting principles as applied
in the United States or the United Kingdom as the case may be.
"Laws" shall mean all laws, common laws, rules, regulations, ordinances,
codes, judgments, injunctions, orders, decrees, permits, published policies and
other requirements of the United States or United Kingdom and other
jurisdictions to which Teltran, IPL or the Acquired Company, as applicable, are
subject, including all foreign and local governments and all agencies and
instrumentalities thereof, including any administrative agencies or
administrative body created by any such government.
"Liabilities" shall mean any indebtedness, liability, claim, loss, damage,
deficiency, obligation or responsibility, fixed or unfixed, choate or inchoate,
liquidated or unliquidated, secured or unsecured, accrued, absolute, contingent
or otherwise, whether or not of a kind required by generally accepted accounting
principles to be set forth on a financial statement including the notes thereto.
"Lien" means any mortgage, pledge, lien, encumbrance, charge, adverse claim
or restriction of any kind affecting title or resulting in an encumbrance
against property, real or personal, tangible or intangible, or a security
interest of any kind (including any conditional sale or other title retention
agreement, any lease in the nature thereof, any third party option or other
agreement to sell and any filing of or agreement to give, any financing
statement under the Uniform Commercial Code (or equivalent statute) of any
jurisdiction).
"Material Adverse Effect" or "Material Adverse Change" with respect to a
party or the Acquired Company means a change which would in the aggregate have
material adverse effect on the assets, liabilities (whether absolute, accrued,
contingent or otherwise), condition (financial or otherwise), results of
operations, business or future business or financial condition on a consolidated
or combined basis of such party.
"Ordinary Course Liabilities" shall mean those Liabilities of the Acquired
Company that have arisen since the date of the Balance Sheet in the ordinary
course of the Acquired Company's business and consistent with reasonable
commercial practices, other than Liabilities for any advances made on the
Purchase Price by Buyer, or other Liabilities that may have arisen from
indebtedness for borrowed money.
"Preferred Stock" or "Series A Preferred Shares" shall refer to the Series
A Preferred Stock of NCTN convertible as set forth in the Certificate of
Designations.
"Person" shall mean any natural person, corporation, division of a
corporation, partnership, trust, joint venture, association, company, estate,
unincorporated organization or governmental entity.
"Release" shall mean that document in substantially the form attached
hereto as Exhibit B by which the parties intend to release all intracompany
receivables, payables, loans and advances as of the closing date among Teltran
and IPL on the one hand, and the Acquired Company on the other.
"Stated Value" shall refer to the $1,000 in stated value of the Preferred
Stock as hereinabove defined.
"Stockholders' Agreement" shall be a Standstill and Stockholders Agreement
containing terms set forth in Exhibit C attached hereto among NCTN, NCT Group,
Inc. and each of the holders of the Series A Preferred Shares, which shall be
reasonably acceptable to NCTN's and Teltran's counsel.
"Subsidiary" shall refer to any corporation, company, partnership joint
venture, business trust or other entity in which a Person has a equity interest
or which is otherwise controlled by such Person.
"Transactions" shall mean, in respect of any party, all transactions set
forth in or contemplated by this Agreement that involve, relate to or affect
such party, including, without limitation, all transactions and undertakings set
forth in such documents, agreements, instruments of title or certificates that
such party may deliver to another party pursuant to this Agreement.
"Working Capital" as reflected on any balance sheet of the Company as may
be referred to herein or prepared and adjusted as set forth in Section 2.5 and
Schedule 2.5 hereto shall mean current assets less current liabilities.
ARTICLE II.
THE CLOSING
2.1 The Transactions. The closing ("Closing") of the Transactions under this
Agreement shall occur as soon as reasonably practical after the execution and
delivery hereof by all parties, and promptly following final agreement between
Teltran and NCTN and their respective counsel as to the precise form of the
Certificate of Designations. Such Closing shall be deemed to be held at the
offices of NCTN at 20 Ketchum Street, Westport CT, U.S.A. effective at 10:00
a.m. local time on such date as the Closing shall occur (the "Closing Date").
2.2 The Closing. At the Closing the parties shall deliver the following
agreements, documents, instruments of title, certificates and other materials as
contemplated by the Transactions:
2.2.1 NCTN Deliveries. NCTN shall deliver by wire transfer of same day funds to
Teltran the sum of One Hundred Thousand U.S. Dollars ($100,000) (the "Initial
Cash Price") to an account at a U.S. bank designated in writing, less any
advances of the Purchase Price made by NCTN to Teltran or the Acquired Company
prior to the Closing Date set forth on Schedule 2.2.1. The advances set forth on
Schedule 2.2.1 shall not reflect any cash advances made to the Acquired Company
to pay Ordinary Course Liabilities. In addition, NCTN shall issue for the
benefit of Teltran and IPL to the following persons and parties Series A
Preferred Shares, free and clear of all Liens:
(a) to John Chalfin, Series A Preferred Shares having a value, after
applying the Exchange Rate to the Stated Value, of (pound)750,000;
(b) to the finders (Cook and Pittsburg), Series A Preferred Shares having a
value, after applying the Exchange Rate to the Stated Value, of (pound)425,810;
(c) to a collateral or escrow agent designated by Teltran, Series A
Preferred Shares having a Stated Value of up to (pound)2,264,190. If Teltran
instructs NCTN to deliver Series A Preferred Shares having a Stated Value of
less than (pound)2,264,190 to a collateral agent or escrow agent, NCTN shall
deliver the remaining Series A Preferred Shares directly to Teltran or its
counsel;
NCTN may in its sole discretion round up or down the total number of Series A
Preferred Shares to be issued at the Closing to the nearest Stated Value of a
single share of Series A Preferred Stock to avoid issuing fractional shares. In
addition, NCTN shall make the following deliveries to Teltran and IPL:
(d) a release of the personal guarantee of Byron Lerner of the advances
referenced on Schedule 2.2.1; and if applicable referred to in Section 2.10;
(e) an opinion of NCTN's counsel as reasonably requested by Teltran's and
IPL `s counsel; and
(f) such other documents and certificates as Teltran or its counsel may
reasonably request.
2.2.2 Teltran Deliveries. Teltran shall deliver to NCTN:
(a) one or more certificates representing all of the Acquired Company
Shares with all tax stamps, endorsements and proof of other liens or charges
arising in connection with the transfer and sale of the Acquired Company Shares
having been paid by Teltran based upon reasonable assumptions as to the fair
market value of the Series A Preferred Shares to be delivered at Closing and
pursuant to Section 2.6 herein, with such stock transfer powers duly endorsed
over to NCTN as may be required by applicable Law to more fully consummate the
Transactions contemplated hereby;
(b) an executed and delivered original of the Assignment and Assumption
Agreement date no less than one day prior to the Closing Date;
(c) executed originals of all Consents relating to the Acquired Company and
its assets;
(d) a Release of the Acquired Company in respect of all Liabilities that
may be owed by the Acquired Company to Teltran and its Subsidiaries in a form
reasonably acceptable to NCTN and its counsel;
(e) certified resolutions of the Teltran Board of Directors approving this
Agreement, the Assignment and Assumption Agreement, the Release and the
Transactions;
(f) the Stockholders' Agreement with NCTN in respect of the Series A
Preferred Shares to be issued for the benefit of Teltran and IPL hereunder;
(g) an officer's certificate signed by two officers or directors of Teltran
as may be designated and in the form requested by NCTN as to the truth,
completeness and accuracy of the representations and warranties of Teltran
contained in this Agreement, the Assignment and Assumption Agreement, the
Stockholders' Agreement and the fair presentation of the Balance Sheet;
(h) an opinion of Teltran and IPL's counsel as reasonably requested by
NCTN's counsel; and
(i) such other documents, instruments, certificates and undertakings as
NCTN and its counsel may reasonably request.
2.2.3 IPL Deliveries. IPL shall deliver to NCTN as follows:
(a) an executed original of such instruments of title to the Acquired
Assets as counsel for NCTN may reasonably request to best confer free and clear
title thereto in the name of NCTN;
(b) certified resolutions of the Board of Directors of IPL approving this
Agreement, the Assignment and Assumption Agreement, the Release and the
Transactions;
(c) a Release of the Acquired Company in respect of all Liabilities that
may be owed by the Acquired Company to IPL and its Subsidiaries in a form
reasonably acceptable to NCTN and its counsel;
(d) executed originals of all Consents relating to the Acquired Assets;
(e) an officer's certificate signed by two officers or directors of IPL as
may be designated by NCTN in a form reasonably requested by NCTN's counsel
attesting as to the accuracy and completeness of the representations and
warranties of IPL set forth herein and in the Assignment and Assumption
Agreement;
(f) an executed original of the Assignment and Assumption Agreement; and
(g) such other documents, instruments, certificates and undertakings as
NCTN or its counsel may reasonably request.
2.2.4 Acquired Company Deliveries. Teltran shall cause the Acquired Company to
deliver to NCTN:
(a) a certified long form copy of its Articles of Association and
Memorandum of Association;
(b) all minute books and corporate records of the Acquired Company and the
Acquired Company's seal;
(c) written resignations of all officers and directors of the Acquired
Company effective on the Closing Date;
(d) certified resolutions of the board of directors of the Acquired Company
authorizing the Transactions, and appointing nominees of NCTN as directors as
well as the managing director and other officers of Acquired Company effective
on the Closing Date;
(e) a Release to the Teltran and IPL Liabilities owed by Teltran and IPL to
the Acquired Company in an amount not to exceed(pound)375,388.87; and
(f) such other documents as NCTN or its counsel may reasonably request.
2.2.5 Companies House Filings. Promptly after the Closing NCTN and the Acquired
Company shall make all necessary and appropriate filings with Companies House of
the United Kingdom to report and record the Transactions, the newly elected
directors and officers of the Acquired Company, and the ownership of the NCTN
Acquired Shares as of the Closing Date.
2.3 Ordinary Course Liabilities; DataTech Settlement. NCTN agrees that the
Acquired Company shall remain obligated to pay, perform and discharge the
Ordinary Course Liabilities. NCTN further agrees that the Acquired Company shall
be solely responsible for payments to be negotiated, settled by NCTN and paid
(the "DataTech Settlement") by the Acquired Company in connection with all
claims made by DataTech Limited and Logical e business Solutions Limited in
connection with the Debenture of the Acquired Company dated March 15, 2000, to
the benefit of The Web Factory Limited (now known as Logical e business
Solutions Limited), (the "DataTech Debenture").
2.4 DataTech Settlement Consideration. No later than three business days after
the execution and delivery of one or more agreements evidencing all terms of the
DataTech Settlement, NCTN shall pay to Teltran in same day funds $100,000 by
wire transfer (the "DataTech Consideration").
2.5 Adjustment. Promptly following the Closing NCTN shall cause the Acquired
Company to prepare a balance sheet of its assets and liabilities in accordance
with GAAP based upon the Balance Sheet (without customary footnotes and year-end
adjustments) dated the Closing Date (the "Closing Balance Sheet"), and shall
deliver to Teltran a copy of the Closing Balance Sheet together with a completed
Schedule 2.5 attached hereto that reflects certain adjustments as set forth on
such Schedule to a "Pro Forma Balance Sheet at 12/20" and a "Final Closing
Balance Sheet." If the adjusted Closing Net Working Capital of the Acquired
Company, reflected on the Final Closing Balance Sheet as adjusted pursuant to
Schedule 2.5, is less than the adjusted net Working Capital reflected on the Pro
Forma Balance Sheet at 12/20 as adjusted pursuant to Schedule 2.5, then the
absolute difference (the "Adjustment") shall be deducted from the total post
closing consideration referenced in Section 2.6 herein, and NCTN shall offset
such deduction against any payments of cash or in respect of delivery of Series
A Preferred Shares (which for this purpose shall be dollar for dollar against
the stated value) that it may owe to Teltran as set forth in Section 2.4 or
Section 2.6 herein; provided that Teltran shall have the right to object in
writing within ten business days of receipt to NCTN's final compilation of
Schedule 2.5, the Pro Forma Balance Sheet at 12/20 and the Final Closing Balance
Sheet. If the parties are unable to resolve their differences within an
additional ten business days, they shall jointly engage a neutral independent
accounting firm (the "Firm") within ten business days thereafter and whose
review and determination of the merits of Teltran's objections to the NCTN
compilation of Schedule 2.5 and the Final Closing Balance Sheet shall be
determinative final and binding on the parties, absent manifest error. If one
party substantially prevails as to its objections or compilation of Schedule
2.5, the Pro Forma Balance Sheet at 12/20 and the Final Closing Balance Sheet,
the other party shall pay the fees and expenses of such Firm. If neither party
substantially prevails, Teltran and NCTN shall share equally in the pay of such
fees and expenses, with the Firm determining which, if any, party substantially
prevailed.
2.6 Post Closing Consideration. Subject to NCTN's right of offset for breaches
of representations and warranties of Teltran and IPL and claims for
indemnification as set forth in Section 2.7 below, and the right of NCTN to
deduct the Adjustment against payments of cash or issuance of Preferred Stock as
set forth in Section 2.5 above, following the Closing NCTN shall pay to Teltran
$150,000 in same day funds on or prior to the 60th day following the Closing
Date or if such 60th day is not a business day in either London or New York the
next business day thereafter (the "Post Closing Consideration"). The parties
shall endeavor to move up the day of payment of this Post Closing Consideration
by reaching full agreement on the Adjustment, if any, pursuant to Section 2.5.
NCTN shall further issue and deliver on such date to Teltran or its designees on
behalf of Teltran and IPL Series A Preferred Shares having a stated value of
(pound)1,500,000, (the "Final Shares") less any amounts of the Adjustment that
were not deducted, or Excluded Liabilities that were not offset as provided in
Section 2.8, offset by the DataTech Settlement Consideration or the Post Closing
Consideration. The value of the Initial Cash Consideration, the stated value of
the Series A Preferred Shares issued at Closing pursuant to Section 2.2.1(a),
(b) and (c), the DataTech Consideration and the stated value Final Shares when
added together shall equal the sum of the $350,000 and Preferred Shares having a
stated value equivalent to (pound)4,940,000 (the "Purchase Amount"), subject to
deduction of the Adjustment as provided in Section 2.5 and any offset as
provided in Section 2.7.
2.7 Offsets. If NCTN or its stockholders or Subsidiaries incur any Liabilities
relating to any breach of representations and warranties of Teltran and IPL or
breach of any covenants, obligations or undertakings of Teltran and/or IPL in
this Agreement or the Assignment and Assumption Agreement, then NCTN shall have
the right to offset such Liabilities against the obligation to deliver to
Teltran the DataTech Consideration in Section 2.4, the Post Closing
Consideration or to issue the Final Shares as provided in Section 2.6. For
purposes of any offsets against shares of Preferred Stock, such offsets shall be
dollar for dollar against the stated value of the Preferred Stock.
2.8 Allocation. Teltran and IPL shall provide to NCTN an intended allocation of
the total Purchase Price between them for the Acquired Company Shares and the
Acquired Assets no later than five business days following the Closing Date.
NCTN shall have five business days thereafter to propose any changes thereto,
and if reasonably acceptable to Teltran and IPL, the parties shall adopt such
allocation for all purposes in connection with the Transactions contemplated
hereby.
2.9 Certain Matters. Notwithstanding any other provision of this Agreement, the
parties have agreed to handle certain employment and other matters concerning
the Acquired Company as set forth on Schedule 2.9. Such matters are addressed in
their entirety in Schedule 2.9. and shall not be the basis for any increase or
decrease in the Adjustment or in determination of the Excluded Liabilities or
the Ordinary Course Liabilities.
2.10 Certain Pre-Closing Advances. Notwithstanding any other provisions of this
Agreement, any advance made by NCTN or its affiliates for operations in the
normal course of business of Acquired Company shall not be included as an
Excluded Liabilities in the Agreement or Assignment and Assumption Agreement,
subject to any indemnity or included as a liability for any calculation under
Section 2.5 and any guaranties thereof shall be released. If the Closing shall
not occur, the Acquired Company shall remain liable to NCTN for such advance and
any such guaranty shall remain in effect.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF TELTRAN and IPL
Except as set forth in the Acquired Company Disclosure Schedule, Teltran
and IPL jointly and severally represent and warrant to NCTN as follows on the
date hereof and on the Closing Date with the knowledge and understanding that
NCTN is relying materially upon such representations and warranties.
3.1 Organization and Standing of Acquired Company. The Acquired Company is a
corporation duly organized, validly existing and in good standing under the
corporate laws of England and Wales. The Acquired Company has the corporate
power to carry on its business as now conducted and to own its assets and is
duly qualified to transact business as a foreign corporation in each
jurisdiction where such qualification is necessary except where the failure to
qualify will not have a Material Adverse Effect. The copies of the Memorandum of
Association and Articles of Association of the Acquired Company as amended to
date, and made available to NCTN, are true and complete copies of those
documents as now in effect ("Corporate Documents").
3.2 Capitalization. The authorized capital stock of the Acquired Company, as set
forth in Corporate Documents to be exchanged hereunder constitutes all the
issued and outstanding Shares of the Acquired Company except as set forth in
Schedule 4.2, the shares of common stock of the Acquired Company that are issued
and outstanding are duly authorized, validly issued and outstanding, fully paid
and non-assessable (not subject to further charge), and were not issued in
violation of the preemptive rights of any person. There are no outstanding (a)
options, warrants or rights to purchase or subscribe for any equity securities,
or other ownership interests of the Acquired Company, (b) obligations of the
Acquired Company, whether absolute or contingent, to issue any shares of equity
securities or other ownership interests, (c) debt or equity securities directly
or indirectly convertible into any equity securities of the Acquired Company or
(d) any stockholder agreements, options, rights of first refusal or other
similar rights with respect to the capital stock of the Acquired Company to
which the Acquired Company is a party.
3.3 Share Ownership. Teltran represents that it is the record and beneficial
owner of all shares of Acquired Company Shares free and clear of all Liens
except such Liens as shall be satisfied at Closing. Upon execution of this
Agreement and deliveries at closing of the certificates for Acquired Company
Shares, NCTN shall receive marketable title to such Acquired Company Shares free
and clear of all Liens and encumbrances and claims of third parties.
3.4 Authority. Teltran and IPL are corporations duly formed, validly existing
and in good standing in the jurisdiction of their incorporation or formation.
The execution, delivery and performance of this Agreement, the Assignment and
Assumption Agreement, the Stockholders' Agreement and the Releases will not
conflict with, violate or cause a default under, their respective charter
documents, or any note, credit agreement, indenture, pledge or security
agreement, or other instrument relating to indebtedness for borrowed money, or
any material contracts to which they or the Acquired Company may be a party, or
by which they, their assets or the Acquired Assets are bound. Teltran and IPL
have all the requisite corporate power and authority to execute and delivery and
perform its obligations under this Agreement and all related transactions as
provided hereunder and upon execution and delivery, the Agreement, the
Assignment and Assumption Agreement, the Stockholders' Agreement and the
Releases to be delivered hereunder are valid, binding, enforceable against
Teltran and IPL in accordance with their respective terms subject to the
Enforceability Exceptions.
3.5 Investment Intent. Teltran and IPL are acquiring the Preferred Stock
herewith to be issued hereunder for investment, for their own account, and not
with a view to any public distribution thereof. In such connection, each further
represents and warrants that they understand that NCTN is issuing the Preferred
Stock for the benefit of Teltran and IPL in reliance upon an exemption from the
registration requirements pursuant to Section 5 of the Securities Act of 1933,
as amended (the "Act") and the rules and regulations thereunder. Such Preferred
Stock any common stock of NCTN that may be issued upon the conversion thereof
(the "Conversion Shares") may not be sold, transferred, pledged, hypothecated,
assigned or otherwise disposed of by any holder thereof unless NCTN shall have
been supplied with evidence satisfactory to it and its counsel that such
transfer is not in violation of the Act. Teltran and IPL understand that the
certificates for the Preferred Stock and the Conversion Shares shall bear an
appropriate restrictive legend to reflect the foregoing restrictions and that
stop transfer instructions will be placed against the Preferred Stock and
Conversion Shares with respect thereto. Teltran and IPL consent to the placing
of such legend on the certificates for the Preferred Stock.
3.6 Infringement. The Acquired Company is not violating or infringing, the
rights of others in any trademark, trade name, service mark, copyright, patent,
trade secret, know-how or intangible asset.
3.7 Assets. IPL has good and marketable title to all of the assets and
properties constituting the Assets free and clear of all Liens. The Acquired
Company has good and marketable title to all of the assets it purports to own or
which are reflected on the balance sheet, and has a valid and enforceable
leasehold interest in the assets and properties it purports to lease, subject
only to such Liens that have been previously disclosed to NCTN.
3.8 Compliance with Laws. The Acquired Company is in compliance with all Laws
that may be applicable to it and to its asset and lines of business, except
where noncompliance would not have a Material Adverse Effect on its current
working capital to be reflected on the Closing Balance Sheet.
3.9 Employees. The Acquired Company has only those persons listed on Schedule
3.9 as employees, and has no other employment obligations or Liabilities in
respect thereof, whether past, present or in the future to any other person.
Schedule 3.9 accurately sets forth the maximum annual salary obligations
currently owed to its employees.
3.10 Balance Sheet. The Balance Sheet fairly presents the assets and Liabilities
of the Acquired Company as of the date thereon, and was prepared in accordance
with GAAP (except for customary footnotes and year-end adjustments) from records
accurately and fairly maintained by the Acquired Company. The Acquired Company
has not incurred or suffered any Liability not in the ordinary course of
business since the date of the Balance Sheet. The assets of the Acquired Company
are free and clear of all Liens, subject only to such Liens that have been
previously disclosed to NCTN. The Acquired Company has no obligations of
indebtedness for borrowed money, except for such advances as may have been made
by NCTN on or prior to the Closing Date.
3.11 Full Disclosure. Neither Teltran, IPL, the Acquired Company or their
respective officers, directors, employees and representatives have made any
untrue statements of material fact or omitted to disclose any material facts to
make any statements not misleading to NCTN, NCT Group, Inc., a Delaware
corporation and the parent of NCTN, or their respective representatives in
connection with the Transactions or the representations and warranties contained
in this Agreement or the Assignment and Assumption Agreement or the schedules
and documents delivered hereunder.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF NCTN
NCTN represents and warrants to and agrees with Teltran as follows as of
the date hereof and the Closing Date with the knowledge and understanding that
Teltran is relying materially upon such representations and warrants:
4.1 Organization and Standing of NCTN. NCTN is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware ad
has the corporate power to carry on its business as now conducted and to own its
assets and is duly qualified to transact business as a foreign corporation in
each state where such qualification is necessary except where the failure to
qualify will not have a Material Adverse Effect.
4.2 Governmental Approval: Consents. No authorization, license, permit,
franchise, approval, order or consent of and no registration, declaration or
filing by NCTN with any governmental authority, domestic or foreign, federal,
state or local, is required in connection with NCTN execution, delivery and
performance of this Agreement and consummation of the transaction. No Consents
of any other parties are required to be received by or on the part of NCTN to
enable Teltran to enter into and carry out this Agreement.
4.3 Authority. This Agreement constitutes, and all other agreements contemplated
hereby will constitute, when executed and delivered by NCTN in accordance
herewith, the valid and binding obligations of NCTN enforceable in accordance
with their respective terms, subject to the Enforceability Exceptions.
4.4 Share Issuance. The shares of Preferred Stock to be issued hereby are, and
the shares of common stock to be issued upon conversion or exchange thereof
shall be, duly and validly issued, fully paid and non-assessable.
4.5 Capitalization. The authorized capital stock of the NCTN is set forth in
Schedule 4.5. Except as set forth in such schedule, no other shares of Preferred
Stock of the Acquired Company are issued and outstanding. There are no plans to
issue outstanding shares of Preferred Stock except as disclosed in Schedule 4.5.
There are no (a) options, warrants, convertible securities or other rights to
purchase or subscribe for any equity securities, or other ownership interests of
NCTN outstanding, or (b) other obligations of NCTN whether absolute or
contingent, to issue any shares of equity securities or other ownership
interests, except as disclosed on Schedule 4.5.
ARTICLE V.
INDEMNITY
5.1 WebFactory Indebtedness. NCTN shall indemnify and hold harmless Teltran from
liability, costs and expense of any description of the Acquired Company as well
as any guaranty of any indebtedness of the Acquired Company, including any
indebtedness incurred in connection with the acquisition of assets by the
Acquired Company from the WebFactory Limited (now known as Logical e Business
Solutions Limited) in March 2000, which is specifically reflected or noted on
the Balance Sheet, and if not so reflected, NCTN shall have no indemnification
or hold harmless obligation to Teltran in respect thereof. NCTN shall cause the
Acquired Company to indemnify and hold Teltran harmless from the Ordinary Course
Liabilities.
5.2 IPL Shareholders. Teltran and IPL shall jointly and severally indemnify and
hold NCTN harmless from any and all claims of the IPL shareholders and any IPL
creditors with respect to the transfer of the Acquired Assets. IPL represents
and warrant to NCTN that it is receiving fair consideration for the Acquired
Assets pursuant to the allocation of the Purchase Price as contemplated by
Section 2.8 herein.
5.3 Brokers' Fees. Except for fees paid to the Finder as set forth herein,
Teltran and the Acquired Company shall save and hold the other harmless from any
claims made against the other on account of their acts or alleged acts from any
person for any other agent's, broker's or finder's fee or commission incurred in
connection with the Transactions.
5.4 Teltran Indemnity. Teltran and IPL jointly and severally shall indemnify and
hold harmless the Acquired Company and NCTN and its officers, directors,
representatives, stockholders and affiliates (the "NCTN Indemnitees") from and
against (a) the Excluded Liabilities, (b) any breach of representation, warranty
or covenant made by them in this Agreement, the Assignment and Assumption
Agreement or in connection with the Transactions, and (c) any Liabilities of the
Acquired Company as of the Closing Date (other than the Ordinary Course
Liabilities). For purposes of clarity and without limitation on the aforesaid,
neither Teltran nor IPL shall have any obligation to indemnify or hold harmless
the Acquired Company, NCTN or any of the NCTN Indemnitees from or against the
Ordinary Course Liabilities, the DataTech Settlement, or such claims as may be
asserted by DataTech and Logical e business Solutions or any indebtedness in
connection with the DataTech Debenture, any advance made by NCTN (other then an
advance of Initial Cash Price hereunder) any item listed in Schedule 2.9 (except
as otherwise provided therein), nor shall any such item be deemed an Excluded
Liability or a liability assumed pursuant to the assignment and Assumption
Agreement. In the event any liability was satisfied under any other provision of
this Agreement, including Section 2.5, neither Teltran nor IPL shall have no
further obligation therefore.
ARTICLE VI.
POST CLOSING MATTERS
6.1 Non Solicitation. Teltran further undertakes and agrees that during the term
of the Agreement and, for the one year period after termination, it will not,
directly or indirectly employ, cause to be employed, or solicit for employment
any of the Acquired Company's employees.
6.2 Non-Disclosure of Information.
(i) Teltran shall (i) never, directly or indirectly, disclose to any person or
entity for any reason, or use for his own personal benefit, any "Confidential
Information" (as hereinafter defined) either during his employment with Teltran
and its affiliates or following termination of that employment for any reason
(ii) at all times take all precautions necessary to protect from loss or
disclosure by it of any and all documents or other information containing,
referring or relating to such Confidential Information.
(ii) Notwithstanding any provision to the contrary in this Section 6.2, this
paragraph shall not apply to information which Teltran is called upon by legal
process regular on its face (including, without limitation, by subpoena or
discovery requirement) to disclose or to information which has become part of
the public domain or is otherwise publicly disclosed through no fault or action
of Teltran.
(iii) For purposes of this Agreement, "Confidential Information" means any
information relating in any way to the business of the Acquired Company which
consists of technical and non-technical information about the Acquired Company's
products, processes, programs, concepts, forms, business methods, data, any and
all financial and accounting data, marketing, customers, customer lists, and
services and information corresponding thereto. Confidential Information shall
not include any of such items which are published or are otherwise part of the
public domain, or freely available from trade sources or otherwise without
breach of any obligation of confidentiality.
6.3 Injunctive Relief. The parties hereto agree that the remedy at law for any
breach of the provisions of this paragraph 7 will be inadequate and that the
Company or any of its subsidiaries or other successors or assigns shall be
entitled to injunctive relief without bond. Such injunctive relief shall not be
exclusive, but shall be in addition to any other rights and remedies Company or
any of its subsidiaries or their successors or assigns might have for such
breach.
6.4 Access. From and after the Closing Date, NCTN and the Acquired Company shall
give Teltran and its accountants such reasonable access as Teltran may request
to the Acquired Company's books and records and financial personnel for purposes
of reviewing NCTN's compilation of Schedule 2 as provided in Section 2.5, and
for preparation of Teltran's consolidated tax returns and financial statements
and related disclosures as may be required by applicable law.
ARTICLE VII.
MISCELLANEOUS
7.1 Expenses. Except as otherwise provided herein, the Acquired Company, NCTN
and Teltran shall each pay their own expenses incident to the negotiation,
preparation, and carrying out of this Agreement, including all fees and expenses
of its counsel and accountants for all activities of such counsel and
accountants undertaken pursuant to this Agreement, irrespective of whether or
not the transactions contemplated hereby are consummated.
7.2 Survival of Representations, Warranties and Covenants. All statements
contained in this Agreement or in any certificate delivered by or on behalf of
NCTN, IPL or Teltran pursuant hereto, or in connection with the transactions
contemplated hereby shall be deemed representations, warranties and covenants by
the parties as the case may be, hereunder. All representations, warranties, and
covenants made by the parties in this Agreement, or pursuant hereto, shall
survive the Closing, but shall terminate two years from the Closing Date.
7.3 Succession and Assignments; Third Party Beneficiaries. This Agreement may
not be assigned (either voluntarily or involuntarily) by any party hereto
without the express written consent of the other party. Any attempted assignment
in violation of this Section shall be void and ineffective for all purposes.
This Agreement shall be binding upon the successors and permitted assigns of the
parties hereto. Except as expressly set forth in this Section 7.3, there shall
be no third party beneficiaries of this Agreement.
7.4 Accuracy of Documents. All documents delivered by the Acquired Company, NCTN
to Teltran, and by Teltran to NCTN, as photocopies faithfully reproduce the
originals thereof, and such originals are authentic and were, to the extent
execution was required, duly executed.
7.5 Notices. All notices, requests, demands, or other communications with
respect to this Agreement shall be in writing and shall be (i) sent by facsimile
transmission, (ii) or with respect of notices from the United States sent by the
United States Postal Service, registered or certified mail, return receipt
requested, (iii) personally delivered by a nationally recognized express
overnight courier service, charges prepaid, to the following addresses (or such
other addresses as the parties may specify from time to time in accordance with
this Section):
To Teltran, and IPI:
(1) Teltran International Group, Inc.
One Penn Plaza, Suite 3632
New York, New York 10119
Fax: (212) 643-1997
With a copy to:
Parker Duryee Rosoff & Haft
529 Fifth Avenue
New York, New York 10017
Attn: Michael DiGiovanna, Esq.
Fax: (212) 972-9487
(2) To NCTN:
Cy Hammond
NCT Group Inc.
40 Ketchum Street
Westport, CT 06880
Fax: (203) 226-4338
With a copy to:
William P. O'Neill
Latham & Watkins
1001 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
Fax: (202) 637-2201
All such notices shall, when sent in accordance with the preceding
sentence, be deemed to have been given and received on the earliest of (i) the
day delivered to such address or sent by facsimile transmission, (ii) the fifth
business day following the date deposited with the United States Postal Service,
or (iii) the next business day after shipment by such courier service.
7.6 Construction. This Agreement shall be construed and enforced in accordance
with the internal laws of the State of New York (US) without giving effect to
the principles of conflicts of law thereof.
7.7 Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which shall together
constitute one and the same Agreement.
7.8 No Implied Waiver; Remedies. No failure or delay on the part of the parties
hereto to exercise any right, power, or privilege hereunder or under any
instrument executed pursuant hereto shall operate as a waiver nor shall any
single or partial exercise of any right, power, or privilege preclude any other
or further exercise thereof or the exercise of any other right, power, or
privilege. All rights, powers, and privileges granted herein shall be in
addition to other rights and remedies to which the parties may be entitled at
law or in equity.
7.9 Entire Agreement. This Agreement, including any exhibits and Disclosure
Schedules attached hereto, sets forth the entire understandings of the parties
with respect to the subject matter hereof, and it incorporates and merges any
and all previous communications, understandings, oral or written as to the
subject matter hereof, and cannot be amended, waived or changed except in
writing, signed by the party to be bound thereby.
7.10 Headings. The headings of the Sections of this Agreement, where employed,
are for the convenience of reference only and do not form a part hereof and in
no way modify, interpret or construe the meanings of the parties.
7.11 Severability. To the extent that any provision of this Agreement shall be
invalid or unenforceable, it shall be considered deleted hereof and the
remainder of such provision and of this Agreement shall be unaffected and shall
continue in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this agreement as of the date
hereof.
TELTRAN INTERNATIONAL GROUP, LTD.
By:
---------------------------------------
INTERNET PROTOCOLS, LTD.
By:
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NCT NETWORKS, INC.
By:
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<PAGE>
Schedule 2.8
Certain Matters
1. The Acquired Company shall negotiate and settle all claims with Mike
Nevell, at the direction of NCTN, and NCTN and the Acquired Company will be
solely responsible for any payments to be made to Mr. Nevell, without any
Adjustment to the Balance Sheet at December 20, 2000 or to the Final
Closing Balance Sheet included in Schedule 2.5.
2. Teltran shall be responsible for reaching settlements with Patricia Morris
and Alan Harvey. Once such settlement is made and the Acquired Company is
fully and unconditionally released from such claims, NCTN shall pay
one-half of the settlement amount to Teltran, which payment by NCTN shall
not exceed(pound)15,822. Any settlement amount in excess of(pound)31,644
shall be the sole responsibility of Teltran. Teltran shall be responsible
for the other half of such settlement. Teltran agrees, upon receipt of such
payment by NCTN, to indemnify and hold harmless the Acquired Company, NCTN
and their respective officers, directors and affiliates from such claims,
including reasonable attorneys' fees, if it is ever necessary to defend
against such claims. The settlement with Ms. Morris and Mr. Harvey shall
not cause any increase or decrease in the Adjustment or the Balance Sheet
at December 20, 2000 or to the Final Closing Balance Sheet included in
Schedule 2.5.
3. Any claims by Cook and/or Miller-Brazil are the sole responsibility of
Teltran and such claims shall be discharged in full at the Closing from the
consideration to be delivered at the Closing hereunder or otherwise as
arranged by Teltran.
<PAGE>
EXHIBIT C
Terms of Stockholders' Agreement
1. The holders of the Preferred Stock shall agree to vote their common stock
of NCTN to be issued upon conversion of the Preferred Stock as recommended
by a majority of the Board of Directors of NCTN to the common stockholders,
including with respect to the election of Directors.
2. The holders of the Preferred Stock agree not to acquire additional shares
of NCTN common stock or securities convertible into or exchangeable for
NCTN common stock without the permission of the NCTN Board of Directors.
3. Points 1 and 2 above shall be binding upon such holders' successors and
assigns if such holders' Preferred Stock or shares of common stock are
transferred privately to any third party, and not so binding if sold
through any market on which NCTN common stock is listed for trading in
public transactions.
4. The holders of the Preferred Stock shall be free to transfer any shares of
NCTN common stock issued to them upon conversion of the Preferred Stock
through any market on which NCTN common stock is listed for trading in
public transactions, without restriction under the Stockholders' Agreement.
<PAGE>
Legal Opinions
1. Teltran Counsel: The Purchase Agreement, Assignment and Assumption
Agreement, Releases, and Stockholders' Agreement have been duly approved by
all necessary corporate action for execution and deliver by Teltrans and
IPL and (a) do not conflict with any charter documents, and (b) are valid,
binding and enforceable against Teltran and IPL, and the holders of the
Preferred Stock (where applicable), subject to standard exceptions.
2. NCTN Counsel: The Purchase Agreement has been duly approved by all
necessary corporate action for execution and delivery by NCTN and (a) does
not conflict with any charter documents, and (b) is valid, binding and
enforceable against NCTN subject to standard exceptions. The Preferred
Stock and the NCTN Common Stock when issued upon conversion of the
Preferred Stock, has been or will be duly authorized, validly issued, fully
paid and non-assessable.