ASSET ACQUISITION AGREEMENT
This Asset Acquisition Agreement is made as of April
26,1997, by and among NetChannel Inc., a Delaware corporation
("NetChannel"), ViewCall America, Inc., a Georgia corporation
("ViewCall"), Colorocs Information Technologies, Inc., a Georgia
corporation and the majority shareholder of ViewCall
("Colorocs"), and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ("▇▇▇▇▇"), an individual and a
principal shareholder of Colorocs.
Section 1. PURCHASE AND TRANSFER OF ASSETS
1.1 Purchased ViewCall Property. Subject to the terms and
conditions set forth in this Agreement, ViewCall agrees to sell,
transfer, assign and deliver to NetChannel, and NetChannel agrees
to purchase and accept, the following property, except to the
extent the same constitutes Excluded Property:
(a) Listed Tangible Personal Property. All of the
furniture, fixtures, equipment and other tangible personal
property owned by ViewCall, including without limitation, the
furniture, fixtures, and equipment listed in Section 1.1 (a) of
the ViewCall Disclosure Schedule attached hereto as Schedule 2
(the "Tangible Personal Property").
(b) Personal Property Leases. All of the lessee's rights
under and interest in and to the leases of Personal Property
listed in Section 1.1(b) of ViewCall Disclosure Schedule
(collectively, the "Personal Property Leases").
(c) Technology. All of the patents, patent rights, works
of authorship, registered and unregistered copyrights, registered
and unregistered trademarks, service marks, trade names, and
trade dress, and any registrations therefor, of or related to
ViewCall's Internet service and server technology as further
described in Exhibit A (the "Technology"), including (without
limit) any object code, source code, flow charts, diagrams,
coding sheets, listings and annotations, programmers' notes, work
papers and work product, engineering notebooks, designs,
compositions, schematics, test data and test results, ideas,
know-how and tangible or intangible proprietary information,
trade secrets or material related to the foregoing, as well as
all reference manuals and support materials normally distributed
to end-users and potential end-users in connection with the
distribution of the Technology.
(d) Listed Contracts. All rights of ViewCall under all of
the contracts listed in Exhibit B (the "Assigned Contracts").
Any contracts not listed in Exhibit B, including (without
limitation) any contracts listed in Schedule 1.1(d) of the
ViewCall Disclosure, shall for purposes of this Agreement be
referred to as the "Excluded Contracts."
(e) Books and Records. All books, papers and records
(whether in written or other form) of any kind owned by ViewCall
to the extent the same relate to (i) any employee of ViewCall or
Colorocs who has been offered employment by NetChannel and who
has accepted such offer of employment, or (ii) any of the
Purchased Property (defined at Section 1.3 below) or ViewCall's
use or development thereof.
(f) Non-competition Rights. All of ViewCall's rights under
contract or otherwise, howsoever arising, to prevent or otherwise
restrict any employee of or consultant to ViewCall from accepting
employment with, or performing any duty or service for,
NetChannel or any of its affiliates.
The property described and referred to in the preceding Sections
1.1(a) through 1.1(f) is referred to in this Agreement as the
"Purchased ViewCall Property."
1.2 Purchased Colorocs Property.
(a) Colorocs Notes and Liens. All of Colorocs' right,
title and interest in and to the Colorocs Notes and Liens will be
acquired by NetChannel pursuant and subject to a Note and
Security Purchase Agreement in the form attached hereto as
Exhibit C; and
(b) Technology. Subject to the terms and conditions set
forth in this Agreement, Colorocs agrees to sell, transfer,
assign and deliver to NetChannel, and NetChannel agrees to
purchase and accept, all right, title or interest of Colorocs in
or to the Technology.
The property described and referred to in the preceding Section
1.2(a) and (b) is referred to in this Agreement as the "Purchased
Colorocs Property."
1.3 Purchased Property. As used in this Agreement, the
term "Purchased Property" refers, collectively, to the Purchased
ViewCall Property and the Purchased Colorocs Property.
1.4 Excluded Property. Notwithstanding anything to the
contrary in Sections 1.1 or 1.2 hereof, or in any other document
executed in connection with the transaction contemplated by this
Agreement, the Purchased ViewCall Property shall not include, and
NetChannel shall not acquire, any of the following (collectively,
the "Excluded Property"):
(a) Listed Property. Any of the property listed in Section
1.4(a) of ViewCall Disclosure Statement.
(b) NetChannel Designated Property. Any property
designated at any time by NetChannel after execution of this
Agreement (and whether before or after the Closing) as Excluded
Property.
(c) Income Tax Prepayments. All prepaid Income Taxes of
ViewCall and all rights and claims of ViewCall to Income Tax
refunds;
(d) Accounts Receivable. Any accounts receivable of
ViewCall.
(e) Certain Contract Rights. Any rights of ViewCall under
this Agreement or any of (i) the Colorocs Non-competition
Agreement, (ii) the Note and Security Purchase Agreement, (iii)
the Sublease, (iv) the ViewCall Non-competition Agreement, (v)
the Escrow Agreement, (vi) the Excluded Contracts; and (vii) all
other contracts, instruments, certificates and other documents
executed or delivered, or required to be executed or delivered,
pursuant to or in connection with this Agreement or any of the
contracts, instruments, certificates and other documents referred
to in any of clauses (i) through (vii) herein (collectively, the
"Associated Agreements").
1.5 Colorocs Premises. At the Closing, Colorocs and
NetChannel will enter into a sublease covering the premises
located at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
(the "Colorocs Premises") in substantially the form attached
hereto as Exhibit D (the "Sublease").
1.6 Non-competition Agreements. At the Closing, Colorocs
will enter into a non-competition agreement with NetChannel in
substantially the form attached hereto as Exhibit E (the
"Colorocs Non-competition Agreement"). At the Closing, ViewCall
will enter into a non-competition agreement with NetChannel in
substantially the form attached hereto as Exhibit F (the
"ViewCall Non-competition Agreement").
1.7 Investor Rights Agreement. At the Closing, Colorocs and
NetChannel will enter into a First Amendment to Investor Rights
Agreement in substantially the form attached hereto as Exhibit G
(the "First Amendment").
Section 2. PRICE
2.1 Purchased ViewCall Property. The consideration payable
to ViewCall for the Purchased ViewCall Property and the ViewCall
Non-Competition Agreement, is and shall be payable as follows:
(a) VCA Escrowed Shares. At the Closing, in consideration
of the transfer and delivery of the Purchased ViewCall Property
and the ViewCall Non-Competition Agreement, NetChannel shall
deliver to the Escrow Agent a duly issued certificate evidencing
555,556 shares of NetChannel Series C Preferred Stock registered
in the name of ViewCall (the "VCA Escrowed Shares"), which shall
be held and disposed of the by the Escrow Agent in accordance
with the terms of an Indemnification and Escrow Agreement in
substantially the form attached hereto as Exhibit H (the "Escrow
Agreement").
(b) Settled Creditors. From and after the Closing and as
and when required to enable ViewCall to consummate settlements
with Settled Creditors in accordance with this Agreement (the
"Conforming Settlements"), NetChannel shall (i) make cash
payments in an aggregate amount not to exceed $732,693 to Settled
Creditors designated by ViewCall, and (ii) issue NetChannel
Series C Preferred Stock in an aggregate number of shares not to
exceed 382,030 to Settled Creditors designated by ViewCall, all
as set forth Exhibit I. All such payments and share issuances
shall be under and subject to the applicable terms of an
agreement in substantially the form attached hereto as Exhibit J
(the "Channeling Agreement"), to be executed by each Settled
Creditor as a condition precedent to NetChannel's obligation to
make any payment or issue any shares to such Settled Creditor.
(c) ▇▇▇▇▇ ▇▇▇▇▇▇. At the Closing, NetChannel shall issue
25,000 shares of NetChannel Series C Preferred Stock to ▇▇▇▇▇
▇▇▇▇▇▇, in satisfaction of ViewCall's Obligations to him. Such
share issuance shall be under and subject to the applicable terms
of a Channeling Agreement.
(d) Employee Options. At the Closing, NetChannel shall
cause options ("NetChannel Options") to be issued to each person
who is the holder of an option (an "Optionee") which has been
issued by ViewCall pursuant to the ViewCall America, Inc. 1996
Long Term Incentive Plan and is outstanding on the date hereof.
The NetChannel Options, will be fully vested, have an exercise
price of $.25 per share, be immediately exercisable, and remain
in full force and effect for five years following termination of
employment of the Optionee from NetChannel, except that if an
Optionee is not hired by NetChannel, the NetChannel Option shall
expire on the fifth anniversary of the Closing Date. ViewCall
and NetChannel will jointly prepare and agree on an Options List
prior to Closing. In no event shall NetChannel have an
obligation to issue NetChannel Options exercisable for more than
1,000,000 shares of Common Stock pursuant to this provision.
2.2 Colorocs Purchased Property. The purchase price of the
Purchased Colorocs Property shall be paid as follows:
(a) Unescrowed Shares. At the Closing and as part of the
consideration for the sale and transfer to NetChannel of the
Colorocs Notes and Liens, NetChannel shall deliver to Colorocs
certificates evidencing 2,300,000 shares of Series B Preferred
Stock and 114,280 shares of Series C Preferred Stock; and
(b) Colorocs Escrowed Shares. At the Closing and as the
balance of the consideration for the sale and transfer to
NetChannel of the Colorocs Notes and Liens, NetChannel shall
deliver to the Escrow Agent a certificate evidencing 300,000
shares of Series C Preferred Stock registered in the name of
Colorocs (the "Colorocs Escrowed Shares"), which shall be held
and disposed of by the Escrow Agent in accordance with the terms
the Escrow Agreement.
2.3 Colorocs Noncompetition Agreement and Sublease. The
consideration payable to Colorocs for the Colorocs Noncompetition
Agreement and the Sublease shall be paid at the Closing by
delivery to Colorocs of a certificate evidencing 400,000 shares
of Series C Preferred Stock, registered in the name of Colorocs.
2.4 Other Matters. At the Closing, NetChannel will deliver
to ▇▇▇▇▇ warrants representing 450,000 shares of NetChannel
Common Stock, with an exercise price of $1.00 per share (the
"▇▇▇▇▇ Warrants"), in consideration of (i) his personal
participation and assistance in securing the assignment and
transfer of his lien against the assets of ViewCall to
NetChannel, and (ii) his agreement to serve on the Board of
Directors of NetChannel after the Closing.
2.5 Sole Consideration.
(a) No Obligations Assumed. Except for the Assumed
Liabilities expressly assumed by NetChannel in this Agreement or
in any of the Associated Agreements, NetChannel is not assuming,
and shall not be liable or responsible, for any Obligation of
ViewCall or Colorocs or any of their respective affiliates or any
other person. For purposes hereof, "Obligation" shall mean any
indebtedness, liability or obligation of ViewCall or Colorocs of
any type whatsoever and whensoever arising, whether fixed or
contingent, asserted or unasserted, arising under any contract,
by law or otherwise in any manner whatsoever. As used herein,
"Assumed Liabilities" means (a) the executory obligations arising
after the Closing Date under the Assigned Contracts, (b) the
obligations of ViewCall to Settled Creditors under executed
Channeling Agreements acceptable to NetChannel, not to exceed
payment of $732,693 in cash and the issuance of not more than
382,030 shares of Series C Preferred Stock, (c) other certain
other Obligations of ViewCall to trade creditors not to exceed
$267,307, which are acceptable to NetChannel on a case by case
basis, and only upon the execution by any such creditor of a
Channeling Agreement acceptable to NetChannel. Any Obligation
which is not expressly identified as an "Assumed Liability" is an
"Excluded Liability" hereunder and for purposes of the Escrow
Agreement.
(b) Sole Consideration. The consideration provided for in
Sections 2.1, 2.2 and 2.3 and in the Sublease is the only
consideration or compensation payable by NetChannel to ViewCall
or Colorocs or any other Person in connection with this Agreement
or any of the Associated Agreements or any of the transactions
contemplated hereby or thereby.
2.6 Allocation of Purchase Price. The purchase price for
the Purchased Property shall be allocated among the Purchased
Property as mutually agreed between NetChannel and ViewCall, with
ViewCall's agreement to NetChannel's proposed allocation, not to
be unreasonably withheld. Each party agrees to report these
transactions for federal, state, local and foreign tax purposes
in accordance with such allocation.
Section 3. THE CLOSING.
3.1 The Closing. The consummation of the purchase and sale
of the Purchased Property (the "Closing") shall take place on the
Closing Date at the offices of NetChannel, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇. As employed in
this Agreement, the term "Closing Date" means the earlier of (i)
May 15, 1997, and (ii) such earlier date, if any, as may be
mutually agreeable to the parties.
3.2 Transactions at Closing. At the Closing:
(a) ViewCall shall deliver to NetChannel the following:
(i) a ▇▇▇▇ of Sale in form and substance reasonably
satisfactory to NetChannel and its counsel, executed by
ViewCall;
(ii) an Assignment of Contracts, in form and substance
reasonably satisfactory to NetChannel and its counsel,
executed by ViewCall;
(iii) an Assignment of Copyrights, in form and substance
reasonably satisfactory to NetChannel and its counsel,
executed by ViewCall;
(iv) an opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇ LLC, with
respect to the matters set forth in Section 8.5 of this
Agreement, and otherwise in form and substance reasonably
satisfactory to NetChannel and its counsel;
(v) the Escrow Agreement, executed by ViewCall;
(vi) a certificate of the President of ViewCall to the
effects provided in this Agreement;
(vii) evidence of the notice of termination of the
relationship between ViewCall and MCA, in form and substance
reasonably satisfactory to NetChannel and its counsel;
(viii) a letter consenting to the termination of the Fort
▇▇▇▇ Software Escrow Agreement, and to the release from the
escrow of any of the items previously deposited in escrow,
in form and substance reasonably satisfactory to NetChannel
and its counsel;
(ix) an estoppel letter executed by NationsBank of Georgia,
N.A., to the effect that ViewCall, as of he Closing Date, is
not indebted to NationsBank, N.A., in form and substance
reasonably satisfactory to NetChannel and its counsel;
(x) certified resolutions of the shareholders of ViewCall
approving the transactions contemplated by this Agreement
and the Associated Agreements.
(b) Colorocs shall deliver to NetChannel the following:
(i) the Sublease, executed by Colorocs;
(ii) the Note Purchase Agreement, executed by Colorocs;
(iii) the Notes (as defined in the Note Purchase Agreement)
acquired by NetChannel pursuant to the Note Purchase
Agreement, endorsed to NetChannel in and in a form
reasonably satisfactory to NetChannel and its counsel;
(iv) the Security Agreement (as defined in the Note Purchase
Agreement) acquired by NetChannel pursuant to the Note
Purchase Agreement, endorsed to NetChannel in and in a form
reasonably satisfactory to NetChannel and its counsel;
(v) a UCC-3 assignment statement, executed by Colorocs,
evidencing the assignment to NetChannel of the Security
Agreement;
(vi) a UCC-3 assignment statement evidencing the transfer of
the security interest held by ▇▇▇▇▇ to Colorocs;
(vii) the Escrow Agreement, executed by Colorocs;
(viii) the Colorocs Non-Competition Agreement, executed by
Colorocs;
(ix) the First Amendment to Investors Rights Agreement,
executed by Colorocs;
(c) NetChannel shall deliver to ViewCall the following:
(i) an Assumption Agreement in respect of the Assumed
Liabilities and the obligations of ViewCall under the
Conforming Settlements, in form and substance reasonably
satisfactory to ViewCall and its counsel;
(ii) the Escrow Agreement executed by NetChannel;
(iii) an opinion of counsel to NetChannel, with respect to
the matters set forth in Section 9.3 of this Agreement, and
otherwise in form and substance reasonably satisfactory to
ViewCall and its counsel;
(iv) a certificate of the President of NetChannel to the
effects provided in this Agreement;
(v) evidence of the issuance of the options contemplated by
Section 2.1 (d) hereof;
(vi) evidence of the issuance of 25,000 shares of Series C
Preferred to ▇▇▇▇▇ ▇▇▇▇▇▇ as contemplated by Section 2.1(c)
hereof;
(vii) evidence of the offer of employment to all employees
of ViewCall;
(viii) evidence of the negotiation of a consulting agreement
between NetChannel and ▇▇▇▇ ▇▇▇▇▇▇, which agreement shall
include noncompetition and nonsolicitation covenants of ▇▇▇▇
▇▇▇▇▇▇ reasonably acceptable to NetChannel; and
(ix) a certificate of the Secretary of NetChannel certifying
the incumbency of each officer executing documents or
instruments to be delivered to ViewCall or Colorocs,
attaching (1) a certified copy of the Restated Charter,
certified by the Secretary of Sate of Delaware, or, in the
event that a certified copy cannot be obtained at Closing, a
conformed copy of the Restated Charter as filed with the
Secretary of Sate of Delaware together with evidence of
filing with the Secretary of State of Delaware, (2) the
bylaws of NetChannel and all amendments thereto through the
Closing Date, (3) resolutions of the Board of Directors of
NetChannel approving (x) the transactions contemplated by
this Agreement and the Associated Agreements and (y) the
Restated Charter, (4) a good standing certificate from the
secretaries of State of California, Delaware, and Georgia,
in each case certified by the Secretary of NetChannel as
being true correct an complete as of the Closing Date;
(d) NetChannel shall deliver to Colorocs the following:
(i) a certificate evidencing 2,300,000 shares of Series B
Preferred, registered in the name of Colorocs, representing
a portion of the consideration payable to Colorocs pursuant
to the Note Purchase Agreement;
(ii) a certificate evidencing 414,280 shares of Series C
Preferred, registered in the name of Colorocs, representing
a portion of the consideration payable to Colorocs pursuant
to the Note Purchase Agreement;
(iii) a certificate evidencing 400,000 shares of Series C
Preferred, registered in the name of Colorocs, representing
a portion of the consideration payable to Colorocs pursuant
to the Colorocs Noncompetition Agreement;
(iv) the Sublease, executed by NetChannel;
(v) the Note Purchase Agreement, executed by NetChannel;
(vi) the Escrow Agreement, executed by NetChannel;
(vii) a certificate of the Secretary of NetChannel
certifying the incumbency of each officer executing
documents or instruments to be delivered to ViewCall or
Colorocs, attaching (1) a certified copy of the Restated
Charter, certified by the Secretary of Sate of Delaware, or,
in the event that a certified copy cannot be obtained at
Closing, a conformed copy of the Restated Charter as filed
with the Secretary of Sate of Delaware together with
evidence of filing with the Secretary of State of Delaware,
(2) the bylaws of NetChannel and all amendments thereto
through the Closing Date, (3) resolutions of the Board of
Directors of NetChannel approving (x) the transactions
contemplated by this Agreement and the Associated Agreements
and (y) the Restated Charter, (4) a good standing
certificate from the secretaries of State of California,
Delaware, and Georgia, in each case certified by the
Secretary of NetChannel as being true correct an complete as
of the Closing Date;
(ix) the First Amendment to Investors Rights Agreement,
executed by NetChannel, and by holders of not less than 66
2/3% of the holders of Registrable Securities thereunder;
(e) NetChannel shall deliver to Escrow Agent the following:
(i) a certificate evidencing 300,000 shares of Series C
Preferred, registered in the name of Colorocs, representing
a portion of the consideration payable to Colorocs pursuant
to the Note Purchase Agreement;
(ii) a certificate evidencing 555,556 shares of Series C
Preferred, registered in the name of ViewCall, representing
a portion of the consideration payable to ViewCall pursuant
to this Agreement;
(iv) the Escrow Agreement, executed by NetChannel;
(f) ViewCall shall deliver to Escrow Agent the following:
(i) the Escrow Agreement, executed by ViewCall;
(ii) the stock power described in Section 1.2(b) of the
Escrow Agreement, executed by ViewCall.
(g) Colorocs shall deliver to Escrow Agent the following:
(i) the Escrow Agreement, executed by Colorocs;
(ii) the stock power described in Section 1.2(a) of the
Escrow Agreement, executed by Colorocs.
Section 4. REPRESENTATIONS AND WARRANTIES OF SELLING PARTIES
Except as set forth in ViewCall Disclosure Schedule
delivered to NetChannel concurrently with the execution and
delivery of this Agreement, ViewCall and Colorocs, jointly and
severally, represent and warrant to NetChannel that:
4.1 Organization, Good Standing and Qualification. Each of
ViewCall and Colorocs is a corporation duly organized, validly
existing and in good standing under the laws of Georgia. Each of
ViewCall and Colorocs has all necessary corporate power to enter
into this Agreement and each of the Associated Agreements and to
perform its Obligations hereunder and thereunder; and all
corporate action required to be taken on its part to approve the
execution and delivery of this Agreement and each of the
Associated Agreements and the performance of its Obligations
hereunder and thereunder has been duly taken. ViewCall has no
subsidiaries, and ViewCall owns no equity interest in any other
entity. Each of ViewCall and Colorocs is qualified to do
business as a foreign corporation, and is in good standing in,
each jurisdiction in which the failure to be so qualified or to
so be in good standing could have a material adverse impact of
any kind on (i) the financial condition, business, business
operations or properties of either of ViewCall or Colorocs, or
(ii) the ability of either of ViewCall or Colorocs to perform any
of its obligations under this Agreement or under any of the
Associated Agreements.
4.2 Capital Structure.
(a) The authorized capital stock of ViewCall consists of
25,000,000 shares of Common Stock, of which 5,900,000 shares are
issued and outstanding, and 10,000,000 shares of Preferred Stock,
no shares of which are issued or outstanding. ViewCall has
reserved 2,500,000 shares of Common Stock for issuance to
employees and consultants pursuant to the ViewCall Option Plan,
all of which are subject to outstanding and unexercised options.
ViewCall has reserved 3,021,334 shares of Common Stock for
issuance upon exercise of the ViewCall Warrants.
(b) The ViewCall Disclosure Schedule sets forth for each
holder of record of Common Stock, the name of such holder of
Common Stock, the domicile of such holder and the number of
shares owned by such holder.
(c) Prior to Closing, ViewCall will deliver to NetChannel a
list that sets forth for each Settled Creditor the vendor name,
the number of shares of NetChannel Series C Preferred to be
issued to such vendor, and the address and principal place of
business of such vendor, as well as the amount of indebtedness
that was canceled in exchange for the issuance of such stock.
4.3 Financial Statements. The ViewCall Disclosure Schedule
sets forth ViewCall's unaudited balance sheet as of February 28,
1997 (the "ViewCall Balance Sheet" and "ViewCall Balance Sheet
Date") and the related unaudited statements of operations and
cash flows for the period from ViewCall's incorporation through
the ViewCall Balance Sheet Date (collectively, the "ViewCall
Financials"). The ViewCall Financial Statements are complete and
accurate in all material respects, have been prepared in
accordance with generally accepted accounting principles ("GAAP")
consistently applied, except that the Financial Statements do not
contain footnotes required by GAAP. The ViewCall Financials
present fairly the financial condition and operating results of
NetChannel as of the dates and during the periods indicated
therein, subject, in the case of the interim financial
statements, to normal year-end adjustments, which such
adjustments will not be material in amount or significance.
4.4 No Adverse Change. Since the ViewCall Balance Sheet
Date, except as set forth in the ViewCall Disclosure Schedule,
ViewCall has conducted its business in the ordinary course and
there has not occurred:
(a) Any material adverse change in the business condition
of ViewCall;
(b) Any transaction by ViewCall except in the ordinary
course of business as conducted on the ViewCall Balance Sheet
Date and consistent with past practices;
(c) Any amendments or changes in the Articles of
Incorporation or Bylaws of ViewCall;
(d) Any capital expenditure or commitment by ViewCall,
either individually or in the aggregate, exceeding $50,000;
(e) Any damage, destruction or loss, whether or not covered
by insurance, materially and adversely affecting any of the
properties or business of ViewCall;
(f) Any issuance, redemption, repurchase or other
acquisition of shares of capital stock of ViewCall (other than in
the ordinary course under employee benefit plans), or any
declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to
the capital stock of ViewCall;
(g) Any increase in or modification of the compensation or
benefits payable or to become payable by ViewCall to any of its
directors or employees;
(h) Any increase in or modification of any bonus, pension,
insurance or other employee benefit plan, payment or arrangement
(including, but not limited to, the granting of stock options,
restricted stock awards or stock appreciation rights) made to,
for or with any of its employees;
(i) Any sale, lease, license or other disposition of the
property or assets of ViewCall other than inventory sales or
licenses to end users in the ordinary course of business
consistent with past practice;
(j) Any alteration in any term of any outstanding security
of ViewCall;
(k) Any (1) incurrence, assumption or guarantee by ViewCall
of any debt for borrowed money (other than borrowings under any
existing line of credit), (2) issuance or sale of any securities
convertible into or exchangeable for debt securities of ViewCall,
or (3) issuance or sale of options or other rights to acquire
from ViewCall, directly or indirectly, debt securities of
ViewCall or any securities convertible into or exchangeable for
any such debt securities;
(l) Any creation or assumption of any mortgage, pledge,
security interest or lien or other encumbrance on any Purchased
Property (other than liens arising under existing lease financing
arrangements, liens arising in the ordinary course of ViewCall's
business which in the aggregate are not material, and liens for
taxes not yet due and payable);
(m) Except as specifically contemplated by this Agreement,
any making of any loan, advance or capital contribution to, or
investment in, any person other than travel loans or similar
advances made in the ordinary course of business of ViewCall
consistent with past practices;
(n) Except as specifically contemplated by this Agreement,
any entry into, amendment of, relinquishment, termination or
nonrenewal by ViewCall of any contract, lease transaction,
commitment or other right or obligation other than in the
ordinary course of business consistent with past practice and
which in the aggregate are not material;
(o) Any transfer or grant of a right under the Technology,
other than to subscribers to ViewCall's on-line service in the
ordinary course of business consistent with past practice;
(p) Any labor trouble or claim of wrongful discharge or
other unlawful labor practice or action;
(q) Any change in accounting methods or practices
(including any change in depreciation or amortization policies or
rates) by ViewCall;
(r) Any revaluation by ViewCall of any of its assets;
(s) Any waiver or release of any right or claim of
ViewCall, including any write-off or other compromise of any
account receivable of ViewCall;
(t) Any change in pricing or royalties set or charged by
ViewCall to its customers or licensees or in pricing or royalties
set or charged by persons who have licensed intellectual property
to ViewCall.
4.5 Tax Returns and Audits. Within the times and in the
manner prescribed by law, ViewCall has filed all domestic and
foreign federal, state and local tax returns, or valid extensions
required by law and has paid all taxes, assessments, and
penalties due and payable. The provisions for taxes reflected in
ViewCall's balance sheet as of its last Fiscal Year End, are
adequate for any and all federal, state, county and local taxes
for the period ending on the date of that balance sheet, whether
or not disputed. There are no present disputes as to taxes of
any nature payable by ViewCall.
4.6 Intellectual Property.
(a) ViewCall owns, or is licensed or otherwise entitled to
exercise all rights under or with respect to the Technology.
(b) The ViewCall Disclosure Schedule lists all patents,
works of authorship, registered copyrights, registered and
unregistered trademarks, trade names and service marks, and any
applications therefor related to the Technology, and specifies,
where applicable, the jurisdictions in which each such
application, issuance or registration has been filed, including
the respective registration or application numbers, together with
a list of all of ViewCall's currently marketed software products
and an indication as to which, if any, of such software products
have been registered for copyright protection with the United
States Copyright Office and any foreign offices. The ViewCall
Disclosure Schedule also specifically lists all licenses,
sublicenses and material agreements as to which ViewCall is a
party or pursuant to which ViewCall or any other person owns or
is licensed or otherwise authorized or obligated with respect to
the Technology and includes the identity of all parties thereto.
Except as set forth in the ViewCall Disclosure Schedule, ViewCall
is not, nor as a result of the execution and delivery of this
Agreement or the performance of ViewCall's obligations hereunder
will be, in violation of any license, sublicense or other
agreement applicable to it, nor entitle any other party to any
such license, sublicense or agreement to terminate or modify such
license, sublicense or agreement. Except as set forth in the
ViewCall Disclosure Schedule and the agreements listed therein
specifically for this purpose (copies of all of which have been
delivered to NetChannel's counsel), ViewCall is the sole and
exclusive owner of, with all right, title and interest in and to
(free and clear of any liens or encumbrances) or licensee of, the
Technology, and, except as set forth in the ViewCall Disclosure
Schedule, has sole and exclusive rights in respect thereof and is
not contractually obligated to pay any compensation to any third
party.
(c) ViewCall is not, with respect to the Technology,
infringing, and is not aware of any claimed infringement of, any
third party's patent, trademark, trade secret, trade name or
copyright and has not received any notice of any claimed
infringement. No claims with respect to the Technology have been
asserted or, to the knowledge of ViewCall, are or are likely to
be threatened by any person, nor is there any grounds for any
claims now or in the future, (i) to the effect that any business
of ViewCall as currently conducted or proposed to be conducted
infringes on or misappropriates any intellectual property rights
of any third party, or (ii) against the use by ViewCall of any
trademarks, service marks, trade names, trade secrets,
copyrights, maskworks, patents, technology, know-how or computer
software programs and applications used in ViewCall's business as
currently conducted or as currently proposed to be conducted by
ViewCall, or (iii) challenging the ownership, validity or
effectiveness of any of the Technology. Except as set forth in
the ViewCall Disclosure Schedule, no portion of the Technology is
subject to any lien, encumbrance or other secured interest. To
ViewCall's knowledge, all of the Technology is valid and
subsisting. To ViewCall's knowledge, there is no material
unauthorized use, infringement or misappropriation of any of the
Technology by any third party, including any employee or former
employee of ViewCall. No portion of the Technology is subject to
any outstanding order, judgment, decree, stipulation or agreement
restricting in any manner the licensing or exploitation thereof
by ViewCall. ViewCall has not entered into any agreement to
indemnify any other person against any charge of infringement
relating to any of the Technology, except as set forth in the
ViewCall Disclosure Schedule and the agreements listed therein
specifically for this purpose. No employee of ViewCall is in
material violation of any term of any employment contract
(whether written or oral), patent disclosure agreement,
proprietary information agreement, non-competition agreement or
any other contract or agreement relating to the relationship of
any such employee with ViewCall, and to ViewCall's knowledge,
with any other party (including prior employers) because of the
nature of the business conducted or proposed to be conducted by
ViewCall. All key employees of ViewCall have signed Employee
Agreements in substantially the form delivered to NetChannel, and
all consultants of ViewCall have signed consulting agreements
containing proprietary information protective provisions in
substantially the form delivered to NetChannel. All software
included in Technology is original with ViewCall and has been
either created by employees of ViewCall on a work-for-hire basis
or by consultants or contractors who have created such software
themselves and have assigned or are under an obligation to assign
all rights they may have had in such software to ViewCall.
(d) ViewCall has taken reasonable security measures to
protect the secrecy, confidentiality and value of all trade
secrets, know-how, inventions, designs, processes and technical
data required to conduct its business.
4.7 Title to Assets. ViewCall has good and marketable
title to the Purchased ViewCall Property, and Colorocs has good
and marketable title to the Purchased Colorocs Property, in each
case free and clear of mortgages, liens, pledges, charges,
encumbrances, equities, claims, easements, rights of way,
covenants, conditions, or restrictions, except for (i) those
disclosed in the ViewCall Disclosure Schedule, and (ii) the lien
of current taxes not yet due and payable. ViewCall is in
possession of all property leased or licensed to it from others,
and neither any officer, nor any director or employee of
ViewCall, nor any spouse, child, or other relative of any of
these persons, owns, or has any interest, directly or indirectly,
in any of that property.
4.8 Existing Employment Contracts. The ViewCall Disclosure
Schedule contains a list of all employment Contracts and
collective bargaining agreements, and all pension, bonus,
profit-sharing, stock option, or other agreements or arrangements
providing for employee remuneration or benefits to which ViewCall
is a party or by which ViewCall is bound. All these contracts
and arrangements are in full force and effect, and neither
ViewCall nor any other party is in default under any of them.
Except as set forth in the ViewCall Disclosure Schedule, there
have been no claims of defaults and, to the best knowledge of
ViewCall and Colorocs, there are no facts or conditions which if
continued, or on notice, will result in a default under these
contracts or arrangements. There is no pending or, to the best
knowledge of ViewCall and Colorocs, threatened labor dispute,
strike, or work stoppage affecting the business of ViewCall.
4.9 Insurance Policies. The ViewCall Disclosure Schedule
sets forth a description of all insurance policies concerning the
Purchased Property. All these policies are in the respective
principal amounts set forth in ViewCall Disclosure Schedule.
ViewCall and Colorocs have maintained and now maintains (i)
insurance on all the Tangible Personal Property of a type
customarily insured, covering property damage and loss of income
by fire or other casualty, and (ii) adequate insurance protection
against all liabilities, claims, and risks against which it is
customary to insure.
4.10 Other Contracts. Except as set forth in the ViewCall
Disclosure Schedule, ViewCall is not a party to or subject to:
(a) Any agreement, contract or commitment relating to
capital expenditures in excess of $50,000 or for the purchase of
materials, supplies or equipment in excess of normal operating
requirements;
(b) Any indenture, loan or credit agreement, note
agreement, deed of trust, mortgage, security agreement,
promissory note or other agreement or instrument relating to or
evidencing indebtedness for borrowed money or the extension of
credit or subjecting any asset or property of ViewCall to any
lien or evidencing any indebtedness;
(c) Any agreement of indemnification or guaranty of any
indebtedness;
(d) Any lease or agreement under which ViewCall is lessee
of or holds or operates any property, real or personal, owned by
any other person under which payments to such person exceed
$50,000 per year;
(e) Any lease or agreement under which ViewCall is lessor
or permits any person to hold or operate any property, real or
personal, owned or controlled by ViewCall;
(f) Any agreement or other commitment or arrangement with
any person continuing for a period of more than three months from
the Closing Date which involves an expenditure or receipt by
ViewCall in excess of $50,000;
(g) Any consulting or sales agreement, contract or
commitment under which any firm or other organization provides
services to ViewCall;
(h) Any fidelity or surety bond or completion bond;
(I) Any agreement, contract or commitment relating to the
disposition or acquisition of assets or the Technology or any
interest in any business enterprise outside the ordinary course
of ViewCall's business;
(j) Any purchase order or contract for the purchase of raw
materials involving $50,000 or more;
(k) Any construction contracts;
(l) Any distribution, joint marketing or development
agreement;
(m) Any agreement pursuant to which ViewCall has granted or
may grant in the future, to any party, a source-code license or
option or other right to use or acquire source-code;
(n) Any other agreement, contract or commitment that
involves $50,000 or more or is not cancelable without penalty
within thirty (30) days; or
(o) Any other agreement, contract or commitment which is
material to ViewCall.
Each of the Assigned Contracts is valid and binding on
ViewCall, and is in full force and effect. Neither ViewCall nor,
to the knowledge of ViewCall, any other party thereto has
breached, and ViewCall is not aware of any facts which would lead
it to believe that ViewCall has breached any provision of, or is
in default under the terms of, any such Assigned Contract. To
the knowledge of ViewCall, no party to any such Assigned Contract
intends to cancel, withdraw, modify or amend such Assigned
Contract.
4.11 Liabilities. ViewCall does not have and is not
subject to any obligation which is material to the financial
condition of ViewCall except for those obligations which (i) are
reflected in the Financial Statements, (ii) are set forth in the
ViewCall Disclosure Schedule, or (iii) were incurred in the
ordinary course of business since the ViewCall Balance Sheet
Date.
4.12 Compliance with Laws. ViewCall has complied with,
and is not in violation of, applicable federal, state, or local
statutes, laws, and regulations (including, without limitation,
any applicable building, zoning, or other law, ordinance, or
regulation) affecting its properties or the operation of its
business.
4.13 Litigation. Except as set forth in the View Call
Disclosure Schedule, there is no suit, action, arbitration, or
legal, administrative, or other proceeding, or governmental
investigation pending or, to the best knowledge of ViewCall and
Colorocs, threatened, against or affecting ViewCall, or any of
its business, assets, or financial condition. ViewCall and
Colorocs have furnished or made available to NetChannel copies of
all relevant court papers and other documents relating to the
matters set forth in the View Call Disclosure Schedule. ViewCall
is not in default with respect to any order, writ, injunction, or
decree of any federal, state, local, or foreign court,
department, agency, or instrumentality. Except as set forth in
the View Call Disclosure Schedule, ViewCall is not presently
engaged in any legal action to recover moneys due to it or
damages sustained by it.
4.14 Agreement Will Not Cause Breach Or Violation. Neither
the execution or delivery of this Agreement or any of the
Associated Agreements nor the consummation of the transactions
contemplated hereby and thereby will conflict with, or result in
any material violation of, any statute, law, rule, regulation,
judgment, order, decree, or ordinance applicable to either
ViewCall or Colorocs or their respective properties or assets, or
conflict with or result in any breach or default (with or without
notice or lapse of time, or both) under, or give rise to a right
of termination, cancellation or acceleration of any obligation or
loss of a benefit under, or result in the creation of a lien or
encumbrance on any of the Purchased Property pursuant to, (i) any
provision of the Articles of Incorporation or Bylaws of ViewCall
or Colorocs, or (ii) any Assigned Contract, other than such
conflicts, breaches or defaults under this clause (ii) which,
individually or in the aggregate, would not be material, or the
acceleration of the maturity of any indebtedness or other
obligation.
4.15 Authority and Consents. Each of ViewCall and Colorocs
has all requisite corporate power and authority to enter into
this Agreement and the Associated Agreements, and, subject to
approval of this Agreement and the Associated Agreements by the
shareholders of ViewCall which will have been obtained by the
Closing Date, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement by ViewCall and
Colorocs and, subject to approval of this Agreement by the
shareholders of ViewCall, the consummation of the transactions
contemplated by this Agreement have been duly and validly
authorized by all necessary corporate action on the part of
ViewCall and Colorocs. This Agreement has been duly executed and
delivered by ViewCall and Colorocs and, subject to approval by
the shareholders of ViewCall, constitutes the legal, valid and
binding obligations of ViewCall and Colorocs enforceable against
ViewCall and Colorocs in accordance with their respective terms,
except as enforcement may be limited by applicable bankruptcy,
insolvency, reorganization or similar laws relating to or
affecting the enforcement of creditors' rights and except that
the availability of equitable remedies is subject to the
discretion of the court before which any proceeding therefor may
be brought.
4.16 Interest in Customers, Suppliers and Competitors.
Except as set forth in the ViewCall Disclosure Schedule, none of
ViewCall nor Colorocs nor any of its executive officers has any
interest (other than as holders of securities of a
publicly-traded company), either directly or indirectly, in any
entity that currently (i) provides any services or designs,
produces or sells any products or product lines that are the
same, similar to or competitive with any activity or business in
which ViewCall is engaged, (ii) is a supplier, customer, or
creditor of ViewCall, or (iii) has any direct or indirect
interest in any asset or property, real or personal, tangible or
intangible, of ViewCall or any property, real or personal,
tangible or intangible, that is necessary for the conduct of
ViewCall's business. No employee, shareholder, officer or
director of ViewCall or Colorocs, or their spouses or children,
is indebted to ViewCall, nor is ViewCall or Colorocs indebted to
any of them, except travel advances to employees in the ordinary
course of business.
4.17 Corporate Documents. ViewCall has furnished to
NetChannel for its examination (i) copies of the articles of
incorporation and bylaws of ViewCall; and (ii) the stock book of
ViewCall, and (iii) minute books of ViewCall containing all
records required to be set forth of all proceedings, consents,
actions, and meetings of the shareholders and board of directors
of ViewCall.
4.18 Documents Delivered. Each copy of any agreement,
contract or other instrument which is identified in the ViewCall
Disclosure Schedule delivered by ViewCall and Colorocs or their
counsel to NetChannel (or its counsel or representatives),
whether before or after the execution hereof, is in fact what it
is purported to be by ViewCall and Colorocs and has not been
amended, canceled or otherwise modified, except as set forth in
the ViewCall Disclosure Schedule.
4.19 Full Disclosure. No representation or warranty made by
ViewCall or Colorocs in this Agreement or the Associated
Agreements, nor any financial statement, other written financial
information or schedule, certificate, schedule or exhibit
prepared and furnished or to be prepared and furnished by
ViewCall or Colorocs or their representatives pursuant hereto or
in connection with the transactions contemplated hereby, or any
information supplied in connection with the solicitation of
approval of the transaction by ViewCall's shareholders, when
taken as a whole, contains or will contain any untrue statement
of a material fact, or omits or will omit to state a material
fact necessary to make the statements or facts contained herein
or therein not misleading in light of the circumstances under
which they were furnished.
4.20 Restrictions on Business Activities. There is no
agreement (non-compete or otherwise), commitment, judgment,
injunction, order or decree to which ViewCall is a party or
otherwise binding upon ViewCall, Colorocs, or ▇▇▇▇▇ which has or
reasonably could be expected to have the effect of prohibiting or
impairing the conduct of business by ViewCall or the transactions
contemplated by this Agreement. Except as set forth in the
ViewCall Disclosure Schedule, neither ViewCall nor Colorocs has
not entered into any agreement under which ViewCall is restricted
from selling, licensing or otherwise distributing any of its
products to any class of customers, in any geographic area,
during any period of time or in any segment of the market.
4.21 Brokers' and Finders' Fees; Third Party Expenses.
Except as set forth in the ViewCall Disclosure Schedule, none of
ViewCall, Colorocs, or ▇▇▇▇▇ has incurred, nor will it incur,
directly or indirectly, any liability for brokerage or finders'
fees or agents' commissions or any similar charges in connection
with this Agreement or any transaction contemplated hereby. The
ViewCall Disclosure Schedule sets forth the principal terms and
conditions of any agreement, written or oral, with respect to
such fees. The ViewCall Disclosure Schedule sets forth
ViewCall's current reasonable estimate of all transaction fees
expected to be incurred by ViewCall in connection with the
negotiation and effectuation of the terms and conditions of this
Agreement and the transactions contemplated hereby.
Section 5. NETCHANNEL'S REPRESENTATIONS AND WARRANTIES
Except as set forth in the disclosure schedule delivered by
NetChannel to ViewCall not later than two days prior to the
Closing (the "NetChannel Disclosure Schedule"), NetChannel
represents and warrants to ViewCall as follows:
5.1 Organization and Standing. NetChannel is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Delaware, and has all requisite corporate
power and authority to own, operate and lease its properties and
to carry on its business as now being conducted. NetChannel is
qualified to do business as a foreign corporation in each
jurisdiction in which the failure to be so qualified would have a
material adverse effect on NetChannel's Business Condition.
NetChannel has delivered to ViewCall complete and correct copies
of its Certificate of Incorporation, including all amendments
thereto (the "NetChannel Certificate of Incorporation"), and
Bylaws, including all amendments thereto (the "NetChannel
Bylaws"), and has delivered or made available to ViewCall minutes
of all of NetChannel's directors' and shareholders' meetings,
and stock certificate books correctly setting forth the record
ownership of all outstanding shares of NetChannel Capital Stock.
5.2 Subsidiaries. NetChannel does not have and has never
had any subsidiaries or affiliated companies and does not
otherwise own and has never otherwise owned any shares of capital
stock or any interest in, or control, directly or indirectly, any
other corporation, partnership, association, joint venture or
other business entity.
5.3 Capitalization.
(a) As of the date hereof, the authorized capital stock of
NetChannel consists of (a) 15,000,000 shares of Common Stock, out
of which 3,035,000 shares are outstanding, and (b) 7,000,000
shares of Preferred Stock, (i) 1,260,000 of which are designated
as "Series A Preferred Stock," all of which are issued and
outstanding, and (ii) 5,454,544 of which are designated as
"Series B Preferred Stock", 4,363,628 of which are issued and
outstanding. Subject to the approval of the NetChannel
stockholders, as of the Closing, the authorized capital stock
will have been amended to include all shares of NetChannel
Preferred Stock required to effect the transactions contemplated
by this Agreement and the Associated Agreements. NetChannel has
reserved 1,260,000 shares of NetChannel Common Stock for issuance
to employees, consultants and directors of NetChannel pursuant to
NetChannel's 1997 Stock Option Plan (the "NetChannel Option
Plan"), all of which shares are subject to outstanding and
unexercised options and no shares remain available for future
grant. In addition, prior to the Closing Date, subject to
stockholder approval, NetChannel intends to amend the NetChannel
Option Plan to increase the option pool by up to 2,000,000 shares
and will reserve an additional 1,000,000 shares of Common Stock
for issuance to employees, consultants and directors of
NetChannel under the NetChannel Option Plan. NetChannel has
reserved 5,623,628 shares of Common Stock for issuance upon
conversion of the NetChannel Series A Preferred and NetChannel
Series B Preferred. NetChannel has received loans in the
aggregate of $2,375,000 (the "NetChannel Bridge Loans") and
NetChannel has made commitments to the lenders to issue shares of
Series B Preferred at $1.10 per share for 55.5% of the NetChannel
Bridge Loans. The remaining 44.5% of the NetChannel Bridge Loans
may be converted into a future round of NetChannel's Preferred
Stock. NetChannel is currently trying to raise additional funds
on the same basis as the NetChannel Bridge Loans. On the Closing
Date, NetChannel shall have reserved sufficient shares of
NetChannel Series B Preferred, NetChannel Series C Preferred, and
NetChannel Common Stock for issuance pursuant to this Agreement.
Except as set forth above in this Section 5.3(a), there are no
options, warrants, calls, conversion rights, commitments or
agreements of any character to which NetChannel is a party or by
which NetChannel may be bound that obligate or may obligate
NetChannel to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of NetChannel Capital Stock
or that obligate or may obligate NetChannel to grant, extend or
enter into any such option, warrant, call, conversion right,
commitment or agreement ("NetChannel Rights").
(b) All outstanding shares of NetChannel Common Stock and
Preferred Stock are and will be, validly issued, fully paid and
nonassessable, issued in compliance with federal and state
securities laws, and not subject to preemptive rights created by
statute, NetChannel's Certificate of Incorporation or Bylaws or
any agreement to which NetChannel is a party or by which
NetChannel may be bound.
(c) ViewCall, Colorocs, and ▇▇▇▇▇ acknowledge and agree
that the foregoing paragraphs (a) and (b) represent estimates
based upon information available as of the execution date of this
Agreement, and are subject to revision, which NetChannel will
provide to ViewCall, Colorocs and ▇▇▇▇▇ not later than two days
prior to the Closing Date. NetChannel represents and warrants
that the such revision shall not constitute a material adverse
change to the consideration to be provided to ViewCall, Colorocs,
or ▇▇▇▇▇ pursuant to this Agreement or any of the Associated
Agreements.
5.4 Authorization.
(a) Prior to the Closing Date, NetChannel shall have all
requisite corporate power and authority to enter into this
Agreement, and the First Amendment (as defined in Section 1.7
hereof), to perform its obligations hereunder and thereunder, and
to consummate the transactions contemplated hereby and thereby.
Subject to the approval by the NetChannel stockholders of this
Agreement and the NetChannel Restated Certificate (which approval
shall have been obtained prior to the Closing Date), the
execution, delivery and performance of this Agreement and the
First Amendment by NetChannel, as applicable, and the
consummation of the transactions contemplated hereby and thereby
have been duly authorized by all necessary corporate action on
the part of NetChannel, including approval by its Board of
Directors. This Agreement and the First Amendment have been or
will be, as the case may be, duly executed and delivered by
NetChannel, as applicable, and constitute the legal, valid and
binding obligations of NetChannel, as applicable, enforceable
against NetChannel, as applicable, in accordance with their
respective terms, except as enforcement may be limited by
applicable bankruptcy, insolvency, reorganization or similar laws
relating to or affecting the enforcement of creditors' rights and
except that the availability of equitable remedies is subject to
the discretion of the court before which any proceeding therefor
may be brought.
(b) The execution and delivery of this Agreement and the
First Amendment do not, and the consummation of the transactions
contemplated hereby and thereby will not, conflict with or result
in any material violation of any statute, law, rule, regulation,
judgment, order, decree, or ordinance applicable to NetChannel or
its properties or assets, or conflict with or result in any
breach or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation
or acceleration of any obligation or loss of a benefit under, or
result in the creation of a material lien or encumbrance on any
of the properties or assets of NetChannel pursuant to, (i) any
provision of the Certificate of Incorporation or Bylaws of
NetChannel or (ii) any agreement, contract, note, mortgage,
indenture, lease instrument, permit, concession, franchise or
license to which NetChannel is a party or by which NetChannel or
any of its properties or assets may be bound or affected, other
than such conflicts, breaches or defaults under this clause (ii)
which, individually or in the aggregate, would not be material.
A list of all consents required by NetChannel to enter into this
Agreement and the Amendment to Registration Rights Agreement
(which consents will be obtained prior to the Closing) is set
forth under Section 5.4(b) of the NetChannel Disclosure Schedule.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, any governmental
entity, and no consent or approval from any third party to any
agreement, contract, note, mortgage, indenture, lease instrument,
permit, concession, franchise or license to which NetChannel is a
party or by which NetChannel or any of its properties or assets
may be bound or affected, is required by or with respect to
NetChannel in connection with the valid execution and delivery of
this Agreement or the Amendment to Registration Rights Agreement
by NetChannel or the consummation of the transactions
contemplated hereby or thereby, except for (i) such consents,
approvals, orders, authorizations, registrations, qualifications
or filings as may be required under other applicable state
securities laws and the laws of any foreign country, (ii) such
consents and approvals as may be required from the existing
parties to NetChannel's Investor Rights Agreement dated October
4, 1996 as amended (the "NetChannel Investor Rights Agreement")
(which shall have been obtained prior to the Closing Date), (iii)
such other consents, authorizations, filings, approvals and
registrations which if not obtained or made would not have a
material adverse effect on NetChannel's Business Condition, and
(iv) except as set forth on Section 5.4(b) of the NetChannel
Disclosure Schedule.
5.5 Issuance of NetChannel Shares and Warrants. The
issuance of the shares of NetChannel Series B Preferred, the
NetChannel Series C Preferred, the NetChannel Options, and the
▇▇▇▇▇ Warrants, as provided in this Agreement, will have been
duly authorized as of the Closing Date. Such shares, upon the
delivery of certificates representing the same in accordance with
the terms of this Agreement, will be duly authorized, validly
issued, fully paid and non-assessable outstanding shares of
NetChannel Preferred or NetChannel Common Stock, respectively,
free of preemptive rights. The shares of Common Stock issued
upon conversion of the NetChannel Preferred Stock will be duly
authorized, validly issued, fully paid and non-assessable.
5.6 Financial Statements. NetChannel has delivered to
ViewCall its unaudited balance sheet at March 31, 1997 (the
"NetChannel Balance Sheet" and the "NetChannel Balance Sheet
Date") and the related unaudited statements of operations and
cash flows for the period from NetChannel's incorporation through
the NetChannel Balance Sheet Date (collectively, the "NetChannel
Financial Statements"). The NetChannel Financial Statements are
complete and accurate in all material respects, and have been
prepared in accordance with GAAP consistently applied (except
that the unaudited financial statements do not contain footnotes
required by GAAP) and fairly present the consolidated financial
condition of NetChannel as of and at the dates thereof, and
results of NetChannel's operations for the periods then ended,
subject, in the case of the interim financial statements, to
normal year-end adjustments, which such adjustments will not be
material in amount or significance. NetChannel has no
liabilities or obligations, whether absolute, accrued, fixed,
contingent, liquidated, unliquidated or otherwise that are
material to NetChannel individually or in the aggregate, except
for liabilities and obligations disclosed in the NetChannel
Financial Statements or incurred in the ordinary course of
business since March 31, 1997, consistent with past practice.
5.7 No Defaults. NetChannel is not, nor has it received
notice that it is or would be with the passage of time, (a) in
violation of any provision of its Amended and Restated
Certificate of Incorporation, as Amended (the "Restated
Certificate") or Bylaws or (b) in default or violation of any
term, condition or provision of (i) any judgment, decree, order,
injunction or stipulation applicable to NetChannel or (ii) any
agreement, note, mortgage, indenture, contract, lease or
instrument, permit, concession, franchise or license to which
NetChannel is a party or by which NetChannel or its properties or
assets may be bound, which default or violation under this clause
(b) would, individually or in the aggregate, have a material
adverse effect on NetChannel's business condition.
5.8 Litigation. There is no action, suit, proceeding or
investigation of any nature pending or to NetChannel's knowledge
threatened in writing against NetChannel, its properties or
assets or any of its officers or directors, in their respective
capacities as such. To NetChannel's knowledge, there is no
investigation pending or threatened in writing against
NetChannel, its properties or any of its officers or directors by
or before any governmental entity. No governmental entity has at
any time challenged or questioned the legal right of NetChannel
to conduct its business in the present manner or style thereof.
NetChannel is not a party or subject to the provisions of any
order, writ, injunction, judgment or decree of any governmental
entity. No material action, suit or proceeding is pending or
threatened by NetChannel.
5.9 No Adverse Change. Except as set forth on the
NetChannel Disclosure Schedule, since the NetChannel Balance
Sheet Date, there has not occurred:
(a) Any material adverse change in the business condition
of NetChannel;
(b) Any transaction by NetChannel except in the ordinary
course of business as conducted on the NetChannel Balance Sheet
Date and consistent with past practices;
(c) Any amendments or changes in the Certificate of
Incorporation or Bylaws of NetChannel, except amendments made in
connection with (i) the Stock Split; (ii) the issuance of
additional shares of Series B Preferred, other securities of
NetChannel, or warrants to purchase capital stock of NetChannel
in connection with additional financing for NetChannel; (iii) the
increase in shares reserved under the NetChannel Option Plan;
(iv) the transactions contemplated by this Agreement;
(d) Except as specifically contemplated by this Agreement,
any issuance, redemption, repurchase or other acquisition of
shares of capital stock of NetChannel (other than in the ordinary
course under employee benefit plans), or any declaration, setting
aside or payment of any dividend or other distribution (whether
in cash, stock or property) with respect to the capital stock of
NetChannel;
(e) Any damage, destruction or loss, whether or not covered
by insurance, materially and adversely affecting the properties
or business of NetChannel;
(f) Any sale, lease, license or other disposition of the
property or assets of NetChannel other than inventory sales or
licenses to end users in the ordinary course of business
consistent with past practice;
(g) Except as specifically contemplated by this Agreement,
any alteration in any term of any outstanding security of
NetChannel;
(h) Any (1) incurrence, assumption or guarantee by
NetChannel of any debt for borrowed money (other than borrowings
under any existing line of credit or borrowings in connection
with additional financing), (2) issuance or sale of any
securities convertible into or exchangeable for debt securities
of NetChannel, or (3) issuance or sale of options or other rights
to acquire from NetChannel, directly or indirectly, debt
securities of NetChannel or any securities convertible into or
exchangeable for any such debt securities;
(i) Any creation or assumption by NetChannel of any
mortgage, pledge, security interest or lien or other encumbrance
on any asset (other than liens arising under existing lease
financing arrangements, liens arising in the ordinary course of
NetChannel's business which in the aggregate are not material,
and liens for taxes not yet due and payable);
(j) Except as specifically contemplated by this Agreement,
any making of any loan, advance or capital contribution to, or
investment in, any person other than travel loans or similar
advances made in the ordinary course of business of NetChannel
consistent with past practices;
(k) Except as specifically contemplated by this Agreement,
any entry into, amendment of, relinquishment, termination or
nonrenewal by NetChannel of any contract, lease transaction,
commitment or other right or obligation other than in the
ordinary course of business consistent with past practice and
which in the aggregate are not material;
(l) Any transfer or grant of a right under the NetChannel
Intellectual Property Rights (as defined in Section 5.11), other
than transfers or grants to end users in the ordinary course of
business consistent with past practice;
(m) Any labor trouble or claim of wrongful discharge or
other unlawful labor practice or action;
(n) Any change in accounting methods or practices
(including any change in depreciation or amortization policies or
rates) by NetChannel;
(o) Any revaluation by NetChannel of any of its assets;
(p) Any waiver or compromise of a material right or debt
owed to it;
(q) Any making of any loan to its employees, officers or
directors, other than travel loans or similar advances made in
the ordinary course of business;
(r) Any entering into of an agreement obligating NetChannel
to make payments exceeding $100,000 in any fiscal year;
(s) Any change in pricing or royalties set or charged by
NetChannel to its customers or licensees or in pricing or
royalties set or charged by persons who have licensed
intellectual property to NetChannel.
5.10 Taxes. Tax Returns and Audits. Within the times and in
the manner prescribed by law, NetChannel has filed all domestic
and foreign federal, state and local tax returns required by law
and has paid all taxes, assessments, and penalties due and
payable. The provisions for taxes reflected in NetChannel's
balance sheet as of its last Fiscal Year end, are adequate for
any and all federal, state, county and local taxes for the period
ending on the date of that balance sheet, whether or not
disputed. There are no present disputes as to taxes of any
nature payable by NetChannel.
5.11 Intellectual Property.
(a) NetChannel owns, or is licensed or otherwise entitled
to exercise all rights under or with respect to, all patents,
trademarks, trade names, service marks, registered and
unregistered copyrights, and any applications therefor,
maskworks, net lists, computer software programs or applications
(in both source code and object form), formulae, processes,
designs, schematics, compositions, ideas, technology, know-how
and tangible or intangible proprietary information, trade secrets
or material accessory to or employed in the operation of the
business of NetChannel as currently conducted or as currently
proposed to be conducted (the "NetChannel Intellectual Property
Rights").
(b) NetChannel is not infringing, and is not aware of any
claimed infringement of, any third party's patent, trademark,
trade secret, trade name or copyright and has not received any
notice of any claimed infringement. No claims with respect to
the NetChannel Intellectual Property Rights have been asserted
or, to the knowledge of NetChannel, are or are likely to be
threatened by any person, nor is there any grounds for any claims
now or in the future, (i) to the effect that any business of
NetChannel as currently conducted or proposed to be conducted
infringes on or misappropriates any intellectual property rights
of any third party, or (ii) against the use by NetChannel of any
trademarks, service marks, trade names, trade secrets,
copyrights, maskworks, patents, technology, know-how or computer
software programs and applications used in NetChannel's business
as currently conducted or as currently proposed to be conducted
by NetChannel, or (iii) challenging the ownership, validity or
effectiveness of any of the NetChannel Intellectual Property
Rights. No NetChannel Intellectual Property Right is subject to
any lien, encumbrance or other secured interest. To NetChannel's
knowledge, all NetChannel Intellectual Property Rights are valid
and subsisting. To NetChannel's knowledge, there is no material
unauthorized use, infringement or misappropriation of any of the
NetChannel Intellectual Property Rights by any third party,
including any employee or former employee of NetChannel. No
NetChannel Intellectual Property Right is subject to any
outstanding order, judgment, decree, stipulation or agreement
restricting in any manner the licensing or exploitation thereof
by NetChannel. NetChannel has not entered into any agreement to
indemnify any other person against any charge of infringement
relating to any NetChannel Intellectual Property Right, except as
set forth in the Disclosure Schedule and the agreements listed
therein specifically for this purpose. No employee of NetChannel
is in material violation of any term of any employment contract
(whether written or oral), patent disclosure agreement,
proprietary information agreement, non-competition agreement or
any other contract or agreement relating to the relationship of
any such employee with NetChannel, and to NetChannel's knowledge,
with any other party (including prior employers) because of the
nature of the business conducted or proposed to be conducted by
NetChannel. All key employees of NetChannel have signed Employee
Proprietary Information Agreements in substantially the form
delivered to ViewCall, and all consultants of NetChannel have
signed consulting agreements containing proprietary information
protective provisions in substantially the form delivered to
ViewCall. All software included in NetChannel Intellectual
Property Rights is original with NetChannel and has been either
created by employees of NetChannel on a work-for-hire basis or by
consultants or contractors who have created such software
themselves and have assigned or are under an obligation to assign
all rights they may have had in such software to NetChannel.
(c) NetChannel has taken reasonable security measures to
protect the secrecy, confidentiality and value of all trade
secrets, know-how, inventions, designs, processes and technical
data required to conduct its business.
(d) Notwithstanding anything to the contrary in this
Section 5.11, NetChannel makes no representations or warranties
regarding the validity, enforceability or non-infringement of any
patents, trademarks, trade names, service marks, registered and
unregistered copyrights, and any applications therefor,
maskworks, net lists, computer software programs or applications
(in both source code and object form), formulae, processes,
designs, schematics, compositions, ideas, technology, know-how
and tangible or intangible proprietary information or trade
secrets licensed to or developed through any licenses or
development agreements with ViewCall.
5.12 Title to Property; Absence of Liens and Encumbrances.
NetChannel has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all tangible
properties and assets, real, personal and mixed, used in its
business, free and clear of any liens (including liens relating
to or attributable to taxes, other than liens for taxes that are
not yet delinquent), charges, pledges, security interests or
other encumbrances, except as reflected in the NetChannel
Financial Statements and except for such imperfections of title
and encumbrances, if any, which are not substantial in character,
amount or extent and which do not materially detract from the
value, or interfere with the present use, of the property subject
thereto or affected thereby.
5.14 Registration Rights. Except as set forth in the
NetChannel Investor Rights Agreement, NetChannel is not under any
obligation to register pursuant to the Securities Act of 1933, as
amended (the "Securities Act"), any of its currently outstanding
securities or any of its securities that may hereafter be issued.
5.15 Brokers' and Finders' Fees. NetChannel has not
incurred, nor will it incur, directly or indirectly, any
liability for brokerage or finders' fees or agents' commissions
or any similar charges in connection with this Agreement or any
transaction contemplated hereby.
5.16 Minute Books. The minute books of NetChannel made
available to counsel for ViewCall are the only minute books of
NetChannel and contain a reasonably accurate summary of all
meetings of directors (or committees thereof) and shareholders or
actions by written consent since the time of incorporation of
NetChannel.
5.17 Disclosure. No representation or warranty made by
NetChannel in this Agreement, nor any financial statement, other
written financial information or schedule, certificate, schedule
or exhibit prepared and furnished or to be prepared and furnished
by NetChannel or its representatives pursuant hereto or in
connection with the transactions contemplated hereby, or any
information supplied by NetChannel in connection with the
solicitation of approval of the transactions contemplated by this
Agreement by ViewCall's or NetChannel's stockholders, when taken
as a whole, contains or will contain any untrue statement of a
material fact, or omits or will omit to state a material fact
necessary to make the statements or facts contained herein or
therein not misleading in light of the circumstances under which
they were furnished.
Section 6. OBLIGATIONS BEFORE CLOSING
6.1 Conduct of Business of ViewCall and NetChannel. Except
as expressly contemplated by this Agreement, during the period
from the date of this Agreement and the Closing Date, each of
ViewCall and NetChannel shall carry on its business in the usual,
regular and ordinary course in substantially the same manner as
conducted prior to the date of this Agreement and, to the extent
consistent with such business, use all commercially reasonable
efforts consistent with past practice and policies to preserve
intact its present business organization, keep available the
services of its current officers and key employees and preserve
its relationships with customers, suppliers, distributors,
licensors, licensees, and others having business dealings with
it, to the end that its goodwill and ongoing business shall be
unimpaired at the Closing Date. Each party shall promptly notify
the other party of any event or occurrence not in the ordinary
course of business of the notifying party, and any event which
could have a material adverse effect on the business condition of
the notifying party. Notwithstanding the above, NetChannel plans
to (i) enter into agreements in connection with the issuance of
Series B Preferred Stock pursuant to one or more Amendment
Agreements, which amend the NetChannel Certificate of
Incorporation, NetChannel's Series B Preferred Stock Purchase
Agreement dated October 4, 1996, NetChannel's Investor Rights
Agreement and NetChannel's Co-Sale Agreement dated October 4,
1996, and (ii) execute promissory notes to certain investors in
NetChannel's Series B Preferred Stock, who will also be loaning
NetChannel additional funds, which notes will be convertible into
NetChannel capital stock in the next round of financing for
NetChannel. In addition, except as expressly contemplated by
this Agreement or disclosed in the ViewCall Disclosure Schedule,
ViewCall shall not, without the prior written consent of
NetChannel:
(a) Grant any severance or termination pay to any director,
officer, employee or consultant, except mandatory payments made
pursuant to standard written agreements outstanding on the date
hereof (which arrangement shall have been disclosed in the
ViewCall Disclosure Schedule) or with the prior reasonable
approval of the Chief Executive Officer of NetChannel;
(b) Transfer to any person or entity any rights to the
Technology except in the ordinary course of business;
(c) Enter into or amend in any material respect any
agreements pursuant to which any other party is granted marketing
or other similar rights of any type or scope with respect to any
products of ViewCall;
(d) Violate, amend or otherwise modify in any material
respect the terms of any of the Assigned Contracts;
(e) Commence a lawsuit other than for the routine
collection of bills;
(f) Declare or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of
any ViewCall capital stock; split, combine or reclassify any
ViewCall Capital Stock; issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for
shares of ViewCall Capital Stock; or repurchase or otherwise
acquire, directly or indirectly, any shares of ViewCall Capital
Stock, except from former employees, directors and consultants in
accordance with agreements outstanding on the date hereof
providing for the repurchase of shares at cost in connection with
any termination of service to ViewCall;
(g) Issue, deliver, purchase or sell, or authorize or
propose the issuance, delivery, purchase or sale of, any shares
of its capital stock or securities convertible into such shares,
or subscriptions, rights, warrants or options to acquire, or
other agreements or commitments of any character obligating
ViewCall to issue, any such shares or other convertible
securities;
(h) Solicit approval for or effect any amendments to
ViewCall's Articles of Incorporation or Bylaws (other than as
contemplated by this Agreement);
(i) Acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation,
partnership, association or other business organization or
division thereof, or otherwise acquire or agree to acquire any
assets which are material, individually or in the aggregate, to
ViewCall's business condition;
(j) Sell, lease, license or otherwise dispose of any of its
properties or assets;
(k) Incur any indebtedness for borrowed money (other than
with respect to amounts borrowed from NetChannel) or guarantee
any such indebtedness, or issue or sell any debt securities or
guarantee any debt securities of others;
(l) Revalue any of its assets, including without
limitation, writing down the value of inventory or writing off
notes or accounts receivable other than in the ordinary course of
business and consistent with past practice;
(m) Pay, discharge or satisfy in an amount in excess of
$10,000 in any one case, any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in
the ordinary course of business of liabilities reflected or
reserved against in ViewCall's Financial Statements or those
incurred after the ViewCall Balance Sheet Date in the ordinary
course of business;
(n) Make or change any material tax election other than in
the ordinary course of business and consistent with past
practice, adopt or change any material tax accounting method,
file any material tax return (other than any estimated tax
returns, payroll tax returns or sale tax returns) or any
amendment to a material tax return, enter into any closing
agreement, settle any tax claim or assessment, or consent to any
tax claim or assessment;
(o) Engage in any activities or transactions that are
outside the ordinary course of its business consistent with past
practice;
(p) Fail to pay or otherwise satisfy its monetary
obligations as they become due, except such as are being
contested in good faith;
(r) Waive or commit to waive any rights of substantial
value;
(s) Cancel, materially amend, renew or fail to renew any
insurance policy; or
(t) Take, or agree (in writing or otherwise) to take, any
of the actions described in Sections 6.1(a) through (s) above, or
any action which would make any of the representations or
warranties or covenants of ViewCall contained in this Agreement
untrue or incorrect in any material respect.
6.2 Access to Information. Each party (the "Disclosing
Party") shall afford to the other (the "Requesting Party"), and
to the Requesting Party's accountants, counsel and other
representatives, reasonable access, during normal business hours
and upon reasonable prior notice during the period from the date
of this Agreement until the Closing Date, to (i) all of the
Disclosing Party's properties, books, contracts, commitments and
records, and (ii) all other information concerning the business,
properties and personnel of the Disclosing Party as the
Requesting Party may reasonably request. No information or
knowledge obtained in any investigation pursuant to this Section
6.2 shall affect or be deemed to modify any representation or
warranty contained herein or the conditions to the obligations of
the parties to consummate the transactions contemplated by this
Agreement. The parties shall abide by the terms of the Mutual
Nondisclosure Agreement dated as of February 27, 1997, with
regard to all such information provided or disclosed.
6.3 Shareholders' Approval. ViewCall shall obtain
shareholder approval the transactions contemplated by this
Agreement, including without limitation approval of this
Agreement and the Associated Agreements. In addition, NetChannel
shall obtain any stockholder approval necessary to consummate the
transactions contemplated by this Agreement, including, without
limitation, approval of this Agreement and Associated Agreements.
6.4 Preparation of Information Statement. As soon as
practicable after the execution of this Agreement, ViewCall shall
prepare an Information Statements for purposes of soliciting the
approval of the ViewCall shareholders of this Agreement and the
Associated Agreements and the transactions contemplated hereby
and thereby. ViewCall shall ensure that its Information
Statement shall comply with all applicable federal and state
securities laws.
6. 5 Exclusivity; Acquisition Proposals. From the date
hereof through the Closing, ViewCall and NetChannel will continue
to be bound by the terms of Section 10 of the Letter of Intent
between NetChannel and ViewCall dated March 7, 1997 (the "LOI")
and of the Letter Agreement between NetChannel and ViewCall dated
March 11, 1996.
6.6 Breach of Representations, Warranties and Covenants.
(a) Neither ViewCall nor Colorocs shall take, or fail to
take, any action which from the date of this Agreement through
the Closing would cause or constitute a breach of any of its
representations, warranties and covenants set forth in this
Agreement or which would from the date of this Agreement through
the Closing cause any of such representations or warranties to be
inaccurate. In the event of, and promptly after becoming aware
of, the occurrence of or the pending or threatened occurrence of
any event which would cause or constitute such a breach or
inaccuracy, ViewCall and/or Colorocs shall give detailed notice
thereof to NetChannel and shall use its best efforts to prevent
or promptly remedy such breach or inaccuracy.
(b) NetChannel shall not take, or fail to take, any action
which from the date of this Agreement through the Closing would
cause or constitute a breach of any of its representations,
warranties and covenants set forth in this Agreement or which
would from the date of this Agreement through the Closing cause
any of such representations or warranties to be inaccurate. In
the event of, and promptly after becoming aware of, the
occurrence of or the pending or threatened occurrence of any
event which would cause or constitute such a breach or
inaccuracy, NetChannel shall give detailed notice thereof to
ViewCall and shall use its best efforts to prevent or promptly
remedy such breach or inaccuracy.
6.7 Consents. Each of NetChannel and ViewCall shall
promptly apply for or otherwise seek, and use its commercially
reasonable efforts to obtain, all consents and approvals required
to be obtained by it for the consummation of the transactions
contemplated by this Agreement and the Associated Agreements, and
ViewCall shall use its best efforts to obtain all necessary
consents, waivers and approvals under any of ViewCall's
agreements, contracts, licenses or leases in connection with the
transactions contemplated by this Agreement and the Associated
Agreements.
6.8 Reasonable Efforts. Each of the parties to this
agreement shall use its commercially reasonable efforts to effect
the transactions contemplated hereby and to fulfill and cause to
be fulfilled the conditions to closing under this Agreement.
6.9 Public Announcements. Each party will consult in
advance with the other concerning the timing and content of any
announcements, press releases and public statements concerning
the transactions contemplated by this Agreement and the
Associated Agreements, and will not make any such announcement,
release or statement without the other's consent.
6.10 Election of New Director. Within 15 days after the
Closing, NetChannel shall hold a meeting of its board of
directors, during which it shall appoint ▇▇▇▇▇▇▇ ▇▇▇▇▇ to the
NetChannel board of directors (and NetChannel shall have taken
all necessary corporate action, including obtaining shareholder
approval of an amendment to the NetChannel Bylaws, if required,
to permit such an appointment).
7. SECURITIES ACT COMPLIANCE; REPRESENTATIONS; AND RESTRICTIONS
ON TRANSFER.
7.1 Securities Act Exemption. The NetChannel Series B
Preferred, NetChannel Series C Preferred, the ▇▇▇▇▇ Warrants, and
the NetChannel Options shall not be registered under the
Securities Act in reliance upon exemptions contained in the
Securities Act.
7.2 Stock Restrictions. In addition to any legend imposed
by applicable state securities laws (including by the
Commissioner), the certificates representing the shares of
NetChannel Series B Preferred and of NetChannel Series C
Preferred issued pursuant to this Agreement or any of the
Associated Agreements and any shares of NetChannel Common Stock
issuable pursuant to the ▇▇▇▇▇ Warrant or upon conversion of the
NetChannel Series B Preferred or the NetChannel Series C
Preferred (collectively, all of such shares being referred to as
the "NetChannel Securities") shall bear restrictive legends (and
stop transfer orders shall be placed against the transfer thereof
with NetChannel's transfer agent), stating substantially as
follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR
HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES OR
THE HOLDER RECEIVES AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY STATING THAT SUCH SALE, TRANSFER,
ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF
SUCH ACT.
7.3 Restrictions on Transfer and Securities Law Matters.
Each holder of the NetChannel Securities (each, a "New
Stockholder") shall be bound by the following provisions:
(i) Such New Stockholder shall not offer, sell or otherwise
dispose of any NetChannel Securities except in compliance
with the Securities Act and the rules and regulations
thereunder.
(ii) Such New Stockholder shall not make any sale, transfer
or other disposition of the NetChannel Securities unless (i)
such sale, transfer or other disposition is within the
limitations of and in compliance with Rule 144 (to the
extent applicable) promulgated by the Securities and
Exchange Commission under the Securities Act and the New
Shareholder furnishes NetChannel with reasonable proof of
compliance with such Rule, (ii) in the opinion of counsel
which is reasonably acceptable to NetChannel and its counsel
(and for purposes of this Agreement, the law firms of
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇ LLC and ▇▇▇▇▇▇ & Bird shall be
acceptable to NetChannel and its counsel), another exemption
from registration under the Securities Act is available with
respect to any such proposed sale, transfer or other
disposition of the NetChannel Securities, or (iii) the offer
and sale of the NetChannel Securities is registered under
the Securities Act.
Section 8. CONDITIONS PRECEDENT TO NETCHANNEL'S PERFORMANCE
The Obligations of NetChannel to be performed under this
Agreement and each of the Associated Agreements are subject to
the satisfaction at the satisfaction at the Closing, of all the
conditions set out below in this Section 8. NetChannel may waive
any or all of these conditions in writing; provided, however,
that no such waiver of a condition shall constitute a waiver by
NetChannel of any of its or their other rights or remedies, at
law or in equity, if ViewCall and Colorocs shall be in default of
any of its representations, warranties, or covenants under this
Agreement or any of the Associated Agreements.
8.1 Accuracy of ViewCall and Colorocs' Representations and
Warranties. All representations and warranties by ViewCall and
Colorocs in this Agreement and the Associated Agreements shall be
true on and as of the Closing Date as though made at that time.
8.2 Absence of Liens. At or prior to the Closing, ViewCall
shall deliver to NetChannel a UCC search report dated as of a
date not more than five days before Closing issued by the Georgia
Secretary of State indicating that there are no filings under the
Uniform Commercial Code on file with such Secretary of State
which indicate that there is any lien any of the Purchased
Property which has not been disclosed in the ViewCall Disclosure
Schedule.
8.3 Corporate Actions This Agreement and each of the
Associated Agreements, each of the transactions contemplated
hereby and thereby and each of the Obligations of the parties
hereunder and thereunder, following notice as required under the
Georgia Business Corporation Code (i) shall have been approved by
the Boards of Directors of Colorocs and (ii) shall have been
approved by the shareholders of ViewCall. The Information
Statement prepared by ViewCall shall characterize the transaction
as a sale of all or substantially all of the assets of ViewCall.
8.4 Dissenters Rights The shareholders of ViewCall (other
than Colorocs) shall have been advised of the right to dissent
and obtain payment for each such shareholder's shares of ViewCall
in accordance with Article 13 of the Georgia Business Corporation
Code in connection with any and all of the transactions
contemplated by this Agreement or any of the Associated
Agreements, and ViewCall and its Board of Directors shall have
taken all steps necessary to be taken by either of them under the
Georgia Business Corporation Code to notify ViewCall's
shareholders of the availability of, and otherwise to perfect,
such rights.
8.5 ViewCall and Colorocs' Performance. ViewCall and
Colorocs shall have performed, satisfied, and complied with all
covenants, agreements, and conditions required by this Agreement
or any of the Associated Agreements to be performed or complied
with by ViewCall and Colorocs on or before the Closing Date.
8.6 Certification by ViewCall. NetChannel shall have
received a certificate, dated as of the Closing Date, signed and
verified by the president or a vice president and the treasurer
or an assistant treasurer of each of ViewCall and Colorocs,
certifying, in such detail as NetChannel and its counsel may
reasonably request, that the conditions specified in Section 8.3,
8.4 and Section 8.5 have been fulfilled.
8.7 Opinion of ViewCall's Counsel. NetChannel shall have
received from ▇▇▇▇▇▇▇, ▇▇▇▇▇▇, and ▇▇▇▇▇▇▇▇▇▇ L.L.C., counsel for
ViewCall and Colorocs, an opinion dated the Closing Date, in form
and substance satisfactory to NetChannel and its counsel, that:
(a) Each of ViewCall and Colorocs is a corporation duly
organized, validly existing and in good standing under the laws
of Georgia and have all necessary corporate power to own their
respective properties as now owned and operate their respective
businesses as now operated;
(b) This Agreement and the Associated Agreements have been
duly and validly authorized and executed and delivered by each of
ViewCall and Colorocs, and is valid and binding on each of
ViewCall and Colorocs and enforceable in accordance with its
terms, except as limited by bankruptcy and insolvency laws and by
other laws affecting the rights of creditors generally;
(c) Except as set forth in the ViewCall's Disclosure
Schedule, such counsel does not know of any suit, action,
arbitration, or legal, administrative, or other proceeding or
governmental investigation pending or threatened against or
affecting either of ViewCall and Colorocs or any of their
Subsidiaries or their respective businesses or any of their
properties, or financial or other condition;
(d) Neither the execution nor delivery of this Agreement or
the Associated Agreements, nor the consummation of the
transaction contemplated in this Agreement, will constitute (i) a
default, or an event that would with notice or lapse of time or
both constitute a default under, or violation or breach of,
ViewCall's or Colorocs' articles of incorporation, bylaws, or any
indenture, license, lease, franchise, mortgage, instrument, or
other agreement to which ViewCall or Colorocs is a party, or by
which ViewCall or Colorocs or the Purchased Property may be bound
that is known to counsel, and not disclosed in the ViewCall
Disclosure Schedule;
(e) The assignment of the security interest to NetChannel
pursuant to the Note Purchase Agreement is valid. NetChannel has
a perfected security interest in the collateral covered thereby,
including the NetChannel Preferred issued to ViewCall pursuant to
this Agreement, without the filing of any amendment or any other
document; and
(f) The transactions contemplated by this Agreement do not
constitute a "bulk transfer" under Article 6 of the Uniform
Commercial Code as currently in effect in the State of Georgia.
8.8 Absence of Litigation. No action, suit, or proceeding
before any court or any governmental body or authority,
pertaining to the transaction contemplated by this Agreement or
to its consummation, shall have been instituted or threatened on
or before the Closing Date.
8.9 Consents. All necessary agreements and consents of any
parties to the consummation of the transactions contemplated by
this Agreement and the Associated Agreements, or otherwise
pertaining to the matters covered by it, shall have been obtained
by ViewCall and delivered to NetChannel.
8.10 Approval of Documentation. The form and substance of
all certificates, instruments, opinions, and other documents
delivered to NetChannel under this Agreement shall be
satisfactory in all reasonable respects to NetChannel and its
counsel.
8.11 Change of Corporate Name. ViewCall shall have entered
into an undertaking to change its corporate name to a name
reasonably approved by NetChannel within twenty days following
the Closing Date.
8.12 Continuity of Management. NetChannel shall have made
arrangements suitable to it for the employment by NetChannel of
sufficient of ViewCall's employees to continue the operation of
the business being transferred without disruption thereto.
8.13 Condition of Purchased Property. The Purchased
Property shall not have been materially or adversely affected in
any way as a result of any fire, accident, storm or other
casualty or labor or civil disturbance or act of God or the
public enemy.
Section 9. CONDITIONS PRECEDENT TO VIEWCALL'S PERFORMANCE
The Obligations of ViewCall to sell and transfer the
Purchased Property under this Agreement are subject to the
satisfaction, at or before the Closing, of all the following
conditions:
9.1 Accuracy of NetChannel's Representations And
Warranties. All representations and warranties by NetChannel
contained in this Agreement or in any written statement delivered
by NetChannel under this Agreement shall be true on and as of the
Closing as though such representations and warranties were made
on and as of that date.
9.2 NetChannel's Performance. NetChannel shall have
performed and complied with all covenants and agreements, and
satisfied all conditions that it is required by this Agreement to
perform, comply with, or satisfy, before or at the Closing.
9.3 Opinion of NetChannel's Counsel. NetChannel shall have
furnished ViewCall with an opinion, dated the Closing Date, of
Wilson, Sonsini, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, counsel for NetChannel, in
form and substance satisfactory to ViewCall and its counsel, to
the effect that:
(a) NetChannel is a corporation duly organized, validly
existing, and in good standing under the laws of the State of
Delaware and has all requisite corporate power to perform its
Obligations under this Agreement;
(b) All corporate proceedings required by law or by the
provisions of this Agreement to be taken by NetChannel on or
before the Closing Date, in connection with the execution and
delivery of this Agreement and the consummation of the
transactions contemplated by this Agreement, have been duly and
validly taken;
(c) NetChannel has the corporate power and authority to
acquire the Purchased Property for the consideration set forth
herein;
(d) Every consent, approval, authorization, or order of any
court or governmental agency or body that is required for the
consummation by NetChannel of the transactions contemplated by
this Agreement has been obtained an will be in effect on the
Closing Date;
(e) As of the closing of the transaction, the authorized
capital stock of NetChannel consists of _________. As of the
closing of the Transaction, ______ shares of Common Stock are
validly issued and outstanding, fully paid and nonassessable, and
______ Shares of Series A Preferred Stock, ______ Shares of
Series E Preferred Stock, and ______ Shares of Series C Preferred
Stock will be outstanding. To our knowledge, except for ______,
there is no outstanding warrant or option issued or granted by
NetChannel to acquire any equity securities from NetChannel.
(f) The shares of NetChannel Preferred are free of any
lien, encumbrance, or restrictions of transfer except for
restrictions on transfer imposed by federal and state securities
laws. Except as provided in the transaction documents, to our
knowledge, NetChannel has no obligation (contingent or other) to
purchase, redeem, or otherwise acquire any of its equity
securities or any interest therein or to pay any dividend or make
any other distribution in respect thereof. The Company has duly
reserved for issuance upon conversion of the Shares and upon
conversion of the shares purchased by exercise of the ▇▇▇▇▇
Warrants (the "Warrant Shares"), all shares of Common Stock
issuable upon conversion of the Shares and the Warrant Shares.
The Common Stock issued upon conversion of the Shares and the
Warrant Shares, when issued in accordance with the Articles, will
be duly and validly issued, fully paid and nonassessable, and
free of liens and encumbrances imposed by NetChannel, except as
set forth in the transaction agreements.
(g) The Shares and all outstanding shares of Common Stock
have been issued pursuant to exemptions from the registration
provisions of applicable federal and state securities laws.
(h) The consummation of the transaction contemplated by
this Agreement does not violate or contravene any of the
provisions of any charter, bylaw, or resolution of NetChannel or
of any indenture, agreement, judgment, or order to which
NetChannel is a party or by which NetChannel is bound.
In rendering its opinion, counsel for NetChannel may rely on
certificates of governmental authorities and on opinions of
Associate counsel.
9.4 NetChannel's Corporate Approval. NetChannel shall have
received corporate authorization and approval for the execution
and delivery of this Agreement and all corporate action necessary
or proper to fulfill the Obligations of NetChannel to be
performed under this Agreement on or before the Closing Date.
Section 10. SELLING PARTIES' OBLIGATIONS AFTER THE CLOSING
10.1 Preservation of Good Will. Following the Closing,
ViewCall and Colorocs will restrict its activities so that
NetChannel's reasonable expectations with respect to the
goodwill, business reputation, employee relations and prospects
connected with the Purchased Property will not be materially
impaired.
10.2 Change of Name. ViewCall, Colorocs and ▇▇▇▇▇ agree
that after the Closing Date they shall not use or employ in any
manner directly or indirectly the name "ViewCall", or any
variation thereof.
10.3 Access to Records. From and after the Closing,
ViewCall and Colorocs shall allow NetChannel, and its counsel,
accountants and other representatives, such access to records
which after the Closing are in the custody or control of ViewCall
and Colorocs as NetChannel reasonably requires in order to comply
with its Obligations under the law or under Contracts assumed by
NetChannel pursuant to this Agreement.
Section 11. COSTS AND EXPENSES
Except as provided herein, each of the parties shall pay all
costs and expenses incurred or to be incurred by it in
negotiating and preparing this Agreement and in closing and
carrying out the transactions contemplated by this Agreement. All
costs and expenses incurred in connection with this Agreement,
the Associated Agreement and the transactions contemplated hereby
and thereby shall be paid by the party incurring such expense;
provided that the legal fees of ViewCall incurred solely in
connection with the Merger (up to a maximum of $100,000) shall be
paid at the Closing, less amounts paid prior to Closing.
Section 12. FORM OF AGREEMENT
12.1 Headings. The subject headings of the Sections and
paragraphs of this Agreement are included for purposes of
convenience only, and shall not affect the construction or
interpretation of any of its provisions.
12.2 Entire Agreement; Modification; Waiver. This
Agreement, the Associated Agreements, and the Confidentiality
Agreement executed in connection with the Letter of Intent
constitute the entire agreement among the parties pertaining to
the subject matter contained in it and supersedes all prior and
contemporaneous agreements, representations, and understandings
of the parties. No supplement, modification, or amendment of
this Agreement shall be binding unless executed in writing by all
the parties. No waiver of any of the provisions of this
Agreement shall be deemed, or shall constitute, a waiver of any
other provision, whether or not similar, nor shall any waiver
constitute a continuing waiver. No waiver shall be binding unless
executed in writing by the party making the waiver.
12.3 Counterparts. This Agreement may be executed
simultaneously in one or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute
one and the same instrument.
Section 13. PARTIES
13.1 Parties in Interest. Nothing in this Agreement,
whether express or implied, is intended to confer any rights or
remedies under or by reason of this Agreement on any persons
other than the parties to it and their respective successors and
assigns, nor is anything in this Agreement intended to relieve or
discharge the Obligation or liability of any third persons to any
party to this Agreement, nor shall any provision give any third
persons any right of subrogation or action over against any party
to this Agreement.
13.2 Assignment. This Agreement shall be binding on and
shall inure to the benefit of the parties to it and their
respective heirs, legal representatives, successors, and assigns.
Section 14. REMEDIES
14.1 Sole Remedy. The sole remedy of NetChannel for any
damage, loss, or cost arising out of the enforcement of this
Agreement, or because of an alleged dispute, breach, default, or
misrepresentation in connection with any of the provisions of
this Agreement is indemnification pursuant to the terms the
Escrow Agreement.
14.2 Conditions Permitting Termination. Each party may on
or prior to the Closing Date terminate this Agreement by written
notice to the others, without liability to the other, if any bona
fide action or proceeding shall be pending against any party on
the Closing Date that could result in an unfavorable judgment,
decree, or order that would prevent or make unlawful the carrying
out of this Agreement.
14.3 Defaults Permitting Termination. If either NetChannel
on one hand, and any of Colorocs, ▇▇▇▇▇ or ViewCall on the other
hand, materially defaults in the due and timely performance of
any of its warranties, covenants, or agreements under this
Agreement prior to Closing, the non-defaulting party or parties
may on the Closing Date give notice of termination of this
Agreement. The notice shall specify with particularity the
default or defaults on which the notice is based. The
termination shall be effective five days after the proposed
Closing Date set forth in this Agreement, unless the specified
default or defaults have been cured on or before this effective
date for termination.
Section 15. NATURE AND SURVIVAL OF REPRESENTATIONS AND
WARRANTIES
All representations, warranties, covenants, and agreements
of the parties contained in this Agreement, or in any instrument,
certificate, opinion, or other writing provided for in it, shall
survive the Closing for the period permitted for the institution
of indemnification claims under the Escrow Agreement.
Section 16. NOTICES
All notices, requests, demands, and other communications
under this Agreement shall be in writing and shall be deemed to
have been duly given on the date of service if served personally
on the party to whom notice is to be given, or on the third day
after mailing if mailed to the party to whom notice is to be
given, by first class mail registered or certified, postage
prepaid, and properly addressed as follows:
(a) If to NetChannel, to:
NetChannel Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn.: General Counsel
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to ViewCall, to:
ViewCall America, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇ ▇▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇ LLC
990 One Live Center
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
(c) if to Colorocs or ▇▇▇▇▇, to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Any party may change its address for purposes of this
Section by giving the other parties written notice of the new
address in the manner set forth above.
Section 17. GOVERNING LAW
This Agreement shall be construed in accordance with, and
governed by, the laws of the State of California, as applied to
contracts made and performed within the State of California.
Section 18. ANNOUNCEMENTS
None of ViewCall, ▇▇▇▇▇, and Colorocs will make any
announcements to the public or to employees of ViewCall
concerning this Agreement or the transactions contemplated hereby
without the prior approval of NetChannel, which will not be
unreasonably withheld. Notwithstanding any failure of NetChannel
to approve it, ViewCall, ▇▇▇▇▇ and Colorocs may make an
announcement of substantially the same information as theretofore
announced to the public by NetChannel, or any announcement
required by applicable law, but ViewCall, ▇▇▇▇▇, and Colorocs
shall in either case notify NetChannel of the contents thereof
reasonably promptly in advance of its issuance.
IN WITNESS WHEREOF, the parties to this Agreement have duly
executed it on the day and year first above written.
NETCHANNEL INC.
________________________________
By: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Its: Chief Executive Officer
VIEWCALL AMERICA, INC.
________________________________
By: ▇▇▇▇ ▇▇▇▇▇▇
Its: Chief Executive Officer
COLOROCS INFORMATION TECHNOLOGIES,
INC.
________________________________
By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Its: Chairman and C.E.O.
________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
43
Asset Acquisition Agreement -2- 05/23/97 Execution Copy