ASSET PURCHASE AGREEMENT ------------------------

 

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                            ASSET PURCHASE AGREEMENT

                            ------------------------

 

         THIS AGREEMENT (the "Agreement") is entered into and is effective this

31st day of December, 2003, by and between CDS Holdings, LLC, an Indiana limited

liability company ("Seller"), and CTI Group (Holdings) Inc., a Delaware

corporation ("Buyer").

 

                                   BACKGROUND

                                   ----------

 

         WHEREAS, Seller is maker and Buyer is payee under that certain Amended,

Restated and Consolidated Promissory Note dated as of February 12, 2001, in the

original principal amount of $10,531,063.43 (the "Note"); and

 

         WHEREAS, to secure payment of the Note, Seller granted to Buyer a

security interest in substantially all of the assets of Seller (the

"Collateral") pursuant to that certain Security Agreement between the parties

dated February 12, 2001 (the "Security Agreement"); and

 

          WHEREAS, Seller wishes to sell, and Buyer wishes to buy, substantially

all of the assets of Seller on the terms and under the conditions of this

Agreement. Buyer may designate an affiliated company to complete the purchase,

and Buyer and any such affiliated company are hereinafter referred individually

and collectively as the "Buyer" hereunder.

 

         NOW, THEREFORE, intending to be legally bound, in consideration of the

mutual agreements contained herein, and subject to the satisfaction of the terms

and conditions set forth herein, the parties agree as follows:

 

1.        DEFINED TERMS

 

         Certain defined terms (the first letters of which are capitalized) used

in this Agreement and not specifically defined in context are set forth in

Appendix A of this Agreement and are incorporated herein by reference.

 

2.        THE TRANSACTION

 

         2.1. Sale of Assets of Seller. On the closing date of the sale of the

Assets by Seller to Buyer (the "Closing Date"), subject to the other terms and

conditions of this Agreement, the Seller shall sell, transfer, assign and convey

to the Buyer free of any Encumbrances, and the Buyer shall purchase, all right,

title and interest in and to all of the Assets of Seller, except Excluded

Assets, as hereinafter defined. Buyer shall not assume any of Seller's

liabilities or other Obligations of any nature whatsoever, other than the

Assumed Liabilities identified in Section 2.1(b).

 

                  (a) Assets of Seller. The "Assets of Seller" means all Assets

of the Seller existing on the Closing Date, wherever located and whether or not

reflected on the Seller's books and records, but excluding Cash Assets in the

amount of Seventy Nine Thousand Four Hundred Twenty Five Dollars ($79,425) (the

"Excluded Assets"). Subject to the exclusion of said Excluded Assets, the Assets

 

 

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of Seller include, but are not limited to, the following Assets of Seller

existing on the Closing Date:

 

                           (i) All saleable finished goods, raw materials, work

         in process, supplies and inventories of any kind and description of

         Seller (the "Inventory").

 

                           (ii) All of Seller's Tangible Property, prepayments,

         deposits, escrows and other prepaid expenses, and Intangibles.

 

                           (iii) All of Seller's Contract Rights other than

         Contract Rights under any Contract requiring a Consent that is not

         obtained on or before the Closing Date (the "Non-Assigned Contracts");

         provided that (x) Seller shall provide to the Buyer all the benefits of

         such Non-Assigned Contracts, (y) Seller shall continue to use best

         efforts to obtain such Consent, and (z) once such Consent is obtained,

         the Contract Rights under such Non-Assigned Contract shall be deemed,

         automatically and without further action by the parties, to be included

         in the Assets of Seller as of the date such material Consent is

         delivered to Buyer.

 

                           (iv) All rights under all Insurance Policies owned,

          held or maintained by Seller or any of its predecessors at any time

         prior to the date of this Agreement.

 

                           (v) All transferable rights under all Permits granted

         or issued to Seller or otherwise held by Seller.

 

                           (vi) All of Seller's rights with respect to its

         telephone numbers, telephone directory listings and advertisements,

         unemployment reserve accounts and experience ratings, and all of

         Seller's goodwill relating to or arising in connection with Seller's

         Business (as hereinafter defined).

 

                           (vii) All of Seller's customer lists, prospect

         customer lists, supplier lists, data bases, computer media, sales and

          marketing materials, invoices, correspondence, files, books and

         records.

 

                           (viii) All of Seller's claims, causes of action and

         other legal rights and remedies, whether or not known as of the Closing

         Date, relating to either (a) Seller's ownership of the Assets of

         Seller, or (b) the operation of Seller's Business.

 

                           (ix) All of Seller's membership interest (the "XILA

         Interests") in XILA Communications, LLC, an Indiana limited liability

         company ("XILA").

 

The fair market value of the Assets of Seller (excluding the XILA Interests)

shall be determined by Seller and Buyer by arms-length negotiation prior to

Closing and set forth in a certificate to be executed and delivered by the

parties at such Closing (the "Non-XILA Fair Market Value").

 

 

 

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              (b) Specified Liabilities or Other Obligations of Seller. Buyer

shall not be deemed to assume any of Seller's liabilities or other Obligations

of any nature whatsoever, except that Buyer shall assume and agree to pay,

discharge or perform, as appropriate, when lawfully due the obligations and

liabilities of the Seller identified on Schedule 2.1(b) attached hereto (the

"Assumed Liabilities").

 

         2.2. Escrow of Excluded Assets. At Closing, Seller shall deliver, by

bank cashier's check or wire transfer representing immediately available funds,

to Blank Rome LLP, as escrow agent under an Escrow Agreement in substantially

the form attached hereto as Exhibit A (the "Escrow Agreement"), the Excluded

Assets, after payment or provision for the legal and accounting expenses

incurred or to be incurred by Seller in connection with this Agreement and the

dissolution, winding-up and liquidation of Seller.

 

3.        CONSIDERATION

 

            The total consideration for the Assets of Seller (the "Total

Purchase Price") shall be (a) the cancellation of the Note by the Buyer, (b)

Buyer's payment or performance when due of the Assumed Obligations, and (c)

Buyer's performance, when due, of the post-closing covenants contained herein.

 

4.        REPRESENTATIONS AND WARRANTIES OF THE SELLER

 

         Knowing that the Buyer relies thereon, the Seller represents and

warrants to the Buyer, and covenants with the Buyer, as follows:

 

         4.1. Organization; Power and Authority. Each of the Seller and XILA is

a limited liability company duly organized and validly existing under the Laws

of the State of Indiana. Each of the Seller and XILA possesses the full power

and authority to own its Assets and conduct its business as and where presently

conducted, and the Seller possesses the full power and authority to enter into

and perform this Agreement.

 

         4.2. Effect of Agreement. The execution, delivery and performance of

this Agreement by the Seller and the consummation of the transactions

contemplated hereby (a) have been, or shall have been by the Closing Date, duly

authorized by all necessary action by the Seller's manager(s) and members, if

any; (b) do not constitute a violation of, a default under, or termination of

the articles of organization or operating agreement of Seller or XILA; (c) do

not constitute a default or breach of (immediately or after the giving of

notice, passage of time or both), or termination of any Contract to which the

Seller or XILA is a party or by which the Seller or XILA is bound; (d) do not

constitute a violation of any Law applicable to the Seller or XILA or their

respective businesses as currently conducted (each a "Business," together the

"Businesses") or Assets; (e) except as described in Schedule 4.2, do not require

the Consent of any Person; (f) do not accelerate or otherwise modify any

Obligation of Seller or XILA; and (g) do not result in the creation of any

Encumbrance upon, or give to any other Person any interest in, any of Seller's

or XILA's Businesses or assets. There exists no rights of first refusal or other

preemptive rights with respect to Seller's or XILA's Businesses or Assets. This

Agreement constitutes the valid and legally binding agreement of the Seller,

enforceable against the Seller in accordance with its terms, except as the same

may be limited by bankruptcy, insolvency, moratorium or other similar laws

affecting the enforcement of creditors' rights generally, or by reason of

general equity principles.

 

 

 

 

 

 

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         4.3. Compliance with Law. (a) The operation of Seller's and XILA's

Businesses, the conduct of Seller's and XILA's Businesses as and where such

Businesses have been or presently are conducted, and the ownership, possession

and use of the Assets of Seller and XILA comply with all Laws applicable to

Seller or XILA, as the case may be; and (b) Seller and XILA each has obtained

and holds all Permits required for the lawful operation of its respective

Business as and where such Business is presently conducted.

 

         4.4. Assets. Schedule 4.4 includes a list of all Assets of Seller and

XILA with a value in excess of One Thousand Dollars ($1,000), other than the

Excluded Assets, and identifies all Encumbrances on such Assets.

 

         4.5   Financial Statements. Seller's and XILA's fiscal years end on

December 31. Schedule 4.5 includes accurate and complete copies of the unaudited

financial statements ("Financial Statements") of Seller and XILA for the eleven

(11) month period ending November 30, 2003. All of the Financial Statements were

prepared by Seller and XILA, respectively, in the ordinary course of its

business, applying standards, estimates of certain expenses and accounting

procedures regularly used by Seller in its interim accounting, and subject to

year-end adjustments which, in the past experience of Seller and XILA, have

sometimes been material, such Financial Statements fairly present the financial

condition of Seller and XILA at the date thereof and the results of their

respective operations for the period covered thereby. The Financial Statements

of XILA have been prepared on a consistent basis since the acquisition of XILA

by Seller.

 

         4.6. Real Property. Neither Seller nor XILA owns any Real Property.

Schedule 4.6 is a list of all Real Property leased by Seller or XILA, showing

location, rental cost and landlord.

 

         4.7. XILA Interests. The XILA Interests constitute all of the

membership interests in XILA, and XILA has no other authorized or outstanding

equity interests. Except as set forth in Schedule 4.7 attached hereto, the XILA

Interests are free of Encumbrances, and neither the Seller nor XILA is party to

any Contract or subject to any Judgment granting any other Person any rights

with respect to the XILA Interests or the right to acquire any additional

membership or other equity interests in XILA.

 

         4.8. Contracts. Schedule 4.8 is an accurate and complete list of all

Contracts to which Seller or XILA is a party or by which Seller or XILA is bound

except:

 

              (a) Contracts which can be terminated by Seller or XILA, as the

         case may be, within thirty (30) days of a notice of termination without

         any liability to Seller or XILA, as the case may be, resulting from

         such termination;

 

              (b) any Contract which is an accepted purchase or sale order

         entered into and accepted in the ordinary course of business, or

 

 

 

 

 

 

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               (c) any obligation, agreement or commitment which involves the

         payment of less than $10,000 in any year (collectively, the "Specified

         Contracts").

 

         4.9.   Employees. Schedule 4.9 includes a list of all of Seller's and

XILA's employees and (a) their titles or responsibilities; (b) their principal

residence address; (c) their dates of hire; and (d) their current salaries or

wages.

 

         4.10. Customers. Schedule 4.10 is a complete list of all customers of

Seller and XILA that individually accounted for revenue to Seller or XILA of at

least $25,000 during the 12-month period prior to the date of this Agreement.

 

         4.11. Taxes. Except as described in Schedule 4.11, Seller and XILA each

has timely filed all tax returns and reports required to be filed by it, all of

which were prepared in all material respects, in accordance with all applicable

laws, rules and regulations, and Seller and XILA each has timely paid all taxes

or withholdings required to be paid by it with respect to such returns and

reports. Seller and XILA each has properly withheld from payments to its

employees, contractors, salesmen, agents, representatives, vendors and other

Persons all amounts required by Law to be withheld, and Seller and XILA each has

timely filed all informational returns and reports required to be filed by it

with respect to such withholdings. Except as described in Schedule 4.11, no

audit or other Proceeding is pending or, to the Knowledge of Seller, is

threatened against Seller or XILA, and no notice of deficiency or adjustment has

been received by Seller or XILA, by or from any governmental taxing authority,

with respect to sales, use, excise, real property, payroll, withholding or

similar taxes, and there are no agreements or waivers in effect which provide

for an extension of time for the assessment of any such tax against Seller or

XILA.

 

         4.12 Proceedings and Judgments. Except as described on Schedule 4.12

(a) no Proceeding involving or related to Seller or XILA or their respective

Businesses or Assets is currently pending or, to Seller's Knowledge, threatened

in writing and received by Seller or XILA; (b) no Judgment involving or related

to Seller or XILA or their respective Businesses or Assets is currently

outstanding; and (c) no breach of contract, breach of warranty, tort,

negligence, infringement, product liability, discrimination, wrongful discharge

or other claim of any nature involving or related to Seller or XILA or their

respective Businesses or Assets has been asserted and not finally resolved

without future liability to Seller or XILA, as the case may be, or, to Seller's

Knowledge, threatened in writing and received by Seller or XILA, at any time

during the two (2) year period prior to the date of this Agreement, and, to

Seller's Knowledge, there is no basis for any such claim. As to each matter

described on Schedule 4.12, accurate and complete copies of all pertinent

pleadings, judgments, orders, correspondence and other legal documents have been

delivered to Buyer.

 

         4.13. Full Disclosure. No representation or warranty made by the Seller

in this Agreement or pursuant hereto (a) contains any untrue statement of any

fact; or (b) omits to state any material fact that is necessary to make the

statements made, in the context in which made, not materially false or

misleading. The copies of documents attached as Schedules to this Agreement or

otherwise delivered to Buyer in connection with the transactions contemplated by

this Agreement, are accurate and complete, and to Seller's Knowledge, are not

 

 

 

 

 

 

 

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missing any amendments, modifications, correspondence or other related papers

which were received by Seller or XILA and which would be pertinent to Buyer's

understanding thereof in any respect. To Seller's Knowledge, there is no fact

that has not been disclosed to Buyer in the Schedules to this Agreement or

otherwise in writing, that was or is, or so far as the Seller can reasonably

foresee will have, a material adverse effect on the ability of the Seller to

perform its Obligations under this Agreement.

 

5.        REPRESENTATIONS OF BUYER

 

         Knowing that the Seller relies thereon, the Buyer represents and

warrants to the Seller, and covenants with the Seller, as follows:

 

         5.1. Organization. The Buyer is a corporation that is duly organized,

validly existing and in good standing under the Laws of its jurisdiction of

incorporation. The Buyer has the full corporate power and authority to own its

Assets, conduct its business as and where such business is presently conducted,

and enter into this Agreement.

 

         5.2. Agreement. For the Buyer, its execution, delivery and performance

of this Agreement, and its consummation of the transactions contemplated by this

Agreement (a) have been, or shall have been by the Closing Date, duly authorized

by all necessary corporate actions by its Board of Directors; (b) do not

constitute a violation of or default under its certificate of incorporation or

bylaws; (c) do not constitute a default or breach (immediately or after the

giving of notice, passage of time or both) under any Contract to which it is a

party or by which it is bound; (d) do not constitute a violation of any Law or

Judgment that is applicable to it or to the business or Assets of the Buyer, or

to the transactions contemplated by this Agreement; and (e) do not require the

Consent of any Person. This Agreement constitutes the valid and legally binding

agreement of the Buyer, enforceable against it in accordance with its terms.

 

6.        CERTAIN OBLIGATIONS OF THE SELLER

 

         6.1. Investigation. During the period from the date of this Agreement

to the Closing Date: (a) the Seller shall permit the Buyer and its authorized

representatives to have full access to Seller's and XILA's facilities during

normal business hours, to observe Seller's and XILA's Business operations, to

meet with Seller's and XILA's officers and employees, and to audit, examine and

copy all of the Seller's and XILA's files, books and records, and other

documents and papers, and (b) the Seller shall provide to the Buyer and its

authorized representatives all information concerning the Seller and XILA and

their respective Businesses and Assets, that is reasonably requested by the

Buyer.

 

         6.2. Conduct of Seller's and XILA's Businesses. Between the date of

this Agreement and the Closing Date, except with the prior written consent of

Buyer, Seller shall, and shall cause XILA to (a) conduct their respective

Businesses consistent with past practices, (b) not make any change in their

business practices, and (c) use their respective best efforts to preserve their

Businesses intact, keeping available the services of its current officers,

employees, salesmen, agents and representatives, and maintaining the goodwill of

their customers, suppliers and other Persons having business relations with

them.

 

 

 

 

 

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         6.3. Consents. Between the date of this Agreement and the Closing Date,

the Seller shall in good faith use its best efforts to obtain all Consents, and

to give the notices and make the filings, described on Schedule 4.2.

 

         6.4. Advice of Changes. Between the date of this Agreement and the

Closing Date, the Seller shall promptly advise the Buyer, in writing, of any

fact of which it obtains Knowledge and which, if existing or known as of the

date of this Agreement, would have been required to be set forth or disclosed in

or pursuant to this Agreement.

 

         6.5. Best Efforts. The Seller shall use its best efforts to consummate

the transactions contemplated by this Agreement as of the earliest practicable

date. The Seller shall not take, or cause to be taken, or to the best of its

ability permit to be taken, any action that would impair the prospect of

completing the transactions contemplated by this Agreement.

 

         6.6. Access to Employees. During the period from the date of this

Agreement to the Closing Date, the Seller shall permit the Buyer and its

authorized representatives to have reasonable access during normal business

hours to Seller's employees.

 

7.        CERTAIN OBLIGATIONS OF BUYER PENDING CLOSING

 

         7.1. Consents. Between the date of this Agreement and the Closing Date,

the Buyer shall in good faith cooperate with the Seller in its efforts to obtain

the Consents and to give the notices and make the filings, described in Schedule

4.2; provided that no Person other than the Buyer shall be required to guarantee

to any Person any Obligations of Buyer under any Contract assigned by Seller to

Buyer.

 

         7.2. Advice of Changes. Between the date of this Agreement and the

Closing Date, the Buyer shall promptly advise Seller, in writing, of any fact of

which it obtains Knowledge and which, if existing or known as of the date of

this Agreement, would have been required to be set forth or disclosed in or

pursuant to this Agreement.

 

         7.3. Best Efforts. The Buyer shall use its best efforts to consummate

the transactions contemplated by this Agreement as of the earliest practicable

date. The Buyer shall not take, or cause to be taken, or to the best of its

ability permit to be taken, any action that would impair the prospect of

completing the transactions contemplated by this Agreement.

 

8.        CONDITIONS PRECEDENT TO THE SELLER'S CLOSING OBLIGATIONS

 

         Each obligation of the Seller to be performed on the Closing Date shall

be subject to the satisfaction of each of the conditions stated in this Section

8, except to the extent that such satisfaction is waived by the Seller in

writing.

 

 

 

 

 

 

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         8.1. Representations of the Buyer. All representations, warranties and

certifications made by the Buyer in this Agreement or pursuant hereto shall be

true on and as of the Closing Date, with the same force and effect as though

made on and as of the Closing Date.

 

         8.2. Performance by the Buyer. All of the covenants, terms and

conditions of this Agreement to be satisfied or performed by the Buyer on or

before the Closing Date shall have been satisfied or performed.

 

         8.3. Absence of Proceedings. No Proceeding shall have been instituted

or threatened, no Judgment shall have been issued, and no new Law shall have

been enacted, on or before the Closing Date, that seeks to or does prohibit or

restrain, or that seeks damages as a result of, the consummation of the

transactions contemplated by this Agreement.

 

         8.4 Asset Valuation. Seller and Buyer have mutually agreed upon the

Non-XILA Fair Market Value and executed the certificate of such value provided

for in Section 2.1(a) of this Agreement.

 

9.        CONDITIONS PRECEDENT TO BUYER'S CLOSING OBLIGATIONS

 

         Each obligation of the Buyer to be performed on the Closing Date shall

be subject to the satisfaction of each of the conditions stated in this Section

9, except to the extent that such satisfaction is waived by the Buyer in

writing.

 

         9.1. Representations of the Seller. All representations, warranties and

certifications made by the Seller in this Agreement or pursuant hereto shall be

true on and as of the Closing Date, with the same force and effect as though

made on and as of the Closing Date, and the Schedules to this Agreement shall be

complete, accurate and current on and as of the Closing Date.

 

         9.2. Performance by the Seller. All of the covenants, terms and

conditions of this Agreement to be satisfied or performed by the Seller on or

before the Closing Date shall have been satisfied or performed.

 

         9.3. Absence of Proceedings. No Proceeding shall have been instituted

or threatened, no Judgment shall have been issued, and no new Law shall have

been enacted, on or before the Closing Date, that seeks to or does prohibit or

restrain, or that seeks damages as a result of, the consummation of the

transactions contemplated by this Agreement.

 

         9.4. Adverse Changes. Between the date of this Agreement and the

Closing Date, there shall not have been (a) any material adverse change or

material casualty loss affecting the Seller or XILA or their respective

Businesses or Assets or the financial condition or prospects of the Seller or

XILA or their respective Businesses or Assets, (b) any material adverse change

in the financial performance of the Seller or XILA, or (c) any event which

reasonably could give rise to a material adverse change or material casualty

loss.

 

 

 

 

 

 

 

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         9.5. Consents. All Consents set forth on Schedule 4.2 shall have been

obtained.

 

         9.6. Due Diligence. Between the date of this Agreement and the Closing

Date, Buyer shall have completed its due diligence review of the Seller and XILA

and the results of such review shall have been satisfactory to Buyer in all

respects.

 

         9.7 Board of Directors Approval. Buyer's board of directors, in its

discretion, shall have duly authorized the execution, delivery and performance

of this Agreement, and Buyer's consummation of the transactions contemplated by

this Agreement.

 

         9.8 Asset Valuation. Seller and Buyer have mutually agreed upon the

Non-XILA Fair Market Value and executed the certificate of such value provided

for in Section 2.1(a) of this Agreement.

 

10.       CLOSING

 

         10.1. Closing. Unless this Agreement is terminated as provided in

Section 14, the closing of the transactions contemplated by this Agreement (the

"Closing") shall be held at Buyer's offices in Indianapolis, Indiana on a

mutually agreeable date and time, but in no event later than December 31, 2003

(the "Closing Date"), unless the parties otherwise agree in writing.

 

         10.2. Obligations of Seller at Closing. At the Closing, the Seller

shall deliver to the Buyer the following:

 

               (a) Assets of Seller. Possession and control of Seller's

Business, all of the Assets of Seller and all of Seller's leased Real Property

and Tangible Property used in the Seller's Business, including, but not limited

to, all applicable keys, access cards and other entry devices.

 

               (b) Documents of Transfer. Such bills of sale, assignments,

deeds, releases, endorsements, affidavits, and other instruments and documents

of sale, transfer, assignment and conveyance as Buyer may reasonably require, in

order to lawfully and effectively sell, transfer, assign and convey to Buyer all

right, title and interest in and to all of the Asset