ASSET PURCHASE AGREEMENT

 

Exhibit 2.1

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                            ASSET PURCHASE AGREEMENT

 

 

                                  by and among

 

 

                                 CLARINET, INC.,

 

 

                    AMERICAN TELECONFERENCING SERVICES, LTD.,

 

 

                                        and

 

 

                          CLEARONE COMMUNICATIONS, INC.

 

 

 

 

 

                                  July 1, 2004

 

 

 

 

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                            ASSET PURCHASE AGREEMENT

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

 

 

        THIS ASSET PURCHASE AGREEMENT ("Agreement") is made as of the 1st day of

July, 2004 (the "Effective Date"), by and among CLARINET, INC., a Georgia

corporation ("Purchaser"), AMERICAN TELECONFERENCING SERVICES, LTD., a Missouri

corporation d/b/a Premiere Conferencing ("Purchaser's Parent") and CLEARONE

COMMUNICATIONS, INC., a Utah corporation ("Seller"). Capitalized terms not

otherwise defined shall have the meaning ascribed to such terms in Article IX.

 

        WHEREAS, Seller provides, primarily through its Let's Conference suite

of services, conferencing services consisting of: operator assisted and

reservationless audio conferencing services; video conferencing services;

webconferencing services; webcasting services; audio, video and data streaming

services; and certain other services ancillary to the foregoing services,

directly to end users, resellers and agents under various brand names including

INSTANT ACCESS, WEBCAST, WEBSHOW, WEBCOLLABORATE, WEBPRO and VIDEOPRO all as

described more particularly on page 29 of Seller's product catalog version

Rev.2.0 (collectively, the "Conferencing Business").

 

        WHEREAS, Purchaser wishes to purchase from Seller and Seller is willing

to sell to Purchaser, substantially all of the assets of Seller, used in the

Conferencing Business, all on and subject to the terms and conditions set forth

in this Agreement (the "Acquisition").

 

        NOW, THEREFORE, in consideration of the premises and mutual

representations, warranties, covenants and agreements hereinafter set forth, the

parties hereto agree as follows:

 

                                    ARTICLE I

 

                                PURCHASE AND SALE

 

        1.1 Acquired Assets. Subject to the terms and conditions set forth in

this Agreement, at the Closing, Seller shall sell, convey, assign, transfer and

deliver to Purchaser and Purchaser shall accept, purchase, acquire and take

assignment and delivery of, all right, title and interest in, to and under the

assets owned by Seller and used or held for use in the Conferencing Business

(wherever located and whether real or personal, tangible or intangible)

(collectively, the "Acquired Assets") free and clear of all Encumbrances (except

for Permitted Encumbrances), except for the Excluded Assets. The Acquired Assets

include the following:

 

                (a) all right, title and interest under Contracts, including all

Customer Service Contracts and all Contracts with partners and resellers related

to the Conferencing Business;

 

                (b) all accounts receivable, prepaid expenses, trade

receivables, notes receivable, contingent rights, deposits, advances and other

receivables of Seller relating to the Conferencing Business arising on or before

the Effective Date;

 

                (c) all telecommunications access numbers, including "800"

numbers, used or held for use in connection with the Conferencing Business;

 

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                (d) all computer equipment, conferencing and conferencing

related equipment, devices, messaging and messaging related equipment (and all

lease rights associated with any such equipment), including data processing

hardware and related telecommunications equipment, media and tools, and any

equipment subject to an operating lease, in each case that is used or held for

use in connection with the Conferencing Business, including the assets

identified on Schedule 1.1(d);

 

                (e) all co-location and related rights used or held for use in

connection with the Conferencing Business, if any;

 

                (f) all Intellectual Property owned by or licensed to Seller and

used or held for use in connection with the Conferencing Business;

 

                (g) all technical and descriptive materials relating to the

acquisition, design, development, use or maintenance of computer code and

program documentation and materials used or held for use in the Conferencing

Business (the "Documentation");

 

                (h) all Contracts respecting the ownership, license,

acquisition, design, development, distribution, marketing, use or maintenance of

computer program code, related technical or user documentation and databases, in

each case used or held for use in the Conferencing Business;

 

                (i) all data and information, in any medium, including

proprietary and confidential information and trade secrets, such as client,

customer, supplier and vendor lists, catalogs, research material, technical

information, source code and object code used or held for use in connection with

any Acquired Assets, and know-how;

 

                (j) all books, records, files, papers, processes, procedures or

software including all software related to full-service audio conference calling

services, on-demand reservationless audio conference calling services, web data,

video and audio conferencing services and audio and video streaming services,

and all delivery platforms, gateways, "on ramp" connections, access points, and

client satisfaction software, whether in hard copy or computer format, used or

held for use in the Conferencing Business (the assets described in paragraphs

(e) thru (j) of this Section 1.1 are collectively referred to as the "Technology

Assets");

 

                (k) all operational data, creative materials, marketing

information, advertising materials, sales and promotional literature, studies,

reports, sales records, sales agent records, manuals and data, sales and

purchase correspondence, personnel and employment records, billing systems,

engineering information, customer files (including customer credit and

collection information), historical and financial records, quality control data

and any files used or held for use in the Conferencing Business although Seller

may maintain copies of the foregoing which shall remain subject to the

confidentiality obligations contained herein;

 

                (l) all office furniture, fixtures and other equipment primarily

used or held for use in the operation of the Conferencing Business, including

the furniture, fixtures and other equipment set forth on Schedule 1.1(l);

 

                 (m) all warranties, indemnities or other rights and causes of

 

 

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action relating to the Acquired Assets;

 

                (n) all goodwill related to, arising from or used in connection

with the Conferencing Business, including goodwill relating to the Intellectual

Property;

 

                (o) to the extent transferable, all permits, licenses, consents,

approvals, certificates, variances or other authorizations required in

connection with the operation of the Conferencing Business under any Law or

Contract (the "Permits");

 

                (p) any other personal property of Seller as of the Effective

Date that is not an Excluded Asset and that is used or held for use in the

Conferencing Business;

 

                (q) all corporate names and tradenames and marks and URL domain

rights used or held for use in connection with the Conferencing Business, but

excluding the name and mark "ClearOne" and all combinations or derivations

thereof; and

 

                 (r) any other asset or Contract listed on Schedule 1.1(r).

 

        1.2 Excluded Assets. The following assets of Seller (collectively, the

"Excluded Assets") shall be retained by Seller, and are not being sold or

assigned to Purchaser hereunder:

 

                (a) all corporate names and tradenames, trademarks or service

marks that are used in connection with any of Seller's businesses other than the

Conferencing Business;

 

                (b) notwithstanding anything to the contrary in Section 1.1,

assets of Seller that are used in the Conferencing Business and are specifically

identified in Schedule 1.2(b);

 

                (c) all taxpayer and other identification numbers and minute

books, stock transfer books, tax returns, corporate seals and all other

documents relating to the organization, maintenance, and existence of Seller as

a corporation;

 

                (d) Seller's rights under this Agreement and the agreements to

be executed by Seller in connection herewith;

 

                (e) all cash and cash equivalents of Seller except as reflected

on the Closing Date Balance Statement;

 

                (f) the name and mark "ClearOne" and all combinations or

derivations thereof; and

 

                (g) such other assets of Seller that are only of incidental use

in the Conferencing Business and whose exclusion from the Acquired Assets does

not have a materially negative impact on the ongoing conduct of the Conferencing

Business.

 

        1.3 Assumed Liabilities. As part of the consideration for the Acquired

Assets, subject to Section 1.4, at the Closing, Purchaser shall assume the

following liabilities and obligations of Seller to the extent arising from or

related to the Conferencing Business or the Acquired Assets (the "Assumed

Liabilities"):

 

 

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                (a) all obligations or liabilities of Seller to be performed on

or after the Effective Date under those Contracts or Permits that are Acquired

Assets, in each case solely to the extent legally assigned to Purchaser (other

than with respect to the Restricted Contracts), provided such obligations under

such Contracts or Permits (including the Restricted Contracts), to the extent

required by GAAP, are reflected on the Closing Date Balance Statement and taken

into account in the determination of the Final Net Working Capital.

Notwithstanding the foregoing, obligations or liabilities arising from or

related to any default, breach or violation of any such Contract or Permit

(including Restricted Contracts) on or prior to the Effective Date, will not

constitute a portion of the Assumed Liabilities. The parties acknowledge that

performance obligations not involving payment obligations under Customer Service

Contracts (including the Restricted Contracts) accruing on or after the

Effective Date will not be taken into account in determining Final Net Working

Capital because such obligations are not required to be recognized under GAAP.

The obligation to perform services pursuant to such Customer Service Contracts

that are part of the Acquired Assets shall be included in the Assumed

Liabilities;

 

                (b) accounts payable and accrued expenses, including accrued

salaries, wages, payroll and insurance withholding and accrued vacation

obligations of or with respect to Hired Employees, that are current liabilities

of Seller arising in the ordinary course of the Conferencing Business,

consistent with past practices, in the amounts set forth on Schedule 1.3(b) but

solely to the extent reflected on the Closing Date Balance Statement and taken

into account in the determination of the Final Net Working Capital;

 

                (c) accrued excise and state taxes in the amounts set forth on

Schedule 1.3(c) but solely to the extent reflected on the Closing Date Balance

Statement and taken into account in the determination of the Final Net Working

Capital;

 

                (d) the liabilities listed on Schedule 1.3(d), but solely to the

extent reflected on the Closing Date Balance Statement and taken into account in

the determination of the Final Net Working Capital; and

 

                (e) the liabilities, if any, for WARN Act obligations assumed

pursuant to Section 5.1(g).

 

        1.4   No Other Liabilities Assumed.

 

                (a) Notwithstanding anything in this Agreement to the contrary,

neither Purchaser nor any of its Affiliates shall assume and in no event shall

be deemed to have assumed, any Liability of Seller or any of its Affiliates

whatsoever (collectively, the "Retained Liabilities"), other than as

specifically set forth in Section 1.3. The liabilities retained by Seller are

herein referred to as the Retained Liabilities. Without limiting the generality

of the foregoing, Purchaser is assuming no obligation for, and shall have no

responsibility with respect to, Taxes (other than sales, real estate (to the

extent assumed under the Sublease) and personal property taxes not yet payable

that shall be pro-rated between Purchaser and Seller as of the Effective Date

and those Taxes referenced in Section 1.3(c)), liabilities under Environmental

Laws or Benefit Plans. Except as expressly provided in Section 1.3 or Section

5.1(g), Purchaser shall not assume any Liabilities with respect to any of

Seller's employees, including any Liabilities for employment compensation,

 

 

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benefits or severance under any Benefit Plan.

 

                (b) Notwithstanding any other provision of this Agreement, the

obligations of Seller and Purchaser pursuant to this section shall survive the

Effective Date and the transactions contemplated by this Agreement. To the

extent Purchaser pays or satisfies any Retained Liabilities, Seller shall

reimburse Purchaser promptly upon request, except as otherwise specifically

provided herein.

 

        1.5   Procedures for Assets Not Transferable.

 

                (a) Except as otherwise provided in Section 1.5(b), if there are

any Consents that have not yet been obtained (or otherwise are not in full force

and effect) as of the Closing, with respect to any Permits which comprise a

portion of the Acquired Assets or any other property or right included in the

Assumed Liabilities or the Acquired Assets as to which such Consents were not

obtained (or otherwise are not in full force and effect) (collectively, the

"Restricted Assets"), then notwithstanding Section 1.1, Section 1.3 and Section

3.5, neither this Agreement nor the Assignment and Assumption Agreement nor any

other document related to the consummation of the Acquisition shall constitute a

sale, conveyance, assignment, transfer or delivery or an attempted sale,

conveyance, assignment, transfer or delivery of the Restricted Assets, and

following the Closing, the parties shall use commercially reasonable efforts,

and cooperate with each other, to obtain the Consent relating to each Restricted

Assets as quickly as practicable. Pending the obtaining of such Consents

relating to any Restricted Asset, the parties shall cooperate with each other in

any reasonable and lawful arrangements designed to provide to Purchaser the

benefits of use of the Restricted Asset for its term (or any right or benefit

arising thereunder, including the enforcement for the benefit of Purchaser of

any and all rights of Seller against a third party thereunder). Once a Consent

for the sale, conveyance, assignment, transfer and delivery of a Restricted

Asset is obtained, Seller shall (for no additional consideration hereunder)

promptly convey, assign, transfer and deliver such Restricted Asset to

Purchaser, and Purchaser shall assume the obligations under such Restricted

Asset assigned to Purchaser from and after the date of assignment to Purchaser.

 

                (b) If there are any Consents necessary for the assignment and

transfer of any Contracts (other than the Material Customer Contracts) (the

"Nonmaterial Consents") that have not yet been obtained (or otherwise are not in

full force and effect) as of the Closing (the "Restricted Contracts"), Purchaser

shall accept the assignment of such Restricted Contracts, in which case, as

between Seller and Purchaser, such Restricted Contracts shall, to the maximum

extent practicable and notwithstanding the failure to obtain the applicable

Nonmaterial Consent, be transferred at the Closing pursuant to the Assignment

and Assumption Agreement. Following the Closing, the parties shall use

commercially reasonable efforts, and cooperate with each other, to obtain

Consents relating to the Restricted Contracts as quickly as practicable.

 

        1.6   Waiver of Bulk Sales Laws. Purchaser and Seller hereby waive

compliance with the Bulk Sales Laws, and Seller agrees to indemnify and hold

harmless Purchaser and its Affiliates from and against any claims arising out of

or due to the failure to comply with such Bulk Sales Laws.

 

 

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                                   ARTICLE II

 

                                 PURCHASE PRICE

 

        2.1 Purchase Price. The aggregate purchase price for the Acquired Assets

shall be $21,500,000, plus the assumption of the Assumed Liabilities (the

"Purchase Price"), subject to adjustment as provided in Section 2.4.

 

        2.2 Payment of the Purchase Price. The Purchase Price shall be paid by

Purchaser to Seller at the Closing by: (a) assumption of the Assumed

Liabilities; (b) delivery of the Escrow Amount in readily available funds to the

Escrow Agent as provided in Section 2.3; and (c) delivery to Seller of the

Closing Date Adjusted Purchase Price, less the Escrow Amount.

 

        2.3 Escrow. At Closing, Purchaser shall deposit an amount equal to

$1,300,000 (the "Escrow Amount") with an escrow agent jointly selected by

Purchaser and Seller (the "Escrow Agent"), which amount shall be withheld from

the Purchase Price. The parties acknowledge and agree that $300,000 of the

Escrow Amount shall be used for the purpose of securing the post-Closing

purchase price adjustment set forth in Section 2.4 (the "Working Capital Escrow

Amount") and $1,000,000 of the Escrow Amount shall be used for the purpose of

securing the Seller's indemnification obligations pursuant to Section 7.2 (the

"Indemnity Escrow Amount"). The Escrow Amount shall be administered in

accordance with the provisions of an Escrow Agreement in the form attached

hereto as Exhibit A (the "Escrow Agreement"). The Escrow Amount shall be held as

a trust fund and shall not be subject to any lien, attachment, trustee process

or any other judicial process of any creditor of any party and shall be held and

disbursed solely for the purposes and in accordance with the respective terms

thereof.

 

        2.4 Net Working Capital Purchase Price Adjustments. The Purchase Price

shall be subject to adjustment as follows:

 

                (a) At the Closing, Seller shall deliver to Purchaser a

statement of selected balance sheet items (the "Closing Date Balance Statement")

with respect to the Conferencing Business as of the Effective Date, which items

shall be prepared in accordance with GAAP. The Closing Date Balance Statement

shall be accompanied by: (i) all relevant backup materials and schedules along

with a certificate from Seller's Chairman of the Board and Controller or

Principal Accounting Officer certifying as to the reasonableness of the

estimates, all in detail reasonably acceptable to Purchaser; and (ii) a

statement setting forth the calculation of the Closing Date Net Working Capital.

If the Closing Date Net Working Capital is less than the Net Working Capital

Target Amount, the amount of such deficiency shall be deducted from the Purchase

Price at the Closing. The Purchase Price, as adjusted pursuant to this section

shall be deemed to be the "Closing Date Adjusted Purchase Price."

 

                (b) Within ninety (90) days of the Effective Date, Purchaser

will review the Closing Date Balance Statement and the calculation of the

Closing Date Net Working Capital and if Purchaser disputes the calculation of

Closing Date Net Working Capital, Purchaser shall notify Seller in writing (the

"Dispute Notice") of the amount, nature and basis of such dispute. Seller shall

have twenty (20) Business Days from the receipt of the Dispute Notice to dispute

Purchaser's adjustment to the Closing Date Net Working Capital. If Seller fails

to dispute such adjustment, then the adjustment shall be final and conclusive.

 

 

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In the event of a dispute, Purchaser and Seller shall first use their diligent

good faith efforts to resolve such dispute between themselves. If the parties

are unable to resolve the dispute within thirty (30) Business Days after

delivery of the Dispute Notice, then any remaining items in dispute shall be

submitted to an independent nationally recognized accounting firm selected in

writing by Purchaser and Seller or, if Purchaser and Seller fail or refuse to

select a firm within ten (10) calendar days after written request therefor by

Purchaser or Seller, such an independent nationally recognized accounting firm

shall be selected in accordance with the rules of the American Arbitration

Association (the "Chosen Firm"). All determinations pursuant to this section

shall be in writing and shall be delivered to the parties. The determination of

the Chosen Firm as to the resolution of any dispute shall be binding and

conclusive upon all parties. A judgment on the determination made by the Chosen

Firm pursuant to this section may be entered in and enforced by any court having

jurisdiction thereover. The fees and expenses of the Chosen Firm in connection

with the resolution of disputes pursuant to this section shall be shared equally

by Purchaser and Seller; provided, however, that if the Chosen Firm determines

that one party has adopted a position or positions with respect to the

calculation of Closing Date Net Working Capital that is frivolous or clearly

without merit, the Chosen Firm may, in its discretion, assign a greater portion

of any such fees and expenses to such party. The final amount of the Closing

Date Net Working Capital as determined pursuant to this section shall be the

"Final Net Working Capital."

 

                (c) Payments on Account of Adjustments. If the Final Net Working

Capital is less than the Closing Date Net Working Capital, then the Escrow Agent

shall pay the difference to Purchaser from the Working Capital Escrow Amount in

accordance with the terms of the Escrow Agreement. If the amount of the

difference between the Final Working Capital and the Closing Date Net Working

Capital exceeds the Working Capital Escrow Amount, then Seller shall immediately

pay such additional amount in cash to Purchaser.

 

        2.5 Method of Payment. The payments being made from one party to another

under this Agreement are being made by wire transfer of immediately available

federal funds in United States dollars to an account previously designated in

writing by the party to receive such payment.

 

        2.6 Allocation of Purchase Price. Within thirty (30) days from the

Effective Date, the parties shall allocate the Purchase Price among the Acquired

Assets and such allocation shall be attached to this Agreement as Schedule 2.6.

Such allocation is intended to comply with the requirements of Section 1060 of

the Internal Revenue Code of 1986, as amended. Seller and Purchaser shall file

Form 8594 with their respective Tax Returns consistent with such allocation. The

parties shall treat and report the transaction contemplated by this Agreement in

all respects consistently for purposes of any Federal, state or local tax,

including the calculation of gain, loss and basis with reference to the Purchase

Price allocation made pursuant to this Section 2.6. The parties shall not take

any action or position inconsistent with the obligations set forth in this

Agreement. Seller agrees to indemnify and hold Purchaser and its Affiliates

harmless and Purchaser hereby agrees to indemnify and hold Seller harmless, from

and against any and all losses, liabilities and expenses (including additional

income taxes and reasonable fees and disbursements of counsel) that may be

incurred by the indemnified party as a result of the failure of the indemnifying

party so to report the sale and purchase of the Acquired Assets as required by

applicable Laws.

 

 

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        2.7 Taxes. Seller shall pay all Taxes and fees imposed by Governmental

Authorities and required to be paid in connection with or arising from the sale,

transfer, or assignment of the Acquired Assets.

 

                                  ARTICLE III

 

                    REPRESENTATIONS AND WARRANTIES OF SELLER

 

        Seller represents and warrants to Purchaser that the statements

contained in this Article III are true and correct on the Effective Date except

as set forth in the disclosure schedule accompanying this Agreement (the

"Disclosure Schedule"). The Disclosure Schedule will be arranged in paragraphs

corresponding to the numbered paragraphs contained in this Article III.

 

        3.1 Due Incorporation. Seller is a corporation, duly organized and

validly existing and in good standing under the laws of the State of Utah with

all requisite corporate power and authority to own, lease and operate the

Acquired Assets. Seller is duly authorized to do business and in good standing

in each other jurisdiction in which either the nature of the activities

conducted by it or ownership of the Acquired Assets requires it to be so

qualified and where the failure to so qualify would have a Material Adverse

Effect, each of which jurisdiction is set forth on Schedule 3.1.

 

        3.2 Due Authorization. Seller has full corporate power and authority to

enter into this Agreement and to carry out the transactions contemplated hereby.

The execution, delivery and performance of this Agreement have been duly

authorized by all necessary action by the board of directors of Seller

("Seller's Board of Directors") and no other corporate proceedings or actions

(including any action or proceeding by the Seller's shareholders) are required

to carry out the transactions contemplated hereby. This Agreement has been duly

and validly executed and delivered by Seller and constitutes the legal, valid

and binding obligation of Seller, enforceable in accordance with its terms. The

execution, delivery and performance by Seller of this Agreement and all other

instruments, agreements, certificates and documents contemplated hereby: (a) do

not, and will not, violate or conflict with any provision of the articles of

incorporation, bylaws or other governing documents of Seller; (b) except for the

Restricted Contracts requiring the consent to assign of the counterparty(ies)

thereto for the assignment to be lawful, do not, and will not, violate or

constitute a default under any Law or any Contract to which Seller is a party,

or by which it or any of the Acquired Assets are bound; and (c) will not result

in the creation of any Encumbrance upon the Acquired Assets, or permit the

acceleration of the maturity of any indebtedness secured by the Acquired Assets.

No notice to, filing with, authorization of, exemption by, or Consent of any

Person is required in order for Seller to consummate the transactions

contemplated hereby, except as set forth on Schedule 3.2 or as shall have been

obtained on or prior to the Effective Date.

 

        3.3 Capitalization. The authorized capitalization of Seller consist of

50,000,000 shares of common stock, par value $0.001 per share, of which

11,195,619 shares are issued and outstanding.

 

        3.4 No Adverse Change. Except as set forth in Schedule 3.4, since April

30, 2004, the Conferencing Business has been operated only in the usual, regular

 

 

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and ordinary course and manner and there has not been any: (a) material loss or

damage or other material adverse change to any of the Acquired Assets (whether

or not covered by insurance); (b) sale, transfer or disposition of any of the

Acquired Assets; (c) Encumbrance placed on any of the Acquired Assets; (d)

change in the accounting systems, tax elections, policies or practices of Seller

related to the Conferencing Business; (e) Contract, with respect to the

Conferencing Business, entered into by Seller other than in the ordinary course

of business; (f) notice of any actual or threatened labor trouble, strike, walk

out, picketing, boycott or other similar occurrence; (g) cancellation, without

fair consideration, of any liability due with respect to the Conferencing

Business; (h) modification, cancellation or termination of any Material Contract

or Material Customer Contract; or (i) any other event that has had a Material

Adverse Effect on the Conferencing Business.

 

        3.5 Title to and Condition of Assets. Seller has good and valid title to

the Acquired Assets (including the assets reflected in the Financial Schedules).

Seller has delivered to Purchaser original title certificates for each

certificated asset, if any, included within the Acquired Assets. Seller hereby

conveys the Acquired Assets to Purchaser and hereby vests in Purchaser good and

valid title to the Acquired Assets (except for the Restricted Contracts

requiring the consent to assign of the counterparty(ies) thereto for the

assignment to be lawful), free and clear of any Encumbrance (including any

finance or equipment lease), except Permitted Encumbrances. Except for the

Excluded Assets, the Acquired Assets include all material assets used in the

Conferencing Business as it is presently conducted and has heretofore been

conducted. The furniture, fixtures and equipment, including all computer

equipment, conferencing and conferencing related equipment, devices, messaging

and messaging related equipment, that are Acquired Assets are in normal

operating condition, reasonable wear and tear excepted.

 

        3.6 Financial Schedules. A true and correct copy of the Financial

Schedules is set forth on Schedule 3.6(a). The Financial Schedules are true,

complete and correct in all material respects, and except as reflected on

Schedule 3.6(b), have been prepared in accordance with GAAP consistently applied

and properly reflect all of the assets and liabilities of the Conferencing

Business as then in existence and fairly present the financial condition of the

Conferencing Business and the results of operations of the Conferencing Business

as of the dates thereof and the periods then ended. The Financial Schedules have

been prepared in accordance with the books and records of Seller and do not

reflect any transactions that are not bona fide.

 

        3.7 Taxes. All Taxes of Seller, which if not properly determined would

create or impose a lien on any Acquired Asset, have been properly determined in

accordance with applicable rules and regulations and have been timely paid in

full if due and if not due will be timely paid when due. Seller has duly and

timely filed all Tax Returns of every nature required to be filed by it, in

every jurisdiction in which the same may have been so required and has paid all

Taxes disclosed on such returns. Each such Tax Return is true and complete and

Seller does not have and will not have any additional Liability with respect to

such Tax Returns which Liability will create or impose a lien on any Acquired

Asset. All Taxes that Seller is required by law to withhold or collect,

including sales and use taxes and amounts required to be withheld for Taxes of

employees, have been duly withheld or collected and, to the extent required,

have been paid over to the proper Governmental Authorities. No material Tax

Return of Seller is under audit or examination, and no written notice of such an

audit or examination has been received by Seller.

 

 

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        3.8 Agreements.

 

                 (a) Schedule 3.8(a)(i) sets forth an accurate and complete list

of all Contracts relating to the Conferencing Business, including all Customer

Service Contracts, debts, loans, security agreements, equipment and other

leases, and identifies the nature of each Contract. Schedule 3.8(a)(ii)

identifies each Material Customer. Seller has delivered to Purchaser true and

complete copies of each Contract listed on Schedule 3.8(a)(i) and Schedule

3.8(a)(ii) and has executed originals of such Contracts. Each such Contract is

in full force and effect and the legal and binding obligation of Seller,

enforceable in accordance with its terms against Seller and the other party

thereto. No event of default by Seller is in effect with respect to any such

Contract or lease, no event of default by the other party or parties to such

Contract or lease exists and no circumstance exists that, with notice or lapse

of time or both, would constitute an event of default by any party thereto.

 

                (b) Certain Material Customers and Nonmaterial Customers listed

on Schedule 3.8(a) have entered into standard terms and conditions agreements

with Seller (the "Standard Terms"), in substantially the form attached as

Exhibit B. Except with respect to pricing, the Standard Terms entered into by

each Material Customer and Nonmaterial Customer does not contain any additional

material terms or material deviations from Exhibit B.

 

                (c) Schedule 3.8(c) sets forth an accurate and complete list of

all employment, consultant or independent contractor agreements and employee,

consultant or independent contractor non-competition or confidentiality

agreements currently in effect relating to the Conferencing Business. Seller has

delivered to Purchaser a true and complete copy of all agreements listed on

Schedule 3.8(c).

 

        3.9 Permits. Seller holds the Permits described on Schedule 3.9 (each of

which is in full force and effect) and no other Permits are necessary for the

lawful operation of the Conferencing Business by Seller or its ownership of the

Acquired Assets. Seller has not received notice of termination, revocation or

modification of any Permit and is not delinquent in the payment of any Taxes or

fees with respect to Seller's Permits. Seller has delivered true, correct and

complete copies of each Permit to Purchaser.

 

        3.10 Litigation. There are no claims, actions, suits, disputes,

proceedings, inquiries or governmental investigations (each, a "Proceeding")

pending or threatened against or affecting the Conferencing Business or any of

the Acquired Assets or relating to the transactions contemplated by this

Agreement. Seller is not named in any order, judgment, decree, stipulation or

consent of or with any Governmental Authority that affects or may affect the

Conferencing Business, the Acquired Assets or the transactions contemplated by

this Agreement. Schedule 3.10 sets forth and describes all Proceedings relating

to the Conferencing Business in the three (3) years prior to the Effective Date.

 

        3.11 Customers. Except as set forth in Schedule 3.11, to Seller's

Knowledge: (i) since April 30, 2004, no Material Customer has discontinued or

materially limited its purchases from or dealings with Seller; and (ii) Seller

has not received written or oral notice from any such Material Customer

 

 

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indicating that such Material Customer intends to terminate or materially reduce

its purchases from or dealings with the Conferencing Business in the future.

Seller has no Contracts with any customer of the Conferencing Business that do

not constitute, or are not set forth in, Customer Service Contracts.

 

        3.12 Accounts Receivable; Deferred Revenue. All of the accounts

receivable pertaining to the Conferencing Business are owned by and in the name

of Seller, and Schedule 3.12 sets forth all accounts receivable of the

Conferencing Business outstanding as of the Effective Date, presented on an aged

basis, and separately identifies the name of each account debtor and the total

amount of each related accounts receivable. All of Seller's accounts receivable

represent bona fide amounts owed for products previously delivered or services

previously rendered and none of Seller's accounts receivable represent a billing

for products not yet delivered or services not yet performed. No portion of any

accounts receivable is subject to any counterclaim, defense or setoff or is

otherwise in dispute. Seller has not accepted any prepayment or other payment

for products to be delivered or services to be performed on or after the

Effective Date. Seller does not have any Deferred Revenue.

 

        3.13 Insurance.

 

                (a) Schedule 3.13(a) sets forth a list of all insurance policies

carried by Seller with respect to the Acquired Assets or the Conferencing

Business, and also sets forth an accurate list of all insurance loss runs and

worker's compensation claims received for the most recently ended three (3)

policy years with respect to the Conferencing Business. Summaries of all

insurance policies carried by Seller with respect to the Acquired Assets or the

Conferencing Business that are presently in effect have been provided to

Purchaser and all such insurance policies have been issued by insurers of

recognized responsibility and currently are, and will remain without

interruption through the Effective Date, in full force and effect.

 

                (b) Except as set forth in Schedule 3.13(b), no insurance

carried by Seller with respect to the Acquired Assets or the Conferencing

Business has been canceled by the insurer during the past five (5) years, and

Seller has never been denied insurance coverage with respect to the Acquired

Assets or the Conferencing Business in any material regard or to any material

degree.

 

        3.14 Intellectual Property.

 

                (a) Schedule 3.14 sets forth a complete and correct list of the

Intellectual Property used or held for use in the Conferencing Business and all

licenses or similar agreements or arrangements with respect to the Intellectual

Property used or held for use in the Conferencing Business to which Seller is a

party either as licensee or licensor. Seller owns and possesses all right, title

and interest in and to, or has a valid, enforceable and transferable license to

use, the Intellectual Property and the Intellectual Property constitutes all

intellectual property rights necessary or desirable for the operation of the

Conferencing Business. No claim by any third party contesting the validity,

enforceability, use or ownership of any of the Intellectual Property has been

made or is currently outstanding or, to Seller's Knowledge, is threatened.

Seller has not received any notices of and is not aware of any facts that

indicate a likelihood of any infringement or misappropriation by, or conflict

with, any Person with respect to the Intellectual Property, including any demand

 

 

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or request that Seller license rights from, or make royalty payments to, any

Person. To Seller's Knowledge, Seller has not infringed, misappropriated or

otherwise conflicted with any proprietary rights of any third parties and Seller

is not aware of any infringement, misappropriation or conflict that will occur

as a result of the continued operation of the Conferencing Business or the

Acquired Assets.

 

                (b) Procedures for Protection. Seller has taken all necessary

action to maintain, safeguard and protect all of the Intellectual Property and

the trade secrets related to the Conferencing Business, and Seller has taken all

steps required by applicable Law to protect and secure the trade secrets related

to the Conferencing Business.

 

                (c) Personnel Agreements. All personnel, including employees,

agents, consultants and contractors, who have contributed to or participated in

the conception and development of any Acquired Assets or Intellectual Property

on behalf of Seller either: (i) have been party to a "work-for-hire" arrangement

or agreement with Seller, in accordance with applicable Law, that has accorded

Seller full, effective, exclusive and original ownership of all tangible and

intangible property thereby arising; or (ii) have executed appropriate

instruments of assignment in favor of Seller as assignee that have conveyed to

Seller full, effective and exclusive ownership of all tangible and intangible

property thereby arising.

 

        3.15 Environmental Matters. With respect to the Conferencing Business or

the Premises: (a) Seller has not received any notice of any noncompliance with

any Environmental Law or any Liability or remedial or corrective obligation

thereunder or any investigation or proceeding relating thereto; (b) to Seller's

Knowledge, no asbestos-containing materials, polychlorinated biphenyls, other

Pollutants or underground storage tanks have been shipped from, used at,

disposed of on, or are otherwise located at or under the Premises; (c) to

Seller's Knowledge, no property adjacent to the Premises: (i) has been used for

the disposal, processing or treatment of waste or Pollutants or as a dump site;

or (ii) contains, or has contained, any underground storage tanks; and (d) no

facts, events or circumstances with respect to the past or present operations by

Seller or its Affiliates or predecessors on or at the Premises or, to Seller's

Knowledge, the condition or operation of the Premises prior to Seller's

occupancy thereof, would prevent continued compliance with, or give rise to any

material liability (contingent or otherwise) under any Environmental Law.

 

 

        3.16 Employment Matters.

 

                (a) Schedule 3.16(a) sets forth: (i) all present employees

(including any leased or temporary employees) and independent contractors of

Seller engaged in the Conferencing Business; (ii) each employee's or independent

contractor's current rate of compensation; and (iii) each such employee's

accrued vacation, if applicable. Schedule 3.16(a) also sets forth any employee

engaged in the Conferencing Business who is absent from work due to a

work-related injury, is receiving workers' compensation or is receiving

disability compensation. Except as set forth in Schedule 3.16(a), there are no

unpaid wages, bonuses or commissions owed to any employees or independent

contractors engaged in the Conferencing Business (other than those not yet due

and that have been accrued in the financial books and records of Seller and

 

 

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that, to the extent unpaid as of the Effective Date, will be reflected as

accrued expenses on the Closing Date Balance Statement).

 

                (b) Except as set forth in Schedule 3.16(b), Seller: (i) has not

experienced any organized slowdown, organized work interruption, strike or work

stoppage by employees engaged in the Conferencing Business; (ii) is not party

to, nor obligated by, any oral or written agreement, collective bargaining

agreement or other similar agreement, regarding the rates of pay, working

conditions or other terms of employment of any of the employees of Seller

engaged in the Conferencing Business; or (iii) is not obligated under any

agreement or otherwise obligated to recognize or bargain with any labor

organization or union on behalf of any of the employees engaged in the

Conferencing Business.

 

                (c) Except as set forth in Schedule 3.16(c): (i) neither Seller

nor any of its officers, directors, or employees engaged in the Conferencing

Business has been charged or, to the Seller's Knowledge, threatened with, the

charge of any unfair labor practice, grievance, arbitration, negotiation, suit

or action by any employee of Seller engaged in the Conferencing Business or

representative of Seller's employees engaged in the Conferencing Business and no

complaint or charge is pending against Seller before the National Labor

Relations Board or any state or local agency; and (ii) Seller is in compliance

with all Laws concerning the employer-employee relationship and with all

agreements relating to the employment of its employees engaged in the

Conferencing Business, including applicable wage and hour laws, workers'

compensation laws, occupational safety laws, unemployment laws and social

security laws.

 

                (d) Except as set forth in Schedule 3.16(d): (i) all officers,

employees and agents of Seller engaged in the Conferencing Business are

employees at-will, terminable on two weeks notice or less without penalty; and

(ii) there are no outstanding agreements or arrangements with respect to

severance payments with current or former employees of Seller engaged in the

Conferencing Business.

 

         3.17 Compliance with Laws. Seller has complied with all Laws applicable

to the Conferencing Business, the Premises and the Acquired Assets and no claims

have been filed against Seller alleging a violation of any such Laws. Seller has

not given or agreed to give any money, gift or similar benefit to any actual or

potential customer, supplier, government employee, insider or any other Person

to assist or hinder a seller in connection with any actual or proposed

transaction.

 

        3.18 Employee Benefits. Except as set forth in Schedule 3.18, Seller

does not maintain any Benefit Plans, including a welfare plan within the meaning

of Section 3(1) of ERISA or a pension plan within the meaning of Section 3(2) of

ERISA. None of Seller's Benefit Plans is subject to Title IV of ERISA or

constitutes a multi-employer plan, and all of the Benefit Plans comply in form

and have been administered and operated in accordance with all requirements of

applicable Law. There have been no claims against any of Seller's Benefit Plans

in excess of ten thousand dollars ($10,000) during any twelve (12) month period.

 

        3.19 Adequacy of Technology Assets. Except as set forth in Schedule

3.19, the Acquired Assets include the source code (other than source code for

shrink-wrap software generally commercially publicly available), system

documentation, statements of principles of operation and schematics for all

 

 

                                     - 13 -

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Technology Assets, as well as any pertinent commentary or explanation that may

be necessary to render such materials understandable and usable by a trained

computer programmer. The Documentation also includes any programs owned or

licensed by Seller (including compilers), "workbenches," tools and higher level

(or "proprietary") languages used for the development, maintenance and

implementation of the Technology Assets.

 

        3.20 Third-Party Components in Software Programs. Seller has validly and

effectively obtained the right and license to the third-party software contained

in the Technology Assets and Documentation pursuant to the Contracts. The

Technology Assets and Documentation contain no other programming or materials in

which any third party may claim superior, joint or common ownership.

 

        3.21 Third-Party Interests or Marketing Rights in Software Programs.

Except as set forth in Schedule 3.21, Seller has not granted, transferred or

assigned any right or interest in the Technology Assets, the Documentation or

the Intellectual Property to any Person. There are no contracts, agreements,

licenses and other commitments and arrangements in effect with respect to the

marketing, distribution, licensing or promotion of the Technology Assets, the

Documentation or Intellectual Property by any salesperson, distributor,

sublicensor or other remarketer or sales organization.

 

        3.22 Competing Conferencing Business Interests. Other than the

Conferencing Business, the Retained Business and as described on Schedule 3.22,

neither Seller nor any of its Affiliates engages in any business activity

relating to full-service audio conference calling, on-demand reservationless

audio conference calling, web data, video and audio conferencing and audio and

video streaming.

 

        3.23 Transactions with Related Parties. Except as set forth in Schedule

3.23, neither Seller nor any employee, officer, director (or immediate family

member of any of the foregoing) or Affiliate of Seller ("Related Parties") has

any interest in any property (whether real, personal or mixed and whether

tangible or intangible) used in or pertaining to the Conferencing Business. No

Related Party owns, of record or as a beneficial owner, an equity interest or

any other financial or profit interest in any Person that has: (a) had business

dealings or a material financial interest in any transaction with Seller other

than business dealings or transactions disclosed on Schedule 3.23, each of which

has been conducted in the ordinary course of business with Seller at

substantially prevailing market prices and on substantially prevailing market

terms; or (b) engaged in competition with Seller with respect to any line of the

products or services of Seller (a "Competing Business") in any market presently

served by Seller, except for ownership of less than one percent (1%) of the

outstanding capital stock of any Competing Business that is publicly traded on

any recognized exchange or over-the-counter market. Except as set forth on

Schedule 3.23, no Related Party is a party to any Contract with, or has any

claim or right against, Seller.

 

        3.24 Disclosure. Neither this Agreement nor any of the Schedules or

Exhibits hereto contains any untrue statement of a material fact or omits a

material fact necessary to make the statements contained herein or therein, in

light of the circumstances in which they were made, not misleading.

 

 

                                     - 14 -

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        3.25 Brokers. Seller has not incurred any Liability for brokerage or

finders' fees or agents' commission or other similar payment in connection with

the Acquisition.

 

        3.26 No Limitation. No investigation or due diligence conducted by, or

knowledge obtained by, Purchaser shall limit, modify or negate any of the

foregoing representations and warranties.

 

                                    ARTICLE IV

 

                   REPRESENTATIONS AND WARRANTIES OF PURCHASER

 

        Purchaser and Purchaser's Parent jointly and severally represent and

warrant to Seller as of the Effective Date as follows:

 

        4.1 Due Incorporation. Purchaser is a corporation duly organized and

validly existing under the laws of the State of Georgia with full corporate

authority to conduct its business as it is now conducted.

 

        4.2 Due Authorization. Purchaser and Purchaser's Parent have the full

power and authority to enter into this Agreement and to carry out the

transactions contemplated hereby. The execution, delivery and performance of

this Agreement by Purchaser and Purchaser's Parent have been duly authorized by

all necessary corporate action on the part of Purchaser and Purchaser's Parent.

This Agreement has been duly executed and delivered by Purchaser and Purchaser's

Parent and constitutes the legal, valid and binding obligation of Purchaser and

Purchaser's Parent enforceable in accordance with its terms. No notice to,

filing with, authorization of, exemption by or Consent of any Person is required

in order for Purchaser and Purchaser's Parent to consummate the transactions

contemplated hereby, except as shall have been obtained on or prior to the

Effective Date.

 

        4.3 Brokers. Purchaser has not incurred any Liability for brokerage or

finders' fees or agents' commission or other similar payment in connection with

the Acquisition.

 

                                    ARTICLE V

 

                                     COVENANTS

 

 

        5.1 Employees of the Conferencing Business.

 

                (a) Purchaser shall offer employment commencing on the Effective

Date to all employees of Seller who are engaged in the Conferencing Business

(such employees who accept the terms and conditions of such offer and who are

employed by Purchaser are hereinafter referred to as "Hired Employees"). Seller

agrees to terminate or cause to be terminated the employment of such employees

who agree to become Hired Employees effective as of the Effective Date.

Purchaser's offer of employment to each employee that it is required to offer

employment to hereunder shall contain a salary and benefit package which shall

be substantially comparable to such employee's salary, wage and benefits as of

the Effective Date (excluding Seller's stock option plan). All such employees

shall be offered, and, if they become Hired Employees, given, full credit for

 

 

                                     - 15 -

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years of service and fractions thereof with Seller for eligibility, vesting and

benefit determination purposes, under non-severance employee benefit plans

maintained by Purchaser, including but not limited to, vacation, medical, dental

and sick pay plans, 401(k) plans and qualified and non-qualified retirement

plans. Such employees shall be offered, and to the extent they become Hired

Employees, shall receive immediate coverage under medical and dental plans of

Purchaser with no waiting period, no requirement of a physical examination or

evidence of insurability and non exclusion of coverage for pre-existing

conditions; provided that such pre-existing conditions are covered by Seller's

medical and dental plans. Except as otherwise provided in this Section 5.1,

Seller shall remain solely responsible for all employees that are not Hired

Employees and all claims related thereto.

 

                (b) Except for accrued salaries of Hired Employees and the other

Assumed Liabilities under Section 1.3, Seller shall pay or shall cause to be

paid (or arrange for its insurance carriers to pay) all amounts due Hired

Employees, through t