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Asset Purchase Agreement

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EXHIBIT 10.1


EXECUTION COPY


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ASSET PURCHASE AGREEMENT


BY AND AMONG


ACT TELECONFERENCING, INC.,


ACT VIDEOCONFERENCING, INC.


AND


PICTURETEL CORPORATION


DATED AS OF OCTOBER 4, 2001


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TABLE OF CONTENTS


1. Closing..................................................................1
1.1. Closing Date.................................................1
1.2. Sale of Assets...............................................1
1.3. Bill of Sale; Assumption Agreement; Power of Attorney........2
1.4. No Other Liabilities or Obligations Assumed..................2
1.5. Excluded Assets..............................................3
1.6. Purchase Price; Payment......................................3
1.7. Purchase of Shares by Buyer..................................4 2. Representations and Warranties of Seller.................................4
2.1. Organization and Standing....................................4
2.2. Authorization and Binding Obligations........................5
2.3. No Contravention.............................................5
2.4. Compliance with Laws.........................................5
2.5. Tax Matters..................................................5
2.6. Employee Benefit Plans; ERISA; Employees.....................6
2.7. Litigation...................................................7
2.8. Agreements...................................................7
2.9. Suppliers and Customers......................................8
2.10. Tangible Property............................................8
2.11. Intellectual Property........................................8
2.12. Third-Party Programs, Rights, etc............................9
2.13. Financial Statements of the CSC Operations...................9
2.14. Certain Transactions.........................................9
2.15. No Undisclosed Liabilities..................................10
2.16. Interested Party Transactions...............................10
2.17. Assets......................................................11
2.18. Securities Act Matters......................................11
2.19. Brokers or Finders..........................................12
2.20. Information Furnished by Seller.............................12 3. Representations and Warranties of Buyer and Buyer Parent................12
3.1. Organization and Standing...................................12
3.2. Authorization and Binding Obligations.......................12
3.3. No Contravention............................................13
3.4. Issuance of the Shares......................................13
3.5. SEC Filings.................................................13
3.6. Brokers or Finders..........................................14
3.7. Information Furnished to Seller.............................14
3.8. Registration Rights.........................................14 4. Additional Agreements Prior to the Closing..............................14
4.1. Employees...................................................14
4.2. Control and Conduct of the CSC Operations...................15
4.3. Certain Transactions........................................15
4.4. Insurance...................................................15
4.5. Performance of Assumed Contracts............................15


4.6. Consents....................................................15
4.7. Access to Information.......................................15
4.8. Notice of Events............................................15
4.9. Updating of Disclosure Schedule.............................16 5. Closing Conditions and Deliveries.......................................16
5.1. Conditions to Buyer's Obligations...........................16
5.2. Conditions to Seller's Obligations..........................18 6. Indemnification.........................................................19
6.1. Indemnification by Seller...................................19
6.2. Indemnification by Buyer and Buyer Parent...................20
6.3. Indemnification Procedure...................................20
6.4. Limitations on Indemnification..............................21
6.5. Payment of Indemnification Claims...........................21
6.6. Exclusive Remedy............................................22 7. Post-Closing Covenants..................................................22
7.1. Further Assurances; Cooperation.............................22
7.2. Delivery of Assets..........................................22
7.3. Books and Records...........................................22
7.4. Litigation Support..........................................22
7.5. Destruction of Copies of Certain Assets.....................23
7.6. Employee Matters............................................23
7.7. Non-Competition.............................................24
7.8. Non-Solicitation............................................25
7.9. Consents....................................................26 8. Miscellaneous...........................................................26
8.1. Governing Law...............................................26
8.2. Jurisdiction................................................26
8.3. Survival; Termination.......................................26
8.4. Notices.....................................................27
8.5. Entire Agreement; Amendments................................28
8.6. Counterparts................................................28
8.7. Headings....................................................28
8.8. Public Announcements........................................28
8.9. Waiver......................................................28
8.10. Binding Effect and Assignment...............................28
8.11. Confidentiality.............................................29
8.12. Buyer Parent Guarantee......................................29
8.13. Expenses....................................................29
8.14. No Third Party Beneficiaries................................29
8.15. Bulk Sales Laws.............................................29


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EXHIBIT INDEX


EXHIBIT A Form of Seller Note


EXHIBIT B Form of Escrowed Note


EXHIBIT C Bill of Sale


EXHIBIT D Assumption Agreement


EXHIBIT E Escrow Agreement


EXHIBIT F Registration Rights Agreement


EXHIBIT G Opinion of Ropes & Gray


EXHIBIT H Opinion of Faegre & Benson


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ASSET PURCHASE AGREEMENT


This Asset Purchase Agreement (this "AGREEMENT") is made as of this 4th day of October, 2001, by and between ACT Teleconferencing, Inc., a Colorado corporation ("BUYER PARENT"), ACT Videoconferencing, Inc., a Minnesota corporation and a wholly-owned subsidiary of Buyer Parent ("BUYER"), and PictureTel Corporation, a Delaware corporation ("SELLER"). The Buyer Parent, Buyer and Seller are collectively referred to herein as the "Parties".


This Agreement contemplates a transaction in which the Buyer will purchase the tangible and intangible assets described in Section 1.2 below as used in, or necessary for the operation of, the the CSC Operations (as defined below), and will assume certain liabilities thereof, in consideration of the Purchase Price (as defined below). "CSC Operations" shall consist of the following managed video conferencing services provided on a fee for services basis, to the extent and in the form conducted by Seller on the date hereof: (1) multipoint bridging; (2) point-to-point call launching; (3) remote bridge management in which the customer owns the bridge but it is managed remotely; (4) room scheduling done using phone, fax or a web-based interface; and (5) to the extent directly relating to providing the foregoing services (1) through (4), problem management (fault identification, tracking and resolution services), scheduling, event management and video streaming.


NOW, THEREFORE, in consideration of the foregoing premises and the mutual promises, agreements, representations, warranties, and covenants herein contained, the Parties agree as follows.


1. CLOSING


1.1. CLOSING DATE. Subject to the terms and conditions of this Agreement, the closing (the "CLOSING") of the transactions contemplated hereby shall be held at the offices of counsel to Seller, Ropes & Gray, One International Place, Boston, Massachusetts 02110 no later than five Business Days following the satisfaction or waiver of all conditions to the obligations of the parties contemplated hereby (other than conditions with respect to certificates and other ancillary documents to be delivered at the Closing), or on such other date or at such other location as may be mutually agreed upon by the parties. The date on which the Closing occurs is referred to herein as the "CLOSING DATE".


1.2. SALE OF ASSETS. At the Closing, Seller shall sell to Buyer, free and clear of all liens, mortgages, security interests, encumbrances, pledges, charges, restrictions on transfer, or adverse claims (collectively, "LIENS") other than Liens set forth on PARAGRAPH 1.2 of the Disclosure Schedule, and Buyer shall buy from Seller, all of Seller's right, title and interest in the following (collectively, the "ASSETS"):


(a) the assets described on Paragraph 1.2(i) of the Disclosure Schedule;


(b) Seller's entire right, title and interest in, to and under the contracts, agreements, licenses, permits, arrangements, permissions, purchase orders taken by Seller that


are not accounts receivable, and other commitments and arrangements with respect to the CSC Operations identified on PARAGRAPH 1.2(c) of the Disclosure Schedule(the "ASSUMED CONTRACTS");


(c) all rights of Seller under express or implied warranties from suppliers or contractors with respect to the Assets;


(d) all claims, causes of action, choses in action, rights of recovery and rights of set-off of any kind arising out of the Assets or the CSC Operations, unless arising out of an Excluded Asset;


(e) all existing business and marketing records of the CSC Operations, including accounting and operating records, asset ledgers, inventory records, budgets, databases, customer lists, event calendars, information and data respecting leased or owned equipment, files, books, correspondence and mailing lists, creative, promotional and advertising materials and brochures, and other business records; PROVIDED, HOWEVER, that if any such business or marketing records are not related exclusively to the CSC Operations, Seller shall furnish to Buyer and Buyer shall receive only reasonable access to such business or marketing records;


(f) all cash collected after September 30, 2001 for invoices to the extent relating to conferences occurring on or after October 1, 2001.


1.3. BILL OF SALE; ASSUMPTION AGREEMENT. The sale and delivery of the Assets shall be effected by a Bill of Sale and Assignment in substantially the form of EXHIBIT C (the "BILL OF SALE"), an Assumption Agreement in substantially the form of EXHIBIT D (the "ASSUMPTION AGREEMENT"), and such deeds, endorsements, assignments and other instruments of transfer and conveyance, agreements, and documents as may be reasonably required to effect the provisions of Section 1.2 as may be reasonably requested by Buyer's counsel.


1.4. NO OTHER LIABILITIES OR OBLIGATIONS ASSUMED. The Buyer shall assume as of the Closing (a) all obligations of the Seller under the agreements, contracts, leases, licenses and other arrangements listed on PARAGRAPH 1.2(c) of the Disclosure Schedule that arise from or relate to periods after September 30, 2001 and (b) the liabilities set forth on PARAGRAPH 1.4 of the Disclosure Schedule (together, the "ASSUMED LIABILITIES"), which Assumed Liabilities Buyer hereby assumes. Other than the Assumed Liabilities, Buyer expressly does not, and shall not, assume or be deemed to have assumed under this Agreement or by reason of any transaction contemplated hereunder or otherwise, any debts, liabilities (contingent or otherwise) or obligations of Seller or the CSC Operations of any nature whatsoever, whether the same are direct or indirect, fixed or contingent, or known or unknown, whether arising under an agreement or contract or otherwise. Notwithstanding any other provision of this Agreement, the Assumed Liabilities shall not include any liabilities or obligations of Seller with respect to accounts payable and payment obligations incurred in the conduct of the CSC Operations through and including September 30, 2001. Buyer shall forever defend, indemnify and hold harmless Seller from and against any and all liabilities, obligations, claims, damages (including incidental and consequential damages), costs and expenses (including court costs and reasonable attorneys' fees) related to or arising from Buyer's failure to fully perform and discharge the responsibilities of Seller with respect to the Assumed Liabilities. Buyer further agrees to pay and discharge all such liabilities and obligations as they become due.


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1.5. EXCLUDED ASSETS. Anything to the contrary notwithstanding, the Assets shall not include any of the following rights, properties or assets (collectively, the "EXCLUDED ASSETS"):


(a) all accounts receivable and other rights to receive payment generated in the conduct of the CSC Operations through and including September 30, 2001; and


(b) the assets described in PARAGRAPH 1.5(b) of the Disclosure Schedule.


1.6. PURCHASE PRICE; PAYMENT. The consideration to be paid by Buyer for the Assets (the "PURCHASE PRICE") shall consist of:


(i) 769,231 shares of the common stock of Buyer
Parent, no par value (the "COMMON STOCK");


(ii) $1,000,000 cash (the "CASH PAYMENT");


(iii) promissory notes issued by Buyer Parent in
favor of Seller (each individually a "NOTE"), in the combined aggregate
original principal amount of $2,500,000; and


(iv) Buyer's assumption of the Assumed
Liabilities.


(b) DELIVERY OF SHARES AND THE NOTES. At the Closing, Buyer shall, subject to the provisions of Section 1.6(a):


(i) deliver to Seller (A) a certificate
representing 692,308 shares of Common Stock, (B) ninety percent (90%)
of the Cash Payment required under Section 1.6(a)(ii) by wire transfer
of immediately available funds pursuant to wire transfer instructions
delivered by Seller to Buyer; and (C) a Note in the original principal
amount equal to ninety percent 90% of the Notes issuable under Section
1.6(a)(iii) in the form of EXHIBIT A (the "SELLER NOTE");


(ii) deliver to State Street Bank and Trust
Company, as escrow agent (the "ESCROW AGENT"), (A) 76,923 shares of
Common Stock (the "ESCROWED SHARES"); (B) ten percent (10%) of the Cash
Payment required under Section 1.6(a)(ii) (the "ESCROWED CASH"); and
(C) a Note in the original principal amount equal to ten percent (10%)
of the Notes issuable under Section 1.6(a)(iii) in the form of EXHIBIT
B (the "ESCROWED NOTE"), each of which is to be held in escrow to
secure Seller's indemnification obligations under this Agreement
pursuant to the terms of an Escrow Agreement in the form of EXHIBIT E
(the "ESCROW AGREEMENT").


(c) ALLOCATION. Within 30 days following the Closing Date, Buyer and Seller (which approval Seller shall not unreasonably withhold), shall mutually agree upon and prepare and finalize a schedule setting forth an allocation of the consideration described in Section 1.6(a) among the Assets (the "ALLOCATION SCHEDULE"). Each party agrees to report the transactions contemplated hereby for federal income tax and all other tax purposes (including, without limitation, for purposes of Section 1060 of the Internal Revenue Code of 1986 (the "Code")) in a manner consistent with the Allocation Schedule, and in accordance with all applicable rules and


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regulations, and to take no position inconsistent with the allocation set forth therein in any administrative or judicial examination or other proceeding. Each of Buyer and Seller shall timely file the appropriate forms in accordance with the requirements of Section 1060 of the Code and this Section.


1.7. PURCHASE OF SHARES BY BUYER. In the event Buyer Parent issues debt or equity securities to non-Affiliates (as defined in the Securities Act of 1933, as amended) prior to the second anniversary of the Closing Date, the proceeds of which (gross of underwriting commissions, discount and expenses) exceed $5,000,000, other than in a firm commitment registered public offering, (a "FINANCING EVENT"), Buyer Parent shall, within ten (10) days of such consummation, provide written notice (the "Notice") to Seller of the occurrence of the Financing Event. Within ten (10) days from Seller's receipt of the Notice, Seller may require Buyer Parent to purchase from Seller shares of Common Stock received as part of the Purchase Price, at a price equal to (i) in the case of a Financing Event involving the sale of Common Stock of the Buyer Parent, the purchase price of the Common Stock sold therein, or (ii) in the case of any other Financing Event, the price equal to the average of the closing sale prices of the Common Stock on the Nasdaq National Market during the five (5) trading days immediately preceding the date of the Financing Event; PROVIDED, HOWEVER, that in no event shall Buyer Parent be obligated to use greater than twenty percent (20%) of Buyer Parent's aggregate proceeds from the Financing Event for such repurchase. In the event of a Financing Event within two years of the Closing Date, Buyer Parent shall have the right to purchase from Seller up to one hundred percent (100%) of the Common Stock received as part of the Purchase Price provided that the consideration Seller receives for such Common Stock (net of any underwriting commissions, discounts and expenses) as calculated above is an amount equal to or greater than $7.00 per share (as appropriately adjusted for stock splits, stock combinations, stock dividends and recapitalizations).


2. REPRESENTATIONS AND WARRANTIES OF SELLER


Seller hereby represents and warrants to Buyer and Buyer Parent, subject to such exceptions as are disclosed in the disclosure schedule supplied by Seller to Buyer Parent (the "Seller Disclosure Schedule") dated as of the date hereof, as follows (notwithstanding anything to the contrary contained herein, Seller is not making any representation or warranty with respect to the Excluded Assets or Excluded Liabilities):


2.1. ORGANIZATION AND STANDING. Seller (a) is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, (b) has full right, power and authority to enter into and perform and do all things contemplated under this Agreement necessary to give effect to the provisions of this Agreement, to own and lease the Assets and to carry on and operate the CSC Operations as now being conducted and proposed to be conducted by it under existing agreements, (c) is duly qualified or licensed to do business and is in good standing as a foreign corporation in every jurisdiction in which the character of the Assets or nature of the CSC Operations requires such qualification, except to the extent that the failure to be so qualified or licensed would not have a material adverse effect on the CSC Operations or Assets, and (d) except as set forth on Paragraph 2.1 of the Disclosure Schedule, does not own any of the Assets, and does not conduct any of the CSC Operations, through any other corporation, limited liability company, partnership or other entity.


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2.2. AUTHORIZATION AND BINDING OBLIGATIONS. The execution, delivery and performance by Seller of this Agreement have been duly and validly authorized by all necessary corporate action. This Agreement has been duly executed and delivered by Seller and constitutes the valid and binding agreement of Seller, enforceable in accordance with its terms, except as its enforceability may be limited by bankruptcy, insolvency, moratorium or other laws relating to or affecting creditors' rights generally and the exercise of judicial discretion in accordance with general equitable principles.


2.3. NO CONTRAVENTION. The execution, delivery and performance of this Agreement, the consummation of the transactions contemplated hereby and the compliance with the provisions hereof by Seller does not (a) violate any provision of the certificate of incorporation or bylaws of Seller, (b) conflict with, result in the breach of, or constitute a default under, or result in the creation of any Lien upon any of the Assets, or require any authorization, consent, approval, exemption or other action by or notice to any third party, court or other governmental or administrative body, under the provisions of any agreement (including, without limitation, the Merger Agreement (as defined below)) or other instrument to which Seller is a party or by which any of the Assets are bound or affected or (c) violate any laws, regulations, orders or judgments applicable to Seller, except in each of clause (b) and (c), where the conflict, breach, default, Lien, violation or failure to give or receive such authorization, consent, approval, exemption or other action would not have a material adverse effect on the CSC Operations or Assets or on Seller's ability to consummate the transactions contemplated by this Agreement (a "MATERIAL ADVERSE EFFECT").


2.4. COMPLIANCE WITH LAWS. Seller has complied with, and is now in compliance with, all material laws, rules, regulations, orders, judgments and decrees of any governmental, regulatory or administrative body, agency or authority, or any court or judicial authority (each, an "AUTHORITY") applicable to the CSC Operations. Seller possesses each material franchise, license, permit, authorization, certification, consent, variance, permission, order or approval of or from any Authority, and has filed all filings, notices or recordings with any such Authority (collectively, "LICENSES") material to, or necessary for the conduct of, the CSC Operations and is in compliance with each of such Licenses, except to the extent that the failure to comply would not have a Material Adverse Effect. Each such License is identified on PARAGRAPH 2.4 of the Disclosure Schedule. No proceeding or other action is pending or, to the best knowledge of Seller, threatened, to revoke, amend, or limit any License.


2.5. TAX MATTERS. Seller has, within the times and in the manner prescribed by law, filed all required tax returns, including sales and use tax returns, has paid or provided for all taxes, including sales and use taxes owed by Seller, with respect to the CSC Operations (whether or not shown on any tax return to be due and owing by it), has paid or provided for all deficiencies or other assessments of taxes, interest or penalties owed by it, and all such tax returns were correct and complete in all material respects when filed. No taxing Authority has asserted any claim for the assessment of any additional taxes of any nature with respect to any periods covered by any such tax returns, and all taxes or other charges required to be withheld or collected by Seller with respect to the CSC Operations have been duly withheld or collected and, to the extent required, have been paid to the proper taxing Authority or properly segregated or deposited as required by law.


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2.6. EMPLOYEE BENEFIT PLANS; ERISA; EMPLOYEES.


(a) As used in this Agreement, the term "ERISA AFFILIATE" means any person or entity (whether or not incorporated) which, by reason of its relationship with Seller or a subsidiary is required to be aggregated with Seller or a subsidiary under Sections 414(b), 414(c), 414(m) or 414(o) of the Code, or which, together with Seller or a subsidiary is a member of a controlled group within the meaning of Section 4001(a) of ERISA.


(b) PARAGRAPH 2.6(b) of the Disclosure Schedule lists each "employee benefit plan" as defined in Section 3(3) of ERISA and each other employment severance, deferred compensation, incentive, fringe benefit, change in control, retention, stock option or other equity based or other compensatory or benefit plan, policy, agreement or arrangement that (i) is maintained, administered, contributed to or required to be contributed to by Seller, or its ERISA Affiliates or to which Seller or any ERISA Affiliate is a party, and (ii) covers any current or former employee or other personnel of Seller or any of its ERISA Affiliates who provides or has provided services to or in connection with the CSC Operations. Each such plan, policy, agreement or arrangement is herein referred to as an "EMPLOYEE BENEFIT PLAN." Copies of the Employee Benefit Plans, including, but not limited to, any trust instruments, insurance contracts and all amendments thereto have been delivered or made available to Buyer. At no time within the six (6) year period ending on the date hereof has the Seller or any of its ERISA Affiliates been obligated to contribute to or a participating employer under a multiemployer plan within the meaning of Section 3(37) of ERISA or an employee pension plan covered by Title IV of ERISA, Section 302 of ERISA or Section 412 of the Code.


(c) Each Employee Benefit Plan (and each related trust, insurance contract, or fund) has been maintained, funded and administered in accordance with the terms of such Employee Benefit Plan and complies in form and in operation in all material respects with the applicable requirements of ERISA and the Code except to the extent that the failure to perform such acts would not have a Material Adverse Effect.


(d) PARAGRAPH 2.6(d) of the Disclosure Schedule contains a true and complete list of all employees of Seller who are employed or performing services in the CSC Operations worldwide (collectively, the "CSC OPERATIONS EMPLOYEES") on the date hereof, the title and rate of compensation of each CSC Operations
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