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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 23, 1996
Medcross, Inc.
(Exact name of registrant as specified in its charter)
Florida 0-17973 59-2291344
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
3227 Bennet Street North, St. Petersburg, Florida 33713
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (813) 521-1793
(Former name or former address, if changed since last report.)
<PAGE>
Item 5. Other Events
On February 23, 1996, Medcross, Inc. (the "Company") closed its acquisition of all of
the issued and outstanding common stock of I-Link Worldwide Inc., a Utah corporation
("ILink") from ILINK, Ltd., a Utah limited partnership in exchange for the issuance of
an aggregate of 4,000,000 shares of common stock, par value $.007 per share, of the
Company (the "Common Stock"). The purchase price was determined through arms-length
negotiation. Pursuant to an escrow agreement by and among the Company, ILINK, Ltd. and
DeMartino, Finkelstein, Rosen & Virga, as the escrow agent, 2,600,000 shares of the
Common Stock issued pursuant to the acquisition of ILink, Ltd. were placed in escrow
to be released as follows:
1. 1,600,000 shares of Common Stock are to be released upon the receipt of
proceeds greater than or equal to $4,000,000 from the sale of the
Company's securities pursuant to the conduct of one or more private or
public offerings prior to December 31, 1996; and
2. 1,000,000 shares of Common Stock are to be released upon the first to
occur of the following:
(i) the monthly revenue derived from subscribers
serviced by ILink, Ltd. and revenue derived from
the sale of related products and/or services
equals or exceeds $1,000,000; or
(ii) the number of subscribers serviced by ILink, Ltd.
exceeds 100,000 one year from the date of receipt
by the Company of gross proceeds equal to
$4,000,000 from the sale of its securities
pursuant to one or more private or public
offerings.
ILink provides Internet access services to individuals and businesses in the United
States. ILink is also the owner of a proprietary technology (patent pending) which
enables the transmission of information via facsimile over the Internet.
There was no affiliation or relationship between the Company, its affiliates, officers
or directors, or associates of such persons and ILink or ILink, Ltd. or any of their
officers, directors, stockholders, or partners prior to the acquisition.
Simultaneous with the closing of its acquisition of I-Link, the Company completed a
private placement of $1,000,000 in aggregate principal amount of convertible promissory
notes (the "Notes"). The Notes are payable upon the earlier of August 31, 1996
(subject to extension) or the Company's receipt of proceeds of at least $4,000,000 from
subsequent debt or equity offerings. The Notes bear interest at the rate of 10% until
August 31, 1996, at which time such interest rate increases to 13%.
In addition to the foregoing, in connection with the grant of an option by the holders
thereof, an aggregate of 40,000 shares of outstanding Class A Preferred Stock, par
value $10.00 per share, of the Company (the "Class A Preferred Stock") was converted
into an aggregate of 978,891 shares of Common Stock. Options to acquire the 3,915,570
shares of Common Stock issuable upon conversion of the remaining 160,000 shares of
Class A Preferred Stock outstanding have been granted by the holder thereof. Such
options are exercisable commencing July 1, 1996 at an exercise price of $1.79 per share
or two hundred percent of the average of the bid and asked prices of the Common Stock
as quoted on Nasdaq; the options expire incrementally on December 31, 1996 and
<PAGE>
December 31, 1997. The holder of all 7,500 shares of Class B Preferred Stock has also
granted an option, upon substantially the same terms and conditions as the foregoing
options, to purchase the 183,542 shares of Common Stock issuable upon conversion
thereof. All of the foregoing securities are restricted.
The foregoing corporate developments were reported to the public in a press released
on February 23, 1996, which release is attached hereto as Exhibit 99 and which is
incorporated herein by reference.
Item 7. Financial Statements, Proforma Financial Information, and Exhibits.
(a) Financial Statements of Businesses Acquired.
Audited financial statements of the business acquired shall be filed as soon as
practicable, but not later than 60 days after the required filing date of this
Form 8-K.
(b) Proforma Financial Information.
The proforma financial information relative to the acquisition described above
shall be provided as soon as practicable, but not later than 60 days after the
required filing date of this Form 8-K.
(c) Exhibits.
2(a) Stock Purchase Agreement dated February 13, 1996, by and among Medcross,
Inc., ILINK, Ltd., and Gnet Enterprises, Inc.
2(b) Escrow Agreement dated February 21, 1996, by and among Medcross, Inc.,
ILINK, Ltd., and DeMartino, Finkelstein, Rosen & Virga.
2(c) Form of Promissory Note.
99 Press Release dated February 23, 1996.
<PAGE> SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto duly
authorized.
MEDCROSS, INC.
By: /s/ Henry Y.L. Toh
Henry Y.L. Toh
President, CEO, Acting CFO
Date February 23, 1996
<S> <S>
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EXECUTION COPY
STOCK PURCHASE AGREEMENT
By and Among
MEDCROSS, INC., the Purchaser,
ILINK, Ltd., the Seller
and
GNet Enterprises, Inc., the General Partner of the Seller
February 13, 1996
<PAGE>
TABLE OF CONTENTS
TO
STOCK PURCHASE AGREEMENT
ARTICLE/SECTION/SUBJECT PAGE
INTRODUCTION AND RECITALS. . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I PURCHASE OF WORLDWIDE STOCK
1.1 Purchase and Sale of Worldwide Stock . . . . . . . . . . . . . 2
1.2 Purchase Price.. . . . . . . . . . . . . . . . . . . . . . . . 2
(a) Consideration . . . . . . . . . . . . . . . . . . . . . . 2
(b) Conditions to Release of Escrowed Purchaser Stock . . . . 3
ARTICLE IICLOSING
2.1 Date and Time of Closing . . . . . . . . . . . . . . . . . . . 3
ARTICLE III REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Seller and GNet. . . . . 4
(a) Authorization . . . . . . . . . . . . . . . . . . . . . . 4
(b) Organization. . . . . . . . . . . . . . . . . . . . . . . 4
(c) General Partner . . . . . . . . . . . . . . . . . . . . . 4
(d) Partnership Agreement; Structure. . . . . . . . . . . . . 4
(e) Existence of and Actions Against Seller . . . . . . . . . 5
(f) Organization of Worldwide . . . . . . . . . . . . . . . . 5
(g) Capitalization of Worldwide . . . . . . . . . . . . . . . 5
(h) Financial Statements. . . . . . . . . . . . . . . . . . . 6
(i) Assets of Worldwide . . . . . . . . . . . . . . . . . . . 6
(j) Owned Real Property . . . . . . . . . . . . . . . . . . . 8
(k) Leased Real Property; Tenancies . . . . . . . . . . . . . 8
(l) Title . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(m) Condition of Assets . . . . . . . . . . . . . . . . . . . 9
(n) Intellectual Property . . . . . . . . . . . . . . . . . .10
(o) Inventory . . . . . . . . . . . . . . . . . . . . . . . .11
<PAGE>
(p) Accounts Receivable . . . . . . . . . . . . . . . . . . .11
(q) Accounts Payable. . . . . . . . . . . . . . . . . . . . .12
(r) Absence of Undisclosed Liabilities. . . . . . . . . . . .12
(s) Absence of Certain Changes or Events. . . . . . . . . . .12
(t) Agreements. . . . . . . . . . . . . . . . . . . . . . . .14
(u) Non-Contravention; Consents . . . . . . . . . . . . . . .16
(v) Labor Relations . . . . . . . . . . . . . . . . . . . . .16
(w) Insurance . . . . . . . . . . . . . . . . . . . . . . . .16
(x) Tax Matters . . . . . . . . . . . . . . . . . . . . . . .17
(y) Compliance with Applicable Law. . . . . . . . . . . . . .18
(z) Litigation. . . . . . . . . . . . . . . . . . . . . . . .18
(aa) Permits . . . . . . . . . . . . . . . . . . . . . . . . .19
(bb) Restrictive Covenants . . . . . . . . . . . . . . . . . .19
(cc) Unlawful Payments . . . . . . . . . . . . . . . . . . . .19
(dd) Warranties. . . . . . . . . . . . . . . . . . . . . . . .20
(ee) Employees . . . . . . . . . . . . . . . . . . . . . . . .20
(ff) Subscribers . . . . . . . . . . . . . . . . . . . . . . .20
(gg) Loans to or from Affiliates . . . . . . . . . . . . . . .20
(hh) Books and Records . . . . . . . . . . . . . . . . . . . .20
(ii) Bank Accounts . . . . . . . . . . . . . . . . . . . . . .20
(jj) Investment Purpose. . . . . . . . . . . . . . . . . . . .21
(kk) Assets Necessary to the Business. . . . . . . . . . . . .21
(ll) Agreements with Affiliates. . . . . . . . . . . . . . . .21
(mm) Accuracy of Information Furnished . . . . . . . . . . . .21
(nn) Assignment. . . . . . . . . . . . . . . . . . . . . . . .21
3.2 Representations and Warranties of Purchaser. . . . . . . . . .22
(a) Authorization . . . . . . . . . . . . . . . . . . . . . .22
(b) Organization. . . . . . . . . . . . . . . . . . . . . . .22
(c) Capitalization. . . . . . . . . . . . . . . . . . . . . .22
(d) Non-Contravention; Consents . . . . . . . . . . . . . . .23
(e) Litigation. . . . . . . . . . . . . . . . . . . . . . . .23
(f) Accuracy of Information Furnished; Subsequent Events. . .23
(g) Compliance with Applicable Law. . . . . . . . . . . . . .24
(h) Financial Statements. . . . . . . . . . . . . . . . . . .24
(i) Title . . . . . . . . . . . . . . . . . . . . . . . . . .25
(j) Condition of Purchaser Assets . . . . . . . . . . . . . .25
(k) Purchaser Inventory . . . . . . . . . . . . . . . . . . .26
(l) Purchaser Accounts Receivable . . . . . . . . . . . . . .26
(m) Purchaser Accounts Payable. . . . . . . . . . . . . . . .27
(n) Absence of Undisclosed Liabilities. . . . . . . . . . . .27
(o) Absence of Certain Changes or Events. . . . . . . . . . .27
(p) Agreements. . . . . . . . . . . . . . . . . . . . . . . .29
<PAGE>
(q) Labor Relations . . . . . . . . . . . . . . . . . . . . .31
(r) Tax Matters . . . . . . . . . . . . . . . . . . . . . . .31
(s) Permits . . . . . . . . . . . . . . . . . . . . . . . . .32
(t) Unlawful Payments . . . . . . . . . . . . . . . . . . . .32
(u) Warranties. . . . . . . . . . . . . . . . . . . . . . . .32
(v) Assets Necessary to Purchaser's Business. . . . . . . . .32
(w) Agreements with Affiliates. . . . . . . . . . . . . . . .33
(x) Restrictive Covenants . . . . . . . . . . . . . . . . . .33
(y) Books and Records . . . . . . . . . . . . . . . . . . . .33
3.3 Survival of Representations and Warranties . . . . . . . . . .33
ARTICLE IV COVENANTS
4.1 Covenants of the Seller. . . . . . . . . . . . . . . . . . . .33
(a) Notification. . . . . . . . . . . . . . . . . . . . . . .33
(b) Additional Financial Statements . . . . . . . . . . . . .34
(c) Additional Summaries of Accounts and Notes Receivable . .34
(d) Additional Summaries of Accounts Payable. . . . . . . . .34
(e) Additional Summaries of Inventory . . . . . . . . . . . .34
(f) Audit . . . . . . . . . . . . . . . . . . . . . . . . . .34
(g) Conduct of Business; Certain Covenants. . . . . . . . . .34
(h) Proposals; Other Offers . . . . . . . . . . . . . . . . .38
(i) Best Efforts and Cooperation; Further Assurances. . . . .38
(j) Access to Additional Agreements and Information . . . . .39
4.2 Covenants of Purchaser . . . . . . . . . . . . . . . . . . . .39
(a) Notice of Defaults. . . . . . . . . . . . . . . . . . . .39
(b) Third Party Consents. . . . . . . . . . . . . . . . . . .39
(c) Best Efforts and Cooperation; Further Assurances. . . . .39
(d) Preparation and Filing of Registration Statement. . . . .40
(f) Conduct of Business; Certain Covenants. . . . . . . . . .40
(g) Access to Additional Agreements and Information . . . . .42
(h) Use of Proceeds from Debt Offering. . . . . . . . . . . .43
4.4 Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . .43
4.5 Purchaser's Right to Investigate . . . . . . . . . . . . . . .43
(a) Obligations of the Seller . . . . . . . . . . . . . . . .43
(b) Effectiveness of Representations Notwithstanding Investigation43
<PAGE>
ARTICLE V CONDITIONS
5.1 Conditions to Obligations of Purchaser . . . . . . . . . . . .44
(a) No Material Adverse Change. . . . . . . . . . . . . . . .44
(b) Opinion of Seller's and Stockholders' Counsel . . . . . .44
(c) Accuracy of Representations and Warranties; Performance of Covenants44
(d) Delivery of Certificates. . . . . . . . . . . . . . . . .44
(e) Stock Certificates. . . . . . . . . . . . . . . . . . . .45
(f) Consents and Waivers. . . . . . . . . . . . . . . . . . .45
(g) Litigation. . . . . . . . . . . . . . . . . . . . . . . .45
(h) Delivery of Documents and Other Information . . . . . . .45
(i) Concurrent Transaction. . . . . . . . . . . . . . . . . .45
(j) Validity of Assignment. . . . . . . . . . . . . . . . . .45
(k) Grant of Option . . . . . . . . . . . . . . . . . . . . .46
(l) Assignment of Rights in and to Fax-Link . . . . . . . . .46
5.2 Conditions to Obligations of the Seller. . . . . . . . . . . .46
(a) Copies of Resolutions . . . . . . . . . . . . . . . . . .46
(b) Opinion of Purchasers' Counsel. . . . . . . . . . . . . .46
(c) Accuracy of Representations and Warranties; Performance of Covenants46
(d) Delivery of Officers' Certificates. . . . . . . . . . . .47
(e) Stock Certificates. . . . . . . . . . . . . . . . . . . .47
(f) Consents and Waivers. . . . . . . . . . . . . . . . . . .47
(g) Litigation. . . . . . . . . . . . . . . . . . . . . . . .47
(h) Delivery of Documents and Other Information . . . . . . .47
(i) Concurrent Transaction. . . . . . . . . . . . . . . . . .47
(j) Board Representation. . . . . . . . . . . . . . . . . . .47
(k) Employment Agreements . . . . . . . . . . . . . . . . . .48
(l) Grant of Option . . . . . . . . . . . . . . . . . . . . .48
(m) No Material Adverse Change. . . . . . . . . . . . . . . .48
ARTICLE VI INDEMNIFICATION AND CLAIMS
6.1 Indemnification by the Seller. . . . . . . . . . . . . . . . .48
6.2 Claims Against the Indemnified Party . . . . . . . . . . . . .49
6.3 Right of Offset. . . . . . . . . . . . . . . . . . . . . . . .49
6.4 Indemnification by Purchaser . . . . . . . . . . . . . . . . .49
6.5 Claims Against the Seller. . . . . . . . . . . . . . . . . . .50
6.6 Disclosure Generally . . . . . . . . . . . . . . . . . . . . .51
<PAGE>
6.7 Acknowledgements . . . . . . . . . . . . . . . . . . . . . . .51
ARTICLE VII TERMINATION AND REMEDIES FOR BREACH OF THIS AGREEMENT
7.1 Termination by Mutual Agreement. . . . . . . . . . . . . . . .51
7.2 Termination for Failure to Close . . . . . . . . . . . . . . .51
7.3 Termination by Operation of Law. . . . . . . . . . . . . . . .51
7.4 Termination for Failure to Perform Covenants or Conditions . .51
7.5 Effect of Termination or Default; Remedies . . . . . . . . . .52
7.6 Remedies; Specific Performance . . . . . . . . . . . . . . . .52
ARTICLE VIII MISCELLANEOUS
8.1 Modification, Amendments and Waiver. . . . . . . . . . . . . .52
8.2 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . .52
8.3 Burden and Benefit . . . . . . . . . . . . . . . . . . . . . .53
8.4 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . .53
8.5 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . .53
8.6 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . .53
8.7 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . .53
8.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . .54
8.9 Rights Cumulative. . . . . . . . . . . . . . . . . . . . . . .54
8.10 Severability of Provisions . . . . . . . . . . . . . . . . . .54
8.11 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . .55
<PAGE>
LIST OF EXHIBITS AND SCHEDULES
TO
STOCK PURCHASE AGREEMENT
EXHIBITS:
Exhibit 1.2(b): Form of Escrow Agreement
Exhibit 4.1(b): Additional Financial Statements (as required)
Exhibit 4.1(c): Summary of Accounts Receivable (as required)
Exhibit 4.1(d): Summary of Accounts Payable (as required)
Exhibit 4.1(e): Summary of Inventory (as required)
Exhibit 5.1(b): Form of Opinion of Counsel to Seller
Exhibit 5.1(k): Form of Option Agreement
Exhibit 5.2(b): Form of Opinion of Counsel to Purchaser
Exhibit 5.2(k): Form of Employment Agreement
SCHEDULES:
Schedule 1.2: Partners of Seller
Schedule 3.1(b):Jurisdictions in which Seller is Qualified to do Business
Schedule 3.1(d):Partnership Interests
Schedule 3.1(f):Jurisdictions in which Worldwide is not Qualified to do Business
Schedule 3.1(i)(i):Real Property; Real Property Leases
Schedule 3.1(i)(ii):Personal Property
Schedule 3.1(i)(iii):Personal Property Leases
Schedule 3.1(i)(iv):Inventory
Schedule 3.1(i)(v):Agreements and Contracts
Schedule 3.1(i)(viii):Intellectual Property
Schedule 3.1(l):Inventory
Schedule 3.1(p):Accounts Receivable
Schedule 3.1(q):Accounts Payable
Schedule 3.1(s):Certain Changes or Events
Schedule 3.1(t):Agreements
Schedule 3.1(u):Non-Contravention; Consents
Schedule 3.1(w):Insurance
Schedule 3.1(z):Litigation
Schedule 3.1(dd):Warranties
Schedule 3.1(ee):Employees
Schedule 3.1(ff):Subscribers
Schedule 3.1(gg):Loans to or from Affiliates
Schedule 3.1(ii):Bank Accounts
Schedule 3.1(kk):Assets Necessary to Business
Schedule 3.2(f):Accuracy of Information; Subsequent Events
Schedule 5.1(k):Optionholders; Options
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is entered into and
effective as of this 13th day of February, 1996 by and among Medcross, Inc., a Florida
corporation (the "Purchaser"), ILINK, Ltd., a Utah limited partnership (the "Seller") and
GNet Enterprises, Inc., a Utah corporation and the general partner of the Seller ("GNet").
WITNESSETH:
WHEREAS, the Seller is a development stage Utah limited partnership which,
through its ownership of all of the issued and outstanding shares of capital stock of I-Link
Worldwide Inc. ("Worldwide"), provides Internet access and other related services;
WHEREAS, the Seller consists of 17 partners, 16 of which are limited partners and
one of which, GNet is the general partner and is a party hereto;
WHEREAS, Worldwide is a Utah corporation having authorized capital stock
consisting of 100 shares of common stock, par value $.01 per share (the "Worldwide Stock")
and no shares of preferred stock;
WHEREAS, the Seller owns 100 shares of Worldwide Stock, which shares represent
all of the issued and outstanding shares of capital stock of Worldwide;
WHEREAS, Worldwide owns all of the assets, properties and rights, including
without limitation, any and all furniture, fixtures, equipment, telephonic and electronic
devices, facsimile machines, computers, computer equipment, software programs, copyrights,
network licenses, proprietary licenses, subscriber and customer lists, accounts receivable,
leases, and all intellectual property necessary or appurtenant to the Internet access business
conducted by the Seller and the Fax-Link business proposed to be conducted by the Seller
(the "Business") and the services and products related thereto which are offered by the
Seller (collectively, the "Assets");
WHEREAS, the Seller desires to sell, assign, transfer and convey to the Purchaser,
pursuant to the terms and subject to the conditions set forth in this Agreement, all of the
Seller's right, title and interest in and to all of the issued and outstanding shares of
Worldwide Stock, thereby conveying all of its right, title and interest in the Business and the
Assets;
WHEREAS, the Purchaser is a Florida corporation having authorized capital stock
consisting of 20,000,000 shares of common stock, par value $.007 per share (the "Purchaser
Stock") and 500,000 shares of preferred stock, par value $10.00 per share (the "Preferred
Stock"), of which 1,803,092 shares of common stock and 200,000 shares of Preferred Stock
are issued and outstanding as of the date hereof;
<PAGE>
WHEREAS, it is the desire of the Purchaser to purchase, obtain and acquire from
the Seller, pursuant to the terms and subject to the conditions set forth in this Agreement,
all of the Seller's right, title and interest in and to all of the issued and outstanding shares
of Worldwide Stock, thereby acquiring all of the Seller's right, title and interest in and to
the Business and the Assets; and
WHEREAS, the parties intend that the transactions described herein qualify as a
reorganization under section 368(a)(1)(B) of the Internal Revenue Code of 1986, as
amended. The transactions described herein are part of a plan of reorganization pursuant
to which the Purchaser will acquire all of the Worldwide Stock from the Seller in exchange
solely for shares of Purchaser Stock;
NOW THEREFORE, in consideration of the premises and mutual covenants,
conditions and agreements contained herein and for such other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties
hereto, each intending to be legally bound hereby, agree as follows:
ARTICLE I
PURCHASE OF WORLDWIDE STOCK
1.1 Purchase and Sale of Worldwide Stock. Upon the terms and subject to the
conditions set forth in this Agreement, the Seller hereby agrees that on the Closing Date
(as hereinafter defined in Section 2.1), the Seller shall sell, assign, transfer and convey to
the Purchaser, and the Purchaser hereby agrees to purchase, obtain and acquire from the
Seller, all of the Seller's right, title and interest in and to all of the issued and outstanding
shares of Worldwide Stock, thereby conveying all of its right, title and interest in the
Business and the Assets, free and clear of any and all claims, liens and/or encumbrances.
The Seller hereby further agrees, upon the terms and subject to the conditions set forth
herein, to transfer and deliver to the Purchaser at the Closing (as hereinafter defined in
Section 2.1) certificates, properly endorsed in blank or accompanied by a properly executed
stock power, representing all of the issued and outstanding shares of Worldwide Stock.
1.2 Purchase Price. In consideration of and in exchange for the Seller's sale,
assignment, transfer and conveyance of all of the issued and outstanding shares of
Worldwide Stock to the Purchaser, the Purchaser hereby agrees to issue to the Seller or to
the partners of the Seller listed on Schedule 1.2 hereto (as directed by the Seller) shares of
Purchaser Stock as follows:
(a) Consideration. The Purchaser shall issue an aggregate of 4,000,000
shares of Purchaser Stock, of which 1,400,000 shares of Purchaser Stock shall be issued on
the Closing Date and 2,600,000 shares of Purchaser Stock shall be issued on the Closing
Date and placed in escrow and released upon the fulfillment of the conditions set forth
below.
<PAGE>
(b) Conditions to Release of Escrowed Purchaser Stock. The release of
the 2,600,000 shares of Purchaser Stock subject to escrow as described herein shall be
governed by an escrow agreement between the Seller and the Purchaser, the terms and
conditions of which shall be set forth in a definitive escrow agreement substantially in the
form attached hereto as Exhibit 1.2(b) (the "Escrow Agreement"). The Escrow Agreement
shall provide that the 2,600,000 shares of Purchaser Stock shall: (i) be issued in the name
of the Seller or the partners of the Seller listed on Schedule 1.2 hereto (as directed by the
Seller); (ii) bear a legend relating to the restrictions on transfer thereof imposed by the
Securities Act of 1933 (the "Securities Act"); and (iii) be placed into escrow with the law
firm of De Martino Finkelstein Rosen & Virga, counsel to the Purchaser (the "Escrow
Agent"). The Escrow Agreement shall further provide that: (x) 1,600,000 shares of the
Purchaser Stock subject thereto shall be released at such time as the Purchaser receives
gross proceeds greater than or equal to $4,000,000 from the sale of its securities pursuant
to the conduct of one or more private or public offerings prior to December 31, 1996; and
(y) the remaining 1,000,000 shares of the Purchaser Stock subject thereto shall be released
in the event of and at such time as the monthly revenue derived from the subscribers
serviced by the Business (the "Subscribers") and revenue from the sale of related products
or services equals or exceeds $1,000,000 or the number of Subscribers serviced by the
Business exceeds 100,000 one year from the date of receipt by the Purchaser of gross
proceeds greater than or equal to $4,000,000 from the sale of its securities pursuant to the
conduct of one or more private or public offerings. In addition to the foregoing, upon
placement of the Purchaser Stock into escrow pursuant to the Escrow Agreement, the Seller
(or the partners thereof, as the case may be) shall deliver to the Escrow Agent an
irrevocable proxy coupled with an interest which provides that the shares of Purchaser Stock
held in escrow shall be voted on any matter submitted to a vote of stockholders in
accordance with the ratio of all remaining votes cast on such matter.
ARTICLE II
CLOSING
2.1 Date and Time of Closing. Subject to satisfaction of the conditions set forth
in this Agreement and compliance with the other provisions hereof, the closing of the
transactions contemplated by this Agreement (the "Closing") shall take place on
February 15, 1996 at 10:00 a.m. (eastern time) at the law offices of De Martino Finkelstein
Rosen & Virga, 1818 N Street, N.W., Suite 400, Washington, D.C. 20036, or at such other
place and time thereafter as shall be mutually agreeable to the parties hereto, but in no
event later than March 15, 1996, unless otherwise extended by mutual agreement of the
parties hereto (the "Closing Date").
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Seller and GNet. The Seller and GNet
represent and warrant to the Purchaser as follows:
(a) Authorization. The execution, delivery and performance of this
Agreement and consummation of the transactions contemplated hereby have been duly
authorized by the Seller. The Seller has taken all necessary action and has all the necessary
power to enter into this Agreement and to consummate the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by GNet as the
general partner of the Seller on its behalf, and assuming that this Agreement is the valid
and binding obligation of the Purchaser, is the valid and binding obligation of the Seller,
enforceable against the Seller in accordance with its terms, except as such enforcement may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect, or by legal or equitable principles, relating to or limiting
creditors' rights generally and except that the remedy of specific performance and injunctive
and other forms of equitable relief are subject to certain equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
(b) Organization. The Seller is a limited partnership duly formed, validly
existing and in good standing under the laws of the State of Utah. Other than as set forth
on Schedule 3.1(b) hereto, the Seller has the requisite power and authority to own and lease
its properties and assets and to carry on its business as it is now being conducted and is duly
qualified to do business as a foreign entity in each jurisdiction where it owns or leases real
property or conducts business, except where the failure to be so qualified would not have
a material adverse effect on the business, operations, earnings, prospects, assets or condition
(financial or otherwise) of the Seller. Set forth on Schedule 3.1(b) hereto is a true and
correct list of each jurisdiction in which the Seller is qualified to do business. Other than
the shares of Worldwide Stock, the Seller does not own any shares of capital stock or other
interest in any corporation, partnership, association or other entity.
(c) General Partner. GNet is the sole general partner of the Seller
pursuant to the terms of the Partnership Agreement. GNet is a corporation duly formed,
validly existing and in good standing under the laws of the State of Utah. GNet has the
requisite power and authority to enter into, execute and perform its obligations hereunder
on behalf of the Seller. GNet owns its interest in the Seller free and clear of any and all
adverse claims, liens, mortgages, charges, security interests, pledges, encumbrances or other
restrictions or limitations of any kind whatsoever.
(d) Partnership Agreement; Structure. The Seller has heretofore delivered
to the Purchaser a true and correct copy of the partnership agreement, as amended, among
the partners (the "Partnership Agreement"), which agreement is in full force and effect as
<PAGE>
of the date hereof. The number of partners of the Seller as of the date hereof is as set forth
above in the recitals to this Agreement. The name of each partner of the Seller and its
percentage of interest in the Seller is as set forth on Schedule 3.1(d) hereto and is correct
and accurate as of the date hereof. The outstanding partnership interests in the Seller have
been duly authorized, validly issued and are fully paid. Such interests represent all of the
outstanding ownership or other interests in the Seller. The Seller has not sold or conveyed
any interests in the partnership which could give rise to claims for violation of any federal
or state securities laws (including any rules or regulations promulgated thereunder) or the
securities laws of any other jurisdiction (including any rules or regulations promulgated
thereunder). As of the date hereof, there are no options or commitments of any kind
whatsoever relating to the outstanding partnership interests in the Seller.
(e) Existence of and Actions Against Seller. Nothing has come to the
attention of the Seller that would lead the Seller to believe that any party presently intends
to or has taken any action intended to cause the termination of the Seller as a partnership
prior to the termination date set forth in the Partnership Agreement, other than as
contemplated hereby or necessary to consummation of the transactions described herein.
(f) Organization of Worldwide. Worldwide is a corporation duly
organized, validly existing and in good standing under the laws of the State of Utah.
Worldwide has the corporate power and authority to own and/or lease the Assets and to
carry on the Business as it is now being conducted and, except as set forth on Schedule
3.1(f) hereto, is duly qualified to do business as a foreign corporation in each jurisdiction
where it owns and/or leases any of the Assets or conducts the Business, except where the
failure to be so qualified would not have a material adverse effect on the Assets or the
Business, or the operations, earnings, prospects, or condition (financial or otherwise) of
Worldwide.
(g) Capitalization of Worldwide. The number of authorized, issued and
outstanding shares of capital stock of Worldwide as of the date hereof is as set forth above
in the recitals to this Agreement. The outstanding shares of Worldwide Stock have been
duly authorized, validly issued and are fully paid and non-assessable. The Seller hereby
represents and warrants that it is the sole legal and beneficial owner of the number of
shares of Worldwide Stock as set forth in the recitals to this Agreement, which shares, in
the aggregate, represent all of the issued and outstanding shares of capital stock of
Worldwide. The Seller hereby represents and warrants that the issued and outstanding
shares of Worldwide Stock owned by the Seller are owned, in each case, free of preemptive
rights and free and clear of all adverse claims, liens, mortgages, charges, security interests,
encumbrances and other restrictions or limitations of any kind whatsoever. Worldwide has
not issued any shares of capital stock which could give rise to claims for violation of any
federal or state securities laws (including any rules or regulations promulgated thereunder)
or the securities laws of any other jurisdiction (including any rules or regulations
promulgated thereunder). As of the date hereof, there are no options, warrants, calls,
convertible securities or commitments of any kind whatsoever relating to the shares of
Worldwide Stock to be acquired by the Purchaser pursuant hereto or any of the unissued
shares of capital stock of Worldwide, and there are no voting trusts, voting agreements,
<PAGE>
stockholder agreements or other agreements or understandings of any kind whatsoever
which relate to the voting of the capital stock of Worldwide.
(h) Financial Statements. The Seller has heretofore delivered to the
Purchaser an unaudited interim balance sheet as at September 30, 1995 and an audited
balance sheet as at December 31, 1994 (the "Balance Sheets") and the related audited
statements of revenues and expenses for the period from inception (August 1, 1994) through
December 31, 1994 and unaudited statements of revenues and expenses for the interim
period ended September 30, 1995 (all of the foregoing, including the notes thereto, may
collectively be referred to hereinafter as the "Financial Statements") accompanied by the
corresponding relevant opinions and reports of the Seller's independent auditors as of the
same dates and for the same periods. The Financial Statements present fairly, in all
material respects, the financial position of the Seller as of the respective dates indicated and
the revenues and expenses of the Seller for the respective periods indicated in conformity
with generally accepted accounting principles applied on a consistent basis.
(i) Assets of Worldwide. The following Assets (which constitute all of the
Assets previously owned and/or held by the Seller) are owned, as of the date hereof, and
will be owned, on the Closing Date, by Worldwide as follows:
(i) Worldwide owns and holds all right, title and interest in: (i) fee
ownership of any real property listed on Schedule 3.1(i)(i) hereto (the "Owned Real
Property"); (ii) leases of real property listed on Schedule 3.1(i)(i) hereto (such leases shall
be referred to hereinafter as the "Real Property Leases" and the properties subject thereto
shall be referred to hereinafter as the "Leased Real Property"); (iii) the improvements and
fixtures located on the Leased Real Property (the "Improvements"); (iv) the personal
property associated with operation of the Owned Real Property and the Leased Real
Property (the "Related Property"); and (v) all appurtenances, rights, easements,
rights-of-way, tenements and hereditament incident to the Owned Real Property and the
Leased Real Property (the "Appurtenances"), except for the interest of the lessor therein.
The Owned Real Property, the Leased Real Property, the Improvements, the Related
Property and the Appurtenances may be collectively referred to hereinafter as the context
may require as the "Real Property");
(ii) Worldwide owns all machinery, equipment, vehicles, furniture,
tools, spare parts, supplies, materials, and other similar personal property used in the
Business and located at any of the locations listed in Schedule 3.1(i)(i) (the "Business
Locations"), including without limitation, the items described in Schedule 3.1(i)(ii) hereto,
with such additions thereto and deletions therefrom as may have arisen since the date of
such Schedule 3.1(i)(ii), or may hereafter arise in the ordinary course of business and
consistent with prior practice before the Closing Date (the "Owned Personal Property");
(iii) Worldwide owns and holds all right, title and interest under
leases of machinery, equipment, vehicles, furniture, tools, spare parts, supplies, materials and
other personal property used in the Business and located at any of the Business Locations,
<PAGE>
including without limitation, those which are listed and described in Schedule 3.1(i)(iii)
hereto, with such additions thereto and deletions therefrom as may hereafter arise in the
ordinary course of business and consistent with prior practice before the Closing Date (the
"Personal Property Leases");
(iv) Worldwide owns and holds all right, title and interest of the
Seller in the inventory items (including, without limitation, raw materials, work in process,
samples, finished goods and products) of the Seller used in the Business and located at any
of the Business Locations, including without limitation, the items listed on Schedule
3.1(i)(iv) hereto (the "Inventory");
(v) Worldwide owns and holds all right, title and interest under any
agreements related to the Business, including without limitation: (i) agreements for the
purchase or sale of goods, materials, supplies, customer lists, vendor lists, subscriber lists,
machinery, capital assets or services; (ii) agreements with any subscriber, vendor, supplier,
distributor, dealer, sales agent or representative; (iii) joint venture or partnership
agreements with any other person or entity; and (iv) any other agreements in any way
related to the Business, each of which agreements is listed in Schedule 3.1(i)(v) hereto, with
such additions thereto and deletions therefrom as may hereafter arise in the ordinary course
of business and consistent with prior practice before the Closing Date (collectively, the
"Assigned Contracts");
(vi) Worldwide owns and holds originals (or, where appropriate,
copies) of all operating data and records in any way related to the Business, including books,
records, blueprints, specifications, customer lists, supplier lists, vendor lists, subscriber lists,
credit information and correspondence;
(vii) Worldwide owns or has a valid license for and holds all
computer software, computer software programs and any and all related documentation in
any way relevant to the foregoing or to the Business;
(viii)Worldwide owns and holds all right, title and interest in and to
any and all intellectual property in which the Seller had a right or to which the Seller had
a claim, including without limitation, any and all domestic and foreign patents, patent
applications, trademarks, trademark applications, copyrights, copyright applications, trade
names, trade rights, whether or not registered, inventions, discoveries, improvements,
designs, patterns, processes, formulae, trade secrets, proprietary rights and data, ideas and
know-how, whether patentable or not (including specifically all of the foregoing as the same
relate to Fax-Link, which, as of the date hereof, is not owned by Worldwide, but which will
be owned by Worldwide upon the Closing Date) and the assignable licenses and permits
listed in Schedule 3.1(i)(viii) hereto (the "Intellectual Property");
(ix) Worldwide owns and holds all cash, accounts and notes
receivable, prepaid items and all rights to cash deposits related to the Business; and
<PAGE>
(x) Worldwide owns and holds all permits, licenses, approvals and
authorizations issued by federal, state or local governments or governmental authorities
related to compliance by the Business with applicable laws, rules and regulations.
(j) Owned Real Property. Neither the Seller nor Worldwide owns (of
record or beneficially), nor does either of the Seller or Worldwide have any interest in, any
real property, other that the Leased Real Property. Except for its prior interest in the
Leased Real Property and in any easements or rights-of-way previously established for the
benefit of the Seller which are appurtenant thereto, the Seller did not previously own any
real property.
(k) Leased Real Property; Tenancies. Set forth on Schedule 3.1(i)(i)
hereto is a true, correct and complete list of all of the Real Property Leases. Also set forth
on Schedule 3.1(i)(i) is a true, correct and complete list of the monthly or annual rental
payments due thereunder as of the date hereof and the expiration dates thereof. The Seller
and/or Worldwide has delivered to the Purchaser true, correct and complete copies of each
of the Real Property Leases. Schedule 3.1(i)(i) also sets forth: (1) a list of those Real
Property Leases for which the landlord/lessor consent was required to effectuate the
transactions contemplated hereby; (2) an indication of whether or not, if required, the
requisite prior consent of the landlord/lessor has been obtained as of the date hereof; and
(3) whether, to what extent and the nature of any defaults that exist under such Real
Property Leases. Except as set forth on Schedule 3.1(i)(i), the Seller was not and
Worldwide is not required pursuant to the provisions of any of the Real Property Leases (or
otherwise) to obtain the consent of any lessor with respect to the Leased Real Property
prior to or in connection with consummation of the transactions contemplated hereby. The
Seller and/or Worldwide are currently in default under certain of the Real Property Leases;
however, the aggregate amount of liability on such leases does not exceed $18,000. To the
extent and in the event that such liability exceeds $18,000, the Seller hereby agrees to hold
harmless and indemnify the Seller against any liability resulting from such defaults in an
amount in excess of $18,000. There were no and, as of the date hereof, there are no
subleases or subtenancies for any part of the Leased Real Property that shall remain in
effect after the Closing Date and, to the best knowledge of the Seller, there was no and, as
of the date hereof, there is no third party which has any right to purchase, use or otherwise
possess all or any part of the Leased Real Property.
(l) Title. The Seller previously owned and, as of the date hereof,
Worldwide owns good and marketable title to all of the Assets, including without limitation
the assets and properties reflected on the Balance Sheets or purchased by the Seller or
Worldwide after the date thereof, except supplies consumed or assets or properties sold in
the ordinary course of business subsequent to the date thereof. To the best knowledge of
the Seller, the Leased Real Property is leased free and clear of all adverse claims, liens,
mortgages, charges, security interests, encumbrances and other restrictions or limitations of
any kind whatsoever, except: (A) as stated in the Financial Statements (including the notes
thereto); (B) for liens for taxes or assessments not yet due and payable or which are being
contested by the Seller or Worldwide in good faith; (C) for minor liens imposed by law for
sums not yet due or which are being contested by the Seller or Worldwide in good faith; and
<PAGE>
(D) for imperfections of title, adverse claims, charges, restrictions, limitations,
encumbrances, liens or security interests that are minor and which do not detract from the
value of the Leased Real Property subject thereto or which do not impair the operations of
the Business or affect the present use of the Leased Real Property. To the best knowledge
of the Seller, there was not nor is there, as of the date hereof, any condemnation or eminent
domain proceeding pending or threatened against the Leased Real Property (or any part
thereof). Neither the Seller nor Worldwide has made any commitments or received any
notice, oral or written, from any public authority or other entity with respect to the taking
or use of the Leased Real Property (or any part thereof), whether temporarily or
permanently, for easements, rights-of-way or other public or quasi-public purposes or for any
other purpose whatsoever nor, to the best knowledge of the Seller, was there or, as of the
date hereof, is there any proceeding pending or threatened which could adversely affect the
zoning classification relating to such property or its use. The Assets, including without
limitation the assets reflected on the Balance Sheets or purchased by the Seller or
Worldwide after the date thereof, are owned free and clear of all adverse claims, liens,
mortgages, charges, security interests, encumbrances and other restrictions or limitations of
any kind whatsoever, except: (A) as stated in the Financial Statements (including the notes
thereto); (B) for liens for taxes or assessments not yet due and payable or which are being
contested by the Seller or Worldwide in good faith; (C) for minor liens imposed by law for
sums not yet due or which are being contested by the Seller in good faith; and (D) for
imperfections of title, adverse claims, charges, restrictions, limitations, encumbrances, liens
or security interests that are minor and which do not detract in any material respect from
the value of any of the Assets or which do not impair the Business or operations of the
Business in any material respect or affect the present use of the Assets in any material
respect. Neither the Seller nor Worldwide has made any commitments or received any
notice, oral or written, from any public authority or other entity with respect to the taking
or use of any of the Assets, whether temporarily or permanently, for any purpose
whatsoever, nor is there any proceeding pending or threatened which could adversely affect
the Assets.
(m) Condition of Assets. The Real Property Leases and all other
documents and agreements pursuant to which the Seller had obtained or Worldwide has
obtained the right to use or occupy any real property, personal property or assets, are valid
and enforceable in all respects in accordance with their respective terms, except as such
enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect, or by legal or equitable
principles, relating to or limiting creditors' rights generally and except that the remedy of
specific performance and injunctive and other forms of equitable relief are subject to certain
equitable defenses and to the discretion of the court before which any proceeding therefor
may be brought. Except as otherwise disclosed in the schedules hereto, all rights-of-way,
easements, licenses, permits and authorizations related to the location or operation of the
Business are in good standing and are valid and enforceable in all respects in accordance
with their respective terms; and, except as otherwise disclosed in the schedules hereto, there
is not, under any of the foregoing instruments, documents or agreements, any existing
default, nor is there any event which, with notice or lapse of time or both, would constitute
a default, which could: (i) have a material adverse effect on the Business or the Assets, or
the operations, earnings, prospects or condition (financial or otherwise) of Worldwide; or
(ii) materially adversely affect its use of the Leased Real Property or the title to the Assets.
<PAGE>
The Seller was not and, as of the date hereof, Worldwide is not in violation of and each has
complied and is in compliance with all applicable zoning, building or other codes, statutes,
regulations, ordinances, notices and orders of any governmental authority with respect to the
occupancy, use, maintenance, condition, operation and improvement of the Leased Real
Property and the Assets, except where the failure to comply would not have a material
adverse effect on the Business or the Assets, or the operations, earnings, prospects or
condition (financial or otherwise) of Worldwide. The Seller's prior use and Worldwide's
current use of any improvements for the purposes for which any of the Leased Real
Property and the Assets have been or are being used as of the date hereof does not violate
any such code, statute, regulation, ordinance, notice or order. The Seller previously
possessed and Worldwide currently possesses all licenses, certificates of occupancy, permits
and authorizations required to be obtained with respect to operation and maintenance of
the Leased Real Property and the Assets for all uses for which such property is and the
Assets are operated or used as of the date hereof, except where the failure to do so would
not have a material adverse effect on the Business or the Assets, or the operations, earnings,
prospects or condition (financial or otherwise) of Worldwide and except as otherwise
disclosed in the schedules hereto. All of the Leased Real Property and all other Assets
(whether owned or leased) are in good operating condition and repair, subject to normal
wear and use, and each such item is usable in a manner consistent with prior use by the
Seller and current use by Worldwide.
(n) Intellectual Property.
(i) Schedule 3.1(i)(viii) hereto sets forth a true, correct and
complete list (including where applicable, the date of registration and the serial or
registration number) of the Intellectual Property, including all registered and unregistered
trademarks, service marks and trade names (including any applications for the same), trade
secrets, registered and unregistered copyrights, and computer programs and software
(whether or not protected by patent, copyright or otherwise) which are owned by, licensed
by, used in or are material to the Business. With respect to each of the foregoing items,
there is listed on Schedule 3.1(i)(viii) hereto the following: (A) the extent of the Seller's
prior and Worldwide's current interest therein; (B) each agreement and all other documents
evidencing the Seller's prior and Worldwide's current interest therein; (C) the extent of the
interest of any third party therein; and (D) each agreement and all other documents
evidencing the interest of any third party therein.
(ii) The Seller's prior and Worldwide's current interest in each such
registered and unregistered trademark, service mark, or trade name (including any
applications for the same), patent, patent applications, trade secrets, registered and
unregistered copyrights and computer programs and software listed on Schedule 3.1(i)(viii)
are free and clear of adverse claims, liens, mortgages, charges, security interests and
encumbrances or other restrictions or limitations of any kind whatsoever.
(iii) The Seller had and Worldwide has all right, title and interest in
and to the Intellectual Property which is necessary for the non-infringing production,
distribution, use or sale of all of the goods and services which the Seller previously and
Worldwide currently produces, uses, distributes, sells or provides in connection with or in
any way related to the Business as currently conducted.
<PAGE>
(iv) Neither the Seller nor Worldwide has committed any acts of
unfair competition or directly, indirectly, contributorily or by inducement, infringed upon any
patent, trademark, service mark, trade name, copyright, computer program or software, or
any other intellectual property, nor has the Seller or Worldwide misappropriated any of the
foregoing from any other person or entity or received from any other person or entity any
notice, charge, claim or other assertion with respect thereto.
(v) Neither the Seller nor Worldwide has sent or otherwise
communicated to any other person or entity any notice, charge, claim or other assertion of,
nor has the Seller or Worldwide any knowledge of any present, impending or threatened
infringement upon any patent, trademark, service mark, trade name, copyright, computer
program or software, or any other intellectual property by any other person or entity, or
misappropriation of any of the foregoing by any other person or entity, or any commission
of acts of unfair competition by any other person or entity.
(o) Inventory. Schedule 3.1(i)(iv) hereto sets forth a true, correct and
complete list of the Inventory as of January 31, 1996. There have been no changes in the
Inventory since such date other than ordinary business reductions due to sales and increases
due to receipt of items of Inventory received in the ordinary course of the conduct of the
Business consistent with its past practices. The Seller has delivered the Balance Sheets
which accurately, correctly and completely set forth the value of the Inventory at the
respective dates thereof. The Inventory consists only of items in current product lines or
items which are used in the production or distribution thereof. All items in the Inventory
are of a quality and quantity usable or saleable in the ordinary course of business and are
not obsolete, defective or damaged in any way. The Inventory is valued on the books of the
Seller and is reflected on such Balance Sheets in accordance with generally accepted
accounting principles consistently applied.
(p) Accounts Receivable. Schedule 3.1(p) hereto sets forth a true, correct
and complete list of the accounts receivable (the "Accounts Receivable") as of January 31,
1996. The Seller has delivered the Balance Sheets which accurately, correctly and
completely reflect the aggregate amount of Accounts Receivable at the respective dates
thereof. There have been no material changes in the Accounts Receivable since such date
other than those incurred in the ordinary course of the conduct of the Business consistent
with past practices. All of the Accounts Receivable are valid, arose out of bona fide
transactions in the ordinary course of business, and are the valid and binding obligations of
and are enforceable against the respective account debtors thereunder, except as such
enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect. The Accounts Receivable
have: (i) been collected; (ii) are collectible in the ordinary course of business; or (ii) have
been adequately reserved for in accordance with generally accepted accounting principles
consistently applied. Except as disclosed on Schedule 3.1(p), there is no contest, claim or
<PAGE>
right of set-off contained in any written agreement with any account debtor relating to the
amount or validity of any Account Receivable.
(q) Accounts Payable. Schedule 3.1(q) hereto sets forth a true, correct and
complete list of the accounts payable (the "Accounts Payable") as of January 31, 1996. The
Seller has delivered the Balance Sheets which accurately, correctly and completely reflect
the aggregate amount of Accounts Payable at the respective dates thereof. There have been
no material changes in the Accounts Payable since such date other than those incurred in
the ordinary course of the conduct of the Business consistent with past practices. Except
as set forth on Schedule 3.1(q), all of the Accounts Payable are current (within 30 days),
arose out of bona fide transactions in the ordinary course of business, and are the valid and
binding obligations of and are enforceable against the Seller, except as such enforcement
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect.
(r) Absence of Undisclosed Liabilities. Other than as set forth on the
Balance Sheets, none of the Seller, GNet or Worldwide had or has any indebtedness, loss
or liability of any nature whatsoever (other than those incurred in the ordinary course of
business), whether accrued, absolute, contingent or otherwise and whether due or become
due, which is material to the Assets or the Business, or the operations, prospects, earnings
or condition (financial or otherwise) of Worldwide.
(s) Absence of Certain Changes or Events. Except as set forth on
Schedule 3.1(s) and except as expressly set forth in this Agreement, since September 30,
1995:
(i) the Seller has not amended its certificate of formation (the
"Certificate of Formation') or the Partnership Agreement;
(ii) Worldwide has not, since its organization, amended its certificate
of incorporation (the "Worldwide Certificate of Incorporation") or its bylaws (the
"Worldwide Bylaws");
(iii) Worldwide has not issued, sold, granted or contracted to issue,
sell or grant any of its shares of capital stock, notes, bonds, other securities or any option
to purchase any of the foregoing;
(iv) neither the Seller nor Worldwide has made any capital
expenditures or commitments for the acquisition or construction of any property, plant or
equipment other than in the ordinary course of business;
(v) neither the Seller nor Worldwide has entered into any material
transaction in any way inconsistent with the past practices of the Business or conducted the
Business in any manner inconsistent with past practices;
<PAGE>
(vi) neither the Seller nor Worldwide has incurred any damage,
destruction or any other loss to any of the Assets or Leased Real Property in an aggregate
amount exceeding Fifty Thousand Dollars ($50,000) whether or not covered by insurance;
(vii) neither the Seller nor Worldwide has suffered any loss and,
neither Seller nor Worldwide has become aware of any intention on the part of any
subscriber, customer, dealer, vendor or supplier to discontinue its relationship as established
with the Seller or its current relationship with Worldwide, the loss or discontinuance of
which, alone or in the aggregate, could have a material adverse effect on the Business or
the Assets, or the operations, earnings, prospects or condition (financial or otherwise) of
Worldwide;
(viii)neither the Seller nor Worldwide has modified, amended or
altered any contractual arrangement with any customer, dealer or supplier, the modification,
amendment or alteration of which, alone or in the aggregate, could have a material adverse
effect on the Business or the Assets, or the operations, earnings, prospects or condition
(financial or otherwise) of Worldwide;
(ix) neither the Seller nor Worldwide has incurred any material
liability or obligation (absolute or contingent) or made any material expenditure other than
in the ordinary course of business;
(x) neither the Seller nor Worldwide has experienced any material
adverse change in the Business or the Assets, or the operations, earnings, prospects or
condition (financial or otherwise) of Worldwide or experienced or have knowledge of any
event which could have a material adverse effect on the Business or the Assets, or the
operations, earnings, or condition (financial or otherwise) of Worldwide;
(xi) neither the Seller nor Worldwide has granted, conveyed,
transferred, assigned or made any sale of Accounts Receivable or any accrual of liabilities
outside of the ordinary course of business;
(xii) neither the Seller nor Worldwide has granted, conveyed,
transferred, assigned or made any sale of any interest in the Intellectual Property;
(xiii)neither the Seller nor Worldwide has purchased, disposed of or
contracted to purchase or dispose of, or granted or received an option or any other right to
purchase or sell, any of the Assets, except in the ordinary course of business;
(xiv) neither the Seller nor Worldwide has increased the rate of
compensation payable or to become payable to employees, or increased the amounts paid
or payable to such employees under any bonus, insurance or other compensation plan, or
made any arrangements therefor with or for any of said employees except for increases
consistent with the ordinary course of business or increases resulting from the application
of existing formulas under existing agreements or policies relating to employee
compensation;
<PAGE>
(xv) neither the Seller nor Worldwide has changed any accounting
principle, procedure or practice previously followed by the Seller or changed the method of
applying such principle, procedure or practice.
(t) Agreements. Set forth on Schedule 3.1(t) hereto is a true, correct and
complete list of all contracts, agreements and other instruments material to the Business,
including without limitation, those to which the Seller was or Worldwide is a party and those
by which any of the Assets are bound. Copies of all such agreements have heretofore been
delivered or made available to the Purchaser. Other than as set forth on Schedule 3.1(t),
there is no contract or agreement to which the Seller was or Worldwide is a party or which
affects the Assets or which is material to the Business. Except as otherwise previously
disclosed to the Purchaser in writing or set forth on the schedules hereto, neither the Seller
nor Worldwide is a party to or bound by, nor are any of the Assets subject to, any material
written or oral agreement, including without limitation, the following:
(i) any agreement which has not been entered into or received in
the ordinary course of business or which is not consistent with the prior practice of the
Seller or current practice of Worldwide;
(ii) any agreement which involves the purchase or sale of goods or
payment by or to the Seller or Worldwide for services rendered with a value in excess of
Fifty Thousand Dollars ($50,000) which is not cancelable within thirty (30) days of the
Closing Date by the Seller upon notice given on or prior to the Closing Date;
(iii) any agreement for the employment of any partner or employee
or former partner or employee of the Seller or any officer, director or stockholder of
Worldwide (other than, with respect to any employee, agreements which are terminable
without liability upon notice of thirty (30) days or less and do not provide for any further
payments following such termination) pursuant to which payments may be required to be
made at any time following the Closing Date in an aggregate amount exceeding Fifty
Thousand Dollars ($50,000).
(iv) any mortgage, deed of trust or other form of secured
indebtedness for borrowed money;
(v) any debentures, indentures, notes or installment obligations, the
unpaid balance of which exceeds Fifty Thousand Dollars ($50,000) in the aggregate, or other
instruments for or relating to any unsecured borrowing of money by the Seller or
Worldwide, the unpaid balance of which exceeds Fifty Thousand Dollars ($50,000) in the
aggregate;
(vi) any guaranty of any obligation of any person or party for
borrowings or otherwise, excluding endorsements made for collection in the ordinary course
of business;
<PAGE>
(vii) any agreement or arrangement for the sale or lease of any of the
Assets (other than that which is included in the Inventory) having a book value in excess of
Fifty Thousand Dollars ($50,000) in the aggregate;
(viii)any agreement or agreements pursuant to which the Seller was
or Worldwide is or may be obligated to make any payments, contingent or otherwise, in
excess of Fifty Thousand Dollars ($50,000) in the aggregate, resulting from or arising out
of the prior acquisition of any business, or of all or substantially all of the assets of any
company or any division thereof;
(ix) any agreement, including but not limited to assignments, licenses,
transfers of exclusive rights, "work for hire" agreements, special commissions, employment
agreements, purchase orders, sales orders, mortgages and security agreements, to which the
Seller is a party and which: (A) contains a grant or other transfer by the Seller or
Worldwide, whether present, retroactive, prospective, or contingent, of any rights in any
Intellectual Property, whether or not such Intellectual Property was in existence at the time
such agreement was made; or (B) contains a promise made by the Seller or Worldwide to
pay any consideration, lump sum, royalty or other payment with respect to the acquisition,
license or use of any rights in any Intellectual Property without regard to whether such
consideration, lump sum, royalty or other payment was ever made or received;
(x) any dealership, franchise or distribution agreement, territory or
license agreement or other similar agreement;
(xi) any agreement with any partner or employee of the Seller (or
the immediate family of any of the foregoing), or any officer, director, stockholder or
employee of Worldwide (or the immediate family of any of the foregoing) or any affiliate
thereof;
(xii) any unexpired and enforceable agreements for the disposition
of the Assets; or
(xiii)any other agreement, contract, document or instrument not
entered into in the ordinary course of business which is material to the Business and not
excluded by reason of operation of this or any other provision of this Agreement.
Except as set forth in the schedules hereto, neither the Seller nor Worldwide is, nor
to the best knowledge of the Seller, is any third party, in default and no event has occurred
which, with notice or lapse of time or both, could cause or become a default by the Seller
or Worldwide or, to the best knowledge of the Seller, by any third party, under any contract,
agreement, document or instrument to which the Seller or Worldwide is a party which is
material to the Business. Each contract, agreement, document or instrument which is
material to the Business is enforceable by Worldwide, in accordance with its terms, against
all other parties thereto, except as such enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter
<PAGE>
in effect, or by legal or equitable principles, relating to or limiting creditors' rights generally
and except that the remedy of specific performance and injunctive and other forms of
equitable relief are subject to certain equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
(u) Non-Contravention; Consents. Neither the execution and delivery of
this Agreement by the Seller, nor consummation of the transactions contemplated hereby,
does or will: (i) violate or conflict with any provision of the Certificate of Formation of the
Seller or the Partnership Agreement; (ii) violate or conflict with any provision of the
Worldwide Certificate of Incorporation or the Worldwide Bylaws; (iii) violate or, with the
passage of time, result in the violation of any provision of, or result in the acceleration of
or entitle any party to accelerate any obligation under, or result in the creation or
imposition of any lien, charge, pledge, security interest or other encumbrance upon any of
the Assets, pursuant to any provision of any mortgage, lien, lease, agreement, permit,
indenture, license, instrument, law, order, arbitration award, judgment or decree to which
the Seller or Worldwide is a party or by which either of them or any of the Assets are
bound, the effect of which violation, acceleration, creation or imposition could result, in the
aggregate, in liability of the Seller or Worldwide in excess of Fifty Thousand Dollars
($50,000); (iv) violate or conflict with any other restriction of any kind whatsoever to which
the Seller or Worldwide is subject, or by which any of the Assets may be bound, the effect
of any of which violations or conflicts would result, in the aggregate, in liability of the Seller
or Worldwide in excess of Fifty Thousand Dollars ($50,000); or (v) constitute an event
permitting termination by a third party of any agreement to which the Seller or Worldwide
is a party or is subject, which termination could have a materially adverse effect on the
Business or the Assets, or the operations, earnings, prospects or condition (financial or
otherwise) of Worldwide. Except as set forth on Schedule 3.1(u) hereto, no consent,
authorization, order or approval of, or filing or registration with, any governmental
commission, board or other regulatory body is required in connection with the execution,
delivery and performance of the terms of this Agreement and consummation of the
transactions contemplated hereby by the Seller.
(v) Labor Relations. There are no agreements with or pending petitions
for recognition of any labor union or association as the exclusive bargaining agent for any
or all of the employees of the Seller or Worldwide and no such petition has been pending
at any time during the two years prior to the date hereof. There has not been any
organizing effort by any union or other group seeking to represent any employees of the
Seller or Worldwide as its exclusive bargaining agent at any time since inception of the
Seller or organization of Worldwide. There are no labor strikes, work stoppages or other
labor disputes now pending or threatened against the Seller or Worldwide, nor has there
been any such labor strike, work stoppage or other labor dispute or grievance at any time
since inception of the Seller or organization of Worldwide. The Seller has no knowledge
that any executive, key employee or any group of employees of the Seller or Worldwide has
any plans to terminate his or her employment with the Seller or Worldwide.
(w) Insurance. Set forth on Schedule 3.1(w) hereto is a true, correct and
complete list of all insurance policies or binders of insurance or programs of self-insurance
<PAGE>
which relate to the Business, copies of which have been previously provided or made
available to the Purchaser. The coverage under each such policy and binder is in full force
and effect. Neither the Seller nor GNet has any knowledge of nor have they or Worldwide
received any notice of cancellation, termination, nonrenewal or disallowance of any claim
thereunder or with respect thereto. Neither the Seller nor GNet has any knowledge of any
facts or the occurrence of any events which could form the basis of any claim against the
Seller or Worldwide relating to the Business or the Assets which could increase the
insurance premiums previously payable by the Seller or currently payable by Worldwide
under such policy or binder in excess of normal increases consistent with industry practices.
(x) Tax Matters. Neither the Seller nor Worldwide is a member of an
affiliated group, within the meaning of Section 1504 of the Internal Revenue Code of 1986
(an "Affiliated Group"). The Seller has filed when due and will file if and when due prior
to the Closing Date (after giving effect to any extensions granted by the requisite legal or
regulatory authority) all returns, reports, elections, estimates, declarations, schedules, forms
and other documents ("Tax Returns") relating to taxes required to be filed by the Internal
Revenue Code of 1986 or by any applicable federal, state, county, municipal, local, foreign
or other laws, including, without limitation, consolidated, combined or unitary returns, for
any taxable period ending prior to or on the Closing Date (the "Pre-Closing Tax Period").
The taxable year of the Seller for federal and state income and business tax purposes ends
on December 31 of each year. All taxes shown on any Tax Return required to be filed with
respect to the Seller for any Pre-Closing Tax Period have been, or will have been, paid or
accrued prior to the Closing. The Seller has heretofore delivered to the Purchaser all Tax
Returns filed on its behalf for the fiscal year ended December 31, 1994 (those for the fiscal
year ended December 31, 1995 having not yet become due). The Seller has fully accrued
on its books all taxes for any periods which are not yet due. No tax liens have been filed,
and no material claims have been or are being asserted or proposed, against the Seller with
respect to any taxes. No Tax Returns have been audited since inception of the Seller by any
taxing authority, no deficiencies or claims have been proposed, assessed or claimed
(including interest and penalties) against the Seller which have not been paid or accrued,
and the Seller has not waived or extended any statute of limitations with respect to the
assessment of any taxes, which waiver or extension has not yet expired by its terms. There
are no suits, actions, proceedings, claims or investigations now pending against the Seller
with respect to any taxes. The Seller has withheld or collected from each payment made
to each of its employees, consultants, contractors and other payees the amount of all taxes
(including, but not limited to, federal income taxes, state and local income and wage taxes,
payroll taxes, workers' compensation and unemployment taxes) required to be withheld or
collected therefrom for all Pre-Closing Tax Periods and the Seller has timely paid or
accrued and reported the same in respect of its employees, consultants, contractors and
other payees to the proper tax receiving offices. Neither the Seller nor Worldwide has any
liability for any taxes of any nature whatsoever other than as shown on the Balance Sheets
(except for liabilities for taxes accruing after the date of the Balance Sheets in the ordinary
course of business) and there is no basis for any additional liabilities for taxes for any
Pre-Closing Tax Period. The reserve for accrued but unpaid taxes for the period ending
December 31, 1995 includes adequate provision for all taxes which have been assessed or
<PAGE>
which will be due and payable by the Seller for all Pre-Closing Tax Periods. The Seller has
not been, and Worldwide will not on the Closing Date be, liable for any taxes for which
adequate provision has not been made. Prior to the date hereof, Worldwide has not been
required to file any Tax Returns. Neither the Seller nor Worldwide files any state or local
tax returns on a unitary or combined basis with any other member of an Affiliated Group.
To the extent that the partners of the Seller may incur tax liability in connection with the
payment of the Purchase Price, each partner and not the Seller, will be responsible for
fulfilling any obligations or liabilities with respect thereto.
The term "taxes" or "tax" as used in this section or referred to elsewhere in this
Agreement shall mean all taxes, charges, fees, levies, penalties, or other assessments,
including without limitation, income, capital gain, profit, gross receipts, ad valorem, excise,
property, payroll, withholding, employment, severance, social security, workers'
compensation, occupation, premium, customs duties, windfall profits, sales, use, and
franchise taxes, imposed by the United States, or any state, county, local or foreign
government or any subdivision or agency thereof, and including any interest, penalties, or
additions attributable thereto.
(y) Compliance with Applicable Law. The Seller and Worldwide have
been and each of the Seller and Worldwide currently is in compliance with all foreign,
federal, state and local laws, statutes, ordinances, rules and regulations, except where the
failure to comply with which would not materially adversely affect the Business or the
Assets, or the operations, earnings, prospects or condition (financial or otherwise) of
Worldwide or which would subject any partner of the Seller to civil or criminal penalties or
imprisonment. The Seller and Worldwide have complied and each are in compliance with
the rules and regulations of all governmental agencies having authority over the Business,
except where the failure to comply would not have a material adverse effect on the Business
or the Assets, or the operations, earnings, prospects, assets or condition (financial or
otherwise) of Worldwide. Neither the Seller nor GNet has any knowledge of or received
any notice of violation of any such rule or regulation which could result in any liability of
the Seller or Worldwide for penalties or damages or which could subject the Seller to any
injunction or government writ, order or decree. There are no facts, events or conditions that
could interfere with, prevent continued compliance with or give rise to any liability under
any foreign, federal, state or local governmental laws, statutes, ordinances or regulations
applicable to the Business or the Assets, or the operations, earnings, prospects or condition
(financial or otherwise) of Worldwide, except where the failure to do so would not have a
material adverse effect on the Business or the Assets, or the operations, earnings, prospects,
assets or condition (financial or otherwise) of Worldwide
(z) Litigation. Except as set forth in Schedule 3.1(z), there is no action,
suit, proceeding or investigation pending or, to the best knowledge of the Seller and GNet,
threatened against the Seller or Worldwide, which could restrict the Seller's ability to
perform its obligations hereunder or could have a material adverse effect on the Business
or the Assets, or the operations, earnings, prospects or condition (financial or otherwise) of
Worldwide. To the best knowledge of the Seller and GNet, there are no grounds for or
facts, events or circumstances which could form the basis of any such action that could cause
or result in any such action, suit, proceeding or investigation or which is probable of
<PAGE>
assertion. Neither the Seller nor Worldwide is in default in respect of any judgment, order,
writ, injunction or decree of any court or any federal, state, local or other governmental
agency, authority, body, board, bureau, commission, department or instrumentality which
could have a material adverse effect on the Business or the Assets, or the operations,
earnings, prospects or condition (financial or otherwise) of Worldwide.
(aa) Permits. The Seller held and Worldwide currently holds all permits,
licenses, orders and approvals of all federal, state or local governmental or regulatory
authorities, agencies or bodies required for the conduct and operation of the Business as
currently conducted, except where the failure to do so would not have a material adverse
effect on the Business or the Assets, or the operations, earnings, prospects, assets or
condition (financial or otherwise) of Worldwide. All such permits, licenses, orders, and
approvals are in full force and effect and no suspension, termination or revocation of any
of the foregoing is, to the best knowledge of the Seller and GNet, threatened. None of such
permits, licenses, orders or approvals will be adversely affected by consummation of the
transactions contemplated by this Agreement. The Seller and Worldwide have complied and
each are in compliance with the rules and regulations of all governmental or other
regulatory agencies, authorities, bodies, boards, bureaus, commissions, departments or
instrumentalities which regulate, supervise or are in any manner concerned with import and
export licenses, occupational safety, environmental protection and employment practices
relating to the Business, except where the failure to do so would not have a material adverse
effect on the Business or the Assets, or the operations, earnings, prospects, assets or
condition (financial or otherwise) of Worldwide. Neither the Seller nor GNet has any
knowledge of nor has it received any notice of violation of any of such rules or regulations
which would result in any liability of the Seller or Worldwide for penalties or damages or
which would subject the Seller or Worldwide to any injunction or governmental writ, order
or decree.
(ab) Restrictive Covenants. Neither the Seller nor Worldwide is a party to
any agreement, contract or covenant limiting the freedom of Worldwide to compete in any
line of business or with any person or other entity in any geographic region within or outside
of the United States of America.
(ac) Unlawful Payments. Neither: (i) the Seller nor any partner, employee,
agent or representative of the Seller, nor (ii) Worldwide nor any officer, director, employee,
agent or representative of Worldwide, has made, directly or indirectly, any bribe or
kickback, illegal political contribution, payment from corporate funds which was incorrectly
recorded on the books and records of the Seller or Worldwide, respectively. None of the
foregoing individuals or entities has made unlawful payment from business, partnership or
corporate funds to governmental or municipal officials in their individual capacities for the
purpose of affecting their action or the actions of the jurisdiction which they represent to
obtain favorable treatment in securing business or licenses or to obtain special concessions
of any kind whatsoever, or illegal payment from corporate funds to obtain or retain any
business.
<PAGE>
(ad) Warranties. Except as required or implied by federal or state law or
as otherwise disclosed on Schedule 3.1(dd) hereto, neither the Seller nor Worldwide has
made, extended or otherwise represented that it would provide any express warranty with
respect to the products or services sold, distributed or leased to its clients or customers.
(ae) Employees. Set forth on Schedule 3.1(ee) hereto is a true, correct and
complete list of all of the employees of the Seller and/or Worldwide as of the date hereof,
including their respective names, titles and salaries. Also set forth on Schedule 3.1(ee) is
a true, correct and complete list of any employment agreements between the Seller and/or
Worldwide and any of the foregoing employees in effect as of the date hereof, including
summaries of the material terms of each such agreement.
(af) Subscribers. Set forth on Schedule 3.1(ff) hereto is a true, correct and
complete list of all Subscribers as of the date hereof, including their respective addresses
and the amounts previously owed to the Seller and/or currently owed to Worldwide by each
such subscriber.
(ag) Loans to or from Affiliates. Set forth on Schedule 3.1(gg) hereto is a
true, correct and complete list of all of the outstanding loans extended by the Seller to any
current or former partner, employee or consultant of the Seller or any affiliate of any of
the foregoing. Also set forth on Schedule 3.1(gg) is a true, correct and complete list of all
of the outstanding loans extended to the Seller by any current or former employee or
consultant of the Seller. Such schedule reflects the original principal amount of each loan,
the outstanding principal balance thereunder as of the date hereof, the interest rate
applicable thereto and the maturity date thereof. Except as set forth on Schedule 3.1(gg),
there are no other loans pursuant to which the Seller is owed or owes money which involve
any partner, employee or consultant of the Seller.
(ah) Books and Records.
(i) The books of account and other financial records of each of the
Seller and Worldwide are complete and correct and have been maintained in accordance
with good business practices.
(ii) The Seller and Worldwide will provide the Purchaser prior to
the Closing Date access to all books and records referred to above and all such books and
records shall be delivered to the Purchaser at the Closing.
(ai) Bank Accounts. Set forth on Schedule 3.1(ii) is a true, correct and
complete list of the names of each bank, savings and loan, or other financial institution, at
which the Seller and/or Worldwide has maintained or maintains any account (including any
cash contribution or similar accounts) and the names of all persons authorized to draw
thereon or who have access thereto. Schedule 3.1(ii) includes a true, correct and complete
list of each credit or loan facility established and/or maintained by or on behalf of the Seller
and Worldwide and includes the amounts available to the Seller and/or Worldwide under
each such facility, the outstanding principal balance thereunder as of the date hereof, the
<PAGE>
interest rate applicable thereto and the maturity date thereof.
(aj) Investment Purpose. Each of the Seller and GNet represents that it
is acquiring and will acquire, as the case may be, the shares of Purchaser Stock issuable to
it pursuant hereto solely for its own account for investment purposes only and not with a
view toward resale or distribution thereof other than pursuant to an effective registration
statement as contemplated pursuant to this Agreement. Each of the Seller and GNet
understands that such shares of Purchaser Stock will be issued in reliance upon an
exemption from the registration requirements of the Securities Act and that subsequent sale
or transfer of such securities is prohibited absent registration or exemption from the
provisions of the Securities Act. Each of the Seller and GNet hereby agrees that it will not
sell, assign, transfer, pledge or otherwise convey any of the shares of the Purchaser Stock
issuable to it pursuant hereto, except in compliance with the provisions of the Securities Act
and in accordance with any transfer restrictions or similar terms set forth on the certificates
representing such securities or otherwise set forth herein.
(ak) Assets Necessary to the Business. Except as set forth on Schedule
3.1(kk) hereto, the Seller previously (directly or indirectly) owned or leased all of the Assets;
and the Seller was a party to all license and other agreements necessary to the conduct and
operation of the Business. As of the date hereof and on the Closing Date, Worldwide owns
or leases, and will own or lease all of the Assets; and Worldwide is and will be a party (via
assignment or otherwise) to all license and other agreements necessary to the conduct and
operation of the Business.
(al) Agreements with Affiliates. Except as previously disclosed to the
Purchaser in writing or as otherwise set forth herein or in the schedules hereto, the Seller
is not a party to any instrument, license, lease or other agreement, written or oral, with any
partner of the Seller; and Worldwide is not a party to any instrument, license, lease or other
agreement, written or oral, with any of the foregoing or any officer or director of
Worldwide.
(am) Accuracy of Information Furnished. The Seller and GNet represent
that no statement by the Seller or GNet set forth herein or in the exhibits or the schedules
hereto, and no statement set forth in any certificate or other instrument or document
required to be delivered by or on behalf of the Seller or GNet pursuant hereto or in
connection with the consummation of the transactions contemplated hereby, contained,
contains or will contain any untrue statement of a material fact, or omits, omitted or will
omit to state any material fact which is necessary to make the statements contained herein
or therein, in light of the circumstances under which they were made, not misleading.
(an) Assignment. The Seller and GNet acknowledge that consummation of
the transactions contemplated hereby is dependent upon the Seller's having previously
assigned, transferred and conveyed to Worldwide all of the Seller's right, title and interest
in and to all of its assets, which assets constitute all of the Assets (the "Assignment"). The
<PAGE>
Seller and GNet hereby represent and warrant to the Purchaser that the Assignment: (i) was
duly and validly executed; (ii) is legal and binding upon and enforceable against each of the
Seller and Worldwide; (iii) conforms with the other statements, representations and warrants
set forth herein relating to the Seller, Worldwide, the Business and the Assets; and (iv) has
no terms or conditions which would prohibit consummation of any of the transactions
contemplated hereby.
3.2 Representations and Warranties of Purchaser. The Purchaser represents and
warrants to the Seller as follows:
(a) Authorization. The execution, delivery and performance of this
Agreement and consummation of the transactions contemplated hereby have been duly
authorized, adopted and approved by the board of directors of the Purchaser. The
Purchaser has taken all necessary corporate action and has all the necessary corporate
power to enter into this Agreement and to consummate the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by the officers
of the Purchaser on its behalf, and assuming that this Agreement is the valid and binding
obligation of the Seller, is the valid and binding obligation of the Purchaser, enforceable
against the Purchaser in accordance with its terms, except as such enforcement may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect, or by legal or equitable principles, relating to or limiting
creditors' rights generally and except that the remedy of specific performance and injunctive
and other forms of equitable relief are subject to certain equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
(b) Organization. The Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Florida. The Purchaser has the
corporate power and authority to own and lease its properties and assets and to carry on its
business as it is now being conducted and is duly qualified to do business as a foreign
corporation in each jurisdiction where it owns or leases real property or conducts business,
except where the failure to be so qualified would not have a material adverse effect on the
business, operations, earnings, prospects, assets or condition (financial or otherwise) of the
Purchaser.
(c) Capitalization. The number of authorized, issued and outstanding
shares of capital stock of the Purchaser as of the date hereof is as set forth above in the
recitals to this Agreement. The outstanding shares of Purchaser Stock have been duly
authorized and validly issued and are fully paid and nonassessable. In addition, there are
currently outstanding options and warrants to purchase an aggregate of 809,043 shares of
Purchaser Stock. As of the date hereof, the number of shares of Purchaser Stock which the
Purchaser is currently authorized to issue is adequate to permit the Seller to fulfill its
obligations hereunder with respect to issuance of shares of Purchaser Stock to the Seller
and/or its partners pursuant hereto. On the Closing Date, the shares of Purchaser Stock
issuable to the Seller and/or its partners pursuant to Subsection 1.2(a) will be duly
authorized, validly issued, fully paid and nonassessable.
<PAGE>
(d) Non-Contravention; Consents. Neither the execution and delivery of
this Agreement, nor consummation of the transactions contemplated hereby, does or will:
(i) violate or conflict with any provision of the certificate of incorporation or bylaws of the
Purchaser; (ii) violate or conflict with any material provision of any mortgage, lien, lease,
agreement, permit, indenture, license, instrument, law, order, arbitration award, judgment
or decree to which the Purchaser is a party or by which it or the property or assets which
are material to its business or operation are bound, the effect of any of which violation
result, in the aggregate, in liability of the Purchaser in excess of Fifty Thousand Dollars
($50,000); (iii) violate or conflict with any other restriction to which the Purchaser is subject
or by which any of the property or assets which are material to its business or operation may
be bound, the effect of any of which violation or conflict would result, in the aggregate, in
liability of the Purchaser in excess of Fifty Thousand Dollars ($50,000); or (iv) constitute an
event permitting termination of any agreement to which the Purchaser is subject by any
other party thereto, if in any such circumstance such termination could have a materially
adverse on the Purchaser's ability to fulfill its obligations hereunder. No consent,
authorization, order or approval of, or filing or registration with, any governmental
commission, board or other regulatory body is required in connection with the execution,
delivery and performance of the terms of this Agreement by the Purchaser and
consummation by the Purchaser of any of the transactions contemplated hereby.
(e) Litigation. There is no action, suit, proceeding or investigation pending
against or related to the Purchaser, nor to the best of the Purchaser's knowledge, has the
Purchaser been threatened with any such action, suit, proceeding or investigation, which
would restrict the Purchaser's ability to perform its obligations hereunder or which would
have a material adverse effect on the business, assets, operations, earnings, prospects or
condition (financial or otherwise) of the Purchaser. To the best knowledge of the Purchaser,
there are no grounds for or facts, events or circumstances which would form the basis of any
such action that would cause or result in any such action, suit, proceeding or investigation
or which is probable of assertion. The Purchaser is not in default in respect of any
judgment, order, writ, injunction or decree of any court or any federal, state, local or other
governmental agency, authority, body, board, bureau, commission, department or
instrumentality which could have a material adverse effect on the business, assets,
operations, earnings, prospects or condition (financial or otherwise) of the Purchaser.
(f) Accuracy of Information Furnished; Subsequent Events. No statement
by the Purchaser set forth herein or in the exhibits or the schedules hereto, and no
statement set forth in any certificate or other instrument or document required to be
delivered by or on behalf of the Purchaser pursuant hereto or in connection with
consummation of the transactions contemplated hereby, contained, contains or will contain
any untrue statement of a material fact, or omitted, omits or will omit to state any material
fact which is necessary to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading. The Purchaser has heretofore
delivered to the Seller copies of registration statements and public reporting documents filed
by the Purchaser with the Commission (the "SEC Documents"). The SEC Documents taken
as a whole, fairly represent the business and operations of the Purchaser as of the respective
<PAGE>
dates thereof and the financial statements set forth therein fairly present the financial
position and results of operations of the Purchaser as of and for the respective periods
presented. Since September 30, 1995, to the best knowledge of the Purchaser, no material
adverse change in the business, assets, operations, earnings, prospects or condition (financial
or otherwise) of the Purchaser and no event which would materially adversely effect the
business, assets, operations, earnings, prospects or condition (financial or otherwise) of the
Purchaser has occurred, other than execution of this Agreement, consummation of the
transactions contemplated by or disclosed in this Agreement, including the exhibits and
schedules hereto, and except as set forth on Schedule 3.2(f) hereto.
(g) Compliance with Applicable Law. The Purchaser has been and is in
compliance with all foreign, federal, state and local laws, statutes, ordinances, rules and
regulations (including without limitation the Securities Act and the Securities Exchange Act
of 1934, as amended) as of the date hereof, the failure to comply with which could
materially adversely affect the business, assets, operations, earnings, prospects or condition
(financial or otherwise) of the Purchaser or which would subject any officer or director of
the Seller to civil or criminal penalties or imprisonment. The Purchaser has complied with
the rules and regulations of all governmental agencies having authority over its business or
its operations, including without limitation, agencies concerned with intra-state and interstate
commerce, occupational safety, environmental protection and employment practices, except
where the failure to comply would not have a material adverse effect on the business,
operations, earnings, prospects, assets or condition (financial or otherwise) of the Purchaser.
The Purchaser has no knowledge of and has not received any notice of violation of any such
rule or regulation during the two years prior to the date hereof which could result in any
liability of the Purchaser for penalties or damages or which could subject the Purchaser to
any injunction or government writ, order or decree. To the best knowledge of the
Purchaser, there are no facts, events or conditions that could interfere with, prevent
continued compliance with or give rise to any liability under any foreign, federal, state or
local governmental laws, statutes, ordinances or regulations applicable to the business,
assets, operations, earnings, prospects or condition (financial or otherwise) of the Purchaser,
except where the failure to do so would not have a material adverse effect on the business,
operations, earnings, prospects, assets or condition (financial or otherwise) of the Purchaser.
(h) Financial Statements. The Purchaser has heretofore delivered to the
Seller an unaudited interim balance sheet as at September 30, 1995 and an audited balance
sheet as at December 31, 1994 (the "Purchaser Balance Sheets") and the related audited
statements of operations and cash flows for the two year periods ended December 31, 1993
and December 31, 1994, and unaudited statements of operations and cash flows for the
interim period ended September 30, 1995 (all of the foregoing, including the notes thereto,
may collectively be referred to hereinafter as the "Purchaser Financial Statements")
accompanied by the corresponding relevant opinions and reports of the Purchaser's
independent auditors as of the same dates and for the same periods. The Purchaser
Financial Statements present fairly, in all material respects, the financial position of the
Purchaser as of the respective dates indicated and the operations and cash flows of the
Purchaser for the respective periods indicated in conformity with generally accepted
accounting principles applied on a consistent basis.
<PAGE>
(i) Title. The Purchaser: (i) holds a valid and enforceable leasehold
interest in all real property which it leases (the "Purchaser Leased Real Property"); (ii) owns
good and marketable title to all of its assets, including without limitation the assets and
properties reflected on the Purchaser Balance Sheets or purchased by the Purchaser after
the date thereof, except supplies consumed or assets or properties sold in the ordinary
course of business subsequent to the date thereof. To the best knowledge of the Purchaser,
the Purchaser Leased Real Property is leased free and clear of all adverse claims, liens,
mortgages, charges, security interests, encumbrances and other restrictions or limitations of
any kind whatsoever, except: (A) as stated in the Purchaser Financial Statements (including
the notes thereto); (B) for liens for taxes or assessments not yet due and payable or which
are being contested by the Purchaser in good faith; (C) for minor liens imposed by law for
sums not yet due or which are being contested by the Purchaser in good faith; and (D) for
imperfections of title, adverse claims, charges, restrictions, limitations, encumbrances, liens
or security interests that are minor and which do not detract from the value of the Purchaser
Leased Real Property subject thereto or which do not impair the operations of the
Purchaser or affect the present use of the Purchaser Leased Real Property. To the best
knowledge of the Purchaser, there is no condemnation or eminent domain proceeding
pending or threatened against the Purchaser Leased Real Property (or any part thereof).
The Purchaser has not made any commitments or received any notice, oral or written, from
any public authority or other entity with respect to the taking or use of the Purchaser
Leased Real Property (or any part thereof), whether temporarily or permanently, for
easements, rights-of-way or other public or quasi-public purposes or for any other purpose
whatsoever nor, to the best knowledge of the Purchaser, is there any proceeding pending or
threatened which could adversely affect the zoning classification relating to such property
or its use by the Purchaser as of the date hereof. The Purchaser's assets, including without
limitation the assets reflected on the Purchaser Balance Sheets or purchased by the
Purchaser after the date thereof, are owned free and clear of all adverse claims, liens,
mortgages, charges, security interests, encumbrances and other restrictions or limitations of
any kind whatsoever, except: (A) as stated in the Purchaser Financial Statements (including
the notes thereto); (B) for liens for taxes or assessments not yet due and payable or which
are being contested by the Purchaser in good faith; (C) for minor liens imposed by law for
sums not yet due or which are being contested by the Purchaser in good faith; and (D) for
imperfections of title, adverse claims, charges, restrictions, limitations, encumbrances, liens
or security interests that are minor and which do not detract in any material respect from
the value of any of its assets or which do not impair its business or operations of the
Purchaser in any material respect or affect the present use of the Assets in any material
respect. The Purchaser has not made any commitments or received any notice, oral or
written, from any public authority or other entity with respect to the taking or use of any of
its assets, whether temporarily or permanently, for any purpose whatsoever, nor is there any
proceeding pending or threatened which could adversely affect its assets, including without
limitation, any asset owned or used by the Purchaser as of the date hereof.
(j) Condition of Purchaser Assets. The Purchaser Real Property Leases
and all other documents and agreements pursuant to which the Purchaser has obtained the
right to use or occupy any real property, personal property or assets, are valid and
enforceable in all respects in accordance with their respective terms, except as such
<PAGE>
enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect, or by legal or equitable
principles, relating to or limiting creditors' rights generally and except that the remedy of
specific performance and injunctive and other forms of equitable relief are subject to certain
equitable defenses and to the discretion of the court before which any proceeding therefor
may be brought. All rights-of-way, easements, licenses, permits and authorizations related
to the location or operation of its business are in good standing and are valid and
enforceable in all respects in accordance with their respective terms. There is not, under
any of the foregoing instruments, documents or agreements, any existing default, nor is there
any event which, with notice or lapse of time or both, would constitute a default, which
could: (i) have a material adverse effect on its business or its assets, or the operations,
earnings, prospects or condition (financial or otherwise) of the Purchaser; or (ii) materially
adversely affect its use of the Purchaser Leased Real Property or the title to its assets. The
Purchaser is not in violation of and has complied with all applicable zoning, building or
other codes, statutes, regulations, ordinances, notices and orders of any governmental
authority with respect to the occupancy, use, maintenance, condition, operation and
improvement of the Purchaser Leased Real Property and its assets, except where the failure
to comply would not have a material adverse effect on its business or its assets, or the
operations, earnings, prospects or condition (financial or otherwise) of the Purchaser. The
Purchaser's use of any improvements for the purposes for which any of the Purchaser
Leased Real Property and its assets are being used as of the date hereof does not violate
any such code, statute, regulation, ordinance, notice or order. The Purchaser possesses all
licenses, certificates of occupancy, permits and authorizations required to be obtained by the
Purchaser with respect to the Purchaser's operation and maintenance of the Purchaser
Leased Real Property and its assets for all uses for which such property is and assets are
operated or used by the Purchaser as of the date hereof, except where the failure to do so
would not have a material adverse effect on its business or its assets, or the operations,
earnings, prospects or condition (financial or otherwise) of the Purchaser. All of the
Purchaser Leased Real Property and all of its other assets (whether owned or leased by the
Purchaser) are in good operating condition and repair, subject to normal wear and use, and
each such item is usable in a manner consistent with current use by the Purchaser.
(k) Purchaser Inventory. The Purchaser has delivered the Purchaser
Balance Sheets which accurately, correctly and completely set forth the value of the
Purchaser's inventory (the "Purchaser Inventory") at the respective dates thereof. The
Purchaser Inventory consists only of items in current product lines or items which are used
in the production or distribution thereof. All items in the Purchaser Inventory are of a
quality and quantity usable or saleable in the ordinary course of business and are not
obsolete, defective or damaged in any way. The Purchaser Inventory is valued on the books
of the Purchaser and is reflected on such Purchaser Balance Sheets in accordance with
generally accepted accounting principles consistently applied.
(l) Purchaser Accounts Receivable. The Purchaser has delivered the
Purchaser Balance Sheets which accurately, correctly and completely reflect the aggregate
amount of its accounts receivable (the "Purchaser Accounts Receivable") at the respective
dates thereof. There have been no material changes in the Purchaser Accounts Receivable
<PAGE>
since such date other than those incurred in the ordinary course of the conduct of the
Purchaser's business consistent with past practices. All of the Purchaser Accounts
Receivable are valid, arose out of bona fide transactions in the ordinary course of business,
and are the valid and binding obligations of and are enforceable against the respective
account debtors thereunder, except as such enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter
in effect. The Purchaser Accounts Receivable have: (i) been collected; (ii) are collectible
in the ordinary course of business; or (iii) have been adequately reserved for in accordance
with generally accepted accounting principles consistently applied. Except as previously
disclosed in writing to the Seller, there is no contest, claim or right of set-off contained in
any written agreement with any account debtor relating to the amount or validity of any
Purchaser Account Receivable.
(m) Purchaser Accounts Payable. The Purchaser has delivered the
Purchaser Balance Sheets which accurately, correctly and completely reflect the aggregate
amount of the Purchaser's accounts payable (the "Purchaser Accounts Payable") at the
respective dates thereof. There have been no material changes in the Purchaser Accounts
Payable since such date other than those incurred in the ordinary course of the conduct of
the Purchaser's business consistent with past practices. All of the Purchaser Accounts
Payable are current (within 30 days), arose out of bona fide transactions in the ordinary
course of business, and are the valid and binding obligations of and are enforceable against
the Purchaser, except as such enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in effect.
(n) Absence of Undisclosed Liabilities. Other than as set forth on the
Purchaser Balance Sheets, the Purchaser has not had and does not have any indebtedness,
loss or liability of any nature whatsoever (other than those incurred in the ordinary course
of business), whether accrued, absolute, contingent or otherwise and whether due or become
due, which is material to the Purchaser's assets or its business, or the operations, prospects,
earnings or condition (financial or otherwise) of the Purchaser.
(o) Absence of Certain Changes or Events. Except as previously disclosed
in writing to the Seller and except as expressly set forth in this Agreement, the Purchaser
has not, since September 30, 1995:
(i) amended its certificate of incorporation (the "Purchaser
Certificate of Incorporation") or its bylaws (the "Purchaser Bylaws");
(ii) made any capital expenditures or commitments for the
acquisition or construction of any property, plant or equipment other than in the ordinary
course of business of the Purchaser;
(iii) entered into any material transaction in any way inconsistent
with the past practices of its business or conducted its business in any manner inconsistent
with its past practices;
<PAGE>
(iv) incurred any damage, destruction or any other loss to any of its
assets or Purchaser Leased Real Property in an aggregate amount exceeding Fifty Thousand
Dollars ($50,000) whether or not covered by insurance;
(v) suffered any loss and, the Purchaser has not become aware of
any intention on the part of any customer, dealer, vendor or supplier to discontinue its
current relationship with the Purchaser, the loss or discontinuance of which, alone or in the
aggregate, could have a material adverse effect on its business or its assets, or the
operations, earnings, prospects or condition (financial or otherwise) of the Purchaser;
(vi) modified, amended or altered any contractual arrangement with
any customer, dealer or supplier, the modification, amendment or alteration of which, alone
or in the aggregate, could have a material adverse effect on Purchaser's business or its
assets, or the operations, earnings, prospects or condition (financial or otherwise) of the
Purchaser;
(vii) incurred any material liability or obligation (absolute or
contingent) or made any material expenditure other than in the ordinary course of business
of the Purchaser;
(viii)experienced any material adverse change in Purchaser's business
or its assets, or the operations, earnings, prospects or condition (financial or otherwise) of
the Purchaser or experienced or have knowledge of any event which could have a material
adverse effect on the Purchaser's business or its assets, or the operations, earnings, or
condition (financial or otherwise) of the Purchaser;
(ix) made any distribution of its securities other than as previously
disclosed to the Seller;
(x) granted, conveyed, transferred, assigned or made any sale of
Purchaser Accounts Receivable or any accrual of liabilities outside of the ordinary course
of business of the Purchaser;
(xi) purchased, disposed of or contracted to purchase or dispose of,
or granted or received an option or any other right to purchase or sell, any of its assets,
except in the ordinary course of business of the Purchaser;
(xii) increased the rate of compensation payable or to become
payable to the employees of the Purchaser, or increased the amounts paid or payable to
such employees under any bonus, insurance or other compensation plan, or made any
arrangements therefor with or for any of said employees except for increases consistent with
the ordinary course of business or increases resulting from the application of existing
formulas under existing agreements or policies relating to employee compensation; or
(xv) changed any accounting principle, procedure or practice followed
by the Purchaser or changed the method of applying such principle, procedure or practice.
<PAGE>
(p) Agreements. Copies of all contracts, agreements and other instruments
material to Purchaser's business, including without limitation, those to which the Purchaser
is a party and those by which any of its assets are bound, have heretofore been delivered
or made available by the Purchaser to the Seller. Other than as previously disclosed to the
Seller in writing, there is no contract or agreement to which the Purchaser is a party or
which affects its assets or which is material to its business. Except as otherwise previously
disclosed to the Seller in writing or set forth on the schedules hereto, the Purchaser is not
a party to or bound by, nor are any of its assets subject to, any material written or oral
agreement, including without limitation, the following:
(i) any agreement which has not been entered into or received by
the Purchaser in the ordinary course of business or which is not consistent with the prior
practice of the Purchaser;
(ii) any agreement which involves the purchase or sale of goods or
payment by or to the Purchaser for services rendered with a value in excess of Fifty
Thousand Dollars ($50,000) which is not cancelable within thirty (30) days of the Closing
Date by the Purchaser upon notice given on or prior to the Closing Date;
(iii) any agreement for the employment of any officer or director or
former officer or director (other than, with respect to any officer or director, agreements
which are terminable without liability upon notice of thirty (30) days or less and do not
provide for any further payments following such termination) pursuant to which payments
may be required to be made at any time following the Closing Date in an aggregate amount
exceeding Fifty Thousand Dollars ($50,000);
(iv) any mortgage, deed of trust or other form of secured
indebtedness for borrowed money;
(v) any debentures, indentures, notes or installment obligations, the
unpaid balance of which exceeds Fifty Thousand Dollars ($50,000) in the aggregate, or other
instruments for or relating to any unsecured borrowing of money by the Purchaser, the
unpaid balance of which exceeds Fifty Thousand Dollars ($50,000) in the aggregate;
(vi) any guaranty of any obligation of any person or party for
borrowings or otherwise, excluding endorsements made for collection in the ordinary course
of business;
(vii) any agreement or arrangement for the sale or lease of any of the
Purchaser's assets having a book value in excess of Fifty Thousand Dollars ($50,000) in the
aggregate;
(viii)any agreement or agreements pursuant to which the Purchaser
is or may be obligated to make any payments, contingent or otherwise, in excess of Fifty
Thousand Dollars ($50,000) in the aggregate, resulting from or arising out of the prior
<PAGE>acquisition of any business, or of all or substantially all of the assets of any company or any
division thereof;
(ix) any agreement with any labor union;
(x) any agreement, including but not limited to assignments, licenses,
transfers of exclusive rights, "work for hire" agreements, special commissions, employment
agreements, purchase orders, sales orders, mortgages and security agreements, to which the
Purchaser is a party and which: (A) contains a grant or other transfer by the Purchaser,
whether present, retroactive, prospective, or contingent, of any rights in any intellectual
property, whether or not such intellectual property was in existence at the time such
agreement was made; or (B) contains a promise made by the Purchaser to pay any
consideration, lump sum, royalty or other payment with respect to the acquisition, license
or use of any rights in any intellectual property without regard to whether such
consideration, lump sum, royalty or other payment was ever made or received;
(xi) any dealership, franchise or distribution agreement, territory or
license agreement or other similar agreement;
(xii) any agreement with any officer, director or employee of the
Purchaser, the immediate family of any officer, director or employee of the Purchaser, or
any affiliate of any of the foregoing;
(xiii)any unexpired and enforceable agreements for the disposition
of Purchaser's assets; or
(xiv) any other agreement, contract, document or instrument not
entered into in the ordinary course of business which is material to Purchaser's business and
not excluded by reason of operation of this or any other provision of this Agreement.
Except as previously disclosed to the Seller in writing, the Purchaser is not, nor to
the best knowledge of the Purchaser, is any third party, in default and no event has occurred
which, with notice or lapse of time or both, could cause or become a default by the
Purchaser or, to the best knowledge of the Purchaser, by any third party, under any contract,
agreement, document or instrument to which the Purchaser is a party which is material to
its business. Each contract, agreement, document or instrument to which the Purchaser is
a party which is material to its business is enforceable, in accordance with its terms, against
all other parties thereto, except as such enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter
in effect, or by legal or equitable principles, relating to or limiting creditors' rights generally
and except that the remedy of specific performance and injunctive and other forms of
equitable relief are subject to certain equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
<PAGE>
(q) Labor Relations. There are no agreements with or pending petitions
for recognition of any labor union or association as the exclusive bargaining agent for any
or all of the employees of the Purchaser and no such petition has been pending at any time
during the two years prior to the date hereof. There has not been any organizing effort by
any union or other group seeking to represent any employees of the Purchaser as its
exclusive bargaining agent at any time since inception of the Purchaser. There are no labor
strikes, work stoppages or other labor disputes now pending or threatened against the
Purchaser, nor has there been any such labor strike, work stoppage or other labor dispute
or grievance at any time since inception of the Purchaser. The Purchaser has no knowledge
that any executive, key employee or any group of employees of the Purchaser has any plans
to terminate his or her employment with the Purchaser.
(r) Tax Matters. The Purchaser is not a member of an affiliated group,
within the meaning of Section 1504 of the Internal Revenue Code of 1986 (previously
defined as an "Affiliated Group"). The Purchaser has filed when due and will file if and
when due prior to the Closing Date (after giving effect to any extensions granted by the
requisite legal or regulatory authority) all Tax Returns relating to taxes required to be filed
by the Internal Revenue Code of 1986 or by any applicable federal, state, county, municipal,
local, foreign or other laws, including, without limitation, consolidated, combined or unitary
returns, for any Pre-Closing Tax Period. The taxable year of the Purchaser for federal and
state income and business tax purposes ends on December 31 of each year. All taxes shown
on any Tax Return required to be filed with respect to the Purchaser for any Pre-Closing
Tax Period have been, or will have been, paid or accrued prior to the Closing. The
Purchaser has heretofore delivered or made available to the Seller all Tax Returns filed on
its behalf for the fiscal year ended December 31, 1994. The Purchaser has fully accrued on
its books all taxes for any periods which are not yet due. No tax liens have been filed, and
no material claims have been or are being asserted or proposed, against the Purchaser with
respect to any taxes. No Tax Returns have been audited since inception of the Purchaser
by any taxing authority, no deficiencies or claims have been proposed, assessed or claimed
(including interest and penalties) against the Purchaser which have not been paid or
accrued, and the Purchaser has not waived or extended any statute of limitations with
respect to the assessment of any taxes, which waiver or extension has not yet expired by its
terms. There are no suits, actions, proceedings, claims or investigations now pending against
the Purchaser with respect to any taxes. The Purchaser has withheld or collected from each
payment made to each of its employees, consultants, contractors and other payees the
amount of all taxes (including, but not limited to, federal income taxes, state and local
income and wage taxes, payroll taxes, workers' compensation and unemployment taxes)
required to be withheld or collected therefrom for all Pre-Closing Tax Periods and the
Purchaser has timely paid or accrued and reported the same in respect of its employees,
consultants, contractors and other payees to the proper tax receiving offices. The Purchaser
does not have any liability for any taxes of any nature whatsoever other than as shown on
the Purchaser Balance Sheets (except for liabilities for taxes accruing after the date of the
Purchaser Balance Sheets in the ordinary course of business) and there is no basis for any
additional liabilities for taxes for any Pre-Closing Tax Period. The reserve for accrued but
unpaid taxes for the period ending December 31, 1995 includes adequate provision for all
<PAGE>
taxes which have been assessed or which will be due and payable by the Purchaser for all
Pre-Closing Tax Periods. The Purchaser has not been, and will not on the Closing Date be,
liable for any taxes for which it has not made adequate provision. The Purchaser does not
file any state or local tax returns on a unitary or combined basis with any other member of
an Affiliated Group.
(s) Permits. The Purchaser holds all permits, licenses, orders and
approvals of all federal, state or local governmental or regulatory authorities, agencies or
bodies required for the conduct and operation of its business as currently conducted, except
where the failure to do so would not have a material adverse effect on the business or the
assets of the Purchaser, or the operations, earnings, prospects, assets or condition (financial
or otherwise) of the Purchaser. All such permits, licenses, orders, and approvals (including,
without limitation, approval of the Purchaser Stock subject hereto for listing on the Nasdaq
SmallCap Market) are in full force and effect and no suspension, termination or revocation
of any of the foregoing is, to the best knowledge of the Purchaser, threatened. None of such
permits, licenses, orders or approvals will be adversely affected by consummation of the
transactions contemplated by this Agreement. The Purchaser has complied with the rules
and regulations of all governmental or other regulatory agencies, authorities, bodies, boards,
bureaus, commissions, departments or instrumentalities which regulate, supervise or are in
any manner concerned with import and export licenses, occupational safety, environmental
protection and employment practices relating to its business, except where the failure to do
so would not have a material adverse effect on its business or its assets, or the operations,
earnings, prospects, assets or condition (financial or otherwise) of the Purchaser. The
Purchaser has no knowledge of nor has it received any notice of violation of any of such
rules or regulations which would result in any liability of the Purchaser for penalties or
damages or which would subject the Purchaser to any injunction or governmental writ, order
or decree.
(t) Unlawful Payments. Neither the Purchaser nor any officer, director
employee, agent or representative of the Purchaser has made, directly or indirectly, any
bribe or kickback, illegal political contribution, payment from corporate funds which was
incorrectly recorded on the books and records of the Purchaser, unlawful payment from
corporate funds to governmental or municipal officials in their individual capacities for the
purpose of affecting their action or the actions of the jurisdiction which they represent to
obtain favorable treatment in securing business or licenses or to obtain special concessions
of any kind whatsoever, or illegal payment from corporate funds to obtain or retain any
business.
(u) Warranties. Except as required or implied by federal or state law or
as otherwise previously disclosed to the Seller in writing, the Purchaser has not made,
extended or otherwise represented that it would provide any express warranty with respect
to the products or services sold, distributed or leased to its clients or customers.
(v) Assets Necessary to Purchaser's Business. The Purchaser owns and/or
leases any and all assets material to the conduct of its business as it is currently being
conducted.
<PAGE>
(w) Agreements with Affiliates. Except as previously disclosed to the Seller
in writing or as otherwise set forth herein or in the schedules hereto, the Purchaser is not
a party to any instrument, license, lease or other agreement, written or oral, with any
affiliate of the Purchaser.
(x) Restrictive Covenants. The Purchaser is not a party to any agreement,
contract or covenant limiting the freedom of the Purchaser to compete in any line of
business or with any person or other entity in any geographic region within or outside of the
United States of America.
(y) Books and Records.
(i) The books of account and other financial records of the
Purchaser are complete and correct and have been maintained in accordance with good
business practices.
(ii) The Purchaser will provide the Seller prior to the Closing Date
access to all books and records referred to above.
3.3 Survival of Representations and Warranties. The representations and
warranties set forth in Sections 3.1 and 3.2 hereof shall survive until the close of business
on the second anniversary of the Closing Date, provided that, notice or demand with respect
to any alleged breach thereof which has occurred prior to the second anniversary of the
Closing Date shall be given in writing by the nonbreaching party or parties to the breaching
party or parties not later than the close of business on the sixtieth day following the second
anniversary of the Closing Date; and further provided that, with respect to claims for
damages arising out of any misrepresentation or breach of warranty made by the Seller or
the Purchaser relating to taxes, notice shall have been given on or before the close of
business on the sixtieth day following the later to occur of: (i) the expiration date of the
statute of limitations applicable to any indemnified federal, state or local tax liability; and
(ii) the final determination of any such tax liability, including the final administrative and/or
judicial determination thereof.
ARTICLE
COVENANTS
4.1 Covenants of the Seller.
(a) Notification. Each of the Seller and GNet shall give prompt notice to
the Purchaser of: (i) any notice or other communication received by the Seller or GNet
prior to the Closing Date, relating to a default or an event which, with notice or lapse of
time or both would become a default under this Agreement or under any other material
contract, agreement or instrument to which the Seller or Worldwide is a party, by which it
or any of the Assets are bound or to which it or any of the Assets are subject; (ii) any event
<PAGE>
which, with notice or lapse of time or both, would cause any warranty or representation of
the Seller or GNet under this Agreement to be inaccurate, untrue, incomplete or misleading
in any respect; (iii) any notice or other communication from any third party alleging that the
consent of such third party was, is or may be required in connection with the transactions
contemplated by this Agreement; and (iv) any adverse change in the Business or the Assets,
or the operations, earnings, prospects or condition (financial or otherwise) of Worldwide.
(b) Additional Financial Statements. Upon the Purchaser's request, prior
to and through the Closing Date, the Seller and/or Worldwide, as applicable, shall have
furnished to the Purchaser after the end of each calendar month, an unaudited monthly
balance sheet and statements of revenues and expenses for the Seller for each month ending
after September 30, 1995, which items shall have been attached hereto as Exhibit 4.1(b).
(c) Additional Summaries of Accounts and Notes Receivable. Upon the
Purchaser's request, prior to and through the Closing Date, the Seller and/or Worldwide,
as applicable, shall deliver to the Purchaser after the end of each calendar month, a
summary of all Accounts Receivable (including a complete aging, in such form as may be
requested by the Purchaser) as of the end of each such calendar month for each month
ending after September 30, 1995, which items shall have been attached hereto as Exhibit
4.1(c).
(d) Additional Summaries of Accounts Payable. Upon the Purchaser's
request, prior to and through the Closing Date, the Seller and/or Worldwide, as applicable,
shall deliver to the Purchaser after the end of each calendar month, a summary of all
Accounts Payable (including a complete aging, in such form as may be requested by the
Purchaser) as of the end of each such calendar month for each month ending after
September 30, 1995, which items shall have been attached hereto as Exhibit 4.1(d).
(e) Additional Summaries of Inventory. Upon the Purchaser's request,
prior to and through the Closing Date, the Seller and/or Worldwide, as applicable, shall
deliver to the Purchaser after the end of each calendar month, a summary (prepared
consistent with present practices) of all Inventory as of the end of each such calendar month
for each month ending after September 30, 1995, which items shall have been attached
hereto as Exhibit 4.1(e).
(f) Audit. If requested by the Purchaser, prior to the Closing Date, the
Seller and/or Worldwide (as applicable) shall have submitted to an audit of its books of
account and financial records performed by independent certified public accountants (the
"Auditors") selected by the Purchaser and approved by the Seller. In connection therewith,
the Seller shall have made available to the Auditors all of the Seller's books and records,
financial or otherwise, which are reasonably requested by the Auditors or are deemed
necessary by the Auditors in connection with their conduct of the audit, and shall otherwise
cooperate in such audit.
(g) Conduct of Business; Certain Covenants. Prior to and through the
Closing Date, the Seller shall have conducted and operated, and Worldwide shall conduct
and operate the Business in accordance with prior business practice and neither of the Seller
<PAGE>
or Worldwide will, without prior written consent of the Purchaser, which consent shall not
be unreasonably withheld, take any action other than in accordance with the ordinary and
usual course of business. Each of the Seller and Worldwide will use commercially
reasonable efforts to preserve intact the Business, the Assets and the operation, organization
and relationships with employees, independent contractors, agents, suppliers, customers and
others having business dealings with Worldwide. Prior to and through the Closing Date,
without the prior written consent of the Purchaser, which consent shall not be unreasonably
withheld:
(i) the Seller shall not amend the Certificate of Formation or the
Partnership Agreement;
(ii) Worldwide shall not amend the Worldwide Certificate of
Incorporation or the Worldwide Bylaws;
(iii) Worldwide shall not issue, sell, grant or contract to issue, sell
or grant any shares of its capital stock, notes, bonds, other securities or any option to
purchase any of the foregoing;
(iv) the Seller shall not cause or permit Worldwide to grant any right
or interest or enter into any agreement that would have the effect of granting any right or
interest in or to the Business or the Assets;
(v) the Seller shall not issue or otherwise grant or enter into any
agreement relating to the issuance or grant of any partnership interests or other interests
or rights calling for or permitting the issuance, transfer, sale or delivery of a partnership
interest;
(vi) the Seller shall not make any distribution with respect to any
partnership or other interest in the Seller;
(vii) the Seller shall not issue, transfer, sell or deliver any interest in
the Seller;
(viii)the Seller shall not redeem, repurchase or otherwise acquire for
any consideration any outstanding partnership interest in the Seller;
(ix) neither the Seller nor Worldwide shall incur any indebtedness
for borrowed money, except in the ordinary course of business or pursuant to existing
agreements which the Seller or Worldwide has previously disclosed in writing or made
available to the Purchaser;
(x) except with respect to the defaults listed on the schedules hereto
which relate to the timely payment of monies due and owing under any agreements to which
the Seller and/or Worldwide is a party, neither the Seller not Worldwide shall permit the
<PAGE>
occurrence or continuance of any material default under any agreement to which the Seller
or Worldwide is a party;
(xi) Worldwide shall not make any acquisition of the capital stock
or all or substantially all of the assets of any entity;
(xii) Worldwide shall not enter into any business combination with
any other entity or enter into any joint venture arrangement with any third party;
(xiii)neither the Seller nor Worldwide shall enter into any
employment or similar contract with or increase the compensation payable to any employee,
except in the ordinary course of business and in a manner consistent with past practices;
(xiv) neither the Seller nor Worldwide shall alter, amend or otherwise
modify any material term or provision of any contract or agreement with any of its clients,
customers, subscribers, suppliers or vendors;
(xv) neither the Seller nor Worldwide shall adopt, amend or modify
in any respect or terminate any severance plan or collective bargaining agreement or make
distributions under any severance plan, except in a manner consistent with past practices or
as otherwise contemplated herein;
(xvi) neither the Seller nor Worldwide shall sell, enter into any
contract to sell or grant any option to purchase, any of the Assets, other than in the ordinary
course of business;
(xvii)neither the Seller nor Worldwide shall create, assume or permit
to exist any lien, pledge, security interest, encumbrance or mortgage of any kind whatsoever
on any of the Assets other than:
(A) liens existing on the date hereof which the Seller or
Worldwide previously disclosed to the Purchaser in writing or which are otherwise permitted
hereby;
(B) any mortgage, pledge, lien or other security interest in or
upon any property or asset hereafter acquired by the Seller or Worldwide in the ordinary
course of business, which mortgage, pledge, lien or other security interest is entered into
contemporaneously with such acquisition to secure or provide for the payment of any part
of the purchase price therefor, or the assumption by the Seller or Worldwide of any
mortgage, pledge, lien or other security interest in or upon any property or asset hereafter
acquired by the Seller or Worldwide which mortgage, pledge, lien or other security interest
existed at the time of such acquisition; provided that, each such mortgage, pledge, lien or
other security interest shall not extend to or cover any property or asset of the Seller or
Worldwide other than such property or asset hereafter acquired;
<PAGE>
(C) any mortgage, pledge, lien or other security interest
created for the sole purpose of renewing or refunding any mortgage, pledge, lien or other
security interest allowed under clause (B) above; provided that, the principal amount of
indebtedness secured thereby shall not exceed the principal amount of indebtedness so
secured at the time of such renewal or refunding and that such renewed or refunded
mortgage, pledge, lien or other security interest shall not extend the mortgage, pledge, lien
or other security interest renewed or refunded to any additional property or asset;
(D) the pledge by Worldwide of any of the Assets as security
required by law or governmental regulation as a condition to the transaction of any business
or the exercise of any privilege, license or right;
(E) a banker's lien or right of offset on funds of Worldwide
deposited with a lender or holder in the ordinary course of business in favor of any lender
of funds or holder of Worldwide's commercial paper in the ordinary course of business;
(F) liens for taxes, assessments and governmental charges or
levies imposed upon Worldwide or upon its income or profit, or upon any of its property or
assets if the same shall not at the time be due or are being contested in good faith in
appropriate proceedings; and
(G) liens imposed by law, such as those of carriers,
warehousemen and mechanics, for sums not yet due or are being contested in good faith in
appropriate proceedings.
(xviii)neither the Seller nor Worldwide shall enter into any contract,
including but not limited to assignments, licenses, transfers of exclusive rights, "work for
hire" agreements, special commissions, employment contracts, purchase orders, sales orders,
mortgages and security agreements, which:
(A) contain a grant or other transfer, whether present,
retroactive, prospective or contingent, of any rights in any Intellectual Property; or
(B) contain a promise made to pay any consideration, lump
sum, royalty or other payment with respect to the acquisition, practice or use of any rights
in any Intellectual Property;
(xix) except in the ordinary course of business or arising out of or
relating to this Agreement, initiate any legal proceedings involving the Seller or Worldwide,
or the Business or the Assets, including suits and administrative proceedings in the United
States or any foreign country;
(xx) file with any federal, state or local governmental agency or
regulatory body, any cancellation, reduction, modification, change or amendment of or
<PAGE>
addition to any schedule of tariffs currently on file with such agency or regulatory body, or
file with such governmental agency or regulatory body any schedule of tariffs for services
which are not covered by the tariff schedules on file therewith as of the date hereof; or
(xxi) take any action that would cause any representation or warranty
contained herein to be inaccurate, untrue, incomplete or misleading.
(h) Proposals; Other Offers. Prior to the Closing Date, neither the Seller
nor GNet shall, directly or indirectly (whether through an employee, a representative, an
agent or otherwise) solicit or encourage any inquiries or proposals, engage in negotiations
for or consent to or enter into any agreement providing for the acquisition of the Worldwide
Stock or the Business or the Assets (except in the ordinary course of business). Each of the
Seller and GNet shall promptly notify the Purchaser upon its receipt or other knowledge of
any such request, inquiry or proposal. Neither the Seller nor GNet shall, directly or
indirectly (whether through an employee, a representative, an agent or otherwise) disclose
any nonpublic information relating to the Seller or afford access to any of the books, records
or other properties of the Seller to any person or entity that is considering, has considered
or is making any such acquisition inquiry or proposal.
(i) Best Efforts and Cooperation; Further Assurances. Prior to the Closing
Date and thereafter, with the cooperation of Purchaser where appropriate, the Seller and/or
Worldwide, as applicable, shall:
(i) promptly comply with all filing requirements which federal, state
or local law may impose on the Seller and/or Worldwide with respect to the transactions
contemplated by this Agreement;
(ii) use its best efforts to take all actions necessary to be taken,
make any filing and obtain any consent, authorization or approval of or exemption by any
governmental authority, regulatory agency or any other third party (including, without
limitation, any landlord or lessor of the Seller and/or Worldwide and any party to whom
notification is required to be delivered or from whom any form of consent is required)
which is required to be filed or obtained by the Seller and/or Worldwide in connection with
the transactions contemplated by this Agreement;
(iii) make full and timely payment of all fees and annuities and take
all other action appropriate to maintain in full force and effect any and patent, trademark
and service mark registrations and applications for registration as set forth in Schedule
3.1(i)(viii) or otherwise owned by controlled by the Seller; and
(iv) use its best efforts and take any and all other actions necessary
to facilitate or otherwise ensure consummation of: (A) the private offering by the Purchaser
of an aggregate of $1,000,000 in principal amount of 10% Convertible Promissory Notes (the
<PAGE>
"Debt Offering"); and (B) the private offering by the Purchaser of its equity securities (the
"Equity Offering").
(j) Access to Additional Agreements and Information. Prior to the Closing
Date, the Seller shall make available or otherwise deliver to the Purchaser any and all
agreements, contracts, documents and other instruments material to the Business, including
without limitation, those to which the Seller is a party and those by which any of the Assets
are bound and including without limitation, any and all materials relating to the Intellectual
Property referred to in Subsection 3.1(i)(iii), the agreements set forth in Subsection 3.1(t),
the consents and waivers referred to in Subsection 3.1(u), the insurance materials referred
to in Subsection 3.1(w), the Tax Returns set forth in Subsection 3.1(x), the licenses and
permits referred to in Subsection 3.1(aa), any documents relating to the loans referred to
in Subsection 3.1(gg), the invoices, purchase orders or other similar documents pertaining
to the Seller's subscribers set forth in Subsection 3.1(ff), and any materials relating to the
Seller's bank accounts and credit facilities referred to in Subsection 3.1(ii).
4.2 Covenants of Purchaser.
(a) Notice of Defaults. The Purchaser shall give prompt notice to the
Seller of: (i) any notice or other communication relating to a default hereunder or event
which, with notice or lapse of time or both, would become a default hereunder, received by
the Purchaser prior to the Closing Date, or under any material contract, agreement or
instrument to which the Purchaser is a party, by which it or any of its properties or assets
are bound or to which it or any of its properties or assets are subject which would prevent
the consummation of the transactions contemplated hereby; (ii) any event which, with notice
or lapse of time or both, would cause any representation or warranty of the Purchaser under
this Agreement to be inaccurate or misleading in any respect; (iii) any notice or other
communication by any third party alleging that the consent of such third party is or may be
required in connection with the transactions contemplated by this Agreement; and (iv) any
adverse change in the business, assets, operations, earnings, prospects or conditions
(financial or otherwise) of the Purchaser.
(b) Third Party Consents. The Purchaser shall use its best efforts to obtain
any consent, authorization or approval of, or exemption by, any governmental authority or
agency or other third party required to be obtained or made by it in connection with this
Agreement or the consummation of the transactions contemplated hereby.
(c) Best Efforts and Cooperation; Further Assurances. Prior to the Closing
Date and thereafter, with the cooperation of the Seller and Worldwide, the Purchaser shall:
(i) promptly comply with all filing requirements which federal, state
or local law may impose on the Purchaser with respect to the transactions contemplated by
this Agreement; and
<PAGE>
(ii) use its diligent efforts to take all actions necessary to be taken,
make any filing and obtain any consent, authorization or approval of or exemption by any
governmental authority, regulatory agency or any other third party which is required to be
filed or obtained by the Purchaser in connection with the transactions contemplated by this
Agreement; and
(iii) use its best efforts and take any and all other actions necessary
to facilitate or otherwise ensure consummation of: (A) the Debt Offering; and (B) the
Equity Offering.
(d) Preparation and Filing of Registration Statement. The Purchaser shall
prepare and file or cause to be prepared and filed, as soon as practical after the Closing,
the Registration Statement with the Commission relating to the securities subject hereto and
shall use its best efforts to cause the same to be declared effective by the Commission as
soon as possible thereafter.
(e) Additional Financial Statements. Upon the Seller's request, prior to
and through the Closing Date, the Purchaser shall have furnished to the Seller after the end
of each calendar month, an unaudited monthly balance sheet and statements of operations
and cash flows for the Purchaser for each month ending after September 30, 1995, which
items shall have been attached hereto as Exhibit 4.2(e).
(f) Conduct of Business; Certain Covenants. Prior to and through the
Closing Date, the Purchaser shall have conducted and operated, its business in accordance
with prior business practice and the Purchaser will not, without prior written consent of the
Seller, which consent shall not be unreasonably withheld, take any action other than in
accordance with the ordinary and usual course of business. The Purchaser will use
commercially reasonable efforts to preserve intact its business, assets and the operation,
organization and relationships with employees, independent contractors, agents, suppliers,
customers and others having business dealings with the Purchaser. Prior to and through the
Closing Date, without the prior written consent of the Seller, which consent shall not be
unreasonably withheld, the Purchaser shall not:
(i) amend the Purchaser Certificate of Incorporation or the
Purchaser Bylaws;
(ii) issue, sell, grant or contract to issue, sell or grant any shares of
its capital stock, notes, bonds, other securities or any option to purchase any of the
foregoing;
(iii) incur any indebtedness for borrowed money, except in the
ordinary course of business or pursuant to existing agreements which the Purchaser has
previously disclosed in writing or made available to the Seller;
(iv) enter into any business combination with any other entity or
enter into any joint venture arrangement with any third party;
<PAGE>
(v) alter, amend or otherwise modify any material term or provision
of any contract or agreement with any of its clients, customers, subscribers, suppliers or
vendors;
(vi) adopt, amend or modify in any respect or terminate any
severance plan or collective bargaining agreement or make distributions under any
severance plan, except in a manner consistent with past practices or as otherwise
contemplated herein;
(vii) sell, enter into any contract to sell or grant any option to
purchase, any of its assets, other than in the ordinary course of business;
(viii)redeem, repurchase or otherwise acquire for any consideration
any of its outstanding securities;
(ix) issue, transfer, sell or deliver any shares of its capital stock or
any securities convertible into or exchangeable for such capital stock, other than as
contemplated by the private placement memorandum relating to the Debt Offering;
(x) create, assume or permit to exist any lien, pledge, security
interest, encumbrance or mortgage of any kind whatsoever on any of its assets other than:
(A) liens existing on the date hereof which the Purchaser
previously disclosed to the Seller in writing or which are otherwise permitted hereby;
(B) any mortgage, pledge, lien or other security interest in or
upon any property or asset hereafter acquired by the Purchaser in the ordinary course of
business, which mortgage, pledge, lien or other security interest is entered into
contemporaneously with such acquisition to secure or provide for the payment of any part
of the purchase price therefor, or the assumption by the Purchaser of any mortgage, pledge,
lien or other security interest in or upon any property or asset hereafter acquired by the
Purchaser which mortgage, pledge, lien or other security interest existed at the time of such
acquisition; provided that, each such mortgage, pledge, lien or other security interest shall
not extend to or cover any property or asset of the Purchaser other than such property or
asset hereafter acquired;
(C) any mortgage, pledge, lien or other security interest
created for the sole purpose of renewing or refunding any mortgage, pledge, lien or other
security interest allowed under clause (B) above; provided that, the principal amount of
indebtedness secured thereby shall not exceed the principal amount of indebtedness so
secured at the time of such renewal or refunding and that such renewed or refunded
mortgage, pledge, lien or other security interest shall not extend the mortgage, pledge, lien
or other security interest renewed or refunded to any additional property or asset;
<PAGE>
(D) the pledge by the Purchaser of any of its assets as security
required by law or governmental regulation as a condition to the transaction of any business
or the exercise of any privilege, license or right;
(E) a banker's lien or right of offset on funds of the Purchaser
deposited with a lender or holder in the ordinary course of business in favor of any lender
of funds or holder of the Purchaser's commercial paper in the ordinary course of business;
(F) liens for taxes, assessments and governmental charges or
levies imposed upon the Purchaser or upon its income or profit, or upon any of its property
or assets if the same shall not at the time be due or are being contested in good faith in
appropriate proceedings; and
(G) liens imposed by law, such as those of carriers,
warehousemen and mechanics, for sums not yet due or are being contested in good faith in
appropriate proceedings.
(xi) except in the ordinary course of business or arising out of or
relating to this Agreement, initiate any legal proceedings involving the Purchaser or its
business or assets, including suits and administrative proceedings in the United States or any
foreign country;
(xii) file with any federal, state or local governmental agency or
regulatory body, any cancellation, reduction, modification, change or amendment of or
addition to any schedule of tariffs currently on file with such agency or regulatory body, or
file with such governmental agency or regulatory body any schedule of tariffs for services
which are not covered by the tariff schedules on file therewith as of the date hereof;
(xiii) take any action that would cause any representation or warranty
contained herein to be inaccurate, untrue, incomplete or misleading;
(xiv) permit the occurrence or continuance of any material default
under any agreements to which the Company is a party;
(xv) make any acquisition of the capital stock or all or substantially
all of the assets of any entity, other than as contemplated by the private placement
memorandum relating to the Debt Offering; or
(xvi) enter into any employment or similar contract with or increase
the compensation payable to any employee, except in the ordinary course of business and
in a manner consistent with past practices.
(g) Access to Additional Agreements and Information. Prior to the Closing
Date, the Purchaser shall make available or otherwise deliver to the Seller any and all
<PAGE>
agreements, contracts, documents and other instruments material to its business, including
without limitation, those to which the Purchaser is a party and those by which any of its
assets
are bound.
(h) Use of Proceeds from Debt Offering. The Purchaser hereby agrees to
use the proceeds from the Debt Offering substantially in conformity with the description of
the application of such proceeds as set forth in the private placement memorandum relating
to the Debt Offering.
4.3 Governmental Filings and Consents. The Seller and the Purchaser shall
cooperate with one another in filing any necessary applications, reports or other documents
with any federal or state agencies, authorities or bodies having jurisdiction with respect to
the Business or the transactions contemplated by this Agreement and in seeking any
necessary approval, consultation or prompt favorable action of, with or by any of such
agencies, authorities or bodies.
4.4 Publicity. The Seller and the Purchaser will consult with each other party
hereto prior to making, releasing or otherwise disseminating any public announcements with
respect to the transactions contemplated by this Agreement. Any public announcements
permitted hereunder shall be made only at such time and in such manner as the Seller and
the Purchaser shall mutually agree, except that any party hereto shall be free to make such
public announcements as it shall reasonably deem necessary to comply with federal or state
laws, provided that such announcement is simultaneously delivered to the other parties
hereto.
4.5 Purchaser's Right to Investigate.
(a) Obligations of the Seller. Each of the parties hereto shall afford to the
officers and authorized representatives and agents of the other parties, during regular
business hours and upon reasonable prior notice, free and full access to any office,
warehouse, plant, property, inventory, accounts, books and records of each of the parties
hereto such as to afford such parties the full opportunity to make such investigations as each
shall desire or deem appropriate with respect to the affairs of the parties hereto. Each of
the parties hereto shall furnish the other parties with such additional financial and operating
data and other information relating to its business and assets, and the operations, earnings,
prospects or condition (financial or otherwise) as the parties hereto shall from time to time
request. Prior to the Closing Date, or at all times hereafter in the event that the
transactions contemplated hereby are not consummated or this Agreement is otherwise
terminated, such parties shall, except as may be otherwise required by applicable law, hold
confidential all information obtained pursuant to this Subsection 4.5(a) or otherwise in
connection with consummation of the transactions contemplated by this Agreement. In the
event that this Agreement is terminated, each party shall return to the other parties, as
appropriate, all of such information as shall be in documentary form.
(b) Effectiveness of Representations Notwithstanding Investigation.
Notwithstanding any party's undertaking or conduct of any investigation pursuant hereto, or
<PAGE>
any party's failure to so investigate, the representations, warranties and agreements of each
of the parties hereto shall be operative and effective and shall survive the Closing Date to
the extent previously set forth in Section 3.3. In the event that a party hereto becomes
aware or knows prior to the Closing that a representation or warranty made herein by
another party hereto is untrue, such party shall express such knowledge by written notice
thereof to the party rendering such representation or warranty on or prior to the Closing
Date. Knowledge on the part of the Purchaser on or prior to the Closing that a
representation or warranty of the Seller is untrue or knowledge on the part of the Seller on
or prior to the Closing Date that a representation or warranty of the Purchaser is untrue,
shall render that specific representation or warranty inoperative and ineffective and such
other party shall not have any liability in respect thereof pursuant to Article VI hereof;
provided that, such knowledge is expressed by written notice thereof to the party rendering
such representation or warranty on or prior to the Closing Date.
ARTICLE V
CONDITIONS
5.1 Conditions to Obligations of Purchaser. The obligation of the Purchaser to
consummate the transactions contemplated by this Agreement is subject to the fulfillment
of each of the following conditions, which may be waived in whole or in part by the
Purchaser to the extent permitted by applicable law:
(a) No Material Adverse Change. Since September 30, 1995, no material
adverse change in the Business or the Assets, or the operations, earnings, prospects or
condition (financial or otherwise) of the Seller or Worldwide, and no event which would
materially and adversely affect the Business or the Assets, or the operations, earnings,
prospects or condition (financial or otherwise) of the Seller or Worldwide shall have
occurred.
(b) Opinion of Seller's and Stockholders' Counsel. The Seller shall have
furnished the Purchaser, at the Closing, with an opinion of Parsons Behle & Latimer,
counsel to the Seller, dated as of the Closing Date, substantially in the form attached hereto
as Exhibit 5.1(b).
(c) Accuracy of Representations and Warranties; Performance of
Covenants. Each of the representations and warranties of the Seller and GNet as set forth
in this Agreement was true, correct and complete in all respects when made and shall also
be true, correct and complete in all respects at and as of the Closing Date, with the same
force and effect as if made at and as of the Closing Date. The Seller and GNet shall have
performed and complied in all respects with all agreements and covenants required by this
Agreement to be performed by the Seller and GNet at or prior to the Closing Date.
(d) Delivery of Certificates. The Seller and GNet shall have delivered to
the Purchaser certificates, dated the Closing Date, and signed by: (i) GNet, as the general
<PAGE>
partner of the Seller; and (ii) the President of GNet, as an officer of GNet, as an individual
party hereto, representing and affirming, as applicable, that the representations and
warranties made by each of the Seller and GNet were and are true, correct and complete
as required by Subsection 5.1(c) above and the conditions set forth in this Section 5.1 have
been satisfied. The Seller shall also have delivered a certificate signed by an officer of
GNet, with respect to the authority of GNet, as the general partner of the Seller, in
executing this Agreement and any documents required to be executed or delivered in
connection herewith on behalf of the Seller. GNet shall also have delivered a certificate
signed by the Secretary of GNet with respect to the authority and incumbency of the officers
of GNet in executing this Agreement and any documents required to be executed in
connection herewith on behalf of GNet, as an individual party hereto.
(e) Stock Certificates. At the Closing, the Seller shall have delivered to
the Purchaser certificates representing all of the issued and outstanding shares of Worldwide
Stock, which certificates shall be in the name of the Purchaser or shall be properly endorsed
in blank or accompanied by a properly executed stock power.
(f) Consents and Waivers. At the Closing, any and all necessary consents,
authorizations, orders or approvals described in Subsection 3.1(u) above shall have been
obtained, except as the same shall have been waived by the Purchaser.
(g) Litigation. On the Closing Date, there shall be no effective injunction,
writ or preliminary restraining order or any order of any kind whatsoever with respect to the
Seller issued by a court or governmental agency (or other governmental or regulatory
authority) of competent jurisdiction restraining or prohibiting the consummation of the
transactions contemplated hereby or making consummation thereof unduly burdensome to
the Seller or Worldwide. On the Closing Date and immediately prior to consummation of
the transactions contemplated by this Agreement, no proceeding or lawsuit shall have been
commenced, be pending or have been threatened by any governmental or regulatory agency
or authority or any other person with respect to the transactions contemplated by this
Agreement.
(h) Delivery of Documents and Other Information. Prior to the Closing
Date, each of the Seller and Worldwide shall have made available or delivered to the
Purchaser all of the agreements, contracts, documents and other instruments required to be
delivered pursuant to the provisions of this Agreement.
(i) Concurrent Transaction. On or prior to the Closing Date, the Debt
Offering shall have been consummated.
(j) Validity of Assignment. The Assignment shall be: (i) duly and validly
executed; (ii) legal and binding upon and enforceable against each of the Seller and
Worldwide; (iii) in conformity with the other statements, representations and warranties set
forth herein relating to the Seller, Worldwide, the Business and the Assets; and (iv) free of
any terms or conditions which would prohibit consummation of any of the transactions
contemplated hereby.
<PAGE>
(k) Grant of Option. On or before the Closing Date, Four M International,
Inc. ("Four M"), the holder of an aggregate of 160,000 shares of Preferred Stock previously
designated Class A Convertible Preferred Stock (the "Class A Preferred Stock") shall enter
into option agreements substantially in the form attached hereto as Exhibit 5.1(k) (the
"Option Agreements") which shall provide for the grant, to the persons and/or entities set
forth on Schedule 5.1(k) hereto, of options (the "Options") exercisable (in the respective
amounts set forth on Schedule 5.1(k) hereto) to purchase up to an aggregate of 160,000
shares of Class A Preferred Stock (or the 3,915,570 shares of Purchaser Stock issuable upon
conversion thereof) at an exercise price equal to the lesser of 200% of the average of the
closing bid and asked prices per share of Purchaser Stock as quoted on the Nasdaq
SmallCap Market for the ten (10) business days preceding July 1, 1996 or $1.79 per share.
The Option Agreements shall further provide that in consideration for the grant of the
Options, Four M shall receive an aggregate of $50,000 ($15,000 of which has been paid and
the remainder of which is payable in the respective amounts set forth on Schedule 5.1(k)
hereto) on or before July 1, 1996. The Option Agreements shall also provide that the
Options: (i) shall not become exercisable prior to July 1, 1996; and (ii) shall expire
incrementally on each of December 31, 1996 and December 31, 1997 as set forth on
Schedule 5.1(k) hereto.
(l) Assignment of Rights in and to Fax-Link. On or prior to the Closing
Date, all right, title and interest in and to Fax-Link (including, without limitation, any patent
and/or trademark rights currently pending) shall have been transferred to Worldwide.
5.2 Conditions to Obligations of the Seller. The obligations of the Seller to
consummate the transactions contemplated by this Agreement are subject to the fulfillment
of each of the following conditions, which may be waived in whole or in part by the Seller
to the extent permitted by law:
(a) Copies of Resolutions. At the Closing, the Purchaser shall have
furnished the Seller with certified copies of resolutions duly adopted by the board of
directors of the Purchaser authorizing the execution, delivery and performance of the terms
of this Agreement and all other necessary or proper corporate action to enable the
Purchaser to comply with the terms of this Agreement.
(b) Opinion of Purchasers' Counsel. The Purchaser shall have furnished
the Seller, at the Closing, with an opinion of De Martino Finkelstein Rosen & Virga,
counsel to the Purchaser, dated as of the Closing Date, substantially in the form attached
hereto as Exhibit 5.2(b).
(c) Accuracy of Representations and Warranties; Performance of
Covenants. Each of the representations and warranties of the Purchaser was true, correct
and complete in all respects when made and shall also be true, correct and complete in all
respects at and as of the Closing Date, with the same force and effect as if made at and as
of the Closing Date. The Purchaser shall have performed and complied with in all respects
all agreements and covenants required by this Agreement to be performed by the Purchaser
at or prior to the Closing Date.
<PAGE>
(d) Delivery of Officers' Certificates. The Purchaser shall have delivered
to the Seller certificates, dated the Closing Date and signed by the President of the
Purchaser, affirming that: (i) the representations and warranties of the Purchaser as set
forth in Section 3.2 of this Agreement and referred to in Subsection 5.2(c) above were and
are true, correct and complete as required by Subsection 5.2(c) above; and (ii) the
conditions set forth in this Section 5.2 have been satisfied. The Purchaser shall also have
delivered a certificate signed by the Secretary of the Purchaser with respect to the authority
and incumbency of the officers of the Purchaser executing this Agreement and any
documents required to be executed or delivered in connection therewith.
(e) Stock Certificates. At the Closing, the Purchaser shall have delivered
to the Seller (or into escrow pursuant to the Escrow Agreement as previously set forth
herein) certificates representing the shares of Purchaser Stock issuable pursuant hereto,
which certificates shall be in the name of the Seller or the partners of the Seller (as directed
by the Seller and set forth on the schedules hereto).
(f) Consents and Waivers. On or prior to the Closing Date, any and all
necessary consents, authorizations, orders or approvals described in Subsection 3.2(d) shall
have been obtained, except as the same shall have been waived by the Seller.
(g) Litigation. On the Closing Date, there shall be no effective injunction,
writ or preliminary restraining order or any order of any kind whatsoever with respect to the
Purchaser issued by a court or governmental agency (or other governmental or regulatory
authority) of competent jurisdiction restraining or prohibiting the consummation of the
transactions contemplated herein or making the consummation thereof unduly burdensome
to the Purchaser. On the Closing Date, no proceeding or lawsuit shall have been
commenced, threatened or be pending or by any governmental or regulatory agency or
authority or any other person with respect to the transactions contemplated by this
Agreement.
(h) Delivery of Documents and Other Information. Prior to the Closing
Date, the Purchaser shall have made available or delivered to the Seller all of the
agreements, contracts, documents and other instruments required to be delivered pursuant
to the provisions of this Agreement.
(i) Concurrent Transaction. On or prior to the Closing Date, the Debt
Offering shall have been consummated.
(j) Board Representation. Upon Closing, on the Closing Date, the Seller
shall have the right to designate for appointment to the board of directors of the Purchaser
(the "Board of Directors") one candidate to fill any vacancy then existing. Such designee
shall be appointed to and shall serve on the Board of Directors pursuant to the Purchaser
Certificate of Incorporation and Purchaser Bylaws.
<PAGE>
(k) Employment Agreements. On or prior to the Closing Date, the
Purchaser shall enter into an employment agreement, substantially in the form attached
hereto as Exhibit 5.2(k), with each of Clay Wilkes and Alex Radulovic, employees of the
Seller (the "Employment Agreements"). It is hereby agreed among the parties hereto that
the obligations of the Purchaser hereunder may be fulfilled by execution of the Employment
Agreements between the employees above and a wholly-owned subsidiary of the Purchaser
formed by the Purchaser for the purpose of acquiring the Assets and operating the Business.
(l) Grant of Option. On or before the Closing Date, Four M shall enter
into the Option Agreements.
(m) No Material Adverse Change. Since September 30, 1995, no material
adverse change in the business or the assets, or the operations, earnings, prospects or
condition (financial or otherwise) of the Purchaser, and no event which would materially and
adversely affect the business or the assets, or the operations, earnings, prospects or condition
(financial or otherwise) of the Purchaser shall have occurred.
ARTICLE VI
INDEMNIFICATION AND CLAIMS
6.1 Indemnification by the Seller.
(a) Subject to Section 3.3 hereof, the Seller and GNet (with respect only
to the representations, warranties, covenants, agreements and obligations expressly made or
assumed by it) hereby agree, jointly and severally, to indemnify and hold harmless the
Purchaser (the "Indemnified Party") against and in respect of all damages, claims, losses and
expenses (including, without limitation, attorneys' fees and disbursements) reasonably
incurred by the Purchaser (all such amounts may hereinafter be referred to as the
"Damages") arising out of: (i) any misrepresentation or breach of any warranty made by the
Seller or GNet pursuant to the provisions of this Agreement or in any statement, certificate
or other document furnished by the Seller or GNet pursuant to this Agreement; and (ii) the
nonperformance or breach of any covenant, agreement or obligation of the Seller or GNet
contained in this Agreement which has not been waived by the Purchaser.
(b) Subject to Section 3.3 hereof, the Seller and GNet shall be obligated
to indemnify the Indemnified Party pursuant to this Section 6.1 with respect to claims for
Damages as to which the Indemnified Party shall have given written notice to the Seller
and/or GNet on or before the close of business on the sixtieth day following the second
anniversary of the Closing Date. The Seller and GNet shall be obligated to indemnify the
Indemnified Party with respect to claims for Damages arising out of any misrepresentation
or breach of warranty respectively made by the Seller or GNet relating to taxes as to which
the Indemnified Party shall have given notice on or before the close of business on the
sixtieth day following the later of: (i) the expiration date of the statute of limitations
<PAGE>
applicable to any indemnified federal, state, foreign or local tax liability; or (ii) the final
determination of any such tax liability, including the final administrative and/or judicial
determination thereof.
(c) Notwithstanding the indemnification provided pursuant to Subsection
6.1(a) above, no amount shall be payable in indemnification hereunder or under any other
provision of this Agreement unless the aggregate amount of such Damages in respect of
which the Seller or GNet would be liable, but for operation and application of the
provisions of this Section 6.1, exceeds on a cumulative basis Fifty Thousand Dollars
($50,000) and then only to the extent of such excess.
(d) In any case where the Seller or GNet have indemnified the Indemnified
Party for any Damages and the Indemnified Party recovers from third parties all or any part
of the amount so indemnified by the Seller or GNet, the Indemnified Party shall promptly
pay over to the Seller or GNet, as the case may be, the amount so recovered.
6.2 Claims Against the Indemnified Party. With respect to claims or demands by
third parties, whenever the Indemnified Party shall have received notice that such a claim
or demand has been asserted or threatened which, if valid, would be subject to
indemnification under Section 6.1 hereof, the Indemnified Party shall as soon as reasonably
possible and in any event within thirty (30) days of receipt of such notice, notify the Seller
and/or GNet of such claim or demand and of all relevant facts within its knowledge which
relate thereto. The Seller and/or GNet shall then have the right at their own expense to
undertake the defense of any such claims or demands utilizing counsel selected by the Seller
or GNet, as the case may be, and approved by the Purchaser, which approval shall not be
unreasonably withheld. In the event that the Seller or GNet should fail to give notice of the
intention to undertake the defense of any such claim or demand within sixty (60) days after
receiving notice that it has been asserted or threatened, the Indemnified Party shall have
the right to satisfy and discharge the same by payment, compromise or otherwise and shall
give written notice of any such payment, compromise or settlement to the Seller and GNet.
6.3 Right of Offset. In the event that the Seller or GNet may be required to pay
monies in indemnification to the Indemnified Party pursuant to any indemnification
provision of this Agreement, the Indemnified Party shall have the right to offset any
amounts which are owed to it in indemnification by the Seller or GNet against any amounts
which are payable by the Indemnified Party to the Seller or GNet, as the case may be,
provided however, that nothing set forth in this Section 6.3 shall relieve the Indemnified
Party of its obligations (subject to reduction for offsets as provided herein) under this
Agreement when due.
6.4 Indemnification by Purchaser.
(a) Subject to Section 3.3 hereof, the Purchaser hereby agrees to indemnify
and hold harmless the Seller against and in respect of all damages, claims, losses and
expenses (including without limitation, attorneys' fees and disbursements) reasonably
<PAGE>
incurred by the Seller (all such amounts may hereinafter be referred to as "Seller Damages")
arising out of: (i) any misrepresentation or breach of any warranty made by the Purchaser
pursuant to the provisions of this Agreement or in any statement, certificate or other
document furnished by the Purchaser pursuant to this Agreement; and (ii) the
nonperformance or breach of any covenant, agreement or obligation of the Purchaser which
has not been waived by the Seller.
(b) Subject to Section 3.3 hereof, the Purchaser shall be obligated to
indemnify the Seller pursuant to this Section 6.4 only with respect to claims for Seller
Damages as to which the Seller shall have given written notice to the Purchaser on or
before the close of business on the sixtieth day following the second anniversary of the
Closing Date. The Purchaser shall be obligated to indemnify the Indemnified Party with
respect to claims for Damages arising out of any misrepresentation or breach of warranty
respectively made by the Purchaser relating to taxes as to which the Indemnified Party shall
have given notice on or before the close of business on the sixtieth day following the later
of: (i) the expiration date of the statute of limitations applicable to any indemnified federal,
state, foreign or local tax liability; or (ii) the final determination of any such tax liability,
including the final administrative and/or judicial determination thereof.
(c) Notwithstanding the indemnification provided pursuant to Subsection
6.4(a) above, no amount shall be payable by the Purchaser in indemnification hereunder or
under any other provision of this Agreement unless the aggregate amount of Seller Damages
in respect of which the Purchaser would be liable, but for operation and application of the
provisions of this Subsection 6.4, exceeds on a cumulative basis Fifty Thousand Dollars
($50,000) and then only to the extent of such excess.
(d) In any case where the Purchaser has indemnified the Seller for any
Seller Damages and the Seller recovers from third parties all or any part of the amount so
indemnified by the Purchaser, the Seller shall promptly reimburse to the Purchaser the
amount paid by the Purchaser to the Seller up to the amount so recovered.
6.5 Claims Against the Seller. With respect to claims or demands by third parties,
whenever the Seller shall have received notice that such a claim or demand has been
asserted or threatened, which, if valid, would be subject to indemnification under Section
6.4 hereof, the Seller shall as soon as reasonably possible and in any event within thirty (30)
days of receipt of such notice, notify the Purchaser of such claim or demand and of all
relevant facts within its knowledge which relate thereto. The Purchaser shall have the right
at its expense to undertake the defense of any such claim or demand utilizing counsel
selected by the Purchaser and approved by the Seller, which approval shall not be
unreasonably withheld. In the event that the Purchaser should fail to give notice of its
intention to undertake the defense of any such claim or demand within sixty (60) days after
receiving notice that it has been asserted or threatened, the Seller shall have the right to
satisfy and discharge the same by payment, compromise or otherwise and shall give written
notice of any such payment, compromise or settlement to the Purchaser.
<PAGE>
6.6 Disclosure Generally. If and to the extent any information required to be
furnished in any schedule is contained in this Agreement or in any schedule attached hereto,
such information shall be deemed to be included in all schedules in which the information
is required to be included. The inclusion of any information in any schedule attached
hereto shall not be deemed to be an admission or acknowledgement by the Seller, in and
of itself, that such information is material to or outside the ordinary course of the business
of the Seller.
6.7 Acknowledgements. The representations and warranties contained in this
Agreement and made: (a) by the Seller constitute the sole and exclusive representations
and warranties of the Seller to the Purchaser in connection with the transactions
contemplated hereby; and (b) by the Purchaser constitute the sole and exclusive
representations and warranties of the Purchaser to the Seller to the Purchaser in connection
with the transactions contemplated hereby.
ARTICLE VII
TERMINATION AND REMEDIES FOR BREACH OF THIS AGREEMENT
7.1 Termination by Mutual Agreement. This Agreement may be terminated at
any time by mutual consent of the parties hereto, provided that such consent to terminate
is manifested in writing and is signed by each of the parties hereto.
7.2 Termination for Failure to Close. This Agreement may be terminated by the
Purchaser or the Seller if the Closing shall not have occurred by February 15, 1996, provided
that, the right to terminate this Agreement pursuant to this section shall not be available
to any party whose failure to fulfill any of its obligations hereunder has been the cause of
or resulted in the failure to consummate the transactions contemplated hereby by the
foregoing date.
7.3 Termination by Operation of Law. This Agreement may be terminated by the
Purchaser or the Seller if there shall be any statute, rule or regulation that renders
consummation of the transactions contemplated hereby illegal or otherwise prohibited, or
a court of competent jurisdiction or any government (or governmental authority) shall have
issued an order, decree or ruling, or has taken any other action restraining, enjoining or
otherwise prohibiting the consummation of such transactions and such order, decree, ruling
or other action shall have become final and nonappealable.
7.4 Termination for Failure to Perform Covenants or Conditions. This Agreement
may be terminated prior to the Closing Date:
(a) by the Purchaser if: (i) any of the representations and warranties made
in this Agreement by the Seller shall not be true and correct, when made or at any time
prior to consummation of the transactions contemplated hereby as if made at and as of such
time; (ii) any of the conditions set forth in Section 5.1 hereof have not been fulfilled by the
<PAGE>
Closing Date; (iii) the Seller shall have failed to observe or perform obligations under this
Agreement; or (iv) as otherwise set forth herein; or
(b) by the Seller if: (i) any of the representations and warranties of the
Purchaser shall not be true and correct when made or at any time prior to consummation
of the transactions contemplated hereby as if made at and as of such time; (ii) any of the
conditions set forth in Section 5.2 hereof have not been fulfilled by the Closing Date;
(iii) the Purchaser shall have failed to observe or perform any of its obligations under this
Agreement; or (iv) as otherwise set forth herein.
7.5 Effect of Termination or Default; Remedies. In the event of termination of
this Agreement as set forth above, this Agreement shall forthwith become void and there
shall be no liability on the part of any party hereto, provided that, such party is a
Non-Defaulting Party (as defined below). The foregoing shall not relieve any party from
liability for damages actually incurred as a result of such party's breach of any term or
provision of this Agreement.
7.6 Remedies; Specific Performance. In the event that any party shall fail or
refuse to consummate the transactions contemplated by this Agreement or if any default
under or beach of any representation, warranty, covenant or condition of this Agreement
on the part of any party (the "Defaulting Party") shall have occurred that results in the
failure to consummate the transactions contemplated hereby, then in addition to the other
remedies provided herein, the non-defaulting party (the "Non-Defaulting Party") shall be
entitled to seek and obtain money damages from the Defaulting Party or may seek to obtain
an order of specific performance thereof against the Defaulting Party from a court of
competent jurisdiction, provided that, the Non-Defaulting party seeking such protection must
file its request with such court within forty-five (45) days after it becomes aware of the
Defaulting Party's failure, refusal, default or breach. In addition, the Non-Defaulting Party
shall be entitled to obtain from the Defaulting Party court costs and attorneys' fees incurred
in connection with or in pursuit of enforcing the rights and remedies provided hereunder.
ARTICLE VIII
MISCELLANEOUS
8.1 Modification, Amendments and Waiver. The parties hereto may amend,
modify or otherwise waive any provision of this Agreement by mutual consent, provided that
such consent and any amendment, modification or waiver is in writing and is signed by each
of the parties hereto.
8.2 Assignment. Neither the Seller nor the Purchaser shall have the authority to
assign its respective rights or obligations under this Agreement without the prior written
consent of the other parties hereto, except that the Purchaser may assign all or any portion
of its respective rights hereunder, without the prior written consent of the Seller, to any
<PAGE>
affiliate of the Purchaser (including any wholly-owned subsidiary) or to any lender, bank,
financial institution or other entity providing financing to the Purchaser in connection with
consummation of the transactions contemplated hereby and the Seller shall execute such
documents as are necessary in order to effectuate such assignments.
8.3 Burden and Benefit. This Agreement shall be binding upon and, to the extent
permitted in this Agreement, shall inure to the benefit of the parties and their respective
successors and assigns. In the event of a default by the Seller of any of its obligations
hereunder, the sole and exclusive recourse and remedy of the Purchaser shall be against the
Seller and GNet, as the case may be, and any of the Seller's and GNet's assets; under no
circumstances shall any limited partner of the Seller be liable in law or equity for any
obligations of the Seller or GNet hereunder. In the event of a default by the Purchaser of
any of its obligations hereunder, the sole and exclusive recourse and remedy of the Seller
shall be against the Purchaser and its assets; under no circumstances shall any officer,
director, stockholder or affiliate of the Purchaser be liable in law or equity for any
obligations of the Purchaser hereunder.
8.4 Brokers. The Seller represents and warrants to the Purchaser that there are
no brokers or finders entitled to any brokerage or finder's fee or other commission or fee
based upon arrangements made by or on behalf of the Seller or any other person in
connection with this Agreement or any of the transactions contemplated hereby. The
Purchaser represents and warrants to the Seller that no broker or finder is entitled to any
brokerage or finder's fee or other commission or fee based upon arrangements made by or
on behalf of the Purchaser in connection with this Agreement or any of the transactions
contemplated hereby.
8.5 Entire Agreement. This Agreement and the exhibits, schedules, lists and other
documents referred to herein contain the entire agreement among the parties hereto with
respect to the transactions contemplated hereby and supersede all prior agreements with
respect thereto, whether written or oral.
8.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida, without regard, however, to such
jurisdiction's principles of conflicts of laws.
8.7 Notices. Any notice, request, instruction or other document to be given
hereunder by any party hereto shall be in writing and delivered personally, by facsimile
transmission or telex, or sent by registered or certified mail (return receipt requested),
postage prepaid, addressed as follows:
<PAGE>
If to the Seller
or GNet: GNet Enterprises, Inc., general partner
ILINK, Ltd.
16207 Braesgate Drive
Austin, Texas 78717
Attn: Clay Wilkes, President
Facsimile: (512) 244-9681
with a copy to: Parsons Behle & Latimer
201 South Main, Suite 1800
Salt Lake City, Utah 84111
Attn: William Holyoak, Esq.
Facsimile: (801) 536-6111
If to the Purchaser:Medcross, Inc.
3227 Bennet Street, North
St. Petersburg, Florida 33713
Attn: Henry Y.L. Toh, President
Facsimile: (813) 521-4249
with a copy to: De Martino Finkelstein Rosen & Virga
1818 N Street, N.W., Suite 400
Washington, D.C. 20036
Attn: Ralph V. De Martino, Esq.
Facsimile: (202) 659-1280
or to such other persons or addresses as may be designated in writing by the party to receive
such notice. If mailed as aforesaid, the day of mailing or transmission shall be the date any
such notice shall be deemed to have been delivered.
8.8 Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be an original, but all of which shall constitute but one agreement.
8.9 Rights Cumulative. All rights, powers and privileges conferred hereunder
upon the parties, unless otherwise provided, shall be cumulative and shall not be restricted
to those given by law. Failure to exercise any power given any party hereunder or to insist
upon strict compliance by any other party shall not constitute a waiver of any party's right
to demand exact compliance with any of the terms or provisions hereof.
8.10 Severability of Provisions. The provisions of this Agreement shall be
considered severable in the event that any of such provisions are held by a court of
competent jurisdiction to be invalid, void or otherwise unenforceable. Such invalid, void or
<PAGE>
otherwise unenforceable provisions shall be automatically replaced by other provisions which
are valid and enforceable and which are as similar as possible in term and intent to those
provisions deemed to be invalid, void or otherwise unenforceable. Notwithstanding the
foregoing, the remaining provisions hereof shall remain enforceable to the fullest extent
permitted by law.
8.11 Headings. The headings set forth in the articles and sections of this
Agreement and in the exhibits and the schedules to this Agreement are inserted for
convenience of reference only and shall not be deemed to constitute a part hereof.
* * * * *
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered on the date and year first above written.
ILINK, Ltd., the Seller
By: GNet ENTERPRISES, INC.,
as General Partner
By:/s/ Clay Wilkes
Clay Wilkes, President
GNet ENTERPRISES, INC.
By:/s/ Clay Wilkes
Clay Wilkes, President
MEDCROSS, INC., the Purchaser
By:/s/ Henry Y.L. Toh
Henry Y.L. Toh, President
<S> <S>
</TABLE>
<TABLE>
ESCROW AGREEMENT
ESCROW AGREEMENT (the "Escrow Agreement") dated as of
February 21, 1996, by and among Medcross, Inc., a Florida
corporation (the "Purchaser"), ILINK, Ltd., a Utah limited
partnership (the "Seller") and De Martino Finkelstein Rosen &
Virga, a professional corporation (the "Escrow Agent").
WHEREAS, the Purchaser and the Seller (hereinafter sometimes
collectively referred to as the "Parties"), have entered into a
certain Stock Purchase Agreement dated as of the date hereof (the
"Purchase Agreement"), pursuant to which the Purchaser has agreed
to purchase all of the issued and outstanding shares of common
stock of I-Link Worldwide Inc. ("Worldwide") owned by the Seller in
exchange for the issuance to the Seller of 4,000,000 shares of
common stock, par value $.007 per share, of the Purchaser (the
"Common Stock");
WHEREAS, the Purchaser desires to place in escrow an aggregate
of 2,600,000 shares of the 4,000,000 shares of Common Stock issued
to the Seller pursuant to Section 1.2(b) of the Purchase Agreement
(the "Escrowed Stock") to be held in escrow by the Escrow Agent
upon the terms and conditions set forth herein; and
WHEREAS, the 2,600,000 shares of Escrowed Stock shall be
titled in the name of the Seller in accordance with Section 1.2(b)
of the Purchase Agreement and shall be released upon the conditions
set forth herein.
NOW THEREFORE, it is agreed as follows:
Section 1. Each of the Parties hereby appoint the Escrow
Agent to serve as escrow agent with respect to the Escrowed Stock
issued to the Seller pursuant to Section 1.2(b) of the Purchase
Agreement, subject to the terms and conditions of this Escrow
Agreement, and the Escrow Agent hereby accepts such appointment.
Section 2. Contemporaneous with the execution of this Escrow
Agreement, the Purchaser will deliver certificates representing the
shares of the Escrowed Stock to the Escrow Agent, which
certificates shall have been issued in the name of the Seller and
shall bear legends relating to the restrictions on transfer thereof
imposed by the Securities Act of 1933 and indicating that the
shares of Common Stock evidenced by such certificate are subject to
the terms and conditions of this Escrow Agreement.
Section 3. The Escrow Agent will hold the Escrowed Stock for
the benefit of the Parties, until the same are released pursuant to
this Escrow Agreement. Prior to satisfaction of the conditions
stated in Section 5 hereof, the Escrowed Stock shall not be subject
to levy or attachment to satisfy any obligation of the Seller or
the Purchasers.
Section 4. The Escrow Agent shall make no distribution of the
Escrowed Stock except in accordance with this Escrow Agreement.
<PAGE>
Section 5. The Escrowed Stock shall be released upon receipt
from the appropriate officer or representative of the Purchaser (as
set forth in Section 8) of a certificate executed by the Chief
Executive Officer of the Purchaser certifying that one or more
conditions of release of the Escrowed Stock hereunder has been
satisfied (the "Certificate of Release").
(a) Purchaser shall promptly deliver a Certificate of Release
for 1,600,000 shares of the 2,600,000 shares of Escrowed Stock at
such time as the Purchaser or Worldwide has received gross proceeds
greater than or equal to $4,000,000 from the sale of its securities
pursuant to the conduct of one or more private or public offerings
prior to December 31, 1996; and
(b) Purchaser shall promptly deliver a Certificate of Release
for the remaining 1,000,000 shares of the 2,600,000 shares of
Escrowed Stock upon the first to occur of the following:
(i) monthly net revenue (determined in accordance with generally
accepted accounting principles and consistent with past practices)
derived from the subscribers (the "Subscribers") serviced by
Worldwide and revenue derived from the sale of related products
and/or services equals or exceeds $1,000,000; or (ii) the number of
Subscribers exceeds 100,000 prior to one year from the date of
receipt by the Purchaser of gross proceeds equal to $4,000,000 from
the sale of its securities pursuant to the conduct of one or more
private or public offerings.
(c) Purchaser shall promptly deliver a Certificate of Release
with respect to all remaining Escrowed Stock when the provisions of
Section 7 of the Employment Agreement dated the date hereof between
Worldwide and Clay Wilkes (or Section 7 of the Employment Agreement
dated the date hereof between Worldwide and Alex Radulovic) so
provide.
Upon receipt of the Certificate of Release, the Escrow Agent
shall, within ten business days of receipt of the Certificate of
Release, deliver the Escrowed Stock to Seller. In the event that
written objection is received by the Escrow Agent within the ten
business days set forth above and a disagreement arises over
disposition of the Escrowed Stock, the Escrow Agent shall be
governed by Section 9 below.
Any Escrowed Stock remaining in the possession of the Escrow
Agent on March 31, 1998 shall be released and delivered to the
Purchaser for cancellation.
Upon distribution of the Escrowed Stock in accordance
herewith, all obligations of the Escrow Agent shall cease and the
Escrow Agent shall be released from any and all liability directly
or indirectly relating to this Escrow Agreement or the
administration of the escrow without any further action by or on
behalf of any party hereto.
Section 6. The Escrow Agent is not a party to and shall not
be bound by, charged with any knowledge of, or under any duty to
enforce any contract between or among any of the Parties. The
Escrow Agent shall act as a depository only and shall not be
required to take notice of any default, pledge or warranty under
any contract between or among the Parties.
<PAGE>
Section 7. The Escrow Agent is not responsible or liable in
any manner whatever for the sufficiency, correctness, genuineness
or validity of any instrument, agreement or material distributed in
connection with the Purchase Agreement or for the identity,
authority or right of any person executing such agreement.
Section 8. The Escrow Agent may accept the written directions
contemplated by this Escrow Agreement from the board of directors
of the Purchaser or such officers or agents whose names and
signatures are supplied to the Escrow Agent by the board of
directors of the Purchaser. The Escrow Agent shall be protected
and may act in reliance upon any writing or instrument or
signature which it, in good faith, believes to be genuine, may
assume the validity and accuracy of any statement or assertion
contained in such writing or instrument and may assume that any
person purporting to give any writing, notice, advice or
instruction in connection with the provisions of this Escrow
Agreement has been duly authorized to do so.
Section 9. In the event of any disagreement between any of
the Parties resulting in conflicting or adverse claims or demands
being made in connection with the Escrowed Stock, the Escrow Agent
shall be entitled, at its option, to refuse to comply with or
recognize any such claims or demands so long as the disagreement
shall continue, and in so doing the Escrow Agent shall not become
liable in any way to any person for its failure or refusal to
comply with such conflicting or adverse claims or demands, and its
duties hereunder shall be suspended until (i) the rights of
claimants have been finally adjudicated or the differences adjusted
between the Parties, and (ii) the Escrow Agent shall have been
notified thereof in a writing or writings signed by all persons
interested. In the event the differences between the Parties have
not been adjusted and the Escrow Agent so notified following
receipt of notice by the Escrow Agent of conflicting or adverse
claims or demands, the Escrow Agent may at any time interplead the
Escrowed Stock in a court of proper jurisdiction, and thereupon the
Escrow Agent shall be fully and completely discharged of its duties
as Escrow Agent. Each of the Purchasers and the Seller shall
reimburse the Escrow Agent for one-half of its costs, expenses and
reasonable legal fees in connection with any actions taken pursuant
to this section.
Section 10. Without any certification, notification or
consent, the Escrow Agent may at any time deposit all or part of
the Escrowed Stock in the Escrow Account with a court upon receipt
of any notice from a court or governmental agency requesting or
directing it to do so and shall provide written notice of such
deposit to the other Parties hereto within ten business days
thereafter and all obligations of Escrow Agent shall thereupon
cease, and Escrow Agent shall be released from any and all
liability directly or indirectly relating to this Escrow Agreement
or the administration of the escrow without any further action on
behalf of any party hereto.
Section 11. The Escrow Agent shall be indemnified by the
Parties as follows:
(a) Each of the Parties (the "Indemnifying Parties") will,
jointly and severally, indemnify and hold the Escrow Agent, and
its officers, directors, employees, agents, partners, shareholders,
and affiliates (collectively, the "Indemnified Parties") harmless
against any loss, liability or expense (including reasonable
attorney's fees and costs) incurred without gross negligence or
<PAGE>
willful misconduct on its or their part, arising out of, or in
connection with, its acceptance or administration of duties imposed
by this Escrow Agreement, as well as the costs and expenses of
defending against any such claim, suit, action or proceeding;
provided, however, that the Indemnifying Parties shall indemnify
and hold harmless the Indemnified Parties with respect to any
amount paid for any settlement or compromise only if such
settlement or compromise is effected with the written consent of
each of them, which shall not be unreasonably withheld.
(b) The Escrow Agent shall give notice to the Indemnifying
Parties of any action or proceeding commenced against it or any
other Indemnified Party in respect of which indemnity may be sought
under the Escrow Agreement promptly after such Indemnified Party
shall have been served with a summons or other form of legal
process giving information as to the nature and the basis of the
claim, but failure to so notify the Indemnifying Parties shall not
relieve it from any liability which it may have otherwise than on
account of this indemnity agreement. The Indemnifying Parties may
participate at their own expense in the defense of such action. If
it so elects within a reasonable time after receipt of such notice,
an Indemnifying Party may assume the defense of such action with
counsel chosen by it and approved by the Indemnified Parties who
are defendants in that action, unless the Indemnified Parties
reasonably object to such assumption; provided, however, that an
Indemnifying Party may not effect any settlement or compromise of,
or fail to pursue, including an appeal, any claim, suit, action or
proceeding relating to the Indemnified Parties without the written
consent of each of them, which shall not be unreasonably withheld.
If an Indemnifying Party assumes the defense of the action, the
Indemnifying Party shall not be liable for any fees and expenses of
counsel for the Indemnified Parties incurred thereafter in
connection with such action unless such counsel has acted at the
request of the Indemnifying Party.
Section 12. The acceptance by the Escrow Agent of its duties
as such under this Escrow Agreement is subject to the following
further terms and conditions:
(a) The Escrow Agent shall be entitled to rely upon and be
protected in acting upon any certification, statement, request,
waiver, consent, receipt, instruction, agreement or other
instrument or communication whatsoever which the Escrow Agent in
good faith believes to be genuine and what it purports to be, not
only as to its due execution and the validity and effectiveness of
its provisions, but also as to the truth and acceptability of any
information therein contained.
(b) No term or provision of this Escrow Agreement is intended
to create, nor shall any such term or provision be deemed to have
created, any principal-agent, trust, joint venture, partnership,
debtor-creditor or attorney-client relationship between or among
the Escrow Agent and any of the Parties. This Escrow Agreement
shall not be deemed to prohibit or in any way restrict Escrow
Agent's representation of any of the Parties who may be advised by
Escrow Agent on any and all matters pertaining to this Escrow
Agreement. To the extent one or more of the Parties including each
Purchaser are or have been represented by Escrow Agent, each such
Party or person hereby waives any conflict of interest and
irrevocably authorizes and directs the Escrow Agent to carry out
<PAGE>
the terms and provisions of this Escrow Agreement fairly as to all
parties, without regard to any such representation and irrespective
of the impact upon any of the Parties or any Purchaser. Escrow
Agent's only duties are those expressly set forth in this Escrow
Agreement, and each of the Parties and each Purchaser authorizes
Escrow Agent to perform those duties in accordance with its usual
practices in holding documents of its own or those of other
escrows. Escrow Agent may exercise or otherwise enforce any of its
rights, powers, privileges, remedies and interests under this
Escrow Agreement and applicable law or perform any of its duties
under this Escrow Agreement by or through its partners,
shareholders, employees, attorneys, agents or designees.
(c) The Escrow Agent, and its directors, officers, partners,
shareholders, employees, agents, attorneys and affiliates, are not
a party to and are not bound by, any agreements between the Parties
or which may be evidenced by or arise out of the foregoing
instructions and shall not incur any liability whatsoever for the
holding or delivery of the Escrowed Stock or the taking of any
other action in accordance with the terms and provisions of this
Escrow Agreement, for any mistake or error in judgment, for
compliance with any applicable law or any attachment, order or
other directive of any court or other authority (irrespective of
any conflicting term or provision of this Escrow Agreement), or for
any act or omission of any other person engaged by Escrow Agent in
connection with this Escrow Agreement; and the Parties hereby waive
any and all claims and actions whatsoever against Escrow Agent and
its designees, and its and their respective directors, officers,
partners, employees, attorneys and agents, arising out of or
related directly or indirectly to any and all of the foregoing
acts, omissions and circumstances. Furthermore, Escrow Agent and
its designees, and their respective directors, officers, partners,
employee, attorneys and agents, shall not incur any liability
(other than for a person's own acts or omissions amounting to gross
negligence or willful misconduct as finally determined pursuant to
applicable law by a governmental authority having jurisdiction) for
other acts and omissions arising out of or related directly or
indirectly to this Escrow Agreement, the Escrowed Stock or the
Purchase Agreement; and the Parties hereby expressly waive and
release any and all claims and actions (other than those
attributable to a person's own acts or omissions amounting to gross
negligence or willful misconduct as finally determined pursuant to
applicable law by a governmental authority having jurisdiction)
against Escrow Agent and its designees, and their respective
directors, officers, partners, employees, attorneys and agents,
arising out of or related directly or indirectly to any and all of
the foregoing acts, omissions and circumstances.
(d) The Escrow Agent may consult with competent and
responsible legal counsel (including itself or counsel for any of
the Parties hereto), independent public accountants and other
experts selected by the Escrow Agent and it shall not be liable for
any action taken or omitted by it in good faith in accordance with
the advice of any such counsel, accountants or other experts.
Section 13. This Escrow Agreement shall terminate at the end
of three (3) years from the date of this Escrow Agreement, or on
such earlier date as the Escrow Agent shall have distributed the
Escrowed Stock in accordance with the provisions of this Escrow
Agreement or the Purchase Agreement shall have been terminated;
provided, however, that the provisions of Sections 11 and 12 hereof
<PAGE>
shall survive termination. The Company shall promptly give notice
to the Escrow Agent of the termination or extension of the Purchase
Agreement. This Escrow Agreement shall be binding upon and inure
to the benefit of the parties, their successors and assigns.
Section 14. This Escrow Agreement and the Purchase Agreement
constitute the entire agreement between the Parties as to the
Escrowed Stock and shall not be modified except in writing, signed
and acknowledged by all parties. In the event of any conflict
between the Purchase Agreement and this Escrow Agreement, this
Escrow Agreement shall govern.
Section 15. All notices and communications hereunder shall be
in writing and shall be deemed to be given on the date the same is
deposited in the United States mail, registered or certified mail,
return receipt requested, postage prepaid, addressed as follows:
If to the Escrow Agent, addressed to:
De Martino Finkelstein Rosen & Virga
1818 N Street, N.W., Suite 400
Washington, DC 20036
Attn: Ralph V. De Martino, Esq.
Facsimile: (202) 659-1290
If to the Purchasers, addressed to:
Mr. Henry Y.L. Toh
Medcross, Inc.
3227 Bennett Street North
St. Petersberg, Florida 33713
Facsimile: (813) 521-4249
If to the Seller, addressed to:
Mr. Clay Wilkes, President
GNet Enterprises, Inc., General Partner
ILINK, Ltd.
One Chisholm Trail, Suite 4250
Round Rock, Texas 78681
Facsimile: (512) 244-9681
Section 16. This Escrow Agreement shall be construed and
enforced according to the laws of the District of Columbia. Each
of the Parties hereby covenants and agrees that the Superior Court
of the District of Columbia or the United States District Court for
the District of Columbia, at the election of the Escrow Agent,
shall have personal jurisdiction and proper venue over any dispute
with the Escrow Agent; provided that the foregoing consent to
<PAGE>
jurisdiction and venue by the other parties shall not deprive
Escrow Agent of the right in its discretion voluntarily to commence
or participate in any action, suit or proceeding in any other court
having jurisdiction and venue over the Parties. Each of the
Parties, including each Purchaser, hereby waives personal service
of any summons, complaint or other process, which may be delivered
by the means permitted for notices under Section 15 hereof. Within
thirty (30) days after service of process, each of the Parties
agree to appear or answer and if no appearance or answer is made
within such period, that party shall be deemed in default and
judgment may be entered by Escrow Agent against that party for the
relief demanded in any complaint so served. In any action or
proceeding involving Escrow Agent in any jurisdiction, each of the
Parties waives trial by jury. Nothing in this Escrow Agreement is
intended to, or shall confer upon anyone other than the parties to
this Escrow Agreement (except the officers, directors, employees,
agents or affiliates of the Escrow Agent) any legal or equitable
rights, remedy or claim.
Section 17.
(a) Escrow Agent shall have the right to resign upon notice
to the remaining Parties; and the remaining Parties shall jointly
appoint a successor escrow agent by notice to Escrow Agent.
(b) Upon the resignation of Escrow Agent and the designation
of a successor escrow agent, Escrow Agent (or its legal
representative) shall deliver to the successor escrow agent a copy
of this Escrow Agreement and the Escrowed Stock. Upon such
delivery of the Escrowed Stock, Escrow Agent shall be released from
any and all liability directly or indirectly relating to this
Escrow Agreement, the administration of the escrow or the Escrowed
Stock without any action on behalf of any party hereto. Any
successor escrow agent shall have all the rights and shall be
subject to all of the obligations of Escrow Agent.
(c) Upon the dissolution, disqualification or refusal of
Escrow Agent (or any successor escrow agent) to serve, or continue
to serve under this Escrow Agreement, and should the Parties hereto
fail to agree upon a successor escrow agent, the parties hereto or
the Escrow Agent shall have the right to make application for the
appointment of such successor escrow agent in a court of equity.
Section 18. In the event that any dispute arises hereunder
between the Seller and the Purchaser and such dispute is submitted
to a court for judicial resolution pursuant to the terms hereof,
the prevailing party shall receive reimbursement of its related
costs and attorney's fees by the other party.
* * * *
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Escrow Agreement as of the day and year first above written.
ESCROW AGENT:
WITNESS: DE MARTINO FINKELSTEIN ROSEN &VIRGA,
a professional corporation
/s/ Clay Wilkes By: /s/ Ralph V. De Martino
Ralph V. De Martino, Vice
President and Secretary
PURCHASER:
WITNESS:
/s/ Stephanie Giallourakis By: /s/ Henry Y.L. Toh
Henry Y. L. Toh, President of
Medcross, Inc.
SELLER:
WITNESS:
/s/Ralph V. De Martino By: /s/ Clay Wilkes
Clay Wilkes, President of GNet
Enterprises, Inc., general partner of
ILINK, Ltd.
<S> <S>
</TABLE>
<TABLE>
THIS NOTE HAS NOT BEEN THE SUBJECT OF REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS
OF ANY STATE AND HAS BEEN ISSUED IN RELIANCE ON EXEMPTIONS FROM
THE REGISTRATION REQUIREMENTS OF SAID ACT AND SUCH LAWS. THIS
NOTE MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF EXCEPT AS PERMITTED UNDER SUCH SECURITIES
LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
CONVERTIBLE PROMISSORY NOTE
$__________ St. Petersburg, Florida
February __, 1996
FOR VALUE RECEIVED, the undersigned, Medcross, Inc., a
Florida corporation (hereinafter referred to as the "Maker"),
hereby promises to pay to _____________________ (the "Payee") at
_________________________________________________________________
__ or at such other place as the holder hereof may from time to
time designate in writing, the principal sum of
____________________________________________________
($__________) in one installment due upon the earlier of:
(i) August 31, 1996 or such later date as extended as set forth
below (the "Maturity Date"); or (ii) the Maker's receipt of
proceeds of at least Four Million Dollars ($4,000,000) from an
equity or debt financing conducted by the Maker (the "Accelerated
Maturity Date"), together with interest from and after the date
hereof at the rate of ten percent (10%) per annum computed on the
unpaid principal balance. Interest shall be paid by Maker to the
Payee on the Maturity Date or the Accelerated Maturity Date, as
applicable. By acceptance of this 10% Convertible Promissory
Note (the "Note"), the Payee represents, warrants, covenants and
agrees that he, she or it will abide by and be bound by its
terms.
1. Prepayment and Notices. The unpaid principal balance
outstanding under this Note may be prepaid in part or in full by
the Maker without penalty, upon thirty (30) days notice to the
Payee stating the repayment amount and repayment date (the
"Repayment Date"). The Maker must provide notice ten (10)
business days prior to an Accelerated Maturity Date to the Payee.
Any such notice must specify that the Payee may exercise its
conversion rights prior to the Repayment Date.
2. Conversion.
(a) Up to $1,250 of each $50,000 (i.e., 2.5%) of unpaid
principal amount of this Note shall be convertible at the option
of the Payee (the "Conversion Right") at any time after March 31,
1996 but prior to the close of business on the Maturity Date or
the Accelerated Maturity Date, as applicable, in the manner and
on the terms hereinafter set forth, into 17,500 shares of common
stock, par value $.007 per share (the "Common Stock") of the
Maker (the "Conversion Price"), subject to adjustment pursuant to
Section 4 hereof.
(b) [Intentionally Left Blank]
<PAGE>
(c) The Maker may, at its sole option, elect to extend the
Maturity Date for six months after August 31, 1996, upon payment
by the Maker to the Payee of a cash payment equal to two and one-
half percent (2.5%) of the then outstanding principal balance of
such Note. In the event of extension by the Maker hereunder, the
interest rate with respect to the then renaming unpaid principal
balance shall be the simple annual rate of thirteen percent
(13%). Extension of the Maturity Date hereunder shall not affect
the conversion rights granted in this Note.
(d) Notwithstanding any other provision of this Note to the
contrary, upon receipt of notice of the Maker's intent to prepay
part or all of the principal amount hereunder or of an
Accelerated Maturity Date, the Payee may elect to exercise the
Conversion Right and convert pursuant to Section 2(a) hereof a
portion (as set forth in subsection (a) hereof) of the amount of
unpaid principal which the Maker intends to prepay, up to the
close of business on the last business day before the stated
Repayment Date.
(e) Upon the occurrence of an Event of Default, the
Conversion Right shall be amended such that the remaining unpaid
principal balance shall be converted into shares of Common Stock
at 40% of the Fair Market Value per share, but in no event less
than par value. For this purpose "Fair Market Value" per share
shall be the average of the closing bid and ask prices on the
last ten trading days of the prior calendar month.
3. Conversion Procedure. The Conversion Right may be exercised
by the Payee by the surrender of this Note (along with the
conversion form attached hereto duly executed) to the Maker at
the principal office of the Maker. Risk of loss prior to
surrender of this Note shall be borne by the Payee.
Consequently, hand delivery with written acknowledgement of
receipt by the Maker or registered or certified mail, return
receipt requested, is the preferred mode of delivery. Conversion
shall be deemed to have been effected on the date when such
delivery of the conversion notice is actually made or, if
earlier, at the expiration of five calendar days after being sent
to the Maker by the Payee by registered or certified mail, return
receipt requested, with postage thereon fully prepaid (the
"Conversion Date"). As promptly as practicable thereafter, the
Maker shall issue and deliver to the Payee: (a) a new note
representing the difference between principal amount of this Note
and the principal amount hereof which has been converted pursuant
hereto; and (b) certificates representing the number of shares of
Common Stock to which the Payee is entitled. The Maker shall not
be obligated to issue certificates representing shares of Common
Stock in the name of any party other than the Payee. The person
or entity in whose name the certificates representing the shares
of Common Stock issuable upon conversion hereof shall be deemed
to have become a holder of record on the next succeeding day on
which the transfer books are open, but the Conversion Price shall
be that in effect on the Conversion Date. The Maker covenants
that all securities which may be issued upon exercise of the
Conversion Right will, upon issuance, be fully paid and
nonassessable and free of all taxes, liens and charges caused or
created by the Maker with respect to the issuance thereof.
<PAGE>
4. Adjustments. The number and kind of securities which may be
received upon the exercise of the Conversion Right and the
Conversion Price shall be subject to adjustment from time to time
upon the happening of certain events, as follows:
(a) Stock Splits and Combinations. If the Maker shall at
any time or from time to time after the date hereof effect a
subdivision of its outstanding shares of Common Stock, the
Conversion Price then in effect immediately before such
subdivision shall be proportionately decreased and the number of
shares purchasable upon conversion proportionately increase, and
conversely, if the Maker shall at any time or from time to time
after the date hereof combine its outstanding shares of Common
Stock, the Conversion Price then in effect immediately before
such combination shall be proportionately increased and the
number of shares purchasable upon conversion shall be
proportionately decreased. Any adjustment under this section
shall become effective upon the close of business on the date the
subdivision or combination becomes effective.
(b) Certain Dividends and Distributions. In the event that
the Maker shall at any time or from time to time after the date
hereof make or issue, or fix a record date for the determination
of holders of shares of Common Stock entitled to receive, a
dividend or other distribution payable in additional shares of
Common Stock, then and in each such event, the Conversion Price
then in effect shall be decreased as of the time of such issuance
or, in the event that such a record date shall have been fixed,
as of the close of business on such record date, by multiplying
the Conversion Price then in effect by a fraction:
(i) the numerator of which shall be the total number
of shares of Common Stock issued and outstanding immediately
prior to the time of such issuance or the close of business on
such record date; and
(ii) the denominator of which shall be the sum of the
total number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the close of
business on such record date and the number of shares of Common
Stock issuable in payment of such dividend or distribution;
provided, however, that if such record date shall have been fixed
and such dividend is not fully paid or if such distribution is
not fully made on the date fixed therefor, the Conversion Price
shall be recomputed accordingly as of the close of business on
such record date and thereafter such Conversion Price shall be
adjusted pursuant to this subsection as of the time of actual
payment of such dividends or distributions.
(c) Other Dividends and Distributions. In the event that
the Maker at any time or from time to time after the date hereof
shall make or issue, or fix a record date for the determination
of holders of shares of Common Stock entitled to receive, a
dividend or other distribution payable in securities of the Maker
other than shares of Common Stock, then and in each such event
provisions shall be made so that the holder of this Note shall
receive, upon conversion of this Note, in addition to the number
of shares of Common Stock receivable thereupon, the amount of
securities of the Maker which such holder would have received had
<PAGE>
its Note been converted into shares of Common Stock on the date
of such event and had thereafter, during the period from the date
of such event to and including the Conversion Date, retained such
securities (together with any distributions payable thereon
during such period) receivable by the holder as aforesaid during
such period, giving application to all adjustments called for
during such period under this section with respect to the rights
of the holder of the Note.
(d) Reclassification, Exchange or Substitution. If the
shares of Common Stock issuable upon the conversion of this Note
shall be changed into the same or different number of shares of
any class or classes of capital stock, whether by capital
reorganization, reclassification or otherwise (other than a
subdivision or combination of shares or stock dividend provided
for above, or a reorganization, merger, consolidation or sale of
assets provided for in subsection (e) below), then and in each
such event, the holder of this Note shall have the right
thereafter to convert this Note into the kind and amount of
shares of capital stock and other securities and property
receivable upon such reorganization, reclassification or other
change, as the holder of the number of shares of Common Stock
into which this Note might have been converted immediately prior
to such reorganization, reclassification or change, all subject
to further adjustment as provided herein.
(e) Reorganization, Merger, Consolidation or Sale of
Assets. If, at any time or from time to time, there shall be a
capital reorganization of the shares of Common Stock (other than
a subdivision, combination, reclassification or exchange of
shares provided for elsewhere in this section) or a merger or
consolidation of the Maker with or into another corporation, or
the sale of all or substantially all of the Maker's properties
and assets to any other person or entity, then as a part of such
reorganization, merger, consolidation or sale, provision shall be
made so that the holder of this Note shall thereafter be entitled
to receive upon conversion of this Note, the number of shares of
capital stock or other securities or property of the Maker, or of
the successor corporation resulting from such merger or
consolidation or sale, to which the holder of shares of Common
Stock deliverable upon conversion would have been entitled on
such reorganization, merger, consolidation, or sale. In any such
case, appropriate adjustment shall be made in the application of
the provisions of this section with respect to the rights of the
holder of this Note after the reorganization, merger,
consolidation or sale to the end that the provisions of this
section (including adjustment of the Conversion Price then in
effect and the number of shares of Common Stock receivable upon
conversion of this Note) shall be applicable after that event as
nearly equivalent hereto as may be practicable.
(f) Minimum Adjustment. Notwithstanding anything to the
contrary set forth herein, no adjustment of the Conversion Price
shall be made in an amount equal to less than one cent ($.01),
but any such lesser adjustment shall be carried forward and shall
be made at the time and together with the next subsequent
adjustment which together with any adjustments so carried forward
shall amount to one cent ($.01) or more.
(g) Certificate of Adjustment. Upon the occurrence of each
adjustment or readjustment of the applicable Conversion Price
pursuant to this section, the Maker shall promptly compute such
adjustment or readjustment in accordance with the terms hereof
<PAGE>
and prepare and furnish to the holder of this Note a certificate,
signed by the Chairman of the Board, the President or the Chief
Financial Officer, setting forth such adjustment or readjustment
and showing in detail the facts upon which such adjustment or
readjustment is based.
(h) Notices of Record Date. If and in the event that:
(i) the Maker shall set a record date for the purpose
of entitling the holders of shares of Common Stock to receive a
dividend, or any other distribution, payable otherwise than in
cash;
(ii) the Maker shall set a record date for the purpose
of entitling the holders of shares of Common Stock to subscribe
for or purchase any shares of any class or to receive any other
rights;
(iii) there shall occur any capital reorganization
of the Maker, reclassification of the shares of capital stock of
the Maker (other than a subdivision or combination of its
outstanding shares of Common Stock), consolidation or merger of
the Maker with or into another corporation, or sale of all or
substantially all of the assets of the Maker; or
(iv) there shall occur a voluntary or involuntary
dissolution, liquidation, or winding up of the Maker;
then, and in any such case, the Maker shall cause to be mailed to
the holder of record of this Note, at least thirty (30) days
prior to the dates hereinafter specified, a notice stating the
date: (A) which has been set as the record date for the purpose
of such dividend, distribution, or rights; or (B) on which such
reclassification, reorganization, consolidation, merger, sale,
dissolution, liquidation or winding up is to take place and the
record date as of which the holder of record shall be entitled to
exchange this Note for securities or other property deliverable
upon such reclassification, reorganization, consolidation,
merger, sale, dissolution, liquidation or winding up.
(i) Exceptions. The Maker will execute a purchase
agreement with I-LINK Worldwide Inc. ("ILINK") pursuant to which
the Company will acquire all of the issued and outstanding shares
of stock of ILINK in exchange for the issuance of securities of
the Maker (the "ILINK Acquisition"). Notwithstanding anything to
the contrary set forth elsewhere herein, the provisions hereof
relating to adjustments shall not be operative and no adjustment
which otherwise may have been required pursuant hereto shall be
made as a result of the issuance of securities by the Company in
connection with or related in any way to the ILINK Acquisition.
5. Reservation. The Maker covenants that, during the period
within which the Conversion Right may be exercised, the Maker
will at all times have authorized and reserved for the purpose of
issuance upon exercise of the Conversion Right, a sufficient
number of shares of Common Stock (or other securities subject to
the Conversion Right) to provide for the exercise of the
Conversion Right in full.
<PAGE>
6. Fractional Shares. No fractional shares of Common Stock
shall be issued upon conversion of this Note. In lieu of any
fractional shares of Common Stock to which the Payee would
otherwise be entitled, the Maker shall pay an amount equal to the
product of such fraction multiplied by the fair value of one
share of Common Stock on the Conversion Date, as determined in
good faith by the Board of Directors of the Maker.
7. Registration Rights. The Maker hereby covenants and agrees
as follows:
(a) Definitions. For purposes of this section:
(i) The terms "register," "registered" and
"registration" refer to a registration effected by preparing and
filing a registration statement or similar document in compliance
with the Securities Act of 1933, as amended (the "Securities
Act"), and the declaration of effectiveness of such registration
statement or other document by the Securities and Exchange
Commission (the "SEC").
(ii) The term "Registrable Securities" means: (A) the
shares of Common Stock issued or issuable upon conversion of this
Note; or (B) any other securities of the Maker issued as (or
issuable upon the conversion or exercise of any warrant, right or
other security which is issued as) a dividend or other
distribution with respect to, in exchange for or in replacement
of the shares of Common Stock referenced in subsection (A)
immediately above, excluding in all cases, however, any
Registrable Securities sold to the public pursuant to a
registration or an exemption from registration.
(iii) The number of shares of "Registrable
Securities then outstanding" shall be the number of securities
outstanding which are Registrable Securities.
(iv) The term "Holder" as used hereinafter in this
Section 7 means any person or entity owning of record Registrable
Securities.
(b) Demand Registration Rights. This Note has been issued
in conjunction with the issuance of other Notes pursuant to a
private debt financing conducted by the Maker. In connection
therewith, the following registration rights are provided:
(i) If the Maker shall receive at any time after March
1, 1996, a written request (the "Demand Request") from the
Holders of not less than fifty percent (50%) of the shares of
Common Stock issued or issuable upon conversion of the Notes (the
"Initiating Holders") that the Maker file a registration
statement under the Securities Act covering the registration of
at least fifty percent (50%) of the Registrable Securities then
outstanding, then the Maker shall promptly give written notice of
such Demand Request (the "Registration Notice"), together with a
list of the jurisdictions in which the Maker intends to attempt
to qualify such securities under applicable state securities
laws, to all Holders within sixty (60) days, or as soon as
legally permissible, subject to the provisions of Section
7(b)(ii), file a registration statement under the Securities Act
relating to or otherwise including all Registrable Securities
<PAGE>
which the Initiating Holders have requested to be registered,
together with all or such portion of the Registrable Securities
of any other Holder who requests to be included by notice to the
Maker, which notice must be given within thirty (30) days after
the Registration Notice from the Maker described above.
(ii) If the Initiating Holders intend to distribute the
Registrable Securities covered by the Demand Request by means of
an underwriting, they shall so advise the Maker as a part of the
Demand Request made pursuant hereto and the Maker shall include
such information in the Registration Notice referred to in
Section 7(b)(i) above.
(iii) All Holders proposing to distribute their
securities through an underwriting (together with the Maker as
provided in Section 7(d)(v) below) shall enter into an
underwriting agreement in customary form with the managing
underwriter selected for such underwriting by the Holders of more
than fifty percent (50%) of the shares of Common Stock issued or
issuable to the Initiating Holders and reasonably acceptable to
the Maker. Notwithstanding any other provision of this section,
if the managing underwriter advises the Initiating Holders in
writing that marketing factors require a limitation of the number
of securities to be underwritten, the Initiating Holders shall so
advise all Holders of Registrable Securities, and the number of
shares of Registrable Securities that may be included in the
registration statement and underwriting shall be allocated among
all Holders thereof in proportion, as nearly as practicable, to
the respective amounts of Registrable Securities which would
otherwise be entitled to inclusion in such registration held by
such Holders at the time of filing the registration statement.
If any Holder of Registrable Securities disapproves of the terms
of the underwriting, such person may elect to withdraw therefrom
by written objection to the Maker, the managing underwriter and,
unless otherwise provided, the Initiating Holders. Any
Registrable Securities excluded or withdrawn from the
underwriting by reason of the managing underwriter's marketing
limitation may be included in such registration statement but the
sale thereof may be deferred up to ninety (90) days after the
effective date thereof at the request of the managing
underwriter. If the managing underwriter has not limited the
number of Registrable Securities to be underwritten, the Maker
may include securities for its own account in such registration
if the managing underwriter so agrees and if the number of
Registrable Securities which would otherwise have been included
in such registration and underwriting will not thereby be
limited.
(iv) The Maker shall be obligated to effect only one
demand registration pursuant hereto.
(c) Piggy-Back Registration Rights. In the event that (but
without any obligation to do so) the Maker proposes to register
any of its securities under the Securities Act in connection with
the public offering of such securities solely for cash (other
than a registration on Form S-4, Form S-8 or any form which does
not include substantially the same information as would be
required to be included in a registration statement covering the
sale of the Registrable Securities), the Maker shall promptly
give each Holder written notice of such registration (the
"Piggy-Back Notice"); provided, however, that the Maker shall
have no obligation to so notify Holders with respect to any
<PAGE>
registration after three years after the issuance of this Note
and shall have no obligation if the managing underwriter of the
subject proposed offering expresses its objection thereto to the
Maker. Upon the written request of each Holder given within
twenty (20) days after receipt of such Piggy-Back Notice from the
Maker, the Maker shall, subject to the provisions of Section 7(h)
below, cause to be included in the registration statement filed
by the Maker under the Securities Act all of the Registrable
Securities that each such Holder has requested to be registered;
provided, however, that the Maker shall have no such obligation
if the managing underwriter of the subject proposed offering has
expressed its objection to the same to the Maker.
(d) Obligations of the Maker. Whenever required under this
section to file a registration statement to effect the
registration of any Registrable Securities, the Maker shall, as
expeditiously as reasonably possible:
(i) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its
best efforts to cause such registration statement to become
effective, and, upon the request of the Holders of at least fifty
percent (50%) of the Registrable Securities registered
thereunder, keep such registration statement effective for at
least nine (9) months.
(ii) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus
included therein as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement.
(iii) Furnish to the Holders such numbers of copies
of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such
other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by
them.
(iv) Use its best efforts to register and qualify the
securities covered by such registration statement under the
securities laws of such jurisdictions as shall be reasonably
requested by the Holders for the distribution of the securities
covered by the registration statement, provided that the Maker
shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to
service of process in any such jurisdiction.
(v) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting
agreement with terms generally satisfactory to the managing
underwriter of such offering.
(vi) Notify the Holders promptly after the Maker shall
have received notice thereof, of the time when the registration
statement becomes effective or any supplement to any prospectus
forming a part of the registration statement has been filed.
<PAGE>
(vii) Notify the Holders of any stop order
suspending the effectiveness of the registration statement and
use its reasonable best efforts to remove such stop order.
(e) Furnish Information. It shall be a condition precedent
to the obligations of the Maker to take any action pursuant
hereto that any Holder seeking to include any of its Registrable
Securities in a registration statement filed by the Maker
pursuant hereto shall furnish to the Maker such information
regarding itself, the Registrable Securities held by it, and the
intended method of disposition of such securities as shall be
required to effect the registration of its Registrable
Securities. In that connection, each such Holder shall be
required to represent to the Maker that all such information
which is given is both complete and accurate in all material
respects. Each of such Holders shall deliver to the Maker a
statement in writing from the beneficial owners of such
securities that such beneficial owners bona fide intend to sell,
transfer or otherwise dispose of such securities.
(f) Definition of Expenses.
(i) "Registration Expenses" shall mean all expenses
incurred by the Maker in complying with Sections 7(b), 7(c) and
7(d) hereof, including without limitation, all registration and
filing fees, printing expenses, fees and disbursements of counsel
for the Maker, blue sky fees and expenses, and the expense of any
special audits incident to or required by any such registration
(but excluding the compensation of regular employees of the Maker
which shall be paid in any event by the Maker).
(ii) "Selling Expenses" shall mean all underwriting
discounts, selling commissions and underwriters' expense
allowance applicable to the sale and all fees and disbursements
of any special counsel (other than the Maker's regular counsel)
for any Holder.
(g) Expenses of Registration. All Registration Expenses
incurred in connection with any registration, qualification or
compliance herewith, shall be borne by the Maker, and all Selling
Expenses shall be borne by the Holders of the securities so
registered pro rata on the basis of the number of Registrable
Securities so registered. Notwithstanding the foregoing, the
Holders may withdraw a request made within forty-five (45) days
of the end of the Maker's fiscal year if the audited financial
statements of the Maker for such year and at such year-end
materially and adversely differ from the information known to the
Holders at the time of their request, in which event the Holders
shall not be required to pay any of such Registration Expenses
and shall retain the right to require the Maker to register
Registrable Securities pursuant to Section 7(b).
(h) Underwriting Requirements. All Holders proposing to
distribute their securities through an underwriting pursuant
hereto shall (together with the Maker and any other holders
distributing their securities through such underwriting) enter
into an underwriting agreement in customary form with the
underwriter or underwriters selected for underwriting by the
Maker. Notwithstanding any other provision of this section, at
the request of the managing underwriter, the Holder shall delay
the sale of Registrable Securities which such Holder has
requested be registered under this section for the ninety (90)
<PAGE>
day period commencing with the effective date of the registration
statement. Notwithstanding anything to the contrary herein, no
such delay shall be required with respect to securities offered
by holders of securities who have requested the Maker to register
such securities pursuant to a mandatory registration obligation
of the Maker. If any Holder disapproves of the terms of any such
underwriting, he may elect to withdraw therefrom by written
notice to the Maker and the underwriter. Any Registrable
Securities excluded or withdrawn from such underwriting shall not
be withdrawn from such registration except at the election of the
Holder.
(i) Delay of Registration. No Holder shall have any right
to obtain or seek an injunction restraining or otherwise delaying
any such registration as the result of any controversy that might
arise with respect to the interpretation or implementation of
this section.
(j) Indemnification. In the event that any Registrable
Securities are included in a registration statement pursuant
hereto:
(i) To the extent permitted by law, the Maker will
indemnify and hold harmless each Holder, the officers, directors
and partners of each Holder, any underwriter (as defined in the
Securities Act) for such Holder and each person or entity, if
any, that controls such Holder or underwriter within the meaning
of the Securities Act or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), against any losses, claims, damages
or liabilities (joint or several) to which they may become
subject under the Securities Act, the Exchange Act or other
federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or
violations (collectively a "Violation"): (A) any untrue
statement or alleged untrue statement of a material fact
contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto; (B) the omission or
alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not
misleading; or (C) any violation or alleged violation by the
Maker of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the
Securities Act, the Exchange Act or any state securities law; and
the Maker will reimburse each such Holder, officer, director or
partner, underwriter or controlling person for any legal or other
expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity
agreement contained in this subsection shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or
action if such settlement is effected without the consent of the
Maker (which consent shall not be unreasonably withheld), nor
shall the Maker be liable in any such case for any such loss,
claim, damage, liability or action to the extent that it arises
out of or is based upon a Violation which occurs in reliance upon
and in conformity with written information furnished expressly
for use in connection with such registration by any such Holder,
underwriter or controlling person; and further provided, however,
that the foregoing indemnity agreement is subject to the
condition that, insofar as it relates to any untrue statement,
alleged untrue statement, omission or alleged omission made in
any preliminary prospectus but eliminated or remedied in the
<PAGE>
definitive prospectus, such indemnity agreement shall not inure
to the benefit of the underwriter (or the benefit of any person
or entity that controls such underwriter), if a copy of the
definitive prospectus was not sent or given to such person or
entity with or prior to the confirmation of the sale of such
securities to such person or entity.
(ii) To the extent permitted by law, each selling
Holder, severally and not jointly, will indemnify and hold
harmless the Maker, each of its directors, each of its officers
who have signed the registration statement, each person, if any,
who controls the Maker within the meaning of the Securities Act
or the Exchange Act, any underwriter (within the meaning of the
Securities Act) for the Maker, any person who (or entity that)
controls such underwriter, and any other Holder selling
securities in such registration statement or any of its directors
or officers or any person who controls such Holder, against any
losses, claims, damages or liabilities (joint or several) to
which the Maker or any such director, officer, controlling person
(or entity), or underwriter or controlling person, or other such
Holder or director, officer or controlling person may become
subject, under the Securities Act, the Exchange Act or other
federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereto) arise out of or are
based upon any Violation, in each case to the extent (and only to
the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished by such Holder
expressly for use in connection with such registration; and each
such Holder will reimburse any legal or other expenses reasonably
incurred by the Maker or any such director, officer, controlling
person (or entity), underwriter or controlling person (or
entity), other Holder, officer, director or controlling person in
connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the
indemnity agreement contained in this subsection shall not apply
to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the
consent of the Holder, which consent shall not be unreasonably
withheld.
(iii) Promptly after receipt by an indemnified
party under this Section 7(j) of notice of the commencement of
any action (including any governmental action), such indemnified
party will, if a claim in respect thereof is to be made against
any indemnifying party under this Section 7(j), notify the
indemnifying party in writing of the commencement thereof and the
indemnifying party shall have the right to participate in, and,
to the extent the indemnifying party so desires, jointly with any
other indemnifying party similarly notified, to assume the
defense thereof with counsel mutually satisfactory to the
parties; provided, however, that an indemnified party shall have
the right to retain its own counsel, with the fees and expenses
to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying
party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to
notify an indemnifying party within a reasonable time of the
commencement of any such action, to the extent prejudicial to its
ability to defend such action, shall relieve such indemnifying
party of any liability to the indemnified party under this
Section 7(j), but the omission so to notify the indemnifying
party will not relieve it of any liability that it may have to
any indemnified party otherwise than under this Section 7(j).
<PAGE>
(k) Reports Under Securities Exchange Act of 1934. With a
view toward making available to Holders the benefits of Rule 144
promulgated under the Securities Act and any other rule or
regulation of the SEC that may at any time permit a Holder to
sell securities of the Maker to the public without registration,
the Maker agrees to:
(i) use its best efforts to make and keep public
information available, as those terms are understood and defined
in Rule 144, at all times;
(ii) use its best efforts to file with the SEC in a
timely manner all reports and other documents required of the
Maker under the Securities Act and the Exchange Act; and
(iii) furnish to any Holder, so long as the Holder
owns any Registrable Securities, forthwith upon request such
information as may be reasonably requested in order to allow any
Holder to avail himself of any rule or regulation of the SEC
which permits the selling of any such securities without
registration.
(l) Termination of the Maker's Obligations.
(i) The Maker shall have no obligation pursuant to
Sections 7(b) or 7(c) with respect to any request made by any
Holder after the third anniversary of the Maturity Date.
(ii) Notwithstanding any provision hereof to the
contrary, the Maker shall not be required to effect any
registration under the Securities Act or under any state
securities laws on behalf of any Holder or Holders if, in the
reasonable opinion of counsel for the Maker, the offering or
transfer by such Holder or Holders in the manner proposed
(including, without limitation, the number of shares proposed to
be offered or transferred and the method of offering or transfer)
is exempt from the registration requirements of the Securities
Act and the securities laws of applicable states.
8. Miscellaneous.
(a) Restricted Securities. By acceptance hereof, the Payee
understands and agrees that this Note and the shares of Common
Stock issuable upon conversion hereof are "restricted securities"
under the federal securities laws inasmuch as they are being
acquired from the Maker in a transaction not involving a public
offering and have not been the subject of registration under the
Securities Act and that under such laws and applicable
regulations such securities may be resold in the absence of
registration under the Securities Act only in certain limited
circumstances. The Payee hereby represents that it is familiar
with Rule 144 promulgated under the Securities Act, as presently
in effect, and understands the resale limitations imposed thereby
and by the Securities Act.
(b) Further Limitations on Disposition. This Note may not
be negotiated, assigned or transferred by Payee. The Payee
further agrees not to make any disposition of all or any portion
of this Note (or of the securities issuable upon conversion
hereof) unless and until:
<PAGE>
(i) there is then in effect a registration statement
under the Securities Act covering such proposed disposition and
such disposition is made in accordance with such registration
statement;
(ii) such disposition is made in accordance with Rule
144 under the Securities Act; or
(iii) the Payee shall have notified the Maker of
the proposed disposition and shall have furnished the Maker with
a detailed statement of the circumstances surrounding the
proposed disposition, and the Payee shall have furnished the
Maker with an opinion of counsel, which opinion of counsel shall
be reasonably satisfactory to the Maker, that such disposition
will not require registration under the Securities Act and will
be in compliance with applicable state securities laws.
(c) Legends. It is understood that this Note and each
certificate evidencing shares of Common Stock issuable upon
conversion hereof (or evidencing any other securities issued with
respect thereto pursuant to any stock split, stock dividend,
merger or other form of reorganization or recapitalization) shall
bear the legends (in addition to any legends which may be
required in the opinion of the Maker's counsel by the securities
laws of the state where the Payee is located) set forth on the
first page of this Note.
9. Presentment. Except as set forth herein, Maker waives
presentment, demand and presentation for payment, notice of
nonpayment and dishonor, protest and notice of protest and
expressly agrees that this Note or any payment hereunder may be
extended from time to time by the Payee without in any way
affecting the liability of Maker.
10. Notices.
(a) Notices to the Payee. Any notice required by the
provisions of this Note to be given to the holder hereof shall be
in writing and may be delivered by personal service, facsimile
transmission or by registered or certified mail, return receipt
requested, with postage thereon fully prepaid or overnight
delivery courier. All such communications shall be addressed to
the Payee of record at its address appearing on the books of the
Maker. Service of any such communication made only by mail shall
be deemed complete on the date of actual delivery as shown by the
addressee's registry or certification receipt or at the
expiration of the third (3rd) business day after the date of
mailing, whichever is earlier in time.
(b) Notices to the Maker. Whenever any provision of this
Note requires a notice to be given or a request to be made to the
Maker by the Payee or the holder of any other security of the
Maker obtained in connection with a recapitalization, merger,
dividend or other event affecting this Note, then and in each
such case, any such notice or request shall be in writing and
shall be sent by registered or certified mail, return receipt
requested with postage thereon fully prepaid to the Maker at its
principal place of business.
<PAGE>
No notice given or request made hereunder shall be valid
unless signed by the Payee of this Note or other holder giving
such notice or request (or, in the case of a notice or request by
Holders of a specified percent in aggregate principal amount of
outstanding Notes, unless signed by each Holder of a Note whose
Note has been counted in constituting the requisite percentage of
Notes required to give such notice or make such request).
11. Events of Default.
(a) Each of the following shall constitute an event of
default (an "Event of Default") hereunder: (i) the failure to
pay when due any principal or interest hereunder; (ii) the
violation by the Maker of any covenant or agreement contained in
this Note and the continuance of such violation for a period of
thirty (30) days after written notice from the Payee to the Maker
of such failure; (iii) any change in control of the Maker which
the Board of Directors of the Maker deems to be hostile or
unfriendly; (iv) the assignment for the benefit of creditors by
the Maker; (v) the application for the appointment of a receiver
or liquidator for the Maker or for property of the Maker;
(vi) the filing of a petition in bankruptcy by or against the
Maker; (vii) the issuance of an attachment or the entry of a
judgment against the Maker in excess of $50,000; (viii) a default
by the Maker with respect to any other material indebtedness or
obligation; (ix) the making or sending of a notice of an intended
bulk sale by the Maker; or (x) the termination of existence,
dissolution or insolvency of the Maker. Upon the occurrence of
any of the foregoing Events of Default, this Note shall be
considered to be in default and the entire unpaid principal sum
hereof, together with accrued interest, shall at the option of
the holder hereof become immediately due and payable in full.
Upon the occurrence of an Event of Default which remains uncured
as set forth herein and the placement of this Note in the hands
of an attorney for collection, the Maker agrees to pay reasonable
collection costs and expenses, including reasonable attorneys'
fees and interest from the date of the default at the rate of
fifteen percent (15%) per annum computed on the unpaid principal
balance.
(b) The Payee may waive any Event of Default hereunder.
Such waiver shall be evidenced by written notice or other
document specifying the Event or Events of Default being waived
and shall be binding on all existing or subsequent Payees under
this Note.
12. Construction; Governing Law. The validity and construction
of this Note and all matters pertaining hereto are to be
determined in accordance with the laws of the State of Florida
without regard to the conflicts of law principles thereof.
* * * * *
<PAGE>
IN WITNESS WHEREOF, Maker, by its appropriate officers
thereunto duly authorized, has executed this Convertible
Promissory Note and affixed its corporate seal as of this _____
day of February, 1996.
MEDCROSS, INC.
By:
Henry Y.L. Toh, President
ATTEST:
Stephanie E. Giallourakis, Secretary
<PAGE>
CONVERSION FORM
The undersigned hereby elects to convert
_________________________________ Dollars ($_____________) (not
to exceed 2.5%) of the unpaid principal amount of the attached
10% Convertible Promissory Note (the "Note") into shares of
Common Stock of the Maker.
Date: Signature:
(Sign exactly as your name appears
on the Note)
<S> <S>
</TABLE>
<TABLE>
FOR IMMEDIATE RELEASE
CONTACTS:
Henry Y.L. Toh, President Clay Wilkes, President
MEDCROSS, INC. I-LINK WORLDWIDE INC.
(813) 521-1793 (512) 388-2393
MEDCROSS, INC. ANNOUNCES ACQUISITION OF INTERNET COMPANY
AND COMPLETION OF $1,000,000 DEBT OFFERING
ST. PETERSBURG, FLORIDA, February 23, 1996 - Medcross, Inc. (Nasdaq SmallCap:
MDCR) - announced today the closing of its acquisition of all of the issued and outstanding
common stock of I-Link Worldwide Inc., a Utah corporation ("I-Link") from ILINK, Ltd., a Utah
limited partnership in exchange for the issuance of an aggregate of 4,000,000 shares of common
stock, par value $.007 per share, of Medcross (the "Common Stock"). I-Link provides Internet
access services to individuals and businesses in the United States. I-Link is also the owner of a
proprietary technology (patent pending) which enables the transmission of information via facsimile
over the Internet.
Simultaneous with the closing of its acquisition of I-Link, Medcross completed a private
placement of $1,000,000 in aggregate principal amount of convertible promissory notes (the
"Notes"). The Notes are payable upon the earlier of August 31, 1996 (subject to extension) or
Medcross' receipt of proceeds of at least $4,000,000 from subsequent debt or equity offerings. The
Notes bear interest at the rate of 10% until August 31, 1996, at which time such interest rate
increases to 13%.
In addition to the foregoing developments, in connection with the grant of an option by the
holders thereof, an aggregate of 40,000 shares of outstanding Class A Preferred Stock, par value
$10.00 per share, of Medcross (the "Class A Preferred Stock") was converted into an aggregate of
978,891 shares of Common Stock. Options to acquire the 3,915,570 shares of Common Stock
issuable upon conversion of the remaining 160,000 shares of Class A Preferred Stock outstanding
have been granted by the holder thereof. Such options are exercisable commencing July 1, 1996
at an exercise price of $1.79 per share or two hundred percent of the average of the bid and asked
prices of the common Stock as quoted on Nasdaq; the options expire incrementally on
December 31, 1996 and December 31, 1997. The holder of all 7,500 shares of Class B Preferred
Stock has also granted an option, upon substantially the same terms and conditions as the foregoing
options, to purchase the 183,542 shares of Common Stock issuable upon conversion thereof. All
of the foregoing securities are restricted.
Medcross, Inc., a Florida corporation, through its wholly-owned subsidiaries, owns and
operates domestic radiological diagnostic imaging services, manages therapeutic medical modalities,
and sells and services diagnostic imaging equipment in the Far East. Medcross is a joint venture
partner with China National Equipment and Supplies Import and Export Shenyang Corporation.
# # # #
<S> <S>
</TABLE>
