-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IIcJoGHBOVj+Yr3u9akLJ4pzuAuD3iZCdYRxMrDe3zVlT0KPtjLNHTuiaeag3FQJ N+04S8pUMwAEjh4m8rKnUw== 0001125282-01-502872.txt : 20020412 0001125282-01-502872.hdr.sgml : 20020412 ACCESSION NUMBER: 0001125282-01-502872 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20011204 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WIRE ONE TECHNOLOGIES INC CENTRAL INDEX KEY: 0000746210 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-ELECTRONIC PARTS & EQUIPMENT, NEC [5065] IRS NUMBER: 770312442 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-74484 FILM NUMBER: 1805997 BUSINESS ADDRESS: STREET 1: 225 LONG AVENUE CITY: HILLSIDE STATE: NJ ZIP: 07205 BUSINESS PHONE: 8054828277 MAIL ADDRESS: STREET 1: 225 LONG AVENUE CITY: HILLSIDE STATE: NJ ZIP: 07205 FORMER COMPANY: FORMER CONFORMED NAME: VIEW TECH INC DATE OF NAME CHANGE: 19950418 FORMER COMPANY: FORMER CONFORMED NAME: VIEWTECH INC DATE OF NAME CHANGE: 19950418 S-3 1 b314949_s3.txt REGISTRATION STATEMENT As filed with the Securities and Exchange Commission on December 4, 2001 Registration No. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------------- FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 -------------------------- WIRE ONE TECHNOLOGIES, INC. (Exact Name of Registrant as Specified in its Charter) Delaware 5065 77-0312442 (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification Number)
225 Long Avenue Hillside, New Jersey 07205 (973) 282-2000 (Address, including zip code, and telephone number, including area code of Registrant's principal executive offices) -------------------------- Richard Reiss President and Chief Executive Officer Wire One Technologies, Inc. 225 Long Avenue Hillside, New Jersey 07205 (973) 282-2000 (Name, address, including zip code, and telephone number, including area code, of agent for service) -------------------------- Copies to: Jonathan Birkhahn Michael J.W. Rennock, Esq. Executive VP Business Affairs Morrison & Foerster LLP and General Counsel 1290 Avenue of the Americas Wire One Technologies, Inc. New York, New York 10104 225 Long Avenue (212) 468-8000 Hillside, New Jersey 07205 (973) 282-2000 Approximate Date of Commencement of Proposed Sale of the Securities to the Public: As soon as practicable after the effective date of this Registration Statement. If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. / / If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. /X/ If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. / / --------------------------
CALCULATION OF REGISTRATION FEE =========================================== ================ ==================== ==================== =============== Proposed Maximum Proposed Maximum Amount of Title of Each Class of Amount to Offering Price Aggregate Offering Registration Securities to be Registered be Registered Per Share (1) Price (1) Fee - ------------------------------------------- ---------------- -------------------- -------------------- --------------- Common Stock, $0.0001 par value per share 320,973 $ 6.41 $ 2,057,437 $ 492 - ------------------------------------------- ---------------- -------------------- -------------------- ---------------
(1) Estimated solely for the purpose of computing the registration fee, based on the average of the high and low sales prices of the common stock as reported by the Nasdaq National Market on November 28, 2001 in accordance with Rule 457 under the Securities Act of 1933. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. ================================================================================ PROSPECTUS 320,973 Shares [WIRE ONE LOGO] Common Stock This prospectus relates to 320,973 shares of our common stock which may be sold from time to time by the selling stockholder listed on page 9, including its transferees, pledgees or donees or its successors. The shares are being registered to permit the selling stockholder to sell the shares from time to time in the public market. The selling stockholder may sell the common stock through ordinary brokerage transactions, directly to market makers of our shares or through any other means described in the section "Plan of Distribution" beginning on page 10. Our common stock is quoted on the Nasdaq National Market under the symbol "WONE". On November 30, 2001, the last reported sale price for the common stock on the Nasdaq National Market was $6.91 per share. Our corporate offices are located at 225 Long Avenue, Hillside, New Jersey 07205. Our telephone number at that location is (973) 282-2000. Investment in our common stock involves risks. See "Risk Factors" beginning on page 3 of this prospectus. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. The date of this prospectus is , 2001. TABLE OF CONTENTS
Page ---- Forward-Looking Statements................................................................................ 1 About Wire One............................................................................................ 2 Risk Factors.............................................................................................. 3 Use of Proceeds........................................................................................... 9 Selling Stockholder....................................................................................... 9 Plan of Distribution...................................................................................... 10 Description of Common Stock............................................................................... 11 Experts................................................................................................... 12 Legal Matters............................................................................................. 12 Where You Can Find More Information....................................................................... 12 Incorporation of Certain Documents by Reference........................................................... 13
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY BE USED ONLY WHERE IT IS LEGAL TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY BE ACCURATE ONLY ON THE DATE OF THIS DOCUMENT. FORWARD-LOOKING STATEMENTS This prospectus and the documents incorporated herein by reference include "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. All statements other than statements of historical fact are "forward-looking statements" for purposes of these provisions, including any projections of earnings, revenues or other financial items, any statements of the plans and objectives of management for future operations, any statements concerning proposed new products or services, any statements regarding future economic conditions or performance, and any statement of assumptions underlying any of the foregoing. In some cases, forward-looking statements can be identified by the use of terminology such as "may", "will", "expects", "plans", "anticipates", "estimates", "potential", or "continue" or the negative thereof or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements contained in this prospectus and in the incorporated documents are reasonable, we cannot assure you that such expectations or any of the forward-looking statements will prove to be correct, and actual results could differ materially from those projected or assumed in the forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to inherent risks and uncertainties, including but not limited to the risk factors set forth herein and for the reasons described elsewhere in this prospectus. These factors, risks and uncertainties include market acceptance and availability of new products and services; the nonexclusive and terminable-at-will nature of our reseller agreements with manufacturers; rapid technological change affecting products and services; the impact of competitive products and services, as well as competition from other resellers and service providers; possible delays in the shipment of new products; and the availability of sufficient financial resources to enable us to expand our operations. All forward-looking statements and reasons why results may differ included in this prospectus are made as of the date hereof, and we assume no obligation to update any such forward-looking statement or reason why actual results might differ. 1 ABOUT WIRE ONE Wire One is a leading full-service provider of a complete range of video communications solutions, including Glowpoint, a subscription-based service providing customers with broadband access to a two-way video communications network utilizing a dedicated internet protocol ("IP") backbone. We provide customers with a single point of contact for all of their video communications requirements, including consultation, procurement, integration and operation of their video communications systems. We offer our customers video communications products from leading manufacturers such as PictureTel Corporation, Polycom, Inc., RADVision Ltd., SONY Electronics, Inc. and VCON Telecommunications, Ltd. and provide a comprehensive suite of video and data services including bridging, on-site technical assistance, customized training, engineering and maintenance. Our current customer base includes over 3,000 companies with approximately 15,000 videoconferencing endpoints in the commercial, federal and state government, medical and education marketplaces nationwide and across the globe. Our Glowpoint network, which we believe is the first subscriber service for video communications over IP, provides customers with a high-quality platform for video communications and related applications. The Glowpoint service offers subscribers substantially reduced transmission costs and superior video communications quality, remote management of all videoconferencing endpoints utilizing simple network management protocol, gateway services to ISDN standards-based video communications equipment, video streaming and store-and-forward applications from our network operations center. Leading IP video communications and video networking equipment suppliers, including Cisco Systems, Inc., PictureTel, Polycom, RADVision and VCON, have already announced that their products will be compatible with Glowpoint. We also distribute data products from companies such as Adtran, Lucent, Madge Networks N.V. and RADVision to provide our customers with remote access into LANs, permitting them to acquire bandwidth on demand and to digitally transmit data. 2 RISK FACTORS You should carefully consider the risks and uncertainties described below and the other information contained in this prospectus before deciding whether to invest in our common stock. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations. If any of the following risks actually occur, our business, financial condition or operating results could be materially adversely affected. In such case, the trading price of our common stock could decline and you may lose part or all of your investment. Risks Relating to Our Business We Have Incurred Significant Losses. We May Continue to Incur Losses and We May Never Achieve and Sustain Profitability. During the year ended December 31, 2000, and for the nine-month period ended September 30, 2001, we have incurred significant operating losses and negative cash flows from operating activities. We expect to continue to make significant expenditures in connection with expanding and adapting our national network infrastructure and support services. We may continue to experience losses in future periods. There is no guarantee that Wire One will achieve revenue growth or profitability or generate positive cash flow on a quarterly or annual basis in the future, or at all. We Depend upon Suppliers and Have Limited Sources of Supply for Certain Products and Services. We rely on other companies to supply some key products and services that we sell and some components of our network infrastructure. Some of the products and services that we resell, and certain components that we require for our network, are available only from limited sources. We could be adversely affected if such sources were to become unavailable to us on commercially reasonable terms. We cannot assure you that, on an ongoing basis, we will be able to obtain third-party products and services cost-effectively and on the scale and within the timeframes we require, or at all. Failure to obtain or to continue to make use of such third-party products and services would have a material adverse effect on our business, financial condition and results of operations. Our Future Success Is Dependent on the Continued Employment of Richard Reiss. Wire One's success will be highly dependent on the experience and continued employment of Richard Reiss, our chairman of the board, chief executive officer and president, the loss of whose services would have a material adverse effect on our business. We have entered into an employment agreement with Mr. Reiss, which agreement expires on December 31, 2003. The Loss of Our Professionals Would Make It Difficult to Complete Existing Projects, Which Could Adversely Affect Our Businesses and Results of Operations. Our business is labor-intensive, and our success depends on identifying, hiring, training and retaining professionals. If a significant number of our current employees or any of our senior managers or key project managers leave, we may be unable to complete or retain existing projects. We Depend upon Our Network and Facilities Infrastructure. Our success depends upon our ability to implement, expand and adapt our national network infrastructure and support services to accommodate an increasing amount of video traffic and evolving customer requirements at an acceptable cost. This has required and will continue to require that we enter into agreements with providers of infrastructure capacity, equipment, facilities and support services on an ongoing basis. We cannot assure you that any of these agreements can be obtained on terms and conditions satisfactory to us. We also anticipate that future expansions and adaptations of our network infrastructure facilities may be necessary in order to respond to growth in the number of customers served. 3 Our Network Could Fail, Which Could Negatively Impact Our Revenues. Our success depends upon our ability to deliver reliable, high-speed access to our partners' data centers and upon the ability and willingness of our telecommunications providers to deliver reliable, high-speed telecommunications service through their networks. Our network and facilities, and other networks and facilities providing services to us, are vulnerable to damage, unauthorized access, or cessation of operations from human error and tampering, breaches of security, fires, earthquakes, severe storms, power losses, telecommunications failures, software defects, intentional acts of vandalism including computer viruses, and similar events, particularly if the events occur within a high traffic location of the network or at one of our data centers. The occurrence of a natural disaster or other unanticipated problems at the network operations center, key sites at which we locate routers, switches and other computer equipment that make up the backbone of our network infrastructure, or at one or more of our partners' data centers, could substantially and adversely impact our business. We cannot assure you that we will not experience failures or shutdowns relating to individual facilities or even catastrophic failure of the entire network. Any damage to or failure of our systems or service providers could result in reductions in, or terminations of, services supplied to our customers, which could have a material adverse effect on our business. We May Be Unable to Implement Our Acquisition Growth Strategy, Which Could Harm Our Business and Competitive Position in the Industry. Our business strategy includes making strategic acquisitions of other videoconferencing companies. Our continued growth will depend on our ability to identify and acquire companies that complement or enhance our business on acceptable terms. We may not be able to identify or complete future acquisitions or realize the anticipated results of future acquisitions. Some of the risks that we may encounter in implementing our acquisition growth strategy include: o expenses and difficulties in identifying potential targets and the costs associated with incomplete acquisitions; o higher prices for acquired companies because of greater competition for attractive acquisition targets; o expenses, delays and difficulties of integrating the acquired company into our existing organization; o greater impact of the goodwill of acquired companies on our results of operations because pooling of interests accounting for acquisitions is no longer available; o ability of management to improve our operational and financial systems, procedures and controls and expand, train, retain and manage our employee base; o competition for qualified professionals; o possible dilution of existing stockholders if we sell stock to the public to raise cash for acquisitions; o diversion of management's attention; o expenses of amortizing the acquired companies' intangible assets; and o expenses of any undisclosed or potential legal liabilities of the acquired companies. 4 If realized, any of these risks could have a material adverse effect on our business, results of operations, financial condition and cash flows. We May Need to Obtain Additional Financing and We Cannot Be Certain That Additional Financing Will Be Available When Needed or on Terms Favorable to Us or Our Stockholders. Our future capital requirements will depend on many factors, including but not limited to: o market acceptance of Glowpoint; o promotion and marketing expenditures required to maintain a competitive position in the marketplace; o investments in new technology and improvements of existing technology; and o the response of competitors to our introduction of Glowpoint and other new products and services. We believe that our existing cash balances and funds generated from operations will provide us with sufficient funds to finance our operations for approximately the next 12 months. To the extent that existing resources are insufficient to fund our activities over the long-term, we may need to raise additional funds through equity or debt financing or from other sources. The sale of equity or convertible debt may result in dilution to our stockholders. To the extent that we rely upon debt financing, we will incur the obligation to repay the funds borrowed with interest and may become subject to covenants and terms that restrict our operating flexibility. We cannot assure you additional equity or debt financing will be available or that, if available, it will be on terms favorable to us or our stockholders. Failure to obtain necessary financing could have a material adverse effect on our business, financial condition or results of operations. We May Be Unable to Adequately Protect Our Intellectual Property Rights. Our success depends on our ability to protect the intellectual property imbedded into our proprietary network architecture. If we do not adequately protect our intellectual property, our customers, network infrastructure providers or competitors could use the intellectual property we have developed to enhance their products and services to our detriment, and may develop and offer competing solutions to the marketplace. We rely on a combination of trade secret laws, confidentiality agreements and other contractual provisions to protect our intellectual property rights, but these legal measures provide only limited protection. Currently, we have no patents or patent applications pending. Third Parties May Claim That We Have Breached Their Intellectual Property Rights, Which Could Result in Significant Additional Costs or Prevent Us From Providing All of Our Services. Third parties may bring claims of copyright or trademark infringement, patent violation or misappropriation of creative ideas or formats against us with respect to content that we distribute or our technology or marketing techniques and terminology. Claims of this kind, even if without merit, could be time-consuming to defend, result in costly litigation, divert management attention, require us to enter into costly royalty or licensing arrangements or prevent us from distributing certain content or utilizing important technologies, ideas or formats. 5 A Decrease in the Number and/or Size of Our Projects May Cause Our Results to Fall Short of Investors' Expectations and Adversely Affect the Price of Our Common Stock. If the number or average size of our projects decreases in any quarter, then our revenues and operating results may also decrease. If our operating results (including the growth of our Glowpoint network) fall short of investors' expectations, the trading price of our common stock could decrease materially, even if the quarterly results do not represent any longer-term problems. We Will Be Subject to The Risks Associated with the Conduct of Business in Foreign Markets, Including Increased Credit Risks, Trade Restrictions, Export Duties and Tariffs and Fluctuations in Exchange Rates of Foreign Currency, any of Which Could Have a Material Adverse Effect on Our Operating Margins and Results of Operations. In 2000, approximately 4% of our revenues was derived from sales to foreign markets, and we expect that a portion of our revenues will continue to be derived from sales to foreign markets in the future. Accordingly, we will be subject to all of the risks associated with foreign trade, which could have a material adverse effect on our operating margins and results of operations. These risks include: o shipping delays; o increased credit risks; o trade restrictions; o export duties and tariffs; and o international, political, regulatory and economic developments. We intend to expand our sales and marketing activities to foreign markets by, among other ways, seeking to establish relationships with foreign governmental agencies that typically operate telecommunications networks. To the extent that we are able to successfully expand sales of our products to foreign markets, we will become increasingly subject to foreign political and economic factors beyond our control, including governmentally imposed moratoriums on new business development as a result of budgetary constraints or otherwise, which could have a materially adverse effect on the our business. We also anticipate that the expansion of foreign operations will require us to devote significant resources to system installation, training and service. Risks Related to Our Industry Our Success is Highly Dependent on the Evolution of Our Overall Market. The market for videoconferencing services is evolving rapidly. Although certain industry analysts project significant growth for this market, their projections may not be realized. Our future growth, if any, will depend on the continued trend of businesses to migrate to IP (H.323) based standards. There can be no assurance that the market for our services will grow, that our services will be adopted, or that businesses will use IP (H.323) based videoconferencing equipment or our new IP subscriber network. If we are unable to react quickly to changes in the market, if the market fails to develop, or develops more slowly than expected, or if our services do not achieve market acceptance, then we are unlikely to become or remain profitable. 6 We Compete in a Highly Competitive Market and Many of Our Competitors Have Greater Financial Resources and Established Relationships with Major Corporate Customers. The video communications industry is highly competitive. We compete with other integrators of video communications equipment, which include Avaya, Emergent and Forgent. Other telecommunications carriers and other corporations that have entered into the video communications market include MCI WorldCom, some of the Regional Bell Operating Companies ("RBOC's"), Sprint and Qwest. Many of these organizations have substantially greater financial and other resources than Wire One, furnish many of the same products and services provided by Wire One, and have established relationships with major corporate customers that have policies of purchasing directly from them. We believe that as the demand for video communications systems continues to increase, additional competitors, many of which may have greater resources than Wire One, may continue to enter the video communications market. Our Failure to Keep Pace With Rapid Change in the Video Communications Industry Could Have A Material Adverse Effect on Our Business, Financial Condition or Results of Operations. The video communications industry is characterized by rapid change and frequent new product introductions. Our future success will depend in part on our ability to anticipate and to respond to changes in industry standards and advances in new technologies. We expect to update features and functions of Glowpoint. However, there can be no assurance that we will be able to introduce or integrate these new features and functions of our Glowpoint network in a timely manner consistent with the market opportunity or that, once introduced, these services will gain the market acceptance we expect. Delays in the introduction of new features and functions for Glowpoint or other new technologies could have a material adverse affect on our business, financial condition and results of operations. Government Regulation of Video Communications May Impact Our Business By Directly or Indirectly Increasing Our Costs. We offer video communications services, in part, through data transmission over public telephone lines. These transmissions are governed by regulatory policies establishing charges and terms for wireline communications. We currently are not subject to direct regulation by the Federal Communications Commission ("FCC") or any other governmental agency, other than regulations applicable to businesses generally. In the future, however, we could become subject to regulations by the FCC or other regulatory agencies as a provider of basic telecommunications services. Changes in the regulatory environment relating to the application of access charges and other regulatory changes that directly or indirectly affect costs imposed on telecommunications providers or increase the likelihood or scope of competition, could harm our business, financial condition or results of operations. Risks Related to Our Stock There is Potential for an Adverse Effect on Our Stock Price from Shares Eligible for Future Sale. Future sales of substantial amounts of our common stock in the public market, including the shares covered by this prospectus, or the perception that such sales could occur, could adversely affect the market price of our common stock. As of November 29, 2001, we had outstanding 25,119,173 shares of common stock, plus 10,181,212 shares of common stock reserved for issuance upon the exercise of outstanding options and warrants, of which options and warrants to acquire 7,493,427 shares of common stock are currently exercisable. Substantially all of the outstanding shares of our common stock are either freely salable or salable subject to certain volume restrictions and manner of sale restrictions pursuant to Rule 144 of the Securities Act. 7 We May Issue Additional Shares and Dilute Your Ownership Percentage. Some events over which you have no control could result in the issuance of additional shares of our common stock, which would dilute your ownership percentage in Wire One. We may issue additional shares of common stock or preferred stock: o to raise additional capital or finance acquisitions; o upon the exercise or conversion of outstanding options, warrants and shares of convertible preferred stock; and/or o in lieu of cash payment of dividends. As of November 29, 2001, there were outstanding warrants to acquire an aggregate of 3,717,938 shares of our common stock. Some of these warrants, unlike the common stock, provide for anti-dilution protection upon the issuances of stock below the exercise price of such warrants. If such a dilution event occurs, the number of shares of common stock that may be acquired upon conversion or exercise would increase resulting in dilution for holders of common stock. Our Stock Price May Be Volatile Due to Factors Outside of Our Control. Our stock price could fluctuate due to the following factors, among others: o Announcements of operating results and business conditions by our customers; o Announcements by our competitors relating to new customers or technological innovations or new services; o Economic developments in the telecommunications or multimedia industries as a whole; o Political and economic developments in countries in which we have operations; and o General market conditions. Our Anti-Takeover Defense Provisions May Deter Potential Acquirors and May Depress Our Stock Price. Our certificate of incorporation and bylaws contain provisions that could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from attempting to acquire, control of Wire One. These provisions provide for a classified board of directors and allow us to issue preferred stock with rights senior to those of our common stock and impose various procedural and other requirements that could make it more difficult for Wire One stockholders to effect corporate actions. In addition, Section 203 of the Delaware General Corporation Law has the effect of restricting combinations between our company and certain of our stockholders without the approval of our board of directors. 8 USE OF PROCEEDS The selling stockholder will receive all of the proceeds from the sale of the securities sold pursuant to this prospectus. See "Selling Stockholder" for the entity receiving proceeds from the sales of these shares. SELLING STOCKHOLDER The following table sets forth (i) the name of the selling stockholder, (ii) the number of shares of common stock owned beneficially by it as of November 29, 2001, (iii) the number of shares which may be offered pursuant to this prospectus and (iv) the number of shares and percentage of class to be owned by the selling stockholder after this offering. The selling stockholder may sell all, some or none of its shares in this offering. See "Plan of Distribution." We have filed a registration statement, of which this prospectus forms a part, in order to permit the selling stockholder to resell to the public the shares of common stock that it acquired in connection with our acquisition of certain of the assets of the selling stockholder pursuant to an Asset Purchase Agreement among Wire One Technologies, Inc., the selling stockholder and certain shareholders of the selling stockholder. The following information is based upon information provided by the selling stockholder. The selling stockholder has not held any position or office or had any other material relationship with us or any of our affiliates within the past three years other than as a result of its ownership of shares of equity securities. Because the selling stockholder may offer all, some or none of its common stock, no definitive estimate as to the number of shares that will be held by the selling stockholder after this offering can be provided. The selling stockholder named in the table has sole voting and investment power with respect to all shares of common stock shown as beneficially owned by it. A person is considered the beneficial owner of any securities as of a given date that can be acquired within 60 days of such date through the exercise of any option, warrant or right. Shares of common stock subject to options, warrants or rights which are currently exercisable or exercisable within 60 days are considered outstanding for computing the ownership percentage of the person holding such options, warrants or rights, but are not considered outstanding for computing the ownership percentage of any other person. The "Common Shares Beneficially Owned after Offering" column assumes the sale of all shares offered. The "Percentage of Common Shares Beneficially Owned after Offering" column is based on 25,119,173 shares of common stock outstanding as of November 29, 2001.
Common Shares Common Shares Percentage of Beneficially Common Shares Beneficially Common Shares Owned Prior to Offered by this Owned After Beneficially Name of Selling Stockholder Offering Prospectus Offering Owned After Offering - ------------------------------------ ---------------------- -------------------- ----------------- ------------------------ Axxis, Inc....................... 320,973 320,973 - *
- --------------------- * Less than 1% 9 PLAN OF DISTRIBUTION The selling stockholder, or pledgees, donees, transferees, or other successors in interest, may sell the common stock from time to time on the Nasdaq National Market, in the over-the-counter market, in privately negotiated transactions or otherwise, at fixed prices that may be changed, at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at prices otherwise negotiated. The common stock may be sold by the selling stockholder by one or more of the following methods, without limitation: (a) block trades in which the broker or dealer so engaged will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; (b) purchases by a broker or dealer as principal and resale by such broker or dealer for its account pursuant to this prospectus; (c) an exchange distribution in accordance with the rules of such exchange; (d) ordinary brokerage transactions and transactions in which the broker solicits purchases; (e) privately negotiated transactions; (f) short sales; (g) through the writing of options on the shares; (h) one or more underwritten offerings on a firm commitment or best efforts basis; and (i) any combination of such methods of sale. The selling stockholder may also transfer shares by gift. We do not know of any arrangements by the selling stockholder for the sale of any of the common stock. In effecting sales, brokers and dealers engaged by the selling stockholder may arrange for other brokers or dealers to participate. Broker-dealers may agree with the selling stockholder to sell a specified number of such shares at a stipulated price per share. To the extent such broker-dealer is unable to do so acting as agent for the selling stockholder, it may purchase as principal any unsold shares at the stipulated price. Broker-dealers who acquire shares as principals may thereafter resell such shares from time to time in transactions on the Nasdaq National Market at prices and on terms then prevailing at the time of sale, at prices related to the then-current market price or in negotiated transactions. Broker-dealers may use block transactions and sales to and through broker-dealers, including transactions of the nature described above. The selling stockholder may also sell the shares in accordance with Rule 144 under the Securities Act of 1933, rather than pursuant to this prospectus, regardless of whether such shares are covered by this prospectus. From time to time, the selling stockholder may pledge, hypothecate or grant a security interest in some or all of the shares owned by it. The pledgees, secured parties or persons to whom such securities have been hypothecated will, upon foreclosure in the event of default, be deemed to be selling stockholders. In addition, the selling stockholder may, from time to time, sell short our common stock, and, in such instances, this prospectus may be delivered in connection with such short sales and the shares offered under this prospectus may be used to cover short sales. To the extent required under the Securities Act of 1933, the aggregate amount of the selling stockholder's shares of common stock being offered and the terms of the offering, the names of any such agents, brokers, dealers or underwriters and any applicable commission with respect to a particular offer will be set forth in an accompanying prospectus supplement. Any underwriters, dealers, brokers or agents participating in the distribution of the common stock may receive compensation in the form of underwriting discounts, concessions, commissions or fees from the selling stockholder and/or purchasers of the selling stockholder's shares of common stock, for whom they may act (which compensation as to a particular broker-dealer might be in excess of customary commissions). 10 The selling stockholder and any broker-dealers that participate in the distribution of the common stock may be deemed to be "underwriters" within the meaning of the Securities Act of 1933, and any commissions received by them and any profit on the resale of the common stock sold by them may be deemed to be underwriting discounts and commissions. The selling stockholder may enter into hedging transactions with broker-dealers and the broker-dealers may engage in short sales of the common stock in the course of hedging the positions they assume with the selling stockholder, including, without limitation, in connection with distributions of the common stock by such broker-dealers. The selling stockholder may enter into option or other transactions with broker-dealers that involve the delivery of the shares offered hereby to the broker-dealers, who may then resell or otherwise transfer such shares. The selling stockholder may also loan or pledge the shares offered hereby to a broker-dealer and the broker-dealer may sell the shares offered hereby so loaned or upon a default may sell or otherwise transfer the pledged shares offered hereby. The selling stockholder and other persons participating in the sale or distribution of the shares will be subject to the applicable provisions of the Securities and Exchange Act of 1934, including Regulation M. With certain exceptions, Regulation M precludes any selling stockholder, any affiliated purchasers, and any broker-dealer or other person who participates in such distribution from bidding for or purchasing, or attempting to induce any person to bid or purchase any security which is the subject of the distribution until the entire distribution is complete. Regulation M also prohibits any bids or purchases made in order to stabilize the price of a security in connection with the distribution of that security. All of the foregoing may affect the marketability of our common stock. We have agreed to indemnify the selling stockholder against certain liabilities, including liabilities under the Securities Act of 1933. The selling stockholder has agreed to indemnify us in certain circumstances against certain liabilities, including liabilities under the Securities Act of 1933. The shares of common stock offered hereby were originally issued to the selling stockholder pursuant to an exemption from the registration requirements of the Securities Act of 1933. We agreed to register the common stock under the Securities Act of 1933. We will pay all expenses in connection with this offering other than fees and expenses of counsel and other advisers to the selling stockholder or underwriting discounts, brokerage fees and commissions. DESCRIPTION OF COMMON STOCK We are authorized to issue 100,000,000 shares of common stock, par value $.0001 per share. At the close of business on November 29, 2001 there were 25,119,173 shares of our common stock outstanding. Each holder of common stock is entitled to one vote for each share owned on all matters voted upon by stockholders, including the election of directors. Subject to the rights of any then outstanding shares of preferred stock, holders of common stock are entitled to dividends that the board of directors may declare. The decision to declare dividends is made by the board of directors in its sole discretion, but the board of directors may declare dividends only if there are funds legally available to pay for the dividends. Holders of common stock are entitled to share ratably in our net assets upon liquidation after payment or provision for all liabilities and any preferential liquidation rights of any preferred stock then outstanding. Holders of common stock have no preemptive rights to purchase shares of our stock. Shares of common stock are not subject to any redemption provisions and are not convertible into any other securities of Wire One. 11 EXPERTS The audited consolidated financial statements of Wire One incorporated by reference in this prospectus to Wire One's annual report on Form 10-K for the year ended December 31, 2000 have been audited by BDO Seidman, LLP, independent certified public accountants, to the extent and for the periods set forth in their report incorporated herein by reference, and are incorporated herein in reliance upon such report given upon the authority of said firm as experts in auditing and accounting. LEGAL MATTERS Legal matters with respect to the validity of the securities offered hereby are being passed upon by Morrison & Foerster LLP, New York, New York. WHERE YOU CAN FIND MORE INFORMATION We have filed with the Securities and Exchange Commission a registration statement on Form S-3 under the Securities Act with respect to the common stock offered by this prospectus. This prospectus, which is a part of the registration statement, does not contain all of the information set forth in the registration statement. For further information about us and the common stock offered by this prospectus, we refer you to the registration statement and the exhibits and schedules filed as a part of the registration statement. Statements contained in this prospectus as to the contents of any contract or other document filed as an exhibit to the registration statement are not necessarily complete. If a contract or document has been filed as an exhibit to the registration statement, we refer you to the copy of the contract or document that has been filed. The registration statement, including exhibits, may be inspected without charge at the principal office of the Securities and Exchange Commission in Washington, D.C. and copies of all or any part of which may be inspected and copied at the public reference facilities maintained by the Securities and Exchange Commission at 450 Fifth Street, N.W., Judiciary Plaza, Room 1024, Washington, D.C. 20549, and at the Commission's regional offices located at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material can also be obtained at prescribed rates by mail from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain information on the operation of the public reference room by calling the Commission at 1-800-SEC-0330. In addition, the Commission maintains a website at http://www.sec.gov that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission. We are subject to the information and reporting requirements of the Securities Exchange Act of 1934, as amended, and, in accordance therewith we are required to file annual and quarterly reports, proxy statements and other information with the Commission. These reports, proxy statements and other information are available for inspection and copying at the Commission's public reference rooms and the Commission's website referred to above. 12 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The Commission requires us to "incorporate" into this prospectus information that we file with the Commission in other documents. This means that we can disclose important information to you by referring to other documents that contain that information. The information incorporated by reference is considered to be part of this prospectus. Information contained in this prospectus and information that we file with the Commission in the future and incorporate by reference in this prospectus automatically updates and supersedes previously filed information. We incorporate by reference our documents listed below and any future filings we make with the Commission under Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934, as amended, prior to the sale of all shares covered by this prospectus: 1. Our Annual Report on Form 10-K for the fiscal year ended December 31, 2000; 2. Our Definitive Proxy Statement for the 2001 Annual Meeting of Stockholders, as supplemented; 3. Our Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2001, June 30, 2001 and September 30, 2001; and 4. Our Current Report on Form 8-K filed with the Commission on August 1, 2001 and the amendments thereto filed on October 1, 2001 and October 3, 2001. You may request a copy of these filings, at no cost, by writing or telephoning us at the following address: Wire One Technologies Inc. 225 Long Avenue Hillside, New Jersey 07205 Attention: Kate McCrary Shuster Telephone: (973) 282-2000 13 320,973 Shares [WIRE ONE LOGO] Common Stock PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 14. Other Expenses of Issuance and Distribution The following table sets forth the various expenses, all of which will be borne by the Registrant, in connection with the sale and distribution of the securities being registered (except any underwriting discounts and commissions and expenses incurred by the selling stockholder for brokerage, accounting, tax or legal services or any other expenses incurred by the selling stockholder in disposing of the shares). All amounts shown are estimates except for the Securities and Exchange Commission registration fee. SEC registration fee...................... $ 492.00 Accounting fees and expenses.............. 7,000.00 Legal fees and expenses................... 10,000.00 Printing costs............................ 2,000.00 Miscellaneous............................. 5,508.00 ------------- Total..................................... $ 25,000.00 ============= Item 15. Indemnification of Directors and Officers Reference is made to Section 102(b)(7) of the Delaware General Corporation Law (the "DGCL"), which permits a corporation in its certificate of incorporation or an amendment thereto to eliminate or limit the personal liability of a director for violations of the director's fiduciary duty, except (1) for any breach of the director's fiduciary duty of loyalty to the corporation or its stockholders, (2) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (3) pursuant to Section 174 of the DGCL (providing for liability of directors for unlawful payment of dividends or unlawful stock purchases or redemptions), or (4) for any transaction from which the director derived an improper personal benefit. Our Certificate of Incorporation contains provisions permitted by Section 102(b)(7) of the DGCL. Reference is made to Section 145 of the DGCL which provides that a corporation may indemnify any persons, including directors and officers, who are, or are threatened to be made, parties to any threatened, pending or completed legal action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of such corporation), by reason of the fact that such person is or was a director, officer, employee or agent of such corporation, or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorney's fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, provided such director, officer, employee or agent acted in good faith and in a manner he reasonably believed to be in or not opposed to the corporation's best interests and, with respect to any criminal actions or proceedings, had no reasonable cause to believe that his conduct was unlawful. A Delaware corporation may indemnify directors and/or officers in an action or suit by or in the right of the corporation under the same conditions, except that no indemnification is permitted without judicial approval if the director or officer is adjudged to be liable to the corporation. Where a director or officer is successful on the merits or otherwise in the defense of any action referred to above, the corporation must indemnify him or her against the expenses which such director or officer actually and reasonably incurred. II-1 Item 16. Exhibits Exhibit Number Description - ------ ----------- 3.1 Amended and Restated Certificate of Incorporation.(1) 3.2 Certificate of Amendment of View Tech, Inc. changing its name to Wire One Technologies, Inc. (2) 3.3 Amended and Restated Bylaws.(1) 4.1 Specimen Common Stock Certificate.(2) 5.1 Opinion of Morrison & Foerster LLP as to the legality of the common stock. (3) 10.1 Asset Purchase Agreement, dated as of November 26, 2001, among Wire One Technologies, Inc., Axxis, Inc. and the shareholders of Axxis, Inc. listed on the signature page thereto.(3) 23.1 Consent of BDO Seidman, LLP.(3) 23.2 Consent of Morrison & Foerster LLP. (included in their opinion filed as Exhibit 5.1) 24.1 Power of Attorney (included in the signature page contained in Part II of the Registration Statement). (3) (1) Filed as an appendix to View Tech Inc.'s Registration Statement on Form S-4 (File No. 333-95145) and incorporated herein by reference. (2) Filed as an exhibit to Wire One Technologies, Inc.'s Registration Statement on Form S-1 (Registration No. 333-42518), and incorporated herein by reference. (3) Filed herewith. Item 17. Undertakings The undersigned Registrant hereby undertakes the following: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act; (ii) To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information in the Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective Registration Statement; and (iii) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement; provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the registration pursuant to Section 13 or Section 15(d) of the Exchange Act that are incorporated by reference in this Registration Statement. II-2 (2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (4) That, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in this Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, Wire One has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, Wire One will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. II-3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Hillside, State of New Jersey, on December 4, 2001. WIRE ONE TECHNOLOGIES, INC. By: /s/ Richard Reiss -------------------------------- Richard Reiss Chairman, President and Chief Executive Officer POWER OF ATTORNEY The undersigned hereby constitutes and appoints Richard Reiss and Jonathan Birkhahn, and each of them, as his true and lawful attorneys-in-fact and agents, jointly and severally, with full power of substitution and resubstitution, for and in his stead, in any and all capacities, to sign on his behalf this Registration Statement on Form S-3 in connection with the offering of common stock by the registrant and to execute any amendments thereto (including post-effective amendments), including a registration statement filed pursuant to Rule 462(b), or certificates that may be required in connection with this Registration Statement, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission and granting unto said attorneys-in-fact and agents, and each of them, jointly and severally, the full power and authority to do and perform each and every act and thing necessary or advisable to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, jointly or severally, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated on December 4, 2001. Signature Title - --------- ----- /s/ Richard Reiss Chairman, President and Chief Executive Officer - ---------------------------- (Principal Executive Officer) Richard Reiss /s/ Christopher Zigmont Chief Financial Officer - ---------------------------- (Principal Financial and Accounting Officer) Christopher Zigmont /s/ Leo Flotron Chief Operating Officer and Director - ---------------------------- Leo Flotron /s/ Jonathan Birkhahn Executive Vice President Business Affairs, - ---------------------------- General Counsel, Secretary and Director Jonathan Birkhahn II-4 /s/ Lewis Jaffe Director - ---------------------------- Lewis Jaffe /s/ James Kuster Director - ---------------------------- James Kuster /s/ Dean Hiltzik Director - ---------------------------- Dean Hiltzik /s/ Peter N. Maluso Director - ---------------------------- Peter N. Maluso II-5 Exhibit Index Exhibit Number Description - ------ ----------- 3.1 Amended and Restated Certificate of Incorporation.(1) 3.2 Certificate of Amendment of View Tech, Inc. changing its name to Wire One Technologies, Inc. (2) 3.3 Amended and Restated Bylaws.(1) 4.1 Specimen Common Stock Certificate.(2) 5.1 Opinion of Morrison & Foerster LLP as to the legality of the common stock. (3) 10.1 Asset Purchase Agreement, dated as of November 26, 2001, among Wire One Technologies, Inc., Axxis, Inc. and the shareholders of Axxis, Inc. listed on the signature page thereto.(3) 23.1 Consent of BDO Seidman, LLP.(3) 23.2 Consent of Morrison & Foerster LLP. (included in their opinion filed as Exhibit 5.1) 24.1 Power of Attorney (included in the signature page contained in Part II of the Registration Statement). (3) (1) Filed as an appendix to View Tech Inc.'s Registration Statement on Form S-4 (File No. 333-95145) and incorporated herein by reference. (2) Filed as an exhibit to Wire One Technologies, Inc.'s Registration Statement on Form S-1 (Registration No. 333-42518), and incorporated herein by reference. (3) Filed herewith. EX-5.1 3 b314949_ex5-1.txt OPINION OF MORRISON & FOERSTER LLP [LETTERHEAD OF MORRISON & FOERSTER LLP] December 4, 2001 Wire One Technologies, Inc. 225 Long Avenue Hillside, New Jersey 07205 Ladies and Gentlemen: At your request, we have examined the Registration Statement on Form S-3 filed by Wire One Technologies, Inc., a Delaware corporation (the "Company"), with the Securities and Exchange Commission (the "Commission") on December 4, 2001 (Registration No. 333-_____) (the "Registration Statement"), relating to the registration under the Securities Act of 1933, as amended (the "Act"), of 320,973 shares of the Company's common stock, par value $.0001 per share (the "Shares"), issued in connection with the Company's acquisition of certain of the assets of Axxis, Inc. pursuant to that certain Asset Purchase Agreement, dated as of November 26, 2001, by and among the Company, Axxis, Inc. and the shareholders of Axxis, Inc. listed on the signature page thereto (the "Asset Purchase Agreement"). This opinion is being delivered in accordance with the requirements of Item 601(b)(5) of Regulation S-K under the Act. All capitalized terms used herein and not otherwise defined shall have the respective meanings assigned to them in the Registration Statement. As counsel to the Company, we have examined the proceedings taken by the Company in connection with the issuance and sale by the Company of the Shares. In such examination, we have assumed the genuineness of all signatures and the authenticity of all items submitted to us as originals and the conformity with originals of all items submitted to us as copies. In making our examination of documents executed by entities other than the Company, we have assumed that each other entity has the power and authority (or, in the case of individuals, the capacity) to execute and deliver, and to perform and observe the provisions of such documents, and the due authorization by each such entity of all requisite action and the due execution and delivery of such documents by each such entity. In addition, we have assumed that the current Board of Directors has been validly elected. We have also assumed that the Company has been duly organized and is validly existing and in good standing under the laws of the State of Delaware. [LETTERHEAD OF MORRISON & FOERSTER LLP] Wire One Technologies, Inc. December 4, 2001 Page Two In connection with this opinion, we have examined originals or copies of the Asset Purchase Agreement and of the certificate of incorporation and the bylaws, each as amended to date, of the Company. In addition, we have examined such records, documents, certificates of public officials and the Company, made such inquiries of officials of the Company and considered such questions of law as we have deemed necessary for the purpose of rendering the opinions set forth herein. Based upon and subject to the foregoing, we are of the opinion that the Shares have been duly authorized for issuance by all necessary corporate action on the part of the Company and are validly issued, fully paid and non-assessable. We express no opinion as to matters governed by any laws other than the General Corporation Law of the State of Delaware as in effect on the date hereof. We hereby consent to the filing of this opinion with the Commission in connection with the filing of the Registration Statement and any amendments thereto. We also consent to the use of our name in the related prospectus under the heading "Legal Matters". In giving this consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Act. Very truly yours, /s/ Morrison & Foerster LLP EX-10.1 4 b314949_ex10-1.txt ASSET PURCHASE AGREEMENT ASSET PURCHASE AGREEMENT This Asset Purchase Agreement (this "Agreement") is made as of this 26th day of November 2001, by and among Wire One Technologies, Inc., a Delaware corporation ("Buyer"), Axxis, Inc., a Kentucky corporation ("Seller"), and the shareholders of Seller named on the signature page hereof (each, a "Shareholder", and collectively, the "Shareholders") (Seller and the Shareholders are sometimes referred to individually as a "Seller Party", and collectively as "Seller Parties"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, Seller desires to sell, and Buyer desires to purchase, certain of the assets, properties and rights owned by or used in the business and operations conducted by Seller's "Technologies" division (collectively, the "Business"), upon the terms and subject to the conditions set forth in this Agreement; WHEREAS, the Business constitutes only a portion of Seller's operations, and Seller will continue to operate the remainder of its business after the Closing (as hereinafter defined); and WHEREAS, as consideration for such asset sale and purchase, (i) Buyer desires to issue, and Seller desires to receive, shares of Buyer's common stock, $0.0001 par value ("Common Stock") and the cash payments described herein, and (ii) Buyer shall assume specified liabilities of Seller, upon the terms and subject to the conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the foregoing premises and the mutual promises, agreements, representations, warranties, and covenants herein contained, the parties hereby agree as follows: 1. Closing; Registration Rights; Allocation 1.1 Closing Date; Effective Date; Effective Time. The closing (the "Closing") of the purchase and sale of the Assets contemplated hereby shall be held on the date hereof (the "Closing Date") at the offices of counsel to Buyer, Fulbright & Jaworski L.L.P., 666 Fifth Avenue, New York, New York 10103, or such other location as may be mutually agreed upon by the parties. Notwithstanding the foregoing, from and after the Closing, the purchase and sale of the Assets shall be deemed to have occurred at 11:59 p.m. (the "Effective Time") on September 30, 2001 (the "Effective Date"). 1.2 Sale of Assets. At the Closing, Seller shall sell to Buyer, free and clear of all liens, mortgages, security interests, encumbrances, pledges, charges, restrictions on transfer, or adverse claims (collectively, "Liens"), and Buyer shall buy from Seller, all of Seller's right, title and interest in the assets used in, or necessary for the operation of, the Business (the "Assets") that are not Excluded Assets (as hereinafter defined), including, without limitation, the following: (a) the right to bill customers of Seller for work performed (but not yet billed) by Seller as part of the Business, on all jobs in progress on the Effective Date based upon the terms of the agreements identified on Schedule 2.9(a) (the "In-Progress Jobs"), which In-Progress Jobs include the "backlog jobs" identified on Schedule 1.2(a)-1 and the net underbilling receivables set forth in the last column of the chart set forth on Schedule 1.2(a)-2 (the "Underbilling Receivables"); (b) Seller's entire right, title and interest in, to and under all In-Progress Jobs; (c) all accounts receivable, and all notes and other negotiable instruments and rights to receive payment, generated in the conduct of the Business on or after the Effective Date, all of which are identified on Schedule 1.2(c) (the "Post-Effective Date Receivables"); (d) Seller's inventory to be used to satisfy Seller's obligations under In-Progress Jobs, as specified on Schedule 1.2(d); (e) the vehicles of Seller specified on Schedule 1.2(e); (f) the office furniture, warehouse equipment, office and computer equipment technical equipment, media room equipment, demonstration equipment, hardware, fixtures, office supplies and other tangible property and any related documentation and user materials, and Seller's rights under all related warranties, specified on Schedule 1.2(f); (g) the leasehold interests of Seller specified on Schedule 1.2(g); (h) all goodwill of the Business as a going concern; (i) all rights of Seller under express or implied warranties from suppliers or contractors with respect to the Assets; (j) all claims, causes of action, choses in action, rights of recovery and rights of set-off of any kind arising out of the Assets or the Business; (k) all existing business and marketing records related to the Business, including accounting and operating records, asset ledgers, inventory records, budgets, databases, event calendars, information and data respecting leased or owned equipment, files, books, correspondence and mailing lists, creative, promotional and advertising materials and brochures, and other business records; (l) all media, including, without limitation disks, tapes and compact discs, and other tangible property necessary for the transfer of the Assets from Seller to Buyer pursuant to the terms and conditions of this Agreement; and (m) all purchase or service orders of the Business taken by Seller and not fulfilled as of the Effective Date (which are identified on Schedule 2.9(a)). 1.3 Documentation of Sale. The sale and delivery of the Assets shall be effected by: 2 (a) a Bill of Sale and Assignment in substantially the form of Exhibit A (the "Bill of Sale"); (b) an Assumption Agreement in substantially the form of Exhibit B (the "Assumption Agreement"); (c) a Power of Attorney in favor of Buyer in substantially the form of Exhibit C (the "Power of Attorney"); and (d) such deeds, endorsements, assignments and other instruments of transfer and conveyance, agreements, and documents reasonably satisfactory in form and substance to Buyer and its counsel as may be requested by Buyer. 1.4 No Other Liabilities or Obligations Assumed. Schedule 1.4 sets forth the liabilities of Seller to be assumed by Buyer upon the Closing (the "Assumed Liabilities"), which Assumed Liabilities Buyer hereby assumes and agrees to pay when due. Except as specifically set forth in Schedule 1.4, Buyer expressly does not, and shall not, assume or be deemed to have assumed under this Agreement or by reason of any transaction contemplated hereunder or otherwise, any debts, liabilities (contingent or otherwise) or obligations of Seller or the Business of any nature whatsoever, whether the same are direct or indirect, fixed or contingent, or known or unknown, whether arising under an agreement or contract or otherwise. Notwithstanding any other provision of this Agreement, the Assumed Liabilities shall not include: (a) any debts, liabilities (contingent or otherwise) or obligations of Seller with respect to those Assumed Liabilities referred to in this Section 1.4 arising out of any contract, agreement, commitment or lease (i) required to be listed but not listed on Schedule 1.4 hereto regardless of any knowledge thereof on the part of Buyer or (ii) the benefits of which are not validly assigned to Buyer; (b) any liabilities or obligations of Seller (whether direct or indirect, contingent or otherwise) arising (i) under or in connection with any Employee Benefit Plan (as hereinafter defined) or (ii) under Title IV or Section 302 of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), Section 412 of the Internal Revenue Code of 1986, as amended (the "Code") or Section 4980B of the Code; or (c) except as specifically set forth in Schedule 1.4, any liabilities or obligations of Seller with respect to accounts payable and payment obligations incurred in the conduct of the Business through and including the Closing Date. 1.5 Purchase Price; Payment. (a) Purchase Price. The consideration to be paid by Buyer for the Assets shall consist of the following elements: (i) 320,973 shares of Common Stock to be issued at Closing (the "Shares"), such number of shares being equal to the integral number of shares of Common Stock (rounded up to the nearest share) that may be purchased for TWO MILLION FIFTY ONE THOUSAND SEVENTEEN DOLLARS ($2,051,017) (the "Stock Purchase Price") at a price per share of $6.39 (the "Per Share Price"), such Per Share Price being equal to the closing sales price of Buyer's Common Stock on the Nasdaq National Market on November 19, 2001; 3 (ii) All expenses of the Business paid by Seller in the ordinary course of business consistent with past custom and practice after the Effective Time and through and including the Closing Date and all cash relating to Post-Effective Date Receivables (as hereinafter defined) and Underbilling Receivables collected during such period shall be calculated (the definitive calculation of such sum is referred to herein as the "Adjustment"). At the Closing, based upon the estimate of the Adjustment calculated on Exhibit D hereto (the "Estimated Adjustment"), to the extent such expenses exceed such cash, Buyer shall pay Seller such excess in cash, and to the extent such expenses are less than such cash, Seller shall pay Buyer such deficiency in cash, subject to increase or decrease after the Closing pursuant to Section 1.6 of this Agreement; (iii) Buyer's assumption of the Assumed Liabilities; and (iv) The payment to Seller of $4,776.50 in cash on or before the first day of each of the 18 consecutive months beginning with December 1, 2001 and continuing through May 1, 2003. (b) Delivery of Shares. At the Closing, Buyer shall: (i) deliver to the Seller a certificate representing 272,827 (approximately 85%) of the Shares; and (ii) deliver to Fulbright & Jaworski L.L.P., as escrow agent (the "Escrow Agent"), a certificate representing 48,146 (approximately 15%) of the Shares (the "Escrowed Shares"), to be held in escrow to secure Seller Parties' indemnification obligations under this Agreement pursuant to the terms of an Escrow Agreement ("Escrow Agreement") substantially in the form of Exhibit E. (c) Registration of the Shares. (i) Buyer shall: (A) as soon as practicable after the Closing, prepare and file with the Securities and Exchange Commission (the "SEC") a registration statement on Form S-3 (the "Registration Statement") relating to the resale of the Shares by Seller; (B) use its reasonable best efforts, subject to receipt of necessary information from Seller, to cause the SEC to declare the Registration Statement effective as promptly as practicable after the Registration Statement is filed by Buyer; (C) promptly prepare and file with the SEC (and provide notice to Seller of any such filing) such amendments and supplements to the Registration Statement and the prospectus used in connection therewith as may be necessary to keep the Registration Statement effective until the earlier of (1) the date all of the Shares covered by the Registration Statement have been sold by Seller, or (2) the date that is the second anniversary of the Closing Date; 4 (D) furnish to Seller such number of copies of prospectuses as Seller may reasonably request in order to facilitate the public sale or other disposition by Seller pursuant to the Registration Statement of all or any of the Shares owned by Seller; (E) notify each holder of Shares covered by such Registration Statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of 1933, as amended (the "Securities Act"), of the happening of any event as a result of which the prospectus included in such Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing. Buyer will use reasonable best efforts to amend or supplement such prospectus in order to cause such prospectus not to include any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing; provided, however, that Buyer, in good faith, may delay the filing of any such amendment or supplement for a reasonable period of time in order to permit Buyer (1) to effect disclosure or disposition or consummation of any transaction requiring confidential treatment which is being actively pursued at such time and which would require disclosure in the Registration Statement or (2) to negotiate, effect or complete any transaction which Buyer reasonably believes might be jeopardized, delayed or made more costly to Buyer by disclosure in the Registration Statement; and (F) bear all expenses in connection with the procedures in paragraphs (A) through (E) of this Section 1.5(c)(i) and the registration of the Shares pursuant to the Registration Statement, other than fees and expenses, if any, of counsel and other advisers to Seller or underwriting discounts, brokerage fees and commissions incurred by Seller, if any. (ii) (A) Notwithstanding the generality of the foregoing clauses, Seller agrees that upon notice from Buyer at any time or from time to time during the time the prospectus relating to the Shares covered by the Registration Statement and proposed to be sold by Seller is required to be delivered under the Securities Act of the happening of any event as a result of which, in Buyer's opinion, the prospectus included in the Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, Seller will forthwith discontinue Seller's disposition of such Shares pursuant to the Registration Statement until the time of Seller's receipt of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchaser of such Shares, such prospectus shall not include, in Buyer's opinion, an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing. 5 (B) Seller shall furnish Buyer such information regarding Seller and the distribution of the Shares covered by the Registration Statement as Buyer may from time to time reasonably request in writing. (C) Seller agrees to give at least two (2) Business Days' (as hereinafter defined) prior written notice to Buyer of any proposed sale of the Shares pursuant to the Registration Statement that would occur more than ten (10) Business Days after the effective date of the Registration Statement and not to make such sale (I) unless such two (2) Business Days elapse without response from Buyer, or (II) in the event Buyer sends Seller written notice stating that an amendment to the Registration Statement or supplement to the prospectus must be filed in accordance with the second sentence of Section 1.5(c)(i)(E), until Buyer notifies Seller that the Registration Statement has been amended or the prospectus supplemented as required; provided, however, that Buyer agrees to file such amendment or supplement promptly upon the resolution of the disclosure issue necessitating such delay, or, in any event, not more than thirty (30) days after receipt of Buyer's written notice. (iii) Buyer will use its commercially reasonable efforts to cause the Shares covered by and to be sold pursuant to the Registration Statement to be listed on any securities exchanges or markets on which shares of Common Stock are then listed. (iv) (A) In the event of a registration of any of the Shares under the Securities Act pursuant to this Section 1.5(c), Buyer will, to the extent permitted by applicable law, indemnify and hold harmless Seller against all losses, claims, damages or liabilities to which Seller may become subject under the Securities Act, the Securities Exchange Act of 1934, as amended (the "Exchange Act") or any other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of Buyer), insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement, including the prospectus, financial statements and schedules, and all other documents filed as a part thereof, as amended at the time of effectiveness of the Registration Statement, including any information deemed to be a part thereof as of the time of effectiveness pursuant to paragraph (b) of SEC Rule 430A, or pursuant to SEC Rule 434, or the prospectus, in the form first filed with the SEC pursuant to SEC Rule 424(b), or filed as part of the Registration Statement at the time of effectiveness if no Rule 424(b) filing is required, or any amendment or supplement thereto, or arise out of or are based upon 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, and will reimburse Seller for any legal or other expenses reasonably incurred by Seller in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability or action; provided, however, that Buyer will not be liable in any such case if and to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished in writing by Seller specifically for use in such Registration Statement. For purposes of this Section 1.5(c)(iv), the term "Registration Statement" shall include any final prospectus, exhibit, supplement or amendment included in or relating to, and any document incorporated by reference in, the Registration Statement referred to in Section 1.5(c)(i). 6 (B) Seller will, to the extent permitted by applicable law, indemnify and hold harmless Buyer, each person, if any, who controls Buyer within the meaning of the Securities Act, each officer of Buyer who signs the Registration Statement and each director of Buyer, against all losses, claims, damages or liabilities, joint or several, to which Buyer or such officer or director may become subject under the Securities Act, the Exchange Act or any other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of Seller), insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement or any amendment or supplement thereof, or arise out of or are based upon 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, and will reimburse Buyer and each such officer, director, underwriter and 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 Seller will be liable hereunder in any such case if and only to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement of a material fact or omission or alleged omission of a material fact made in reliance upon and in conformity with information pertaining to Seller furnished in writing to Buyer by Seller specifically for use in the Registration Statement; and provided further, however, that the liability of Seller hereunder shall not in any event exceed the proceeds received from the sale of Seller's Shares covered by such Registration Statement. (C) Promptly after receipt by an indemnified party under this Section 1.5(c)(iv) of notice of the threat or commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party under this Section 1.5(c)(iv), promptly notify the indemnifying party in writing thereof; but the omission to so notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party for contribution or otherwise than under the indemnity agreement contained in this Section 1.5(c)(iv) to the extent it is not prejudiced as a result of such failure. In case any such action is brought against any indemnified party and such indemnified party seeks or intends to seek indemnity from an indemnifying party, the indemnifying party will be entitled to participate in, and, to the extent that it may wish, jointly with all other indemnifying parties similarly notified, to assume the defense thereof with counsel reasonably satisfactory to such indemnified party; provided, however, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be a conflict between the positions of the indemnifying party and the indemnified party in conducting the defense of any such action or that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, the indemnified party or parties shall have the right to select separate counsel to assume such legal defenses and to otherwise participate in the defense of such action on behalf of such indemnified party or parties. Upon receipt of notice from the indemnifying party to such indemnified party of its election so to assume the defense of such action and approval by the indemnified party of counsel, the indemnifying party will not be liable to such indemnified party under this Section 1.5(c)(iv) for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof unless (1) the indemnified party shall have employed such counsel in connection with the assumption of legal defenses in accordance with the proviso to the preceding sentence (it being understood, however, that the indemnifying party shall not be liable for the expenses of more than one separate counsel, approved by such indemnifying party in the case of paragraph (A), representing all of the indemnified parties who are parties to such action) or (2) the indemnified party shall not have employed counsel reasonably satisfactory to the indemnifying party to represent the indemnified party within a reasonable time after notice of commencement of action, in each of which cases the reasonable fees and expenses of counsel shall be at the expense of the indemnifying party. 7 (D) In order to provide for just and equitable contribution to joint liability under the Securities Act in any case in which either (1) any indemnified party exercising rights under this Agreement makes a claim for indemnification pursuant to this Section 1.5(c)(iv) but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section 1.5(c) provides for indemnification in such case, (2) contribution under the Securities Act may be required on the part of any such indemnified party in circumstances for which indemnification is provided under this Section 1.5(c), or (3) the indemnification provided for by this Section 1.5(c) is insufficient to hold harmless an indemnified party, other than by reason of the exceptions provided therein, then, and in each such case, Buyer and Seller will contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (after contribution from others) (x) in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and the indemnified party on the other or (y) if the allocation provided by clause (x) above is not permitted by applicable law, or provides a lesser sum to the indemnified party than the amount hereinafter calculated, in such proportion as is appropriate to reflect not only the relative fault referred to in clause (x) above but also the relative benefits received by the indemnifying party and the indemnified party from the registration of the securities as well as the statements or omissions which resulted in such losses, claims, damages or liabilities and any other relevant equitable considerations. Seller will not be required to contribute any amount in excess of the proceeds received from the sale of its Shares covered by such Registration Statement and no person or entity guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation. (E) The obligations of the Buyer and Seller under this Section 1.5(c)(iv) shall survive completion of any offering of Shares pursuant to a Registration Statement and the termination of Buyer's obligations under Section 1.5(c)(i). No indemnifying party, in the defense of any such claim or litigation, shall, except with the consent of each indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. 8 (v) In the event that the Registration Statement has not been declared effective by the SEC on or prior to the 10th Business Day after the Closing Date, immediately upon effectiveness of such Registration Statement, Buyer shall calculate the integral number of shares of Common Stock (rounded up to the nearest share) that may be purchased for the Stock Purchase Price at a price per share equal to the average of the closing sales prices of Buyer's Common Stock on the Nasdaq National Market on the ten (10) trading days immediately preceding such effective date of the Registration Statement. As used hereinafter, the term "Adjusted Shares" shall refer to such number of shares of Common Stock calculated pursuant to the preceding sentence; provided, however, that in the event that such number of shares of Common Stock is greater than 385,168 (120% of the number of Shares identified in Section 1.5(a)(i)), the term "Adjusted Shares" shall mean 385,168 shares of Common Stock (120% of the number of Shares identified in Section 1.5(a)(i)). Buyer shall immediately notify Seller of such calculation of Adjusted Shares, and, as soon as practicable thereafter, (A) if the number of Shares exceeds the number of Adjusted Shares, Buyer and Seller shall take such action as is necessary to cause 85% of such excess number of Shares to be returned to Buyer by Seller and 15% of such excess number of Shares to be returned to Buyer by the Escrow Agent, or (B) if the number of Adjusted Shares exceeds the number of Shares, Buyer shall take such action as is necessary to cause 85% of such excess number of shares of Common Stock to be issued to Seller and 15% of such excess number of shares of Common Stock to be delivered to the Escrow Agent to be held in escrow pursuant to the Escrow Agreement. Notwithstanding the foregoing, in the event that the delay in causing the Registration Statement to be declared effective by the SEC is due to Seller's failure to provide necessary information required therefor, the 10-Business Day period contemplated in this Section 1.5(c)(v) shall be extended by the number of Business Days of delay caused by such failure of Seller. In the event any adjustment in the number of shares of Common Stock issued to Seller under this Agreement is necessary pursuant to this Section 1.5(c)(v), as used in this Agreement, the term "Shares" shall refer to the Adjusted Shares (except in Sections 1.5(a)(i), 1.5(b), 1.5(c)(i)(A) and 5.2(a)), and the term "Escrowed Shares" shall refer to the shares of Common Stock held by the Escrow Agent after giving effect to the adjustment required under this Section 1.5(c)(v) (except in Sections 1.5(b)(ii) and 5.2(a)). (d) Allocation. Within 60 days following the Closing Date, Buyer, subject to the approval of Seller, shall prepare and finalize a schedule setting forth an allocation of the consideration described in Section 1.5(a) (including any adjustment to the Estimated Adjustment pursuant to Section 1.6 hereof and any adjustment to the number of Shares pursuant to Section 1.5(c)(v)) among the Assets (the "Allocation Schedule"). Each party agrees to report the transactions contemplated hereby for federal income tax and all other tax purposes (including, without limitation, for purposes of Section 1060 of the Code) in a manner consistent with the Allocation Schedule, and in accordance with all applicable rules and regulations, and to take no position inconsistent with the allocation set forth therein in any administrative or judicial examination or other proceeding. Each of Buyer and Seller shall timely file the appropriate forms in accordance with the requirements of Section 1060 of the Code and this Section 1.5(d). 9 1.6 Post-Closing Adjustment. (a) On or prior to February 1, 2002 (or such later date as Buyer and Seller may mutually agree in writing) (the "Deadline"), representatives of Buyer and Seller shall jointly determine the Adjustment. Upon certification in writing of the amount of the Adjustment jointly by such representatives: (i) if the Adjustment is greater than Estimated Adjustment, Buyer shall, within five Business Days of such certification, pay to Seller in cash the amount of such deficiency; or (ii) if the Estimated Adjustment exceeds the Adjustment, Seller shall, within five Business Days of such certification, pay to Buyer in cash the amount of such excess. (b) In the event that the representatives of Seller and Buyer are unable jointly to determine the amount of the Adjustment by the Deadline, Seller and Buyer hereby agree that such determination shall be referred to a mutually satisfactory independent public accounting firm of national stature that has not been employed by any party hereto for the two (2) years preceding the date of such referral (the "Selected Accountants"), which shall promptly make a determination. The determination of the Selected Accountants shall be conclusive and binding on Buyer and Seller. One-half of the fees of the Selected Accountants shall be borne by Seller, and one-half shall be borne by Buyer. If the Selected Accountants determine that the Adjustment is greater than Estimated Adjustment, Buyer shall, within five Business Days of such determination, pay to Seller in cash the amount of such deficiency. If the Selected Accountants determine that the Estimated Adjustment exceeds the Adjustment, Seller shall, within five Business Days of such determination, pay to Buyer in cash the amount of such excess. 1.7 Excluded Assets. Anything to the contrary notwithstanding, the Assets shall not include any of the following rights, properties or assets (the "Excluded Assets"): (a) all accounts receivable of Seller generated by Seller prior to the Effective Time for which Seller has prepared and issued invoices (excluding the Underbilling Receivables); (b) this Agreement, and any of the other documents to be executed in connection herewith (collectively, the "Other Transaction Documents"), or any right, title or interest of Seller or any of the Shareholders hereunder or thereunder; (c) any and all rights to any tax refund due to Seller, accrued and prepaid expenses and deposits, and any and all prepaid insurance premiums, whether or not related to the Business; (d) the Shares; 10 (e) any records relating to the internal governance of Seller; (f) the names "Axxis", "Allied" and "Allied Communications"; (g) the accounting software applications system known as "SBT" and "AVAIL" (the "Accounting Software") (provided that Buyer and its representatives shall be entitled to reasonable access to the Accounting Software in accordance with Section 7.4(b) of this Agreement); and (h) all assets primarily used in, or necessary for the operation of, Seller's ongoing studio and rental business (the "Other Business"). 1.8 Office Space Leases. At the Closing: (a) Buyer will enter into an assumption agreement, in substantially the form attached hereto as Exhibit F (the "Indianapolis Lease Assumption"), for Seller's lease for office space in Indianapolis, Indiana; (b) Buyer will enter into a sublease, in substantially the form attached hereto as Exhibit G (the "Louisville Sublease"), for approximately 21,225 square feet of Seller's office space in Louisville, Kentucky; and (c) Buyer will enter into an assumption agreement, in substantially the form attached hereto as Exhibit H (the "Richmond Amended Lease Assumption"), for Seller's amended lease for office space in Richmond, Indiana. 2. Representations and Warranties of Seller and the Shareholders Seller and the Shareholders hereby, jointly and severally, represent and warrant to Buyer as follows: 2.1 Organization and Standing. Seller (a) is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Kentucky, (b) has full right, power and authority to enter into and perform and do all things contemplated under this Agreement and the Other Transaction Documents to which it is a party necessary to give effect to the provisions of this Agreement and such Other Transaction Documents, to own and lease the Assets and to carry on and operate the Business as now being conducted and proposed to be conducted by it under existing agreements, (c) is duly qualified or licensed to do business and is in good standing as a foreign corporation in every jurisdiction in which the character of the Assets or nature of the Business requires such qualification, and (d) does not own any of the Assets, and does not conduct any of the Business, through any other corporation, limited liability company, partnership or other entity. 2.2 Authorization and Binding Obligations. The execution, delivery and performance by Seller of this Agreement and the Other Transaction Documents to which Seller is a party have been duly and validly authorized by all necessary corporate action, including, without limitation, any necessary approval of the entire transaction by the requisite vote of Seller's shareholders. This Agreement and the Other Transaction Documents to which Seller is a party have been duly executed and delivered by Seller and constitute valid and binding agreements of Seller, enforceable in accordance with their respective terms, except as their enforceability may be limited by bankruptcy, insolvency, moratorium or other laws relating to or affecting creditors' rights generally and the exercise of judicial discretion in accordance with general equitable principles. The Shareholders are the owners of 62.2% of the issued and outstanding capital stock of Seller, the remainder of which is owned by Roy Ridge. 11 2.3 No Contravention. Except for the requirement of consent of Fifth Third Bank, Seller's primary lender, the execution, delivery and performance of this Agreement and the Other Transaction Documents to which Seller is a party, the consummation of the transactions contemplated hereby and thereby and the compliance with the provisions hereof and thereof by Seller do not (a) violate any provision of the articles of incorporation or bylaws of Seller, (b) conflict with, result in the breach of, or constitute a default under, or result in the creation of any Lien upon any of the Assets, or require any authorization, consent, approval, exemption or other action by or notice to any third party (including any shareholder of Seller not a party to this Agreement), court or other governmental or administrative body, under the provisions of any agreement or other instrument to which Seller is a party or by which any of the Assets are bound or affected or (c) violate any laws, regulations, orders or judgments applicable to Seller or the Business. 2.4 Compliance with Laws. Seller has complied with, and is now in compliance with, all laws, rules, regulations, orders, judgments and decrees of any governmental, regulatory or administrative body, agency or authority, or any court or judicial authority (each, an "Authority") applicable to the Business. Seller possesses each franchise, license, permit, authorization, certification, consent, variance, permission, order or approval of or from any Authority, and has filed all filings, notices or recordings with any such Authority (collectively, "Licenses") material to, or necessary for the conduct of, the Business and is now and, has at all times in the past, been in compliance with each of such Licenses. No proceeding or other action is pending or, to the best knowledge of Seller and the Shareholders, threatened, to revoke, amend, or limit any License, and Seller and the Shareholders have no basis to believe that any such proceeding or action would result from the consummation of the transactions contemplated by this Agreement or by the Other Transaction Documents, or that any such License would not be renewed in the ordinary course. 2.5 Environmental and Safety Laws. Seller is not in violation of any applicable law relating to the environment with respect to the facilities identified in Section 1.8 hereof or occupational health and safety, and no material expenditures are or will be required by Seller in order to comply with any such existing law. 2.6 Tax Matters. Seller has, within the times and in the manner prescribed by law, filed all required tax returns, including sales and use tax returns, has paid or provided for all taxes, including sales and use taxes owed by Seller, with respect to the Business (whether or not shown on any tax return to be due and owing by it), has paid or provided for all deficiencies or other assessments of taxes, interest or penalties owed by it, and all such tax returns were correct and complete in all material respects when filed. No taxing Authority has asserted, or will successfully assert, any claim for the assessment of any additional taxes of any nature with respect to any periods covered by any such tax returns, and all taxes or other charges required to be withheld or collected by Seller with respect to the Business have been duly withheld or collected and, to the extent required, have been paid to the proper taxing Authority or properly segregated or deposited as required by law. 12 2.7 Employee Benefit Plans; ERISA; Employees. (a) As used in this Agreement, the term "ERISA Affiliate" means any person or entity (whether or not incorporated) which, by reason of its relationship with Seller or a subsidiary is required to be aggregated with Seller or a subsidiary under Sections 414(b), 414(c), 414(m) or 414(o) of the Code, or which, together with Seller or a subsidiary is a member of a controlled group within the meaning of Section 4001(a) of ERISA. (b) Schedule 2.7(b) lists each "employee benefit plan" as defined in Section 3(3) of ERISA, whether or not subject to ERISA, and each other employment, severance, consulting, confidentiality, deferred, incentive, fringe benefit, change in control, retention, stock option or other equity based or other compensatory or benefit plan, policy, agreement or arrangement that (i) is maintained, administered, contributed to or required to be contributed to by Seller, or its ERISA Affiliates or to which Seller or any ERISA Affiliate is a party, and (ii) covers any current or former employee or other personnel of Seller or any of its ERISA Affiliates who provides or has provided services to or in connection with the Business (the "Business Employees"). Each such plan, policy, agreement or arrangement is herein referred to as an "Employee Benefit Plan." Copies of the Employee Benefit Plans, including, but not limited to, any trust instruments, insurance contracts and all amendments thereto have been furnished to Buyer. Except as set forth on Schedule 2.7(b), neither Seller nor any of its ERISA Affiliates is or ever was obligated to contribute to or a participating employer under a multiemployer plan within the meaning of Section 3(37) of ERISA or an employee pension plan covered by Title IV of ERISA, Section 302 of ERISA or Section 412 of the Code. (c) With respect to any funded employee pension plan within the meaning of Section 3(2) of ERISA, there has been no accumulated funding deficiency within the meaning of Section 302(a)(2) of ERISA or Section 412 of the Code, which has resulted or could result in the imposition of a Lien upon any of the Assets, and no event has occurred and no circumstance exists under which Seller has incurred or may incur, a liability (directly or indirectly), under Title IV of ERISA or Section 4980B of the Code which could become a liability of Buyer or which could result in the imposition of a Lien upon any of the Assets. 13 (d) Schedule 2.7(d) contains a true and complete list of all employees, independent contractors, officers or directors of Seller who are employed or performing services primarily for the Business (including for such purposes certain corporate and administrative personnel, as specified therein) on the date hereof (collectively, the "Closing Date Employees"), the title and rate of compensation of each Closing Date Employee, and the amount of any accrued vacation leave as of the date of this Agreement. Seller has, on or prior to the Closing Date, (i) paid all accrued salary and bonuses, and accrued amounts for sick leave, maternity leave and other leave (other than accrued vacation leave) due and payable to the Closing Date Employees on or prior to the Closing Date, and (ii) notified each Closing Date Employee that his or her employment by Seller shall be terminated as of the Closing. Seller is not in default with respect to any withholding or other employment taxes or payments with respect to accrued vacation or severance pay on behalf of any Closing Date Employee, former employee of the Business or independent contractor of the Business for which it is obligated on the date hereof, and has made all such necessary payments or adjustments arising through the Closing Date. Seller has not instituted any "freeze" of, or delayed or deferred the grant of, any cost-of-living or other salary adjustment for any Closing Date Employee. Schedule 2.7(d) lists the name, title and rate of compensation of each employee of the Business whose employment was terminated within 90 days prior to the date of this Agreement. Seller has not engaged in any unfair labor practice or discriminated on the basis of race, color, religion, sex, national origin, age, disability or handicap in its employment conditions or practices with respect to the Business. No employee or independent contractor of the Business has filed or, to the best knowledge of Seller and the Shareholders, threatened, any claims, and there is no reasonable basis for a claim against Seller relating to employment or similar matters (including, without limitation, compensation and benefits) with Seller with respect to the Business. There are not in existence or, to the best knowledge of Seller and the Shareholders, threatened any work stoppages respecting employees or independent contractors of Seller with respect to the Business or unfair labor practice complaints against Seller with respect to the Business. Seller is not a party to any collective bargaining agreement, no representation question exists respecting the Closing Date Employees and no collective bargaining agreement is currently being negotiated by Seller covering its employees, nor is any grievance procedure or arbitration proceeding pending under any collective bargaining agreement and no claim therefor has been asserted. Seller has not received notice from any union or any employee setting forth demands for representation, elections or for present or future changes in wages, terms of employment or working conditions. There have been no audits of the equal employment opportunity practices of Seller, nor does any basis for any such audit exist. Seller does not have any severance agreement, policy, practice or other arrangement with respect to severance with any Closing Date Employee other than the Employee Benefit Plans. 2.8 Litigation. Except as set forth on Schedule 2.8, there is no pending or, to the best knowledge of Seller and the Shareholders, threatened, adverse claim, dispute, governmental investigation, suit, action, arbitration, legal, administrative or other proceeding of any nature, domestic or foreign, criminal or civil, at law or in equity, by or against or otherwise affecting the Business or the Assets. 2.9 Agreements. (a) Schedule 2.9(a) sets forth a true and complete list of all In-Progress Jobs, all purchase or service orders taken but not fulfilled by Seller as of the Effective Date, and all other agreements relating to the Business or the Assets that involve payments to or by Seller in excess of $5,000 individually or $15,000 in the aggregate, including, without limitation, commitments, including guarantees of any indebtedness, or instruments binding Seller as of the Closing Date with respect to the Business or the Assets, and all powers of attorney. True and complete copies of each such agreement, commitment or instrument have been delivered to Buyer. (b) To the best knowledge of Seller and the Shareholders, each such agreement is the valid and binding obligation of the other contracting party, enforceable in all material respects in accordance with its terms against the other contracting party, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, arrangement, moratorium or other similar laws and by general principles of equity, has not been cancelled in whole or in part and is in full force and effect. 14 (c) Seller has fulfilled all material obligations required to have been performed by it prior to the date hereof with respect to each such agreement, and Seller has no reason to believe that the other contracting party will not be able to fulfill all of its or his obligations when due in respect thereof. (d) To the best knowledge of Seller and the Shareholders, no other contracting party to any such agreement is now in breach thereof, and there are not now, nor have there been in the twelve (12) month period prior to the date hereof, any material disputes between Seller and any such other contracting party. (e) Each such agreement shall be assigned to Buyer at Closing. (f) Seller is not a party to, or bound by, any agreement or commitment that restricts the conduct of the Business anywhere in the world. (g) Schedule 2.9(g) sets forth a true and complete list of each proposed agreement, commitment, arrangement, or other understanding under discussion since the Effective Date, including, without limitation, any proposed purchase or service order relating to the Business, between Seller and any third party that would, or reasonably could be expected to, be required to be disclosed pursuant to any provision of this Agreement, if same had been executed prior to and remained in effect as of the date hereof. True and complete copies of the most recent draft of each such agreement and all other documents evidencing the current state of such discussions have been delivered to Buyer. 2.10 Suppliers and Customers. Schedule 2.10 is a true and complete list of the suppliers and customers with whom Seller has done business with respect to the Business within six (6) months prior to the Closing Date, and lists each outstanding purchase or service order (or correspondence with respect to a proposed purchase or service order) with respect to the Business, identifying in each case the vendor, supplier, contractor or inventor and the items being purchased and stating the quantity and price thereof. The relationships of Seller with the persons listed in Schedule 2.10 are good commercial working relationships, and no such person has canceled or otherwise terminated, or threatened to cancel or terminate, its relationship with Seller, or decreased or limited materially, or threatened to decrease or limit materially, its business done with Seller, and there is no reason to believe that any such person would not continue its business relationship with Buyer following the Closing on substantially the same terms as such person has heretofore done business with Seller. 2.11 Tangible Property. Seller has good and marketable title to each item of tangible personal property that is an Asset, free and clear of all liens and other encumbrances, and, with immaterial exceptions, each such item of tangible personal property is in good operating condition and repair, ordinary wear and tear excepted, and useable in the ordinary course of the Business. Schedule 2.11 contains a complete and accurate list setting forth a description of each item of tangible property that is an Asset, and describes the nature of Seller's interest in any property listed thereon that is not owned entirely by Seller free and clear of any Lien. 15 2.12 Real Property. (a) Schedule 2.12(a) identifies each real property leased or subleased by any Seller Party and used in the Business ("Leased Real Property"). No such lease or sublease with respect to such Leased Real Property (the "Real Property Leases") is subject to any Lien. (b) True and complete copies of the Real Property Leases have been delivered to Buyer by Seller. Subject to the terms of the respective Real Property Leases, the Seller Party party thereto has a valid and subsisting leasehold or subleasehold estate in each Leased Real Property. The Real Property Leases are in full force and effect and neither the Seller Party party thereto nor, to the knowledge of the Seller Parties, any other party to any Real Property Lease is in default thereunder, and no event exists which, with the giving of notice or the passage of time, or both, may become a default under any Real Property Lease. Seller Parties' occupation, possession and use of the Leased Real Property has not been disturbed and no claim has been asserted or threatened adverse to the rights of any Seller Party to the continued occupation, possession and use of any of the Leased Real Property. (c) All buildings, structures, improvements and facilities included within the Leased Real Property, including, but not limited to, the roofs and structural elements thereof, and the heating, ventilation, air conditioning, plumbing, electrical, mechanical, sewer, waste water, storm water, paving and parking equipment, systems and facilities included therein (collectively, the "Improvements") are in good operating condition and repair, reasonable wear and tear not caused by neglect excepted. There are no unsatisfied requests for any repairs, restorations or improvements to the Leased Real Property and Improvements from any Authority; there are no ongoing repairs to the Leased Real Property and/or Improvements being made by or on behalf of any Seller Party, and all repairs for which payment is due have been paid for. No portion of the Leased Real Property has suffered any damage by fire or other casualty which heretofore has not been repaired and restored. The walls, roof and subterranean portions, if any, of the Improvements are sound and watertight and there is no water, chemical or gaseous seepage, diffusion or other intrusion into said Improvements which would impair the beneficial use of the Leased Real Property and Improvements by Buyer and/or its subtenants, licensees or other occupants thereof permitted by Buyer. 2.13 Third Party Components, Rights, etc. (a) Seller has validly and effectively obtained the right and license to use the third-party programs included in the Assets and, with respect to such third-party programs, such other rights and licenses as provided for under the agreements relating thereto, and Seller has the right to assign and transfer to Buyer the foregoing rights and licenses. (b) Seller has not granted, transferred, or assigned any right, title or interest in or to any Asset to any person or entity. There are no contracts, agreements, licenses, and other commitments and arrangements in effect with respect to the marketing, distribution, licensing, or promotion of any material Asset by any independent salesperson, distributor, sublicensor, or other remarketer or sales organization. 16 2.14 Insurance. Seller has, through the Closing Date, maintained the insurance policies set forth on Schedule 2.14 with respect to the Assets, the conduct of the Business and the Leased Real Property, which policies are, and at all times from the Effective Time to the Closing Date have been, in full force and effect, and are sufficient in amount (subject to reasonable deductibles) to allow Seller to replace any of the Assets that might be damaged or destroyed or to satisfy any claim with respect to the conduct of the Business or to any of the Leased Real Property. 2.15 Financial Statements. Seller has delivered to Buyer (i) unaudited balance sheets of the Business as of December 31, 2000 and 1999, and related statements of income for the fiscal years then ended (the "Year-End Financials") and (ii) the unaudited balance sheet of the Business as of the Effective Date (the "Effective Date Balance Sheet"), and the related unaudited statement of income of the Business for the period ended on the Effective Date (collectively with the Effective Date Balance Sheet, the "Interim Financials"). The Year-End Financials and the Interim Financials are correct in all material respects and have been prepared in material compliance with generally accepted accounting principles ("GAAP"). The Year-End Financials and Interim Financials present fairly in all material respects the financial condition and operating results of Seller as of the dates and during the periods indicated therein, subject, in the case of the Interim Financials, to normal year-end adjustments, which will not be material in amount or significance. A true, correct and complete copy of the Effective Date Balance Sheet is attached hereto as Exhibit I. 2.16 Certain Transactions. Since the Effective Date, Seller has conducted the Business in the ordinary course consistent with past custom and practice and has not, in any manner with respect to the Business or the Assets: (a) suffered any change, event or condition that, individually or in the aggregate, has had or could reasonably be expected to have a material adverse effect upon the Business, the Assets or Seller's and the Shareholders' ability to consummate the transactions contemplated herein; (b) entered into any transaction, contract or commitment individually involving payments from Seller in excess of $10,000 (other than this Agreement or as disclosed on Schedule 2.16(b)); (c) except in the ordinary course of business consistent with past custom and practice, including as to quantity and frequency, incurred or paid any liability or obligation, incurred any indebtedness for borrowed money or assumed, guaranteed, endorsed or otherwise become responsible for the obligations of any other individual, corporation or other entity; (d) entered into or amended any employment, consulting or other agreement with, increased any compensation payable to, awarded any bonus to, made any loan to, paid any expense or contribution on behalf of, given any gift to, or otherwise conferred any benefit (directly or indirectly) upon, any of its officers, employees, shareholders or consultants, except in the ordinary course of business consistent with past custom and practice including as to quantity and frequency; 17 (e) made any capital expenditures in excess of $10,000 other than those made the ordinary course of business, consistent with past custom and practice; (f) sold, transferred, leased, assigned or otherwise disposed of any Asset or properties of the Business, except in the ordinary course of business, consistent with past custom and practice; (g) created or assumed or permitted to be created or assumed any Lien affecting any Asset or properties of the Business; (h) made any tax election or settled or compromised any federal, state, local or other tax liability either not in accordance with past practice, or which has had or could reasonably be expected to have a material adverse effect upon the Business or the Assets; (i) taken any action that was intended or may reasonably be expected to result in any of the representations and warranties set forth in this Agreement being or becoming untrue; (j) made a material change in the methods of accounting in effect as of the date that the December 31, 2000 financial statements of the Business were finalized; (k) except in the ordinary course of business consistent with past custom and practice, created, renewed, amended or terminated or given notice of a proposed renewal, amendment of termination of, any material contract, agreement or lease for goods or services to which Seller is a party or by which Seller or any of the Assets are bound; (l) except in the ordinary course of business consistent with past custom and practice, rendered services under any In-Progress Contract or taken purchase or service orders relating to the business of the Business; or (m) agreed to do any of the foregoing. 2.17 No Undisclosed Liabilities. Except as set forth on the Schedules to this Agreement, as of the date hereof, Seller has no direct or indirect indebtedness, liabilities, claims, losses, damages, deficiencies, obligations or responsibilities, liquidated or unliquidated, accrued, absolute, contingent, or otherwise, relating to the Assets. 2.18 Receivables. Schedule 1.2(a)-2 includes an accurate and complete breakdown of all Underbilling Receivables as of the Effective Date, and Schedule 1.2(c) includes an accurate and complete breakdown of all Post-Effective Date Receivables as of the Closing Date (the Underbilling Receivables and Post-Effective Date Receivables are referred to collectively as the "Receivables"). All such Receivables (a) have arisen only from bona fide transactions in the ordinary course of business consistent with past custom and practice, (b) represent valid obligations, and (c) are expected to be collectible in the aggregate face amounts thereof without any counterclaim or set-off when due, except, in the case of Underbilling Receivables, to the extent of the normal allowance for doubtful accounts with respect to accounts receivable that are computed in a manner consistent with GAAP and as reflected in the Effective Date Balance Sheet, or, in the case of Post-Effective Date Receivables, as reflected in the books and records of Seller, and (d) are owned by Seller free of all Liens. No discount or allowance from any Receivable as of the Closing Date has been made or agreed to (other than customary payment discounts in the ordinary course of business consistent with past custom and practice). For the purposes of this Agreement, any person or entity shall be deemed to own subject to a Lien any property or asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such property or asset. 18 2.19 Interested Party Transactions. As it relates to the Business, neither the Shareholders nor any manager of Seller (nor, to the actual knowledge of Seller and the Shareholders, any ancestor, sibling, descendant or spouse of any of such persons, or any trust, partnership or corporation in which any of such persons has or has had an interest) has or has had, directly or indirectly, (i) an interest in any entity that furnished or sold, or furnishes or sells, services, products or technology that Seller furnishes or sells in the conduct of the Business, or proposes to furnish or sell in the conduct of the Business, or (ii) any interest in any entity that purchases from or sells or furnishes to Seller, any goods or services, except for the Louisville, Kentucky office space lease between Seller and Columbia Properties, LLC and the Richmond, Indiana office space lease between Seller and Roy Ridge, or (iii) a beneficial interest in any agreements of Seller; provided, however, that ownership of no more than one percent (1%) of the outstanding voting stock of a publicly traded corporation shall not be deemed to be an "interest in any entity" for purposes of this Section 2.19. 2.20 Assets. Except for the Excluded Assets, the Assets are all of the assets, properties, goodwill, and rights of every nature, kind and description, whether tangible or intangible, real, personal or mixed, wherever located, used in and material to, or necessary for the operation of, the Business. 2.21 Brokers or Finders. Seller has not incurred, and will not incur, directly or indirectly, any liability for brokerage or finders' fees or agents' commissions or any similar charges in connection with this Agreement, the Other Transaction Documents or any transaction contemplated hereby or thereby. Seller and the Shareholders, jointly and severally, shall indemnify and hold Buyer harmless with respect to any claim by any broker, agent, or finder claiming to have acted on behalf of Seller or the Shareholders, respecting the subject matter hereof. 2.22 Securities Act Matters. (a) Seller acknowledges that its representations and warranties contained herein are being relied upon by Buyer as a basis for the exemption of the issuance of the Shares hereunder from the registration requirements of the Securities Act and any applicable state securities laws. (b) Seller understands that (i) when issued, the Shares will not be registered under the Securities Act or any state securities laws by reason of their issuance in a transaction exempt from the registration requirements of the Securities Act and applicable state securities laws (but that the Shares will be registered as set forth in Section 1.5(c) of this Agreement) and (ii) the Shares must be held indefinitely unless a subsequent disposition thereof is registered under the Securities Act and applicable state securities laws or is exempt from such registration. 19 (c) Seller is acquiring the Shares for its own account and not with a view to, or for sale in connection with, directly or indirectly, any distribution thereof that would violate the Securities Act or applicable state securities laws. (d) Seller has relied upon independent investigations that it and its representatives have made and is fully familiar with the business, results of operations, financial condition, prospects and other affairs of Buyer and realizes that the Shares are a speculative investment involving a high degree of risk for which there is no assurance of any return. (e) Seller has such knowledge and experience in financial and business affairs and is capable of determining the information necessary to make an informed investment decision, of requesting such information from Buyer, and of utilizing the information that it has received from Buyer to evaluate the merits and risks of its investment in the Shares and is able to bear the economic risk of its investment in the Shares, and understands that it must do so for an indefinite period of time. (f) Seller and its attorneys, accountants, investment and financial advisors, if any, have been provided access to such information about Buyer as it or its advisors, if any, have requested. (g) Seller is an "accredited investor" as defined in Regulation D under the Securities Act. (h) Seller understands that until the Registration Statement has been declared effective, the certificates representing the Shares will bear the following legend (or a substantially similar legend): "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER ANY STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF WITHOUT SUCH REGISTRATION OR THE DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH DISPOSITION WILL NOT REQUIRE REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED." 2.23 No Misleading Statements. No information furnished by or on behalf of Seller to Buyer contains any untrue statement of a material fact or omits to state a material fact necessary to make such statement, in the light of the circumstances under which it was made, not misleading. All written information, in whatever form, furnished by Seller to Buyer was true and correct as of the date so furnished and, except as the accuracy thereof is affected by the passage of time, remains true and correct in all material respects as of the date hereof. 20 3. Representations and Warranties of the Shareholders Each of the Shareholders, severally and not jointly, represents, warrants and covenants to Buyer that: 3.1 Binding Obligations. This Agreement and the Other Transaction Documents to which such Shareholder is a party have been duly executed and delivered by such Shareholder and constitute valid and binding agreements of such Shareholder, enforceable in accordance with their respective terms, except as their enforceability may be limited by bankruptcy, insolvency, moratorium or other laws relating to or affecting creditors' rights generally and the exercise of judicial discretion in accordance with general equitable principles. Such Shareholder is a shareholder of Seller. 3.2 No Contravention. The execution, delivery and performance of this Agreement and the Other Transaction Documents to which such Shareholder is a party, the consummation of the transactions contemplated hereby and thereby and the compliance with the provisions hereof and thereof by such Shareholder do not (a) conflict with, result in the breach of, or constitute a default under, or require any authorization, consent, approval, exemption or other action by or notice to any third party (including any shareholder of Seller not a party to this Agreement), court or other governmental or administrative body, under the provisions of any agreement or other instrument to which such Shareholder is a party or by which the property of such Shareholder is bound or affected or (b) violate any laws, regulations, orders or judgments applicable to such Shareholder. 3.3 No Misleading Statements. No information furnished by or on behalf of such Shareholder to Buyer contains any untrue statement of a material fact or omits to state a material fact necessary to make such statement, in the light of the circumstances under which it was made, not misleading. All written information, in whatever form, furnished by such Shareholder to Buyer was true and correct as of the date so furnished and, except as the accuracy thereof is affected by the passage of time, remains true and correct in all material respects as of the date hereof. 3.4 Brokers or Finders. Such Shareholder has not incurred, and will not incur, directly or indirectly, any liability for brokerage or finders' fees or agents' commissions or any similar charges in connection with this Agreement, the Other Transaction Documents or any transaction contemplated hereby or thereby. Seller and the Shareholders, jointly and severally, shall indemnify and hold Buyer harmless with respect to any claim by any broker, agent, or finder claiming to have acted on behalf of Seller or the Shareholders, respecting the subject matter hereof. 4. Representations and Warranties of Buyer Buyer represents and warrants to Seller and the Shareholders as follows: 21 4.1 Organization and Standing. Buyer is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, with full corporate right, power and authority to enter into and perform and do all things contemplated under this Agreement and the Other Transaction Documents to which it is a party necessary to give effect to the provisions of this Agreement and such Other Transaction Documents. 4.2 Authorization and Binding Obligations. The execution, delivery and performance by Buyer of this Agreement and the Other Transaction Documents to which Buyer is a party have been duly and validly authorized by all necessary corporate action, including approval of the entire transaction by the requisite vote of the board of directors of Buyer. This Agreement and the Other Transaction Documents to which Buyer is a party have been duly executed and delivered by Buyer and constitute valid and binding agreements of Buyer, enforceable in accordance with their respective terms, except as their enforceability may be limited by bankruptcy, insolvency, moratorium or other laws relating to or affecting creditors' rights generally and the exercise of judicial discretion in accordance with general equitable principles. 4.3 No Contravention. The execution, delivery and performance of this Agreement and the Other Transaction Documents to which Buyer is a party, the consummation of the transactions contemplated hereby and thereby and the compliance with the provisions hereof and thereof by Buyer do not (a) violate any provision of the certificate of incorporation or bylaws of Buyer, (b) conflict with, result in the breach of, or constitute a default under, or require any authorization, consent, approval, exemption or other action by or notice to any third party, court or other governmental or administrative body, under the provisions of any agreement or other instrument to which Buyer is a party or by which the property of Buyer is bound or affected, or (c) violate any laws, regulations, orders or judgments applicable to Buyer. 4.4 Issuance of the Shares. Upon issuance hereunder, the Shares shall be validly issued, fully paid and non-assessable and shall be free and clear of any Liens, except that the Escrowed Shares shall be subject to the provisions of the Escrow Agreement. 4.5 SEC Filings. The Common Stock is registered pursuant to Section 12(g) of the Exchange Act, and Buyer has filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Exchange Act, including material filed pursuant to Section 13(a) or 15(d) thereof. Buyer has delivered or made available to Seller and the Shareholders true and complete copies of the following documents (the "SEC Documents") filed with the SEC: (a) Buyer's Annual Report on Form 10-K for the year ended December 31, 2000; (b) Buyer's Quarterly Reports on Form 10-Q for the quarters ended March 31, 2001, June 30, 2001 and September 30, 2001; (c) Buyer's Current Report on Form 8-K, filed on August 1, 2001, and the amendments thereto filed on October 1, 2001 and October 3, 2001; 22 (d) Buyer's proxy statement (and the supplement thereto) in connection with its Annual Meeting of Stockholders held on May 25, 2001; and (e) Buyer's registration statement on Form S-3 (No. 333-69432), filed on September 14, 2001, and post-effective amendment No. 1 thereto, filed on September 26, 2001. Buyer has not provided Seller or any Shareholder any material non-public information or any information which, according to applicable law, rule or regulation, should have been disclosed publicly by Buyer but which has not been so disclosed. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC promulgated thereunder and other federal, state and local laws, rules and regulations applicable to such SEC Documents, and none of the SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The SEC Documents contain all material information concerning Buyer, and no event or circumstance has occurred which would require Buyer to disclose such event or circumstance in order to make the statements in the SEC Documents not misleading on the date hereof but which has not been so disclosed. 4.6 Brokers or Finders. Buyer has not incurred, and will not incur, directly or indirectly, any liability for brokerage or finders' fees or agents' commissions or any similar charges in connection with this Agreement, the Other Transaction Documents or any transaction contemplated hereby or thereby. Buyer shall indemnify and hold Seller and the Shareholders harmless with respect to any claim by any broker, agent, or finder claiming to have acted on behalf of Buyer respecting the subject matter hereof. 4.7 No Misleading Statements. No information furnished by or on behalf of Buyer to any Seller Party contains any untrue statement of a material fact or omits to state a material fact necessary to make such statement, in the light of the circumstances under which it was made, not misleading. All written information, in whatever form, furnished by Buyer to any Seller Party was true and correct as of the date so furnished and, except as the accuracy thereof is affected by the passage of time, remains true and correct in all material respects as of the date hereof. 5. Closing Conditions and Deliveries 5.1 Conditions to Buyer's Obligations. The obligations of Buyer under this Agreement are subject to the fulfillment on or before the Closing of each of the following conditions, except such conditions as may be waived by Buyer: (a) Delivery of Other Transaction Documents. Seller and the Shareholders shall have delivered to Buyer the following Other Transaction Documents, duly executed by all Seller Parties party to each such Other Transaction Document: (i) the Bill of Sale; (ii) the Assumption Agreement; 23 (iii) the Power of Attorney; (iv) the Indiana Lease Assumption, Louisville Sublease and Richmond Amended Lease Assumption (collectively, the "Real Estate Documents"); (v) the Escrow Agreement; (vi) a Management Services Agreement (the "Service Agreement"), in substantially the form of Exhibit J, between Seller and Buyer with respect to the transition services described therein; and (vii) such other instruments of sale, transfer, conveyance or assignment as Buyer and its counsel reasonably shall have requested prior to the Closing Date for the sale, transfer, conveyance and assignment of the Assets to Buyer. (b) Secretary's Certificate. Seller shall have delivered to Buyer a certification of the secretary of Seller, dated the Closing Date, (i) attaching resolutions of the board of directors of Seller and any required consent of the shareholders of Seller in connection with the authorization and approval of the execution, delivery and performance by Seller of this Agreement and the Other Transaction Documents to which Seller is a party, certified as being in full force and effect as of the Closing Date; and (ii) setting forth the incumbency of the officers of Seller who have executed and delivered this Agreement and each of the Other Transaction Documents to which Seller is a party, including therein a signature specimen of each such officer. (c) Good Standing Certificates. Seller shall have delivered to Buyer certificates, dated as of the Closing Date or within three (3) Business Days prior to the Closing Date, executed by the proper official in each jurisdiction, as to the good standing of Seller in State of Kentucky and in each jurisdiction in which the character of the Assets or nature of the Business requires that Seller be qualified as a foreign corporation, including, without limitation, the State of Indiana. (d) Consents. Seller shall have delivered to Buyer all written consents which are required under any contract or agreement being assigned to Buyer hereunder; provided, however, that as to any such contract or agreement the assignment of which by its terms requires prior consent of any of the parties thereto, if such consent is not obtained prior to or on the Closing Date, Seller shall deliver to Buyer written documentation setting forth arrangements for the transfer of the economic benefit of such contracts or agreements to Buyer as of the Closing Date under terms and conditions acceptable to Buyer. (e) Payment of Estimated Adjustment. Seller shall have paid to Buyer the Estimated Adjustment, if such adjustment was in favor of Buyer. 5.2 Conditions to Seller's and the Shareholders' Obligations. The obligations of Seller and the Shareholders under this Agreement are subject to the fulfillment on or before the Closing of each of the following conditions, except such conditions as may be waived by Seller and the Shareholders: 24 (a) Delivery of Shares. Buyer shall have delivered to Seller a certificate representing the portion of the Shares set forth in Section 1.5(b)(i), and shall have delivered to the Escrow Agent a certificate representing the Escrowed Shares pursuant to Section 1.5(b)(ii). (b) Payment of Estimated Adjustment. Buyer shall have paid to Seller the Estimated Adjustment, if such adjustment was in favor of Seller. (c) Other Transaction Documents. Buyer shall have delivered to Seller and the Shareholders the following Other Transaction Documents, duly executed by Buyer: (i) the Assumption Agreement; (ii) the Real Estate Documents; (iii) the Escrow Agreement; and (iv) the Service Agreement. 6. Indemnification 6.1 Indemnification by Seller and the Shareholders. (a) Joint and Several Obligations. Seller and each of the Shareholders, jointly and severally, shall indemnify and hold harmless Buyer, its successors and assigns, at all times after the Closing Date, against and in respect of: (i) Liabilities of Seller. Other than liabilities expressly assumed by Buyer as provided in Section 1.4 of this Agreement, all liabilities and obligations of Seller and the Business of any kind or nature whatsoever relating to Seller or the Business, whether accrued, absolute, fixed, contingent or otherwise, known or unknown; (ii) Misrepresentations. Any damage, loss, cost, expense or liability (including reasonable attorneys' fees) resulting to Buyer from any false, misleading or inaccurate representation, breach of warranty or non-fulfillment of any agreement or condition on the part of Seller under this Agreement or any Other Transaction Document to which Seller is a party or from any misrepresentation in or any omission from any certificate, schedule or other instrument furnished or to be furnished to Buyer hereunder; (iii) Taxes. Any tax, including any use or sales tax, for which Seller or any of Seller's officers and directors is or may be liable in respect of the conduct of the Business prior to the Closing; (iv) Conduct of the Business. Any claim arising out of or in connection with the conduct of the Business prior to the Effective Time, including severance costs for discharged employees, and any negligence, willful misconduct, fraud or other tort claim arising out of or in connection with the conduct of the Business by Seller from the Effective Time through the Closing; and 25 (v) Actions and Suits. All claims, actions, suits, proceedings, demands, assessments, judgments, costs and expenses, including, without limitation, legal fees and expenses, incident to any of the foregoing. (b) Several Obligations. Each of the Shareholders, severally and not jointly, shall indemnify and hold harmless Buyer, its successors and assigns, at all times after the Closing Date, against and in respect of: (i) Misrepresentations. Any damage, loss, cost, expense or liability (including reasonable attorneys' fees) resulting to Buyer from any false, misleading or inaccurate representation, breach of warranty or non-fulfillment of any agreement or condition on the part of such Shareholder under this Agreement or any Other Transaction Document to which such Shareholder is a party or from any misrepresentation in or any omission from any certificate, schedule or other instrument furnished or to be furnished by such Shareholder to Buyer hereunder; and (ii) Actions and Suits. All claims, actions, suits, proceedings, demands, assessments, judgments, costs and expenses, including, without limitation, legal fees and expenses, incident to any of the foregoing. 6.2 Indemnification by Buyer. Buyer shall indemnify and hold harmless Seller and the Shareholders, at all times after the Closing Date, against and in respect of: (a) Assumed Liabilities. All Assumed Liabilities; (b) Misrepresentations. Any damage, loss, cost, expense or liability (including reasonable attorneys' fees) resulting to Seller and the Shareholders from any false, misleading or inaccurate representation, breach of warranty or non-fulfillment of any agreement or condition on the part of Buyer under this Agreement or any Other Transaction Document to which Buyer is a party or from any misrepresentation in or any omission from any certificate or other instrument furnished or to be furnished to Seller or any Shareholder hereunder; and (c) Actions and Suits. All claims, actions, suits, proceedings, demands, assessments, judgments, costs and expenses, including, without limitation, legal fees and expenses, incident to any of the foregoing. 6.3 Indemnification Procedure. (a) Notice of Claim; Right to Cure. A party that may be entitled to indemnification pursuant to Section 6.1 or 6.2 (the "Indemnitee") shall promptly give written notice (a "Notice of Claim") to the party liable for such indemnification (the "Indemnitor"). A Notice of Claim shall set forth (a) a description, in reasonable detail, of the facts and circumstances with respect to the subject matter of such claim or potential claim for indemnification, and (b) a breakdown of the anticipated total amount (the "Claimed Amount") of the actual damage, liability or loss, including reasonable attorneys' fees and other costs and expenses ("Damages") comprising the indemnification claim. Upon receipt of a Notice of Claim, the Indemnitor may elect to cure the circumstances giving rise to the indemnification claim within thirty (30) days after the date of receipt of the Notice of Claim. If such cure cannot be effected within such 30-day period, the Indemnitor shall proceed in accordance with Section 6.3(b), in the case of a claim other than a third-party claim, or in accordance with Section 6.3(c), in the case of a claim made against an Indemnitee by a third person. The Indemnitee's failure to give prompt notice or to provide copies of documents or to furnish relevant data shall not constitute a defense (in whole or in part) to any claim by the Indemnitee against the Indemnitor for indemnification, except and only to the extent that such failure shall have caused or increased such liability or materially adversely affected the ability of the Indemnitor to defend against or reduce its liability. 26 (b) Claims Other Than Third-Party Claims. In the case of an indemnification claim other than a third-party claim: (i) If the Indemnitor does not elect to cure the circumstances giving rise to the indemnification claim in accordance with Section 6.3(a), within 30 days after its receipt of a Notice of Claim, the Indemnitor shall provide to the Indemnitee a written response (a "Response Notice") in which the Indemnitor shall: (A) agree that the full Claimed Amount is due to such Indemnitee, (B) agree that a portion, but not all, of the Claimed Amount is due to such Indemnitee or (C) contest that any portion of the Claimed Amount is due to such Indemnitee. (ii) If the Indemnitor in the Response Notice agrees that an amount equal to all or a portion of the Claimed Amount is due to the Indemnitee (the "Agreed Amount"), the Indemnitor shall promptly pay to the Indemnitee the Agreed Amount. (iii) If the Indemnitor in the Response Notice contests an amount equal to all or any portion of the Claimed Amount (the "Contested Amount"), the Indemnitor and Indemnitee shall, within 30 Business Days after the Indemnitee's receipt of the Response Notice, select a mutually acceptable arbitrator and submit the dispute with respect to such Contested Amount for binding and final determination by such arbitrator in accordance with the then-current regulations of the American Arbitration Association. The parties agree that any arbitration shall be conducted by an individual arbitrator, as opposed to a panel consisting of several arbitrators. Judgment upon the award rendered by the arbitrator resulting from such arbitration shall be in writing, and shall be final and binding upon all involved parties. The site of any arbitration shall be within New York, New York. The award may be confirmed and enforced in any court of competent jurisdiction. If the arbitrator determines that an amount equal to all or a portion of the Contested Amount is due to the Indemnitee (the "Award Amount"), the Indemnitor shall promptly pay to the Indemnitee the Award Amount. (c) Third-Party Claims. In the case of a claim made against an Indemnitee by a third person, if the Indemnitor does not elect to cure the circumstances giving rise to the indemnification claim in accordance with Section 6.3(a), the Indemnitor shall have the right, at its election, by written notice to the Indemnitee, to assume the defense of the claim as to which such notice has been given. Except as provided in the next sentence, if the Indemnitor so elects to assume such defense, it shall diligently and in good faith defend such claim and shall keep the Indemnitee reasonably informed of the status of such defense, and the Indemnitee shall cooperate fully with the Indemnitor in the defense of such claim, provided that in the case of any settlement providing for remedies other than monetary damages for which indemnification is provided, the Indemnitee shall have the right to approve the settlement, which approval shall not be unreasonably withheld or delayed. If the Indemnitor does not so elect to defend any claim as aforesaid or shall fail to defend any claim diligently and in good faith (after having so elected), the Indemnitee may assume the defense of such claim and take such other action as it may elect to defend or settle such claim as it may determine in its reasonable discretion, provided that the Indemnitor shall have the right to approve any settlement, which approval will not be unreasonably withheld or delayed. 27 6.4 Limitations on Indemnification. (a) Basket Amount. (i) The indemnification provided for in Section 6.1 shall not apply until Buyer's claims for Damages exceed $25,000 in the aggregate, whereupon claim may be made for all amounts in excess of $25,000. (ii) The indemnification provided for in Section 6.2 shall not apply until Seller's and the Shareholders' collective claims for indemnification exceed $25,000 in the aggregate, whereupon claim may be made for all amounts in excess of $25,000. (b) Liability Cap. Notwithstanding anything to the contrary in this Agreement, in no event shall the aggregate amount of collective liability of Seller and the Shareholders pursuant to Section 6.1 exceed the market value of the Shares (or, in the event that any adjustment has occurred pursuant to Section 1.5(c)(v), the market value of the Adjustment Shares) on the effective date of the Registration Statement. For purposes of this Section 6.4(b), the market value of each Share shall equal the average of the closing sale prices of Buyer's Common Stock on the Nasdaq National Market on the ten (10) trading days immediately preceding the effective date of the Registration Statement. (c) Insurance Proceeds and Other Set-Offs. The amount of any Damages for which indemnification is provided under Section 6.1 or Section 6.2 shall be net of any amounts recovered or recoverable by the Indemnitee under insurance policies with respect to such Damages and shall be (i) increased to take account of any net tax cost incurred by the Indemnitee arising from the receipt of indemnity payments hereunder (grossed up for such increase) and (ii) reduced to take account of any net tax benefit realized by the Indemnitee arising from the incurrence or payment of any such Damages. In computing the amount of any such tax cost or tax benefit, the Indemnitee shall be deemed to recognize all other items of income, gain, loss, deduction or credit before recognizing any item arising from the receipt of any indemnity payment hereunder or the incurrence or payment of any indemnified Damages. 6.5 Payment of Indemnification Claims. In the event that Seller or the Shareholders are entitled to indemnification pursuant to Section 6.2, Buyer shall make payment of such indemnification claim in cash. In the event that Buyer is entitled to indemnification pursuant to Section 6.1, the payment of such indemnification by Seller or the Shareholders shall be in cash; provided, however, that Buyer may elect to satisfy any part of an indemnification obligation owed by any Seller Party pursuant to Section 6.1(a) by, jointly with the Sellers' Representative (as hereinafter defined), directing the Escrow Agent to (i) return to Buyer an integral number of Escrowed Shares equal in value to any portion of the indemnification obligation that Buyer has elected to satisfy in such manner, (ii) pay to Buyer any portion of the cash, if any, deposited in the Escrow Account (as defined in the Escrow Agreement) by Seller in lieu of Escrowed Shares, up to the amount of the outstanding indemnification obligation in favor of Buyer, or (iii) tender to Buyer a combination of Escrowed Shares and cash deposited in the Escrow Account in accordance with clauses (i) and (ii) of this Section 6.5; provided, however, that the combined value of the Escrowed Shares and cash from the Escrow Account tendered to Buyer shall not exceed the amount of the outstanding indemnification obligation in favor of Buyer. For purposes of this Section 6.5, the value of each Escrowed Share to be returned to Buyer in payment of an indemnification obligation shall be equal to the average of the closing sale prices of the Common Stock on the Nasdaq National Market during the ten (10) trading days immediately preceding the date upon which Buyer and the Sellers' Representative direct that the Escrow Agent return such Escrowed Share to Buyer. 28 7. Post-Closing Covenants 7.1 Further Assurances; Cooperation. The parties shall, at any time, and from time to time, after the Closing Date, execute and deliver such further instruments of conveyance and transfer and take such additional action as may be reasonably necessary to effect, consummate, confirm or evidence the transactions contemplated by this Agreement and the Other Transaction Documents, including, without limitation: (i) inventorying and listing of the Assets, (ii) using their best efforts to obtain any third party consents not obtained as of the Closing Date, (iii) filing of tax returns, including, without limitation, the filing of sales and use tax returns and notices as any party hereto may reasonably require, (iv) conducting, at the expense of Buyer, a financial audit of the Business in connection with the integration of the financial statements of the Business into the financial statements of the Buyer, (v) cooperating to facilitate the transition of Business customers and suppliers to Buyer, and (vi) releasing the liens in favor of Panasonic, Yamaha and Sony referenced on Schedule 2.11. 7.2 Delivery of Assets. Seller agrees that it will transfer or make available to Buyer, promptly after the receipt thereof, any property that Seller receives after the Closing Date in respect of the Assets transferred or intended to be transferred to Buyer under this Agreement. 7.3 Payment of Liabilities. Seller shall, as of the Closing Date or when due, satisfy all of its liabilities or obligations relating to the Business that are not Assumed Liabilities. Buyer shall satisfy each Assumed Liability when due. 7.4 Books and Records; Accounting Software. (a) Buyer shall preserve and retain the corporate, accounting, tax, legal and other records of the Business that shall come into Buyer's possession as a result of the transactions contemplated hereby for a period of not less than five (5) years from the Closing Date and give reasonable access to Seller and the Shareholders, and Seller's officers, auditors, counsel, and other representatives for the purpose of preparing or defending tax returns or for other reasonable business purposes. 29 (b) For a period of 180 days after the Closing, Seller shall give Buyer's officers, employees, auditors and other representatives reasonable access to the Accounting Software for the purpose of effecting the transition to Buyer's accounting software and for other reasonable business purposes. 7.5 Destruction of Copies of Certain Assets. After the Closing Date, Seller shall, upon the written request of Buyer, immediately destroy or erase all of Seller's copies of computer software and Business records included in the Assets and, upon Buyer's request, promptly confirm destruction of same by signing and returning to Buyer an "affidavit of destruction" acceptable to Buyer; provided, however, that Seller shall be entitled to retain a copy of those specific records, and only those specific records, that contain information that (i) is not related to the Business, (ii) is neither confidential nor privileged and (iii) Seller has a reasonable need to retain. 7.6 Employee Matters. (a) Buyer does not and will not assume the sponsorship of, the responsibility for contributions to, or any liability under or in connection with, any Employee Benefit Plan. Without limiting the foregoing, Seller shall be liable for continuation coverage (including any penalties, excise taxes or interest resulting from the failure to provide continuation coverage) required by Section 4980B of the Code with respect to (i) qualifying events incurred by any Business Employee who does not become an employee of Buyer on or immediately following the Closing (or covered dependents or qualified beneficiaries of such employee), and (ii) any qualifying events which occur on or before the Closing Date incurred by any Business Employee who becomes an employee of Buyer on or immediately following the Closing Date (or covered dependents or qualified beneficiaries of such employee). Buyer will in no event be deemed to be a successor employer (within the meaning of Treasury Regulation Section 54.4980B-2) of Seller for purposes of applying the provisions of Section 4980B of the Code following the Closing with respect to any current or former employee of Seller. (b) Buyer shall, as of the Closing Date, offer employment to the Closing Date Employees. Any such Closing Date Employee who accepts Buyer's offer of employment and who, within seven days of the Closing Date, commences employment with Buyer by reporting for work and being actively employed by Buyer for at least one day is hereinafter referred to as a "Transferred Employee." Buyer shall offer to provide or cause to be provided to Transferred Employees, through December 31, 2001, compensation and benefits that are substantially comparable, in the aggregate, to the compensation and benefits (exclusive of any such compensation and benefits consisting of or based on any equity securities) provided to them by Seller under the Employee Benefit Plans immediately prior to the Closing. Subject to the satisfaction of applicable enrollment requirements, each Transferred Employee (and his or her eligible spouse or dependents) who, as of the Closing Date, participates in Employee Benefit Plans of Seller shall, as soon as administratively feasible following such Transferred Employee's commencement of employment with Buyer, become eligible to participate in employee benefit plans maintained by Buyer for its employees. Each Transferred Employee will carry with him or her and have available for use, in accordance with Buyer's policies, the amount of vacation leave available to him or her under Seller's vacation policy on the day prior to the Closing Date. For all purposes of Buyer's employee benefit plans, the date of hire for each Transferred Employee shall be the date such Transferred Employee was originally hired by Seller. 30 (c) With respect to any Transferred Employee (including any dependent thereof) who is hospitalized or is on short-term disability under any Employee Benefit Plan on or prior to the Closing Date and who remains hospitalized or on short-term disability after such date, Seller shall be responsible for claims and expenses incurred both before and after the Closing Date in connection with such individual, to the extent that such claims and expenses are covered by an Employee Benefit Plan of Seller, until such time (if any) that, in the case of a Transferred Employee, such individual commences full-time employment with Buyer, and, in the case of a dependent of a Transferred Employee, such dependent's hospitalization has terminated. (d) Seller shall be responsible for, and Buyer does not and will not assume any liability (direct or indirect, contingent or otherwise) that may arise under or in connection with any state or local law similar to the Worker Adjustment and Retraining Notification Act, 29 U.S. Stat. ss. 2010 et. seq., as a result of the transactions contemplated hereby. 7.7 Non-Competition. (a) During and for a period of two (2) years following the Closing, no Seller Party shall, without the prior written consent of Buyer, engage directly or indirectly in a Competitive Business Activity (as defined below) anywhere in the Restricted Territory (as defined below). The term "Competitive Business Activity" shall mean (i) engaging in, or managing or directing persons engaged in, the business of the Business as of the Closing Date (including, without limitation, rendering services after the Closing under any In-Progress Jobs or taking purchase or service orders relating to the business of the Business); (ii) acquiring of having an ownership interest in any entity that competes with the Business as of the Closing Date (except for ownership of one percent (1%) or less of any entity whose securities have been registered under the Securities Act or Section 12 of the Exchange Act); or (iii) participating in the financing, operation, management or control of any firm, partnership, corporation, business or other entity described in clause (ii) of this sentence. The term "Restricted Territory" shall mean the United States of America and each and every state, county, city, municipality or other political subdivision thereof. Buyer acknowledges that the Business comprises only a portion of Seller's operations and that during the two-year post-Closing period contemplated under this Section 7.7, Seller will continue to operate the Other Business in the ordinary course of business within the historical parameters of the Other Business, and that neither the operation of the Other Business within such parameters, nor the performance of Seller's obligations under the Service Agreement, shall constitute a "Competitive Business Activity" for purposes of this Section 7.7. (b) The covenants contained in Section 7.7(a) shall be construed as a series of separate covenants, one for each state, county, city, municipality or other political subdivision of the Restricted Territory. Except for geographic coverage, each such separate covenant shall be deemed identical in terms to the covenant contained in Section 7.7(a). 31 (c) Each Seller Party acknowledges that the covenants contained in this Section 7.7 are reasonable and valid in geographical and temporal scope and content and in all other respects, and are necessary for the adequate protection of Buyer's legitimate business interests, because, among other things, Buyer conducts business throughout the United States, Buyer is engaged in a highly competitive industry, and Seller Parties have had unique access to confidential business information relating to the Business and the Assets. Each Seller Party also acknowledges that any breach of the covenants set forth in this Section 7.7 will give rise to irreparable injury to Buyer, that the remedy at law of Buyer for any such breach or threatened breach will be inadequate and that, in addition to any other remedy therefor that Buyer may have, it shall be entitled to temporary injunctive relief before trial from any court of competent jurisdiction as a matter of course and to permanent injunctive relief without the necessity of proving actual damages and without the requirement of any bond or other security. (d) Each Seller Party agrees that the existence of any claim or cause of action by such Seller Party against Buyer shall not constitute a defense to the enforcement by Buyer of the covenants set forth in this Section 7.7, and that any such claim or cause of action against Buyer shall be litigated separately. (e) If, in any judicial proceeding, a court refuses to enforce any of the separate covenants (or any part thereof) set forth in this Section 7.7, then such unenforceable covenant (or such part) shall be eliminated from this Agreement to the extent necessary to permit the remaining separate covenants (or parts thereof) to be enforced, and such remaining covenants shall be given full effect without regard to the invalid covenant (or part thereof). In the event that any of the separate covenants (or any part thereof) set forth in this Section 7.7 is deemed by a court to exceed the geographical or temporal scope or content or other limitations permitted by applicable laws, then such covenant (or part thereof) shall be reformed to the geographical or temporal scope or content or other limitations, as the case may be, permitted by applicable laws, and, in such reduced form, shall be given full effect. 7.8 Non-Solicitation. During and for a period of two (2) years following the Closing, no Seller Party shall, without Buyer's prior written consent, directly or indirectly, (i) solicit the employment of any of the Transferred Employees or any officer, senior manager or other key employee of Buyer or any subsidiary of Buyer or (ii) hire any Transferred Employee, officer, senior manager or other key employee whose employment Buyer or any subsidiary of Buyer has terminated within 90 days following such solicitation or hire; provided, however, that this Section 7.8 shall not prevent advertisements, solicitations, position listings or notices of employment opportunities that are published or made available to the public or hiring of personnel responding thereto and shall not impair the rendering of services to Seller by Transferred Employees pursuant to and in accordance with the Service Agreement. Notwithstanding anything herein to the contrary, if Buyer terminates its employment of any Transferred Employee and such Transferred Employee approaches Seller for employment without solicitation, direct or indirect, from Seller, Seller shall not be prohibited from offering employment to such terminated Transferred Employee during the two-year post-Closing period contemplated in this Section 7.8. 8. Miscellaneous 8.1 Governing Law. This Agreement shall be governed in all respects by the laws of the State of New York, without giving effect to any choice or conflict of law provision or rule (whether of the State of New York or any other jurisdiction that would cause the application of the laws of any jurisdiction other that the State of New York). 32 8.2 Jurisdiction. Except as otherwise provided in Section 6.3, any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement, the Other Transaction Documents or the transactions contemplated hereby or thereby shall be brought exclusively in a New York State or United States Federal court sitting in New York County, and each of the parties hereby expressly submits to such jurisdiction and venue of such court (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. 8.3 Survival. Except as otherwise expressly provided herein, the several representations, warranties, covenants, and agreements of the parties contained in this Agreement or in any Other Transaction Document shall be deemed to be material and to have been relied upon by Buyer, Seller and the Shareholders notwithstanding any investigation made by Buyer, Seller or the Shareholders, shall survive the Closing Date and shall remain operative and in full force and effect until December 31, 2002, except insofar as an indemnification claim has been asserted by any party and has not been resolved prior to the end of such two-year period; provided, however, that the representations and warranties of Seller and the Shareholders set forth in Sections 2.5, 2.6 and 2.7 shall survive for the period of the applicable statute of limitations, and the respective representations, warranties, covenants and agreements of Buyer, Seller and the Shareholders contained in Sections 2.11, 2.13, 2.17, 2.21, 3.4, 4.4, 4.6, 6.1(a)(i), 6.1(a)(iii), 6.1(a)(iv), 6.2(a), 6.4, 6.5, 7.1, 7.2 and 8.11 shall continue without any time limitation. 8.4 Notices. Any notices authorized to be given hereunder shall be in writing and deemed given, if delivered personally or by overnight courier, on the date of delivery, if a Business Day, or if not a Business Day, on the first Business Day following delivery, or if mailed, three days after mailing by registered or certified mail, return receipt requested, and in each case, addressed, as follows: If to Buyer: Wire One Technologies, Inc. 225 Long Avenue Hillside, New Jersey 07205 Attention: Jonathan Birkhahn, Esq. Facsimile: (973) 391-9776 E-mail address: jbirkhahn@wireone.com and a copy to: Fulbright & Jaworski L.L.P. 666 Fifth Avenue New York, New York 10103 Attention: Neil Gold, Esq. Facsimile: (212) 318-3400 E-mail address: ngold@fulbright.com 33 If to Seller Parties or Sellers' Representative: Axxis, Inc. 845 South Ninth Street Louisville, Kentucky 40203 Attention: President Facsimile: (502) 568-6326 and a copy to: Wyatt, Tarrant & Combs, LLP 2700 PNC Plaza 500 West Jefferson Street Louisville, Kentucky 40202 Attention: Michael B. Vincenti, Esq. Facsimile: (502) 589-0309 E-mail address: mvincenti@wyattfirm.com or if delivered by facsimile, on a Business Day before 4:00 p.m. local time of addressee, on transmission confirmed electronically, or if at any other time or day on the first Business Day succeeding transmission confirmed electronically, to the facsimile numbers provided above, or to such other mailing or personal delivery address or facsimile number as any party shall specify to the other, pursuant to the foregoing notice provisions. When used in this Agreement, the term "Business Day" shall mean a day other than a Saturday, Sunday or a day on which commercial banks in New York, New York are generally closed for business. 8.5 Entire Agreement; Amendments. Except for the Mutual Confidentiality Agreement between Seller and Buyer dated August 10, 2001, this Agreement and the Other Transaction Documents (i) set forth the entire agreement of the parties respecting the subject matter hereof, (ii) supersede any prior and contemporaneous understandings, agreements, or representations by or among the parties, written or oral, to the extent they related in any way to such subject matter, and (iii) may not be amended orally, and no right or obligation of any party may be altered, except as expressly set forth in a writing signed by such party. 8.6 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall for all purposes be deemed an original, and all such counterparts shall together constitute but one document. 8.7 Headings. The section and subsection headings do not constitute any part of this Agreement and are inserted herein for convenience of reference only. 8.8 Public Announcements. Neither Buyer on the one hand nor Seller or any Shareholder on the other shall make any press release or other public statement concerning the matters covered by this Agreement without the approval of the other party, except as in the opinion of counsel for the party making the release or statement is required by law or applicable regulation, and shall, in any event, to the extent practicable, permit the other party an opportunity to review any such release or statement prior to dissemination. 34 8.9 Waiver. No waiver of a breach of, or default under, any provision of this Agreement shall be deemed a waiver of such provision or of any subsequent breach or default of the same or similar nature or of any other provision or condition of this Agreement. 8.10 Binding Effect and Assignment. This Agreement shall be binding upon and shall inure to the benefit of the parties and their successors and assigns. Neither Seller nor the Shareholders, on the one hand, nor Buyer, on the other, may assign any obligation under this Agreement except with the prior written consent of the other party hereto. 8.11 Expenses. Each party shall bear its own expenses incurred with respect to the preparation of this Agreement and the Other Transaction Documents and, except as otherwise provided herein, the consummation of the transactions contemplated hereby and thereby. 8.12 Appointment of Representative. (a) Powers of Attorney. Each Seller Party irrevocably constitutes and appoints J. Michael Smith (the "Sellers' Representative") as such Seller Party's true and lawful agent, proxy, and attorney-in-fact and authorizes the Sellers' Representative to act for such Seller Party and in such Seller Party's name, place, and stead, in any and all capacities to do and perform every act and thing required or permitted to be done in connection with the transactions contemplated by this Agreement and any Other Transaction Document, as fully to all intents and purposes as such person might or could do in person, including, without limitation, the power to: (i) receive all notices required to be delivered to such Seller Party under this Agreement, including, without limitation, any notice of a claim for which indemnification is sought under Section 6 hereof; (ii) take any and all action on behalf of such Seller Party from time to time as the Sellers' Representative may deem necessary or desirable to defend, pursue, resolve, and/or settle claims under this Agreement, including, without limitation, claims for indemnification under Section 6 hereof; and (iii) engage and employ agents and representatives (including accountants, legal counsel, and other professionals) and incur such other expenses as he deems necessary or prudent in connection with the administration of the foregoing. Each Seller Party grants unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing necessary or desirable to be done in connection with the transactions contemplated by this Agreement and any Other Transaction Document, as fully to all intents and purposes as such Seller Party might or could do in person, hereby ratifying and confirming all that the Sellers' Representative may lawfully do or cause to be done by virtue hereof. Each Seller Party, by executing this Agreement, agrees that such agency, proxy, and power of attorney are coupled with an interest, and are therefore irrevocable without the consent of the Sellers' Representative and shall survive the death, incapacity, or bankruptcy of such Seller Party to the extent permitted by applicable law. Each Seller Party acknowledges and agrees that, upon execution of this Agreement, any delivery by the Sellers' Representative of any waiver, amendment, agreement, opinion, certificate, or other documents executed by the Sellers' Representative or any decisions made by the Sellers' Representative pursuant to this Section 8.12 shall bind such Seller Party with respect to such documents or decision as fully as if such Seller Party had executed and delivered such documents or made such decisions. 35 (b) Not Liable. The Sellers' Representative shall not have, by reason of this Agreement, a fiduciary relationship in respect of any Seller Party, except in respect of amounts received on behalf of such Seller Party. The Sellers' Representative shall not be liable to any Seller Party for any action taken or omitted by him or any agent employed by him hereunder or under any Other Transaction Document, or in connection therewith, except that the Sellers' Representative shall not be relieved of any liability imposed by law for gross negligence or willful misconduct. The Sellers' Representative shall not be liable to the Seller Parties for any apportionment or distribution of payments made by him in good faith and, if any such apportionment or distribution is subsequently determined to have been made in error, the sole recourse of any Seller Party to whom payment was due, but not made, shall be to recover from the other Seller Parties any payment in excess of the amount to which they are determined to have been entitled. The Sellers' Representative, in such capacity, shall not be required to make any inquiry concerning either the performance or observance of any of the terms, provisions, or conditions of this Agreement or any Other Transaction Document. (c) Replacement of the Sellers' Representative. Upon the death, disability, or incapacity of the initial Sellers' Representative appointed pursuant to Section 8.12(a) above, each Seller Party acknowledges and agrees that such Sellers' Representative's executor, guardian, or legal representative, as the case may be, shall (in consultation with the Seller Parties) appoint a replacement reasonably believed by such person to be capable of carrying out the duties and performing the obligations of the Sellers' Representative hereunder within thirty (30) days. In the event that the Sellers' Representative resigns for any reason, the Sellers' Representative shall (in consultation with the Seller Parties) select another representative to fill such vacancy. Any substituted representative shall be deemed the Sellers' Representative for all purposes of this Agreement and any Other Transaction Document. (d) Actions of the Sellers' Representative; Liability of the Sellers' Representative. Each Seller Party agrees that Buyer shall be entitled to rely on any action taken by the Sellers' Representative, on behalf of the Seller Parties, pursuant to Section 8.12(a) above (each, an "Authorized Action"), and that each Authorized Action shall be binding on each Seller Party as fully as if such Seller Party had taken such Authorized Action. Buyer agrees that the Sellers' Representative shall have no liability to Buyer for any Authorized Action, except to the extent that such Authorized Action is found by a final order of a court of competent jurisdiction to have constituted fraud or willful misconduct. The Seller Parties hereby release and discharge Buyer from and against any liability arising out of or in connection with the Sellers' Representative's failure to distribute any amounts received by the Sellers' Representative on Seller Parties' behalf to the Seller Parties. [The remainder of this page is intentionally left blank.] 36 IN WITNESS WHEREOF, the undersigned have executed this Asset Purchase Agreement as of the date first written above. BUYER: WIRE ONE TECHNOLOGIES, INC. By: --------------------------------------------- Name: Jonathan Birkhahn Title: Executive Vice President Business Affairs and General Counsel SELLER: AXXIS, INC. By: --------------------------------------------- Name: David T. Richardson Title: President SHAREHOLDERS: ------------------------------------------------ Stephen A. Smith ------------------------------------------------ J. Michael Smith ------------------------------------------------ Kenneth W. Rousseau ------------------------------------------------ Michael R. Graves ------------------------------------------------ R. Blake Harris SCHEDULES Schedule Subject Matter -------- -------------- 1.2(a)-1 Backlog jobs 1.2(a)-2 Underbilling Receivables 1.2(c) Post-Effective Date Receivables 1.2(d) Inventory 1.2(e) Vehicles 1.2(f) Furniture, equipment and other tangible assets 1.2(g) Leasehold interests 1.4 Assumed Liabilities 2.7(b) Employee Benefit Plans, multiemployer plans 2.7(d) Closing Date Employees, terminated employees 2.8 Litigation 2.9(a) In-Progress Jobs, orders and other agreements 2.9(g) Proposed agreements 2.10 Suppliers and customers 2.11 Tangible property 2.12(a) Leased Real Property 2.14 Insurance policies 2.16(b) Certain transactions EX-23.1 5 b314949_ex23-1.txt CONSENT OF BDO SEIDMAN, LLP Consent of Independent Certified Public Accountants To the Board of Directors of Wire One Technologies, Inc. We hereby consent to the incorporation by reference in the Prospectus constituting a part of this Registration Statement of our report dated March 13, 2001, relating to the consolidated financial statements of Wire One Technologies, Inc. and subsidiaries appearing in the Company's Annual Report on Form 10-K for the year ended December 31, 2000. We also consent to the reference to us under the caption "Experts" in the Prospectus. /s/ BDO Seidman, LLP BDO Seidman, LLP Woodbridge, New Jersey December 4, 2001 -----END PRIVACY-ENHANCED MESSAGE-----