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Exhibit 2.1
June 14, 2001
E-Sync Networks, Inc.
35 Nutmeg Drive
Trumbull, CT 06611
Re: Proposed Offer for Business and Assets of E-Sync Networks, Inc.
("SELLER")
Gentlemen:
PART I
Subject to the terms and conditions set forth below, CRC, Inc. ("CRC")
is prepared to purchase or cause a newly formed entity (CRC or such entity,
"PURCHASER") to purchase from Seller all of Seller's business and assets,
exclusive only of the Excluded Assets (as hereinafter defined) (such businesses
and assets, exclusive only of the Excluded Assets, are hereinafter referred to
collectively as the "ACQUIRED BUSINESS"), free and clear of all liens, security
interests, competing claims and other encumbrances. The Acquired Business will
include, without limitation, (a) the accounts receivable derived from Seller's
"Professional Services" business or "Managed Services" business (which shall
include at least seven hundred thousand dollars ($700,000) of accounts
receivable, net of liabilities attendant thereto, that are collectible within
ninety (90) days following closing) (such accounts receivable, the "PURCHASED
RECEIVABLES") and (b) the lease for Seller's premises currently used in
operating the Acquired Business (such lease, the "ACQUIRED LEASE") and all other
executory contracts necessary or appropriate for the operation of the Acquired
Business (such lease and other contracts, collectively, the "ASSUMED
CONTRACTS"). Purchaser shall not assume any of the trade payables or other
debts, liabilities or obligations of Seller, excepting only (a) obligations
accruing under the Assumed Contracts from and after the date of the closing of
the foregoing transaction (hereinafter referred to as the "SALE") and (b)
liabilities attendant to the Purchased Receivables. As used in this agreement,
"EXCLUDED ASSETS" means, collectively, such business and assets of Seller as are
specifically designated and that do not and have not related to or been used in
Seller's "Professional Services" business or "Managed Services" business (it
being agreed and understood that it is anticipated that, except as the same may
be related to or have been used in Seller's "Professional Services" business or
"Managed Services" business, Seller's Braincraft subsidiary (including the
assets thereof) and, subject to the parties' agreement, Seller's assets
comprising TotalChain will be so designated as "Excluded Assets"). It is
anticipated that, subject to the terms and conditions of the Acquired Lease, for
a mutually agreed upon period of time and for a mutually agreed upon fee, the
Joint Venture Subsidiary (as defined below) will make available to Seller office
space for at least two of its employees at the premises covered by the Acquired
Lease.
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In consideration for the Sale, Purchaser shall:
(a) upon consummation of the Sale, advance and loan to Seller the amount
of five hundred thousand dollars ($500,000) (the "FIRST INSTALLMENT AMOUNT") and
will thereafter, subject to a schedule and/or terms and conditions to be agreed
to, advance and loan to Seller up to an additional amount (the "EXTENDED
INSTALLMENT AMOUNT") equal to (i) one million five hundred thousand dollars
($1,500,000) less (ii) the outstanding amount of the Good Faith Loan (as
hereinafter defined) and, if made, the Bridge Loan (as hereinafter defined) (all
amounts advanced and loaned to Seller (inclusive of the Good Faith Loan and, if
made, the Bridge Loan) are hereinafter referred to collectively as the "LOAN"),
which Extended Installment Amount shall be subject to reduction and adjustment
as provided below;
(b) upon consummation of the Sale, transfer and contribute all of the
Acquired Business (exclusive of the Purchased Receivables) to a newly formed
limited liability company (the "JOINT VENTURE SUBSIDIARY");
(c) upon consummation of the Sale, cause or arrange for the transfer by
CRC to the Joint Venture Subsidiary of accounts providing recurring network
management services or other professional services revenues totaling at least
$8.0 million on an annual basis (or, if the recurring revenues generated by the
Acquired Business, determined on an annualized basis based upon the three (3)
full calendar months immediately preceding the closing of the Sale, is different
from $8.0 million, an amount equal to the annualized amount of such revenues)
and the personnel and assets appropriate for the operation or realization of
such accounts; and
(d) upon consummation of the Sale, transfer or cause to be transferred
to Seller a fifty-one percent (51%) interest in the Joint Venture Subsidiary.
Notwithstanding anything contained herein to the contrary, the Extended
Installment Amount shall be reduced by the aggregate of (A) forty percent (40%)
of the amount by which the total amount (inclusive of costs and expenses paid to
third parties to assist with obtaining the discharge or reduction of the trade
payables) needed to discharge or satisfy all trade payables of Seller existing
as of the closing of the Sale is less than one million two hundred thousand
dollars ($1,200,000) and (B) one-half (1/2) of the aggregate amount in excess of
one hundred and twenty-five thousand dollars ($125,000) that Purchaser (and/or
the Joint Venture Subsidiary), prior to the lapse of forty-five (45) days
following the closing of the Sale, has made or committed to make (regardless of
whether such commitment is for a future payment) to key personnel of the
Acquired Business (identity of such personnel to be agreed upon) as an
inducement for such personnel to join or continue to work for Purchaser or the
Joint Venture Subsidiary, as may be the case. It is intended that (A) Purchaser
and Seller will agree to cooperate with each other to arrange for the discharge
of Seller's trade payables at the lowest price and (B) in order to facilitate
the retention of such key personnel by the Joint Venture Subsidiary, Seller will
agree to extend their "deemed" period of employment with Seller for purposes of
vesting stock options for a period of an additional six months (or, if sooner,
until they terminate employment with the Joint Venture Subsidiary) and will
grant to each of such key personnel stock options for additional shares of
Seller's common stock in an amount to be mutually agreed upon, which options
shall vest immediately upon completion of 6 months' employment with the Joint
Venture Subsidiary.
As additional consideration for the Sale, (A) when and as collected,
Purchaser will pay over to Seller eighty percent (80%) of the aggregate amount
(net of collection costs) in excess of the sum of (i) six hundred thousand
dollars ($600,000) that is collected by Purchaser with respect to the Purchased
Receivables and (ii)
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the liabilities attendant to the Purchased Receivables that are assumed by
Purchaser and (B) CRC will enter into an agreement with the Joint Venture
Subsidiary pursuant to which CRC will commit to provide to the Joint Venture
Subsidiary the opportunity to cross-sell such Subsidiary's products and services
to CRC's customers.
Repayment of the Loan will be secured by a first priority security
interest in all remaining property and assets of Seller (including its interest
in the Joint Venture Subsidiary). The Loan shall have a term of five (5) years
and shall bear interest at 7% (18% after any default) per annum (payable
monthly, provided that interest otherwise payable for the first three (3) months
following the closing of the Sale shall be deferred until the last three months
of the first year of the Loan), with principal to be repaid at the end of the
term (or upon earlier acceleration). The Loan shall be subject to mandatory
prepayment with respect to (a) sixty percent (60%) of all distributions received
by Seller from or on account of its interest in the Joint Venture Subsidiary,
(b) one hundred percent (100%) of all payments and other consideration received
or receivable on account of or with respect to any sale or other disposition of
such interest or any portion thereof and (c) one hundred percent (100%) of all
payments made with respect to any exercise of the Warrants (as hereinafter
defined). As further consideration for the Loan, Seller shall issue to Purchaser
warrants (the "WARRANTS") that will provide that, upon the exercise thereof in
full, Purchaser will be entitled to receive shares of Seller's common stock
equal to ten percent (10%) of Seller's capital stock (on a fully diluted basis)
determined as of the close of business on the date of the closing of the Sale.
The exercise price for each share of Seller's common stock issuable upon the
exercise of the Warrant shall be equal to the lesser of (a) the original
principal amount of the Loan divided by the total number of shares issuable upon
the exercise of the Warrant or (b) seventy-five percent (75%) of the average
closing bid prices of a share of Seller's common stock during the thirty (30)
trading consecutive days ending on the second trading day preceding the date of
the closing of the Sale. The Warrants will contain customary anti-dilution
provisions (including formula adjustment for stock issuances at a price less
than the current exercise price of the Warrants) and shall also provide that
they are exercisable for ten (10) years or, if longer, until the expiration of
two (2) years following the discharge of the Loan and that they may be exercised
from time to time in whole or in part. Purchaser will also be provided with
registration rights requiring registration of the offer and sale of the capital
stock underlying the Warrants within a mutually agreed period of time following
the closing of the Sale and piggyback registration rights.
Operation, management, voting, transfer of ownership interests, funding
obligations and other matters relating to the Joint Venture Subsidiary shall be
subject to a mutually acceptable operating agreement to be entered into between
Purchaser and Seller as the owners of, and members in, the Joint Venture
Subsidiary. Such operating agreement shall provide for adjustments in the
ownership interests of Purchaser and Seller in the Joint Venture Subsidiary as
follows: Purchaser shall have an option to purchase from Seller up to an
additional 2% of the Joint Venture Subsidiary at a price of $150,000 for each 1%
equity interest in the Joint Venture Subsidiary, up to an additional 5% of the
Joint Venture Subsidiary at a price of $200,000 for each 1% equity interest in
the Joint Venture Subsidiary and up to an additional 10% of the Joint Venture
Subsidiary at a price of $250,000 for each 1% equity interest in the Joint
Venture; provided that, if there is a Change of Control (as hereinafter defined)
or bankruptcy of Seller or if the Loan is not repaid when due (at maturity or
upon acceleration), the option exercise price shall be reduced by $50,000 for
each 1% equity interest in the Joint Venture Subsidiary otherwise provided
above. So long as there is no Change of Control or bankruptcy of Seller and
Seller is not in default with respect to the Loan, Purchaser (a) shall not
exercise this option for 18 months and (b) shall give Seller at least sixty (60)
days' notice of its intention to exercise such option, in whole or in part. Said
option shall be exercisable for five (5) years following the closing of the Sale
or, if later, until two (2) years after the Loan is repaid in full. For purposes
of the foregoing, a "CHANGE OF CONTROL" shall be deemed to have occurred if a
majority of Seller's Board of Directors shall be
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or become comprised of a majority of members who are not currently members of
Seller's Board of Directors.
Consummation of the Sale shall be subject to execution and delivery of
definitive agreements (the "DEFINITIVE AGREEMENTS"), consistent with the terms
set forth herein, that provide, inter alia, that closing of the Sale will be
dependent upon the following conditions being met at or prior to such closing:
(a) approval of the Sale by Seller's stockholders;
(b) obtainment of appropriate consents or approvals for the assignment
to Purchaser and the further assignment to the Joint Venture Subsidiary of all
of the Assumed Contracts;
(c) approval by a mutually agreed upon group of creditors of Seller (to
be determined based both upon (i) number of creditors and (ii) percentage of all
outstanding trade payables and other debt held by those giving approval), which
approval may be conditioned by such creditors upon receipt from Seller of
certain specified payments within a specified period following closing of the
Sale, provided the aggregate amount of all such payments is acceptable to
Purchaser (with it being the intent of Purchaser and Seller that the parameters
set forth above in this clause (c) shall be set forth with particularity in, or
as part of, the Definitive Agreement);
(d) specified key personnel (as reasonably designated by Purchaser) of
the Acquired Business shall have entered into acceptable employment agreements
with Purchaser or the Joint Venture Subsidiary, as applicable;
(e) no materially adverse change shall have occurred with respect to the
Acquired Business or the prospects thereof; and
(f) the Joint Venture Subsidiary shall have been provided with a line of
credit or revolving credit facility on terms and in an amount mutually
acceptable to the parties (such line of credit or revolving credit facility, the
"CREDIT FACILITY") (it being agreed and understood that the parties shall both
use reasonable commercial efforts to assist the Joint Venture Subsidiary in
obtaining the Credit Facility; provided the granting or providing of the Credit
Facility shall not, unless otherwise agreed to by CRC, require or be conditioned
on the providing of (i) any a guaranty (or other surety or commitment) from CRC
or Purchaser or any other affiliate of CRC or from any principal or shareholder
of CRC or Purchaser or any other affiliate of CRC or (ii) the pledge of any
assets other than those owned by the Joint Venture Subsidiary).
It is also the intent of the parties that the Definitive Agreements will
contain an appropriate "no shop" provision, subject to a customary fiduciary
out, and will provide for a break-up fee or similar compensation in the amount
of five hundred thousand dollars ($500,000) to Purchaser in the event the
transactions contemplated thereby do not close otherwise than on account of a
breach by Purchaser or such other conditions as may be agreed to by the parties.
CRC anticipates that if Definitive Agreements are executed and delivered
by July 30, 2001, it will be prepared to advance an additional loan (the "BRIDGE
LOAN") to Seller, on terms and conditions mutually agreeable to the parties, in
order to fund ongoing expenses of Seller pending closing of the Sale as
contemplated by the Definitive Agreements.
The foregoing provisions in Part I of this agreement shall be deemed
merely an outline of the
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principal terms of an agreement or agreements contemplated to be entered between
or among appropriate parties as so contemplated and shall not be binding upon
any party until set forth in a Definitive Agreement executed and delivered by
such party.
PART II
The agreement set forth herein shall be deemed null and void unless,
prior to 5:30 P.M. on June 14, 2001, a copy of this agreement as executed by
Seller has been delivered to CRC or its counsel. If, prior to 5:30 P.M. on June
14, 2001, a copy of this agreement as executed by Seller has been delivered to
CRC or its counsel, then (a) no later than one (1) business day thereafter
(subject to the conditions set forth below having been met so as to permit such
wire transfer to be timely made), CRC will cause a wire transfer to be made to
Seller's account in the amount of two hundred and fifty thousand dollars
($250,000) (the "GOOD FAITH LOAN") and (b) the parties shall commence promptly,
and thereafter proceed with reasonable diligence, in good faith to take all
appropriate steps necessary or appropriate to cause the Definitive Agreements
(consistent with the terms set forth in Part I above) to be negotiated, executed
and delivered and to cause all conditions to the closing of the Sale to be met.
The Good Faith Loan shall be for a term of ninety (90) days (provided that it is
contemplated that, in connection with the execution and delivery of the
Definitive Agreements, (A) the maturity of the Good Faith Loan shall be adjusted
to coincide with any outside date provided therein for closing the Sale and (B)
it will be provided that upon closing the Sale the Good Faith Loan will be
folded into and made part of the Loan), shall bear interest at twelve percent
(12%) per annum (twenty percent (20%) per annum following any default), shall
become immediately due and payable upon any failure of Seller to pay the Make
Whole Amount (as defined below) when due, shall otherwise be subject to
customary terms and conditions and shall be secured by a first priority security
interest in all of Seller's property and assets. Notwithstanding anything
contained herein to the contrary, CRC shall not be obligated to advance the Good
Faith Loan to Seller until CRC shall have received (a) from Seller documentation
(including customary provisions not inconsistent with the foregoing) (such
documentation, the "GOOD FAITH LOAN DOCUMENTATION"), reasonably acceptable to
CRC, (i) evidencing such Loan and Seller's obligation to repay same and (ii)
granting to CRC a first priority security interest in all of Seller's property
and assets securing Seller's obligation (x) to repay such Loan in accordance
with its terms and (y) to pay the Make Whole Amount and (b) from Seller's
counsel a clean legal opinion acceptable to CRC as to customary matters,
including the due authorization and approval of this agreement and the Good
Faith Loan Documentation and the enforceability of the Good Faith Loan
Documentation in accordance with the respective terms thereof.
If the Good Faith Loan is extended or made by CRC to Seller as
contemplated above and if, on or prior to July 30, 2001, the parties
contemplated to be parties thereto have not, for any reason whatsoever
(excepting only on account of a breach by CRC of its obligation to commence
promptly, and thereafter proceed with reasonable diligence, in good faith to
take all appropriate steps necessary or appropriate to cause the Definitive
Agreements (consistent with the terms set forth in Part I above) to be
negotiated, executed and delivered) failed to execute and deliver Definitive
Agreements, Seller shall forthwith (a) pay to CRC (subject to a maximum amount
of seventy-five thousand dollars ($75,000) all legal, accounting and other fees
and expenses (including, without limitation, disbursements of professionals)
paid or incurred by CRC (i) for or in connection with the negotiation,
preparation, or drafting of, or other dealing with, this agreement (including
prior drafts hereof and any terms sheets, for internal purposes or otherwise)
and/or any of the Definitive Agreements, (ii) for or in connection with any
related due diligence or research (legal or otherwise) or (iii) otherwise
related to the transactions contemplated by this agreement (provided that such
expenses shall not include any compensation payable to any principals or
employees of CRC) and (b) pay to CRC in consideration for the expenditures of
time and other resources by CRC and foregone opportunities,
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the amount of one hundred and fifty thousand dollars ($150,000) (the aggregate
amount payable to CRC pursuant to the foregoing provisions of this sentence are
herein referred to as the "MAKE WHOLE AMOUNT"). If not paid when due, the Make
Whole Amount shall accrue and bear interest at twenty percent (20%) per annum
until paid, and CRC shall be entitled to receive reimbursement for all legal
expenses (including disbursements) and other collection costs in enforcing its
right to receive the Make Whole Amount and/or interest thereon or in collecting
such expenses and costs. Seller acknowledges and agrees that Seller's
obligations under the Good Faith Loan Documentation are independent of any
obligation of CRC under or pursuant to this agreement and that, without limiting
the scope or generality of the foregoing, notwithstanding any breach or
violation of this agreement by CRC, the Good Faith Loan shall be repayable in
accordance with its terms and the Good Faith Loan Documentation shall be
enforceable in accordance with the terms thereof. Notwithstanding anything
contained herein to the contrary, in the event any dispute shall arise with
respect to CRC's entitlement to receive all or any portion of the Make Whole
Amount, such dispute shall, at the sole option of CRC, be referred to and
determined by one arbitrator appointed by, and in accordance with the rules of,
the American Arbitration Association in the City, County and State of New York,
and the determination or award of such arbitrator may be entered as a judgment
and enforced in any court of competent jurisdiction. Seller expressly agrees
that, upon CRC's election, any such dispute shall be referred to such arbitrator
for determination. In the event any such arbitrator awards to CRC all or any
portion of the Make Whole Amount, CRC shall be entitled to its costs and
expenses (including attorneys' fees) incurred in connection with such
determination and/or in connection with the enforcement or realization on any
award or determination granted to CRC by such arbitrator.
CRC represents to Seller that (a) this agreement has been approved by
the Board of Directors of CRC and (b) the execution, delivery and performance of
such agreement by CRC will not constitute a breach or violation of, or default
under, any other contract or agreement to which CRC is a party or by which CRC
is otherwise bound.
By signing below, Seller represents that (a) this agreement has been
approved by the Board of Directors of Seller and (b) the execution, delivery and
performance of such agreement by Seller will not constitute a breach or
violation of, or default under, any other contract or agreement to which Seller
is a party or by which Seller is otherwise bound.
This agreement is intended by the parties as a final expression of their
agreement, and is intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto, in respect of the subject
matter contained herein, constitutes the entire agreement of the parties with
respect to the subject matter hereof and supersedes, and merges herein, all
prior and contemporaneous negotiations, discussions, representations,
understandings and agreements between the parties, whether oral or written, with
respect such subject matter. No representation, warranty, restriction, promise,
undertaking or other agreement with respect to such subject matter has been made
or given by either party hereto other than those set forth in this agreement.
Without limiting the generality of the foregoing, the provisions set forth in
Part II of this agreement are intended to be binding upon the parties hereto in
accordance with the terms of this agreement.
This agreement may be amended, modified or supplemented only to the
extent expressly set forth in a writing that is signed by the party to be
charged therewith and that sets forth therein that its purpose is to amend,
modify or supplement this agreement or some term, condition or provision hereof.
No waiver of any term, condition or provision of this agreement or of any breach
or violation of this agreement or any provision hereof shall be effective except
to the extent expressly set forth in a writing that is signed by the party to be
charged therewith. Without limiting the generality of the foregoing, no failure
to object or
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otherwise act, and no conduct (including, without limitation, any failure or
delay in enforcing this agreement or any provision hereof or any acceptance or
retention of payment) or course of conduct or dealing, by either party hereto
shall be deemed (a) to constitute a waiver by such party of the breach or
violation of this agreement or of any provision hereof by the other party hereto
or (b) to have caused or reflected any amendment or other modification of this
agreement or of any term or provision hereof. Any waiver may be made in advance
or after the right waived has arisen or the breach or default waived has
occurred, and any waiver may be conditional. No waiver of any breach or
violation of any agreement or provision herein contained shall be deemed a
waiver of any preceding or succeeding breach or violation thereof nor of any
other agreement or provision herein contained. No waiver or extension of time
for performance of any obligation or act shall be deemed a waiver or extension
of the time for performance of any other obligation or act.
Except as expressly contemplated above, this agreement and the rights,
duties and obligations hereunder may not be assigned or delegated by either
party hereto without the prior written consent of the other party hereto. Except
as provided in the immediately preceding sentence, any purported assignment or
delegation of rights, duties or obligations hereunder made without the prior
written consent of the other party hereto shall be null and void and of no
effect. This agreement and the provisions hereof shall be binding upon and
enforceable against each of the parties hereto and its respective successors and
assigns and shall inure to the benefit of and be enforceable by each of the
parties and its successors and permitted assigns. This agreement is not intended
to confer any rights or benefits on any persons or entities other than the
parties hereto and their respective successors and permitted assigns.
This agreement and the terms and provisions hereof shall be deemed
severable, and the invalidity or unenforceability of any term or provision
hereof shall not affect the validity or enforceability of this agreement or of
any other term or provision hereof. In the event any term or provision hereof
shall be determined to be invalid or unenforceable as applied to any situation
or circumstance or in any jurisdiction, such invalidity or unenforceability
shall not apply or extend to any other situation or circumstance or in any other
jurisdiction or affect the validity or enforceability of any other term or
provision. It is the parties' intent that this agreement and each term and
provision hereof be enforceable in accordance with its terms and to the fullest
extent permitted by law. Accordingly, to the extent any term or provision of
this agreement shall be determined or deemed to be valid or unenforceable, such
provision shall be deemed amended or modified to the minimum extent necessary to
make such provision, as so amended or modified, valid and enforceable.
This agreement is the product of mutual negotiations between the parties
and their respective legal counsels, and no party shall be deemed the
draftsperson hereof or of any portion or provision hereof. Accordingly, in the
event of any ambiguity or inconsistency in any provision of this agreement, the
same shall not be interpreted against either party hereto as the party
responsible for drafting or providing such provision.
EACH OF THE PARTIES HERETO EXPRESSLY WAIVES ITS RIGHT TO A JURY TRIAL
WITH RESPECT TO ANY SUIT, LITIGATION OR OTHER JUDICIAL PROCEEDING REGARDING THIS
AGREEMENT OR ANY DISPUTE HEREUNDER OR RELATING HERETO. This agreement shall be
governed by, interpreted under and construed in accordance with the internal
laws of the State of New York applicable to contracts executed and to be
performed wholly in that State without giving effect to the choice or conflict
of laws principles or provisions thereof. Each of the parties hereto agrees that
any dispute under or with respect to this agreement shall be determined before
the state or federal courts situated in the City, County and State of New York,
which courts shall have exclusive jurisdiction
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over and with respect to any such dispute, and each of the parties hereto hereby
irrevocably submits to the jurisdiction of such courts. Each party hereby agrees
not to raise any defense or objection, under the theory of forum non conviens or
otherwise, with respect to the jurisdiction of any such court.
This agreement may be executed in two or more counterparts and by
facsimile and by one or more of the parties hereto in separate counterparts,
each of which when so executed shall be deemed an original, and all of which
taken together shall constitute one and the same instrument.
Notwithstanding anything contained herein to the contrary, Part II of
this agreement shall be binding upon the parties hereto only upon the Good Faith
Loan being extended or made by CRC to Seller as contemplated above.
If the foregoing is acceptable to Seller and represents Seller's
agreement and understanding, please execute this agreement below and return it
to us.
Very truly yours,
CRC, INC.
/s/ Joshua Wurzburger
Joshua Wurzburger, President
ACCEPTED AND AGREED TO:
E-SYNC NETWORKS, INC.
By: /s/ Michael A. Clark
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Name: Michael A. Clark
Title: President & COO
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