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EXHIBIT 2.6
AGREEMENT OF PURCHASE AND SALE
This Agreement is made and entered into as of the 23rd day of December,
1997 by and between ALPHA MICROSYSTEMS, a California corporation ("Buyer"), and
ADVANCED TELECOMM OF PITTSBURGH, a Pennsylvania Business Trust, ADVANCED
TELECOMM OF XXXXXX, INC., a Pennsylvania corporation, ADVANCED TELECOMM OF
WASHINGTON, D.C., INC., a Pennsylvania corporation, and ADVANCED TELECOMM OF
MARYLAND, INC., a Pennsylvania corporation (collectively doing business as "ATI
Communications" and collectively referred to herein as "Seller") and APPLIED
CELLULAR TECHNOLOGY, INC., a Missouri corporation ("Parent"), with respect to
the following facts:
R E C I T A L S:
A. Seller is in the business of selling, installing and servicing
telephone systems. Parent directly or indirectly owns a controlling interest in
Seller.
B. Seller intends to continue to sell telephone systems and desires to
provide for enhanced service to existing and future customers by selling certain
of its assets relating to, and its business of, installing and servicing
telephone systems (including moving telephone systems, providing additional
equipment for telephone systems and making changes to telephone systems) (its
"Service Business") to Buyer.
C. Buyer desires to purchase Seller's Service Business upon the terms
and conditions set forth herein.
A G R E E M E N T
In consideration of their respective representations, warranties and
agreements contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.01 Agreement. The term "Agreement" herein will refer to this
"Agreement of Purchase and Sale."
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1.02 Annualized Installation Revenue. The term "Annualized Installation
Revenue" herein shall be equal to:
(i) the quotient of (A) the revenues received by Buyer for the
period from the Closing through the date of such calculation (or with
respect to the month immediately prior to the calculation, projected to
be received by Buyer) for installation of telephone systems and
equipment for customers who purchase telephone systems from Seller
subsequent to the Closing; divided by (B) the number of months between
the Closing through the date of such calculation; and
(ii) multiplied by twelve (12).
For the purposes of determining Annualized Installation Revenue, to the
extent any amounts are prepaid, revenues shall be deemed "received" when
booked by Buyer in accordance with generally accepted accounting
principles ("GAAP").
By way of example, if installation revenues received during
calendar 1998 were $1,500,000 and installation revenues received during
the first six months of 1999 were $900,000, the Annualized Installation
Revenue as of July 1, 1999 would be equal to $1,600,000 ($1,500,000 +
$900,000 = $2,400,000; $2,400,000/18 = $133,333.33; $133,333.33 x 12 =
$1,600,000).
1.03 Annualized Service Revenue. The term "Annualized Service Revenue"
herein shall be equal to:
(i) the quotient of (A) the revenues received by Buyer for the
period from the Closing through the date of such calculation (or with
respect to the month immediately prior to the calculation, projected to
be received by Buyer) for installation of telephone systems and
equipment and maintenance of telephone systems and equipment (including
services rendered on both a maintenance contract and a time and
materials basis, and including services such as moves, adds and changes)
for customers on the Customer List, and customers who purchase telephone
systems from Seller subsequent to the Closing; divided by (B) the number
of months between the Closing through the date of such calculation;
(ii) multiplied by twelve (12).
For the purposes hereof, to the extent any amounts are prepaid for annual or
other periodic maintenance or installation or other services, revenues shall be
deemed "received" when booked by Buyer in accordance with generally accepted
accounting principles ("GAAP").
1.04 Assumed Obligations. The term "Assumed Obligations" herein is
defined in Section 2.06(b).
1.05 Buyer. The term "Buyer" herein will refer to Alpha Microsystems, a
California corporation.
1.06 Closing or Closing Date. The term "Closing" or "Closing Date"
herein is as defined in Section 6.02 hereof.
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1.07 Customer List. The term "Customer List" herein is defined in
Section 2.05 hereof.
1.08 Leased Premises. The term "Leased Premises" herein shall refer to
the premises occupied prior to the Closing by Seller located at 0000 Xxxxxxx
Xxxx, Xxxxxx Xxxx, XX 00000; 000 Xxxxxx Xxxxxx, Xxx Xxxxxx, XX 00000; 000 Xxxxx
Xxxxx, Xxxxxxxxxx, XX 00000; and 00000-X Xxxx Xxxxx, Xxxxxxxxxx, XX 00000, all
or some portion of which shall be occupied after the Closing Date by Buyer,
either as a result of Buyer's assumption of an existing lease or the sublease or
license by Seller to Buyer of such premises.
1.09 Leases. The term "Leases" herein is defined in Section 3.09 hereof.
1.10 Parent. The term "Parent" herein will refer to Applied Cellular
Technology, Inc.
1.11 Prepaid Revenue. The term "Prepaid Revenue" herein is defined as
amounts invoiced and unearned as of the Closing by Seller related to Services to
be performed by Buyer subsequent to the Closing. All Prepaid Revenue shall
remain the property of Seller, whether received before or after the Closing
Date.
1.012 Purchase Price. The term "Purchase Price" herein is defined in
Section 2.02 hereof.
1.13 Seller. The term "Seller" herein will refer to collectively to
Advanced Telecomm of Pittsburgh, Advanced Telecomm of Xxxxxx, Inc., Advanced
Telecomm of Washington, D.C., Inc. and Advanced Telecomm of Maryland, Inc.
1.14 Service Business. The term "Service Business" herein is defined in
Recital "B".
1.15 Service Assets. The term "Service Assets" herein is defined in
Section 2.01 hereof.
1.16 Service Contracts. The term "Service Contracts" will refer all
contracts pursuant to which Seller agreed prior to Closing to provide
maintenance and repair services for telephone systems, which are not covered by
any manufacturer's warranty.
1.17 Services. The term "Services" shall refer to installation, routine
maintenance, repair, moves, adds and changes of and to telephone systems.
1.18 Spare Parts. The term "Spare Parts" herein is defined in Section
3.04 hereof.
1.19 Subleases. The term "Subleases" shall refer to the subleases and/or
licenses entered into as of the Closing between Seller as Landlord and Buyer as
Tenant in the form attached as Exhibit "J".
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1.20 Target Revenue. The term "Target Revenue" herein is defined in
Section 8.01(c)(ii)
1.21 Tools and Equipment. The term "Tools and Equipment" herein is
defined in Section 3.07 hereof.
1.22 Vehicles. The term "Vehicles" herein will refer to those Vehicles
listed on Exhibit "E" which are owned by Seller and will be leased to Buyer for
a two (2) month period commencing on the Closing Date.
1.23 Warranty Contracts. The term "Warranty Contracts" herein will refer
to all contracts pursuant to which Seller agreed prior to Closing to provide
maintenance and repair services for telephone systems which may or may not be
covered by a manufacturer's warranty, which will be assigned to and assumed by
Buyer pursuant hereto, subject to Seller's obligation to provide at no cost of
Buyer all parts required for repairs thereunder.
ARTICLE II
PURCHASE AND SALE
2.01 Purchase and Sale. At the Closing, and subject to all of the other
terms and conditions set forth herein (including those set forth in the
following sentence), Seller shall sell, transfer, convey and assign to Buyer,
and Buyer shall purchase from Seller, its entire right, title and interest in
and to the following assets used in the Seller's Service Business: the Spare
Parts listed on Exhibit "C", the Tools and Equipment listed on Exhibit "D", the
Customer List and associated goodwill, the Leases listed on Exhibit "F", the
right to use the name "ATI" and the Warranty Contracts and the Service Contracts
(collectively, the "Service Assets"). Notwithstanding the foregoing, and after
the Closing, Seller shall be entitled to continue to use the Customer List
solely for Seller's own use in its business of selling new telephone systems or
services not provided by Buyer. The entirety of the Service Assets shall be
conveyed free and clear of all liens, trusts, encumbrances, charges, claims,
security interests, community property or other interests, conditional sales
agreements and all other restrictions.
2.02 Purchase Price. The purchase price ("Purchase Price") for the
Service Assets shall be equal to fifty percent (50%) of the Annualized Service
Revenue as of the date eighteen (18) months after the Closing.
2.03 Payment of Purchase Price. Based upon past performance, Seller
estimates that the Purchase Price shall be approximately Two Million One Hundred
Fifty Thousand Dollars ($2,150,000). Subject to the terms and conditions set
forth herein, the Purchase Price shall be calculated and delivered to Seller by
wire transfer as follows:
(a) Buyer shall deliver at the Closing Date the sum of Eight
Hundred Thousand Dollars ($800,000).
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(b) Buyer shall deliver on the first anniversary of the Closing
Date the sum of Six Hundred Fifty Thousand Dollars ($650,000), less any
adjustments in accordance with Sections 2.04(a) and (b) below.
(c) Buyer shall deliver the remainder of the Purchase Price on
the date which is twenty-four (24) months after the Closing Date, less
any adjustments in accordance with Sections 2.04(a), (b) and (c) below.
Notwithstanding the foregoing, if the amount of the Purchase Price (as
calculated in accordance with Section 2.02 above) shall be determined to be less
than One Million Four Hundred Fifty Thousand Dollars ($1,450,000), Seller shall
repay Buyer the difference between the amount which Buyer theretofore delivered
as Purchase Price and the actual Purchase Price within thirty (30) days after
receipt of a written statement showing the calculation of the actual Purchase
Price certified by an officer of Buyer; provided that Seller shall have the
right to protest such calculation for a thirty (30) day period after receipt of
such written statement. If Seller protests such calculation and it cannot be
resolved within thirty (30) days thereafter, either party may invoke the
arbitration procedure in Section 10.05.
2.04 Adjustments to Purchase Price. The amounts payable pursuant to
Section 2.03 above shall be adjusted as set forth above as follows:
(a) Deduction for Claims. In the event there has been an
unresolved claim by any third party made to Buyer or Seller regarding
the Service Assets, which relates to a state of facts existing prior to
the Closing and which involves more than Ten Thousand Dollars ($10,000)
and remains unresolved after sixty (60) days or with respect to which a
lawsuit has been filed, Buyer shall be entitled to withhold from the
payments to be made pursuant to Section 2.03 the aggregate amount of
such claim(s). Subject to the provisions of Section 8.03 hereof, Buyer
may account for all said amounts claimed, until resolution of each
specified claim, by debiting the amount otherwise due Seller. Buyer
shall be entitled to compromise and settle the claim(s), and upon
settlement and payment, shall deduct any amounts paid by Buyer with
respect to each claim(s) from the amounts otherwise due Seller at the
time in which actual payment is otherwise due by Buyer to claimant.
Buyer may only compromise and settle such claims with the approval of
Seller, which approval shall not be unreasonably withheld.
(b) Deduction for Breach. In the event there has been a breach
of any agreement, representation or warranty in this Agreement by Seller
or other event which affords Buyer the right to indemnification pursuant
to the provisions of Section 8.03 hereof, Buyer shall be entitled to
deduct from the payments to be made to Seller pursuant to Section 2.03,
such amount as Buyer shall claim as the amount of its loss with respect
thereto pursuant to the claim notice delivered under Section 8.03 of
this Agreement.
(c) Deduction for Failure to Meet Target Revenues. If on the
second anniversary of the Closing Date Target Revenues have not been
achieved, Buyer shall be entitled to deduct all amounts theretofore paid
to Seller as commissions pursuant to
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Section 8.01(c)(i) from the Purchase Price and the remaining payment due
pursuant to Section 2.03(c), in accordance with Section 8.01(c)(ii)(C).
In the event any proposed or actual adjustments are made pursuant to this
Section 2.04, Buyer shall deliver to Seller a written notice specifying each
ground for deduction of funds from or the addition of funds to the payments and
the dollars allocated thereto, and Seller shall have the right to protest any
proposed adjustment for a thirty (30) day period after receipt. If Seller
protests such proposal and adjustment and it cannot be resolved within thirty
(30) days, either party may invoke the arbitration procedure in Section 10.05.
In the event any deduction or adjustment shall exceed the payment from which it
is to be deducted, any excess shall be deducted against future payments, or if
none, promptly paid to Buyer by Seller.
2.05 Delivery of Customer List. At the Closing Seller shall deliver to
Buyer its complete customer list (the "Customer List") which shall consist of
two parts: (1) the names, addresses, and telephone numbers of all customers to
whom it has sold or leased (or the known lessees to whom purchasers from it have
leased) telephone systems or components within the past five (5) years; and (2)
a list of each Warranty Contract and Service Contract in effect as of the
Closing Date which includes the names, addresses and telephone numbers of the
contracting customers, the expiration date of each contract, the amounts paid
and prepaid thereunder, and the dates on which additional payments are due. Such
information shall be delivered to Buyer by Seller via quarter inch streamer tape
or other medium acceptable to Buyer.
2.06 No Assumption of Liabilities.
(a) Buyer is not assuming, nor shall it become liable for, any
debts, liabilities, taxes or any other obligations of any kind of
Seller, whether known or unknown, disclosed or undisclosed, with respect
to the business of Seller or the Service Assets existing as of the
Closing Date, except as set forth in Section 2.06(b) below.
(b) At the Closing, subject to the provisions of Section
2.06(c), Buyer shall assume and agree to pay, perform and discharge, to
the extent not paid, performed or discharged by Seller on or before the
Closing Date, (i) all obligations and liabilities of Seller under the
Warranty Contracts and the Service Contracts accruing after the Closing,
and (ii) all obligations and liabilities of Seller under the Leases
accruing after the Closing (the "Assumed Obligations").
(c) From and after the Closing, Buyer shall have complete
control over the payment, settlement or other disposition of the Assumed
Obligations and the right to commence, conduct and control all
negotiations and proceedings with respect thereto. Seller shall notify
Buyer promptly of any claim made with respect to any such Assumed
Obligations and shall not, except with Buyer's prior consent,
voluntarily make any payment of, settle or offer to settle, or consent
to any compromise or admit liability with respect to, any such Assumed
Obligation.
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2.07 Taxes. Buyer agrees to be responsible for any and all sales taxes
arising from its purchase of the Service Assets. Personal property taxes shall
be prorated between Buyer and Seller as of the Closing Date. Buyer shall be
responsible for filing necessary tax returns and reports with respect to such
taxes.
2.08 Allocation of Purchase Price: Reporting Requirements. For tax
purposes the parties hereby agree to (a) allocate the Purchase Price hereunder
(which for purposes of such allocation shall include all liabilities being
assumed by Buyer) in accordance with Exhibit "A" hereto, and (b) timely file
Internal Revenue Service Form 8594, Asset Acquisition Statement, and otherwise
report the transactions set forth herein in accordance with such allocation and
with the provisions of Internal Revenue Code Section 1060 and comparable
provisions of state law.
2.09 Delivery of Possession. At the Closing, Seller shall deliver
possession of the Service Assets to Buyer at the Leased Premises. Title and risk
of loss in and to the Service Assets shall pass to and be vested in Buyer
effective at the time of the Closing.
2.10 Consents to Assignment. Any other provision of this Agreement to
the contrary notwithstanding, this Agreement shall not constitute an agreement
to assign any concession, claim, contract, lease or order, or any benefit
arising thereunder or resulting therefrom, if an attempted assignment thereof,
without the consent required or necessary for such assignment, would constitute
a breach thereof or in any way materially adversely affect the rights of Buyer
or Seller thereunder. If such consent is not obtained, or if an attempted
assignment would be ineffective or would materially or adversely affect Seller's
rights thereunder so that Buyer would not in fact receive substantially all of
such rights, Seller shall cooperate in any arrangement Buyer may reasonably
request in writing to provide for Buyer the benefits under any such concession,
contract, lease or order, including enforcement for the benefit of Buyer of any
and all rights of Seller against any other party thereto arising out of the
breach or cancellation thereof by such party or otherwise; and any transfer or
assignment of any property, property right, contract or agreement which shall
require the consent or approval of any other party shall be made subject to such
consent or approval being obtained.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF SELLER
As an inducement to Buyer to enter into this Agreement, Parent and
Seller jointly and severally represent and warrant to Buyer and as to covenants
agree with Buyer that, effective on the date hereof and on the Closing Date,
except as disclosed in Exhibit "B" to this Agreement:
3.01 Organization. Applied Cellular Technology, Inc. is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Missouri Advanced Telecomm of Xxxxxx, Inc., Advanced Telecomm of
Washington, D.C., Inc. and Advanced Telecomm of Maryland, Inc. are corporations
duly organized, validly existing and in good standing under the laws of the
State of Pennsylvania. Advanced Telecomm of Pittsburgh is a Business Trust duly
organized, validly existing and in good standing under the laws of the State of
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Pennsylvania. Each Seller is duly qualified to do business in all states where
it operates the Service Business.
3.02 Authority. All corporate or other action necessary to authorize and
approve this Agreement has been taken, and this Agreement constitutes a valid
and binding agreement, enforceable against Seller and Parent in accordance with
its terms, and no authorizations, consents or approvals, whether of governmental
bodies, shareholders or otherwise, are necessary in order to enable Seller and
Parent to enter into and perform this Agreement. Consummation of the
transactions herein contemplated, and the fulfillment of the terms of this
Agreement will not conflict with or result in a breach of any of the terms or
provisions of, or constitute a default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any of the property or assets
of Seller pursuant to the terms of, or result in the acceleration of any
obligations or payment of a penalty under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which Seller is a
party or by which Seller may be bound or to which any of the property or assets
of Seller is subject, the Certificate of Incorporation or Bylaws of Seller, any
agreement of the shareholders, or any statute or any order, decree, judgment,
rule or regulation applicable to Seller of any court or of any regulatory
authority or other governmental body having jurisdiction over Seller.
3.03 Compliance with Law. Seller is not in violation of any federal,
state and local laws, regulations or orders which would cause a material adverse
effect upon its business.
3.04 Spare Parts. Seller shall deliver to Buyer at the Closing the spare
parts listed on Exhibit "C" (the "Spare Parts") free and clear of any liens or
encumbrances. Such Spare Parts are in good working condition and are not
obsolete.
3.05 Customer List. The Customer List delivered to Buyer pursuant to
Section 2.05 above includes as to Part 1, a true, complete and correct list of
the names, addresses and telephone numbers of all customers to which Seller has
provided Services whether by contract or on a time and materials basis during
the five (5) years prior to the Closing Date; and represents as to Part 2, a
true, complete and correct list of the Warranty and Service Contract customers
as contemplated by Section 3.06 (a) below.
3.06 Warranty Contracts and Service Contracts.
(a) Seller shall deliver a list (certified by Seller and
acknowledged by Buyer) of all existing verbal and written Warranty
Contracts (showing manufacturer warranty and contract expiration date)
and Service Contracts (showing expiration date) of Seller pursuant to
which Seller provides Services to customers which extend beyond the
Closing Date and which shall be assigned to and assumed by Buyer. Seller
has committed no breach and has received no notice of default which is
presently in effect under any Warranty Contract or Service Contract, nor
does Seller have actual knowledge of any event which has occurred which,
with notice or passage of time, could give rise to any such default. All
the Warranty Contracts and Service Contracts, together with any
amendments or modifications thereto, were duly authorized and executed
and are
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enforceable in accordance with their terms, except that Seller does not
represent and warrant as to matters which may relate to (a) the
enforceability as may be limited by applicable insolvency, bankruptcy,
reorganization, moratorium or other similar laws related to or affecting
creditors' rights generally, or (b) enforceability in any court of any
equitable remedies, specific performance and injunctive relief which are
subject to the discretion of the court before which any proceeding
therefor is brought (regardless of whether such enforceability is
considered a proceeding at law or equity). To the best of Seller's
knowledge, there is no reason to believe that any customer who is a
party to any such Service Contract is unable or unwilling to perform its
obligations under such contract.
(b) Seller will deliver to Buyer at the Closing the original or
a full, true and correct copy of each of the written Warranty Contracts
and Service Contracts, all proposed but not yet executed contracts, and
all modifications and amendments to the foregoing, in existence on the
Closing Date.
(c) Seller has no actual knowledge of any request for or need
for service under any Warranty Contract or Service Contract which has
not been performed prior to the Closing, other than routine service
calls, except as set forth on Exhibit "B".
(d) With respect to each Warranty Contract, Seller will cause
the manufacturer to supply to Seller at no cost to the customer or the
service provider replacement parts for defective parts for which the
Buyer has submitted an appropriate return authorization form.
3.07 Tools and Equipment. Attached as Exhibit "D" is a complete listing
of the tools and equipment (including test equipment) used by Seller in its
Service Business (the "Tools and Equipment"), all of which shall be transferred
to Buyer on the Closing Date, free of any liens or encumbrances, unless
otherwise designated on Exhibit "D". The said Tools and Equipment shall be
operable on the Closing Date.
3.08 Vehicles. Seller has the right to lease the Vehicles listed on
Exhibit "E" to Buyer in accordance with the terms of the Seller Vehicle Lease.
3.09 Leases. Attached as Exhibit "F" is a complete listing of (i) the
leases for vehicles used by Seller in its Service Business; (ii) the leases for
all other personal property used by Seller in its Service Business; and (iii)
the leases for offices and other facilities used by Seller for its Service
Business. Only those vehicle and personal property leases specifically
designated on Exhibit "F" will be assigned to Buyer (the assigned leases
hereafter referred to as the "Leases"). Seller has delivered to Buyer the
original or a full, true and correct copy of each Lease listed on Exhibit "F",
including all modifications and amendments thereto. Seller has, to the best
knowledge of Seller, committed no breach, and Seller has received no notice of
default which is presently in effect under any Lease, nor does Seller have
knowledge of any event which has occurred which, with notice or passage of time,
could give rise to any such default. Also set forth on Exhibit "F" is a complete
list of all security deposits paid by Seller with respect to the Leases,
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all of which are fully refundable upon termination of the respective Lease.
Seller has caused no damages to the leased premises or the leased equipment
which would entitle the lessor under such Leases to deduct any amounts from the
Security Deposits. Buyer shall not be required to obtain the release of any said
security deposits or to reimburse Seller for any such security deposits until
the termination of the respective Lease, at which time Buyer shall forward any
such returned security deposit to Seller.
3.10 Employees. Attached hereto as Exhibit "G" is a list of all of
Seller's employees who have been involved during the past year in performing
Services, or otherwise primarily involved during the past year in Seller's
Service Business. Seller agrees that Buyer shall have the right to solicit and
hire any of such employees. Any employees so hired shall be hired in accordance
with the terms of Buyer's standard offer letter. Seller agrees to cooperate and
assist Buyer in its efforts to hire such of Seller's employees listed on Exhibit
"G", as are designated on Exhibit "G". Seller acknowledges that notwithstanding
Buyer's efforts, certain of Seller's employees may refuse to accept Buyer's
offer of employment. Buyer shall have no liability for any termination costs or
liabilities arising by reason of the termination of any employees of Seller,
including payment of accrued vacation, regardless of whether they are hired by
Buyer. The employees listed on Exhibit "G" are not covered by any pension plan
or "employee welfare benefit plan" defined under the Employee Retirement Income
Security Act of 1974, as amended (commonly known as "ERISA") other than a 401(k)
plan. Buyer shall not be liable for and Seller shall indemnify Buyer against any
liability under any pension plan or "employee welfare benefit plan", regardless
of whether listed on Exhibit "G". Seller is not a party to any labor agreement
with respect to its employees with any labor organization, union, group or
association.
3.11 Litigation. There are no actions, suits, investigations or
proceedings by, against, involving or relating to Seller in which service of
process has been made, nor to the best of Seller's knowledge are there any
claims, actions, suits, investigations or proceedings contemplated, pending or
against, involving or relating to Seller, at law or in equity, or before any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, in which any claim has been made against the
Service Assets and there has been no garnishment, attachment or writ of
executions issued with reference to any of the Service Assets.
3.12 Judgments, Decrees and Orders in Restraint of Business. Seller is
not a party or subject to any judgment, decree or order entered in any suit or
proceeding brought by any governmental agency or by any other person enjoining
the Seller in respect of any of its business practices or the acquisition or
disposition of any property or the conduct of its business in any area.
3.13 Title to Service Assets. Seller has good and marketable title to
the Service Assets free and clear of all liens, claims and encumbrances,
including covenants, conditions and restrictions.
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3.14 Adverse Facts. To the best knowledge of Seller, there is no
material adverse fact or condition relating to the Service Assets or any portion
thereof (other than conditions relating to markets generally) which has not been
specifically disclosed on Exhibit "B".
3.15 No Misrepresentations or Omissions. To the best knowledge of
Seller, no material representation, warranty or statement of Seller in this
Agreement or in any document, exhibit, certificate or schedule furnished or to
be furnished to Buyer pursuant hereto or in connection with the transactions
contemplated hereby contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary to make the
statements or facts contained herein or therein not materially misleading. No
financial statements or other records provided by Seller to Buyer in the course
of Buyer's due diligence are incomplete or inaccurate in any material respect.
Seller's financial statements have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
covered thereby.
3.16 Bulk Sales Laws. Seller represents and warrants that the
transactions contemplated hereunder do not require compliance with the bulk
sales laws of any jurisdiction.
3.17 Tax Returns and Liabilities. Within the times and in the manner
prescribed by law, Seller has filed all Federal, state and local tax returns
required by law in connection with the business of Seller and has paid or has
made provision for the taxes due and payable in connection therewith.
3.18 Compliance with Laws Regulating Environmental Quality. The
properties which are the subject of the Leases and the Subleases are, and at all
times have been, operated, used and occupied in compliance with all
Environmental Laws (as defined herein) and have been operated, used and occupied
in a manner which will not give rise to any liability under any Environmental
Laws. Seller has not received any notice at any time that it is or was claimed
to be in violation of or in non-compliance with any conditions of any permit or
Environmental Laws or that any of the current or past uses, operations or
conduct at the properties are or were in violation of or in non-compliance with
any conditions of any permit or Environmental Laws. There is not now pending or,
to the best of Seller's knowledge, threatened, nor any basis known to Seller
for, any action, claim, investigation, lawsuit, proceeding or order against
Seller the properties which are the subject of the Leases, under any
Environmental Laws or otherwise with respect to the use, storage, presence,
generation, manufacture or handling of any Hazardous Substance (as defined
herein) at the properties.
For purposes of this Section 3.18, "Environmental Laws" shall mean any
federal, state, regional, county, municipal, local laws, statutes, rules,
ordinances, regulations and codes, as well as policies, orders, decrees,
judgments, permits, directives, guidances, cleanup standards, injunctions and
binding interpretations issued, promulgated, approved or entered thereunder,
relating to pollution or protection of the environment, including, but not
limited to, those relating to the release or threatened release of Hazardous
Substances into the environment or otherwise relating to the presence,
manufacture, transfer, generation, production, refinement, pumping, processing,
distribution, use, treatment, storage, transport or handling of Hazardous
Substances.
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For purposes of this Section 3.18, "Hazardous Substance" shall mean any
toxic waste, pollutant, contaminant, hazardous substance, toxic substance,
hazardous waste, special waste, industrial substance or waste, petroleum or
petroleum-derived substance or waste, infectious or mutagenic or carcinogenic
substance or waste, radioactive substance or waste, or any constituent of any
such substance or waste, which is regulated under or defined by any
Environmental Law.
3.19 Brokers or Finders. Seller has not entered into any agreement or
incurred any obligation, directly or indirectly, for the payment of any broker's
commissions or finder's fees in connection with this transaction.
3.20 Name. Seller uses the name "ATI Communications" with respect to the
Service Business. Neither Seller nor any of its affiliates has a federal or
state registration or pending registration which includes the name "ATI", and
Seller has the right to grant to Buyer the right to use the name "ATI". No
person has a right to receive any royalty or similar payment in respect to the
use of the name "ATI" by Seller or Buyer, and to the best of Seller's knowledge,
the use of the name ATI is not infringing upon or otherwise violating the rights
of any third party. No proceedings have been instituted against or notices
received by any Seller alleging that Seller's use of the name "ATI" infringes
upon or otherwise violates any rights of a third party.
3.21 Survival of Representations and Warranties. The covenants,
representations, warranties and agreements contained in this Agreement by Seller
shall survive the Closing Date and shall terminate and expire on the close of
business on the third anniversary of the Closing Date and shall be of no force
or effect thereafter, except with respect to any claim with respect thereto
under Section 8.03 of this Agreement, written notice of which shall have been
delivered to Seller on or prior to the third anniversary of the Closing Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Seller to enter into this Agreement, Buyer
represents and warrants to Seller, and as to covenants agrees with Seller, as
follows:
4.01 Incorporation. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of California.
4.02 Authority. This Agreement constitutes a valid and binding
agreement, enforceable against Buyer in accordance with its terms, and excepting
the approval of the Board of Directors of Buyer, no authorizations, consents or
approvals not already obtained, whether of governmental bodies or otherwise, are
necessary in order to enable Buyer to enter into and perform this Agreement.
Consummation of the transactions herein contemplated, and the fulfillment of the
terms of this Agreement will not conflict with or result in a breach of any of
the terms or provisions of, or constitute a default under, or result in the
creation or imposition of any
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lien, charge or encumbrance upon any of the property or assets of Buyer pursuant
to the terms of, or result in the acceleration of any obligations or payment of
a penalty under, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which Buyer is a party or by which Buyer may be bound
or to which any of the property or assets of Buyer is subject, the Certificate
of Incorporation or Bylaws of Buyer, or any statute or any order, decree,
judgment, rule or regulation applicable to Buyer of any court or of any
regulatory authority or other governmental body having jurisdiction over Buyer.
4.03 Judgments, Decrees and Orders in Restraint of Business. Buyer is
not a party or subject to any judgment, decree or order entered in any suit or
proceeding brought by any governmental agency or any other person enjoining the
Buyer in respect of any of its business practices or the acquisition or
disposition of any property or the conduct of its business in any area.
4.04 Brokers or Finders. Buyer has not entered into any agreement or
incurred any obligation, directly or indirectly, for the payment of any broker's
commissions or finder's fees in connection with this Agreement.
4.05 Survival of Representations and Warranties. The covenants,
representations, warranties and agreements contained in this Agreement by Buyer
shall survive the Closing Date and shall terminate and expire on the close of
business on the third anniversary of the Closing Date and shall be of no force
or effect thereafter, except with respect to any claim with respect thereto
under Section 8.03 of this Agreement, written notice of which shall have been
delivered to Buyer on or prior to the third anniversary of the Closing Date.
ARTICLE V
CONDITIONS PRECEDENT TO CLOSING
5.01 Conditions Precedent to the Performance of Seller's Obligations.
The obligations of Seller to sell the Service Assets pursuant to this Agreement
are subject, at the option of Seller, to the fulfillment on or before the
Closing Date of each of the following conditions:
(a) Compliance with Terms. At the Closing Date, all of the
terms, conditions and agreements herein to be complied with and
performed by Buyer at or before the Closing Date shall have been
complied with or performed in all material respects.
(b) Accuracy of Representations and Warrants. Seller shall not
have acquired information that there is any material error, misstatement
or omission in any of the representations or warranties made herein by
Buyer. The representations and warranties made by Buyer in this
Agreement shall be correct and complete at and as of the Closing Date,
with only those exceptions which have been approved in writing by
Seller.
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(c) Delivery of Required Items. Buyer shall have delivered all
items set forth in Section 7.02 below.
(d) Transaction Legal. There shall be no order, decree or ruling
by any court or governmental agency or threat thereof or any other fact
or circumstance which might prohibit or render illegal the transactions
contemplated by this Agreement.
(e) Opinion of Counsel. Seller shall have received the favorable
opinion of counsel for Buyer, dated as of the date of the Closing, in
form and substance satisfactory to counsel for Seller, with respect to
the matters set forth in Sections 4.01 and 4.02 above; provided that
counsel shall not be required to opine with respect to the
enforceability of choice of law provisions or the enforceability of the
covenant not to compete delivered by Buyer. Such counsel may base that
portion of its opinion pertaining or based upon factual matters upon
certificates or letters signed by a principal officer or officers of the
Seller, and may rely as to such matters upon such certificates or
letters, provided such counsel, after reasonable inquiry, has no reason
to believe that such matters are untrue. Copies of such certificates and
opinions so relied upon shall be delivered to Seller at the Closing.
5.02 Conditions Precedent to the Performance of Buyer's Obligations. The
obligations of Buyer to purchase the Service Assets pursuant to this Agreement
are subject to the fulfillment on or before the Closing Date of each of the
following conditions:
(a) Compliance with Terms. At the Closing Date, all of the
terms, conditions and agreements herein to be complied with and
performed by Seller at or before the Closing Date shall have been
complied with or performed in all material respects.
(b) Warranty Contracts and Service Contracts. Buyer shall have
received copies of all of the Warranty Contracts and Service Contracts,
and all modifications and amendments thereof.
(c) Spare Parts, Vehicles, Tools and Equipment. Buyer shall have
been given reasonable access to conduct an inventory and inspection of
the Spare Parts, Vehicles, Tools and Equipment.
(d) Accuracy of Representations and Warranties. Buyer shall not
have acquired information that there is any material error, misstatement
or omission in any of the representations or warranties made herein by
Seller. The representations and warranties made by Seller in this
Agreement shall be correct and complete at and as of the Closing Date,
subject only to those exceptions which have been approved in writing by
Buyer, in its sole and absolute discretion.
(e) Delivery of Required Items. Seller shall have delivered all
items set forth in Section 7.01 below.
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(f) Transaction Legal. There shall be no order, decree or ruling
by any court or governmental agency or threat thereof or any other fact
or circumstance which might prohibit or render illegal the transactions
contemplated by this Agreement.
(g) Approval of Exhibits. The form and contents of each of the
Exhibits and related deliveries shall be satisfactory to Buyer.
(h) Approval By Board of Directors. Buyer's Board of Directors
shall have approved Buyer's purchase of the Service Assets.
(i) Opinion of Counsel. Buyer shall have received the favorable
opinion of counsel for Seller, dated as of the date of the Closing, in
form and substance satisfactory to counsel for Buyer, with respect to
the matters set forth in Sections 3.01 and 3.02 above (provided that
counsel shall not be required to opine with respect to the
enforceability of choice of law provisions or the enforceability of the
covenant not to compete delivered by Buyer), and to the effect that upon
delivery by Seller to Buyer of the Xxxx of Sale as set forth on Exhibit
"H" and the Blanket Assignment set forth on Exhibit "I", no consents,
authorizations, approvals, permits, filings or other actions or
governmental bodies or others (other than any provided or satisfied at
the Closing) are necessary in order to transfer title to the Service
Assets to Buyer. Such counsel may base that portion of its opinion
pertaining or based upon factual matters upon certificates or letters
signed by a principal officer or officers of the Seller, and may rely as
to such matters upon such certificates or letters, provided such
counsel, after reasonable inquiry, has no reason to believe that such
matters are untrue. Copies of such certificates and opinions so relied
upon shall be delivered to Buyer at the Closing.
ARTICLE VI
TERMINATION
6.01 Termination. Anything herein to the contrary notwithstanding, this
Agreement may be terminated and abandoned at any time:
(a) by mutual written consent of Buyer and Seller;
(b) by Buyer, on the Closing Date, if any one or more of the
conditions precedent to its obligations herein shall not have been
fulfilled or waived in writing by Buyer; and
(c) by Seller, on the Closing Date, if any one or more of the
conditions precedent to its obligations herein shall not have been
fulfilled or waived in writing by Seller.
If this Agreement is terminated pursuant to any of the foregoing
provisions, this Agreement shall become wholly void and of no effect, and there
shall be no liability on the part of
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either Buyer to Seller, Seller to Buyer, or their respective boards of directors
as a result of such termination (except such liability arising pursuant to the
indemnification provisions of Article VIII for, among other things, breach of
covenants, representations and warranties and existence of suits and other
actions), and in such event each party shall bear all expenses incurred by it in
connection with this Agreement and any transactions in connection therewith.
6.02 Closing. Provided that all of the conditions to Closing have been
fully satisfied, the transactions contemplated by this Agreement shall be deemed
consummated effective at 11:59 p.m. on December 31, 1997 (the "Closing Date"),
or at such other place or time as shall be mutually agreed upon in writing
between Buyer and Seller (the "Closing").
ARTICLE VII
DELIVERIES AT CLOSING
7.01 Deliveries of Seller. At the Closing, Seller shall deliver to Buyer
all of the following:
(a) Xxxx of Sale. Originally executed Xxxx of Sale for the
Certain Assets of Seller in form and content as set forth in Exhibit "H"
attached hereto, as well as any Vehicle bills of sale and transfer
documents necessary to transfer title to the Vehicles.
(b) Blanket Assignment. Blanket assignment by Seller to Buyer of
all right, title and interest to the Warranty Contracts, the Service
Contracts and the Leases in the form of Exhibit "I" as well as such
other assignments (including specific Lease Assignments) which Buyer
reasonably believes are necessary to vest in Buyer all of Seller's
right, title and interest in and to the Service Assets.
(c) Consents. Consent of the lessors under the Leases for the
Bethel Park Leased Premises.
(d) Customer List. True and correct copies of the Customer List
as of the Closing Date.
(e) Warranty and Service Contracts. The original of each
Warranty and Service Contract and any amendments thereto.
(f) Closing Certificate. A certificate certifying the amount of
Prepaid Revenues.
(g) Subleases. Subleases in the form of Exhibit "J" executed by
Seller.
(h) Seller Vehicle Lease. A Seller Vehicle Lease if the form of
Exhibit "L" executed by Seller.
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7.02 Deliveries of Buyer. At the Closing, Buyer shall deliver to Seller:
(a) Initial Payment. The initial payment required by Section
2.03(a).
(b) Subleases. Subleases in the form of Exhibit "J" executed by
Buyer.
(c) Seller Vehicle Lease. A Seller Vehicle Lease if the form of
Exhibit "L" executed by Buyer.
ARTICLE VIII
POST-CLOSING COVENANTS
8.01 Seller's Appointment of Buyer to Install and Service Telephone
Systems.
(a) Installation. Seller hereby appoints and gives Buyer on an
installation-by-installation basis the right of first refusal, for a
five (5) year period, effective upon the Closing Date, to install all
telephone systems sold or leased by Seller. Seller agrees that it will
not divest its business of selling telephone system to any affiliate
without such affiliate appointing and giving to Buyer such right of
first refusal with respect to its business. Seller agrees to pay to
Buyer for the installation of each such telephone system a fee equal to
twenty-five percent (25%) of the amount charged by Seller for such
telephone system; provided that the amount paid to Buyer for any
installation shall not be less than twenty-five percent (25%) of one and
seven tenths (1-7/10) of the cost to Seller of the installed system
without Buyer's approval. Such fee shall be due and paid within fifteen
(15) days after full payment is received by Seller from the customer or
a signed check-off list is received by Seller from the customer (subject
to credit to Seller for amounts that are determined to be
uncollectable).
(b) Service. Seller hereby agrees for five (5) years after the
Closing Date to exclusively recommend Buyer to service telephone systems
sold or leased by Seller, and not to recommend to its customers any
other service provider for warranty or other service needs (whether on a
contract or time and materials basis), including repair or moving of
telephone systems or additions to or changes to telephone systems.
(c) MACs and Maintenance.
(i) Commissions. Subject to the provisions of
subparagraph (ii) below, Buyer shall pay to Seller (i) ten
percent (10%) of the amount received from any past, present or
future customers of Seller for moves, adds, and changes, new
maintenance contracts not sold by Seller and the sale of data
cabling during the five (5) year period from and after the
Closing, which amounts shall be paid within fifteen (15) days
after the end of the month in which Buyer invoices the customer
(subject to credit to Buyer for amounts that are determined to
be uncollectable); and (ii) fifteen percent (15%) of the
contract price of any new maintenance contract sold by Seller
pursuant to which maintenance services will be provided by
Buyer) during such five (5) year period, which amounts shall be
paid
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within fifteen (15) days after the end of the month in which
Buyer invoices the customer (subject to credit to Buyer for
amounts that are determined to be uncollectible).
(ii) Target Revenues. The parties have established the
Purchase Price and the commission structure as set forth in
paragraph (a) above based upon the premise that either the
Annualized Installation Revenue shall be not less than Two
Million Three Hundred Dollars ($2,300,000) or the Annualized
Service Revenue shall be not less than Four Million Two Hundred
Thousand Dollars ($4,200,000)(each referred to as "Target
Revenues"). If neither of the Target Revenues have been met on
any date as set forth below, the Purchase Price and/or the
commission structure shall be modified as follows:
(A) If as of the first anniversary neither of
the Target Revenues have been met, no commissions shall
be due or payable to Seller pursuant to Section
8.01(c)(i) for the period commencing on the first
anniversary and for six (6) months thereafter.
(B) If as of the date eighteen months after the
Closing neither of the Target Revenues have been met, no
commissions shall be due or payable to Seller pursuant
to Section 8.01(c)(i) for the period commencing on such
date and for six (6) months thereafter.
(C) If as of the second anniversary neither of
the Target Revenues have been met, the total amount of
all commissions paid pursuant to Section 8.01(c)(i)
commencing from the Closing shall be deducted from the
Purchase Price and the amount paid by Buyer reduced
accordingly. If as of the second anniversary either of
the Target Revenues have been met and there has been any
period for which commission were not paid pursuant to
subparagraphs (A) or (B) above, such commissions shall
be retroactively paid.
(D) If as of the end of any subsequent calendar
quarter neither of the Target Revenues have been met, no
commissions shall be due Seller for such quarter, and
Buyer shall be entitled to offset amounts previously
paid Seller against amounts otherwise due Seller.
Notwithstanding the foregoing, if at the end of any
calendar year either of the Target Revenues have been
met and there has been any period during such year for
which commissions were not paid pursuant to this
subparagraph(D) above, such commissions shall be
retroactively paid. The elimination of the commissions
pursuant to this Subparagraph (D) shall not apply if
Target Revenues have been met as of the date eighteen
months after the Closing and as of the second
anniversary of the Closing. However, in such case, if in
any subsequent quarter neither of the Target Revenue has
been met, Buyer shall be entitled, upon sixty (60) days
prior written notice, to terminate any or all of the
Subleases and/or the License for the Leased Premises.
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(d) Quality of Services. Buyer agrees to render
installation and maintenance services in a consistent, timely,
professional and industry acceptable manner. Should Buyer not do
so, Seller shall give written notice to Buyer of such failure,
with detailed backup. Should Buyer fail to remedy any failure
within forty-five (45) days after its receipt of notice,
Seller's obligations under this Section 8.01 shall cease.
8.02 Parts for Warranty Repairs and Service; Designation as Authorized
Service Provider.
(a) Warranty Contract Repairs and Service. Seller agrees to
promptly supply to Buyer at no cost to Buyer all replacement parts
necessary for repairs required under Warranty Contracts and prepaid
Service Contracts assumed by Buyer, provided that, for Warranty
Contracts still under manufacturer's warranty, Buyer submits such
documentation as is reasonably required by the manufacturer with respect
to warranty replacement parts.
(b) Parts for Other Service (Including Additions to Telephone
Systems). Seller agrees to sell and promptly deliver to Buyer spare
parts and telephone equipment for system service, repairs and additions
at ten percent (10%) over Seller's cost. To the extent available in
Seller's inventory, Seller agrees to provide spare parts and telephone
equipment for system service, repairs and additions to Buyer prior to
any service call on an anticipated needs basis, and to accept the return
of any equipment not used within three (3) business days.
(c) Designation as Authorized Service Provider. Seller agrees to
use commercially reasonable efforts to assist Buyer to become an
authorized service provider for Toshiba and other necessary products.
8.03 Buyer Service Responsibility. From and after the Closing, Buyer
shall adhere to the provision of Section 11 of the Toshiba America dealer
agreement, a copy of which is attached as Exhibit "K".
8.04 Indemnification by Buyer and Seller.
(a) Indemnification by Seller. Seller hereby agrees to indemnify
and hold Buyer, its officers, directors, employees, agents, advisers,
affiliates and associates ("Buyer Indemnified Party") harmless, from all
loss, liability and expense (including reasonable attorneys' fees and
expenses in connection with the contest of any claim and interest on any
claim paid by Buyer), which Buyer may incur or sustain by reason of the
fact that (i) Seller should breach or fail to comply with any of the
terms, conditions, covenants or agreements or any exhibits attached
hereto or any of them contained herein, (ii) any representations or
warranties made by Seller in this Agreement, the Exhibits, or in any
certificates, lists or documents delivered pursuant hereto should prove
to be false or
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erroneous, (iii) any claims, actions, suits, investigations or
proceedings, pending or threatened, are or have been made or commenced
by, against, involving, relating to or affecting any part of the Service
Assets with respect to any state of facts existing or any event
occurring prior to the Closing Date except for the Assumed Liabilities,
or (iv) any action, arbitration, suit, proceeding, compromise,
settlement, assessment or judgment arising out of or incidental to any
of the matters indemnified against in this Section 8.01(a); provided,
however, that Seller shall not be obligated to indemnify Buyer and hold
it harmless with respect to any settlement of a claim to which Seller
has not consented, which consent by Seller shall not unreasonably be
withheld, provided that Seller's consent shall not be required for any
matters on any individual claims below $1,000.
(b) Indemnification by Buyer. Buyer hereby agrees to indemnify
and hold Seller, its officers, directors, employees, agents, advisers,
affiliates and associates ("Seller Indemnified Party"), harmless from
all loss, liability and expense (including reasonable attorneys' fees
and expenses in connection with the contest of any claim and interest on
any claim paid by Seller), which Seller may incur or sustain by reason
of the fact that (i) Buyer should breach or fail to comply with any of
the terms, conditions, covenants or agreements or any exhibits attached
hereto, or any of them contained herein, (ii) any representations or
warranties made by Buyer in this Agreement should prove to be false or
materially erroneous, (iii) any claims, actions, suits, investigations
or proceedings, pending or threatened, are or have been made or
commenced by, against, involving or arising out of (A) the Assumed
Obligations, or (B) attributable to any state of facts existing or any
event occurring after the Closing Date (to the extent included in the
Assumed Obligations), (iv) all claims, actions, suits, investigations or
proceedings, pending or threatened, are or have been made or commenced
by, against, involving or arising out of the operation by Buyer of the
Service Business of Seller acquired hereunder, or the sale, transfer or
other disposition by Buyer of all or any part of the Service Assets,
from and after the Closing Date, except, in each case, if such liability
arises in connection with the breach of any of the representations,
warranties, covenants or agreements made by Seller in this Agreement,
any Schedule or Exhibit hereto or any certificate or instrument
delivered in connection herewith, (v) any attempt (whether or not
successful) by any person to cause or require a Seller Indemnified Party
to pay or discharge any debt, obligation or liability of Seller assumed
by Buyer pursuant to this Agreement, notwithstanding the Closing, or
(vi) any action, suit, proceeding, compromise, settlement, assignment,
judgment or arbitration arising out of or incidental to any of the
matters indemnified against in this Section 8.01(b); provided, however,
that Buyer shall not be obligated to indemnify a Seller Indemnified
Party and hold it harmless under this Section 8.01(b) with respect to
any settlement of a claim to which Buyer has not consented, if such
consent has not been unreasonably withheld.
(c) Right to Defend, Etc. If the facts giving rise to any such
indemnification shall involve any actual claim or demand by any third
party against a Buyer Indemnified Party or a Seller Indemnified Party
(referred to hereinafter as an "Indemnified Party"), the indemnifying
parties shall be entitled to notice of and entitled
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(without prejudice to the right of any Indemnified Party to participate
at its own expense through counsel of its own choosing) to defend or
prosecute such claim at their expense and through counsel of their own
choosing if they give written notice of their intention to do so no
later than the time by which the interests of the Indemnified Party
would be materially prejudiced as a result of its failure to have
received such notice; provided, however, that if the defendants in any
action shall include both the indemnifying parties and Indemnified
Party, and the Indemnified Party shall have reasonably concluded that
counsel selected by the indemnifying parties have a conflict of interest
because of the availability of different or additional defenses, the
Indemnified Party shall have the right to select separate counsel to
participate in the defense of such action on its own behalf, at the
expense of the indemnifying parties. The Indemnified Party shall
cooperate fully in the defense of such claim and shall make available to
the indemnifying parties pertinent information under its control
relating thereto.
(d) Indemnification Basket. Notwithstanding anything contained
herein, neither party shall be entitled to indemnification hereunder
unless the aggregate of all amounts to which such party shall be
entitled hereunder exceeds Twenty-Five Thousand Dollars ($25,000), in
which case such party shall be entitled to an amount by which its
damages exceed Twenty-Five Thousand Dollars ($25,000).
8.05 Non-Competition.
(a) Noncompete By Seller and Parent.
(i) Business. Seller and Parent each hereby covenant and
agree that for five (5) years from and after the Closing Date,
it will not, directly or indirectly or through any subsidiary or
joint venture, engage in any Service Business which competes
with Buyer's Service Business in Pennsylvania, Maryland,
northern Virginia or Washington, D.C. Notwithstanding the
foregoing, neither Seller nor Parent shall be precluded from
operating any continuing Service Business which it acquires in a
bona fide business transaction provided that (i) such Service
Business is ancillary to and part of an integrated sales and
service business; (ii) such Service Business is not conducted
under the name "ATI"; and (iii) such Service Business shall not
result in a reduction, directly or indirectly, of the amount of
installations which Buyer would otherwise be entitled to
provided pursuant to Section 8.01(a) hereof.
(ii) Employees. Seller agrees to that it will not
solicit or offer employment to any employee hired by Buyer
pursuant to Section 3.09 for a period of at least three (3)
years after the date of the Closing unless such employee is not
at the time of such solicitation or offer and has not been at
any time during the immediately preceding six (6) month period
employed by Buyer.
(iii) Injunction. Seller acknowledges that compliance
with the covenants contained herein is necessary to protect the
goodwill that was acquired
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by Buyer pursuant to this Agreement. Seller further acknowledges
that any remedy at law for the breach of the foregoing covenants
will be inadequate, and that Alpha Micro and its successors and
assigns shall be entitled to injunctive relief as well as all
other remedies which may be available at law or in equity.
(iv) Separate Covenants. The parties intend that the
covenants contained in this Section 8.04(a) shall be construed
as a series of separate covenants, one for each county. Except
for geographic coverage, each such separate covenant shall be
deemed identical. If any one of the covenants is declared
invalid for any reason, this ruling shall not affect the
validity of the remainder of the covenants, which shall remain
in effect as if the provision had been executed without the
invalid covenants, and the covenant declared invalid shall be
construed, at the option of Buyer, by limiting or reducing it,
so as to be enforceable to the extent compatible with the
applicable law as it shall then appear.
(b) Noncompete by Buyer.
(i) Sale of Telephone Systems. Buyer hereby covenants
and agrees that for five (5) years from and after the Closing
Date, it will not, directly or indirectly or through any
subsidiary or joint venture, (i) engage in the business of
selling telephone systems in Pennsylvania, Maryland, northern
Virginia or Washington, D.C; or (ii) refer any person or entity
in the Pennsylvania, Maryland, northern Virginia or Washington,
D.C area to any other vender to purchase a telephone system.
Nothing herein, however, shall be deemed to preclude Buyer from
selling system replacement parts or additional equipment for
existing telephone systems.
(ii) Injunction. Buyer acknowledges that any remedy at
law for the breach of the foregoing covenants will be
inadequate, and that Seller and its successors and assigns shall
be entitled to injunctive relief as well as all other remedies
which may be available at law or in equity.
(iii) Separate Covenants. The parties intend that the
covenants contained in this Section 8.04(b) shall be construed
as a series of separate covenants, one for each county. Except
for geographic coverage, each such separate covenant shall be
deemed identical. If any one of the covenants is declared
invalid for any reason, this ruling shall not affect the
validity of the remainder of the covenants, which shall remain
in effect as if the provision had been executed without the
invalid covenants, and the covenant declared invalid shall be
construed, at the option of Seller, by limiting or reducing it,
so as to be enforceable to the extent compatible with the
applicable law as it shall then appear.
8.05 Right to Audit. To the extent payments are required hereunder, the
party making such payment shall include with such payment a statement detailing
the calculation of the amounts due. In order to verify the accuracy of the
amounts paid hereunder, either party shall
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have the right, from time to time, but no more often than twice in any eighteen
(18) month period, during normal business hours, to have access to and audit
those books and records of the other to perform such verification Such audit
shall be at the sole cost and expense of the party so electing, unless such
audit reveals an error of greater than five percent (5%) over reported amounts,
in which event the audited party shall reimburse the auditing party the expenses
of such Audit. The audited party shall make any appropriate corrective payment
and reimbursement of audit expenses to the auditing party within fifteen (15)
days after demand. Such right to audit shall terminate twelve (12) months after
the later of the date the last payment is required or made hereunder.
ARTICLE IX
CONDUCT OF BUSINESS PENDING THE CLOSING
9.01 The Seller covenants and agrees that, prior to the Closing Date or
the earlier termination of this Agreement pursuant to Section 6.01 hereof,
unless the Buyer shall otherwise agree in writing or as otherwise expressly
permitted by this Agreement:
(a) Preservation of Business. The business of Seller shall be
conducted only in the ordinary course of business and consistent with
past practice, and the Seller shall use its best efforts to maintain and
preserve its business, assets, prospects, employees, customers and other
advantageous business relationships. Without limiting the generality of
the foregoing, Seller shall (i) maintain the Service Assets in
substantially their current state of repair, excepting normal wear and
tear, (ii) through the Closing Date, maintain insurance covering the
Service Assets of the same nature and level as that in effect on the
date hereof, and (iii) make timely payments on accounts payable and
perform other obligations of the Seller (including under the Warranty
Contracts, the Service Contracts and the Leases) in accordance with the
Seller's past practice.
(b) Preservation of Assets. Seller shall not do any of the
following: (i) issue, sell, pledge, dispose of or encumber any capital
stock of the Seller; (ii) except in the ordinary course of business,
sell, pledge, dispose of or encumber any of the Service Assets; (iii)
whether or not in the ordinary course of business, sell, pledge, dispose
of or encumber any material portion of the Service Assets; or (iv)
authorize or propose any of the foregoing, or enter into any contract,
agreement, commitment or arrangement to do any of the foregoing.
ARTICLE X
GENERAL PROVISIONS
10.01 Notification of Changes. Each party will promptly notify the other
in writing of the existence or happening of any material fact, event or
occurrence which may tend to alter the accuracy or completeness of any
representation or warranty contained in this Agreement.
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10.02 Notices. Except as otherwise expressly provided herein, any notice
herein required or permitted to be given shall be in writing and shall be
personally served or sent by overnight courier, by registered mail or certified
mail, postage prepaid, or by prepaid telex, telecopy or telegram and shall be
deemed to have been given when such writing is received by the intended
recipient thereof. For the purposes hereof, the addresses of the parties hereto
(until notice of a change thereof served as provided in this Section 10.02)
shall be as follows:
If to Buyer: Alpha Microsystems
0000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxx Xxx, Xxxxxxxxxx 00000
Attn: Chief Financial Officer
Fax No.: (000) 000-0000
With a copy to: Allen, Matkins, Xxxx, Xxxxxx & Xxxxxxx LLP
000 Xxxxx Xxxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx Xxxxx Xxxx, Esq.
Fax No.: (000) 000-0000
If to Seller: ATI Communications
000 Xxxxxxxxx Xxxx
Xxxxxx Xxxx, Xxxxxxxxxxxx 00000
Attn: Xxxx X. Xxxxxxx
Fax No.: (000) 000-0000
With copies to: Xxxxx Xxxx LLP
Xxx Xxxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xx. Xxxxx, XX 00000-0000
Attn: Xxxxxxxxx Sale III
Fax: (000) 000-0000
and Applied Cellular Technology, Inc.
000 Xxxxx Xxxx Xxx, Xxxxx 000
Xxxx Xxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxxxx
Fax: _________________
10.03 Entire Agreement. This Agreement, together with the Exhibits
hereto, constitutes the entire understanding between the parties with respect to
the subject matter hereof, superseding all negotiations, prior discussions and
preliminary agreements. This Agreement may not be changed except in writing
executed by Buyer and Seller.
10.04 Payment of Expenses. Buyer and Seller shall each be responsible to
pay all of its own respective expenses as incurred in connection with this
Agreement, the transactions contemplated hereby, the negotiations leading to the
same and the preparations made for carrying
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the same into effect, and no party shall be liable or responsible for the fees
or expenses incurred by any other party.
10.05 Arbitration. Any matter arising under, relating to or concerning
this Agreement (except as expressly set forth in this Section 10.05) shall be
resolved by final and binding arbitration by the local office of the
JAMS/Endispute ("JAMS") closest to Buyer or if JAMS is unavailable, by an
organization of similar nature agreed upon by Buyer and Seller. Such arbitration
shall be conducted according to the JAMS Rules of Practice and Procedure then in
effect, except that the parties shall be entitled only to such discovery as
permitted by C.C.P. Section 1283.05 and any amendment thereto, or successor
statute. Any party may seek to compel the other to comply with the terms of this
Section 10.05 by petition to any court of general jurisdiction. The prevailing
party in any proceeding to enforce this Section 10.05 shall be entitled to the
Court's order for payment of attorneys' fees and costs in connection with said
proceeding. In the case of a judgment on an arbitrator's award, any party may
seek to have the arbitrator's award entered by any court having jurisdiction
thereof. The prevailing party in any arbitration shall be entitled to have
included as part of the arbitrator's award the attorneys' fees and costs
incurred by such prevailing party in connection with the arbitration, including
amounts advanced.
Buyer and Seller agree that in the case of any dispute in which
extraordinary relief may be available, then and only then, a court of competent
jurisdiction shall be presented with, and make a determination of, the propriety
of granting and enforcing such extraordinary relief, upon such conditions as the
court shall determine as proper, and the provisions of this Section 10.05
Arbitration shall not be applicable.
10.06 Attorneys' Fees. Should any litigation be commenced between the
parties hereto or their representatives concerning any provision of this
Agreement or the rights and duties of any person or entity in relation thereto,
the party prevailing in such litigation shall be entitled, in addition to such
other relief as may be granted, to an award of all actual attorneys' fees and
costs incurred in such litigation, without regard to any schedule or rule of
court purporting to restrict such an award, including, without limitation,
actual attorneys' fees, costs and expenses incurred in connection with (i)
enforcing, perfecting and executing such judgment, (ii) post-judgment motions;
(iii) contempt proceedings; (iv) garnishment, levee, and debtor and third-party
examinations; (v) discovery; and (vi) bankruptcy litigation.
10.07 Waiver. No waiver of any term, provision or condition of this
Agreement, whether by conduct or otherwise, in any one or more instances, shall
be deemed to be or be construed as a further or continuing waiver of any such
term, provision or condition or as a waiver of any other term, provision or
condition of this Agreement.
10.08 Captions. The captions of the Sections of this Agreement are for
convenience only and shall not be considered or referred to in resolving
questions or interpretation.
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10.09 Counterparts. This Agreement may be executed in one or more
counterparts and counterparts signed in the aggregate by Buyer and Seller shall
constitute a single original instrument.
10.10 Assignment. This Agreement shall not be assignable by any party
without the consent of the other party. Notwithstanding the foregoing, Buyer may
assign this Agreement in whole or in part, to any subsidiary, affiliate or
parent corporation or any successor of Buyer by merger, consolidation or
acquisition of a substantial portion of its assets. In the case of any such
assignment, Buyer shall continue to remain liable for its obligations hereunder.
10.11 Severability. If any term or provision of this Agreement, or the
application thereof to any person or circumstance, shall to any extent be found
to be invalid, void or unenforceable, the remaining provisions and any
application thereof shall, nevertheless, continue in full force and effect
without being impaired or invalidated in any way.
10.12 Successors and Assigns. Except as otherwise provided herein, the
provisions hereof shall be binding upon and shall inure to the benefit of the
parties hereto, their personal representatives, heirs, executors,
administrators, successors and/or assigns.
10.13 Further Actions. Each of the parties hereto agrees to take any and
all actions reasonably necessary in order to carry out the provisions of this
Agreement.
10.14 Gender and Number. As used in this Agreement, the masculine gender
includes the feminine and neuter, the feminine gender includes the masculine and
neuter, the singular number includes the plural, the plural number includes the
singular, and the term "person" includes both a corporation and a natural
person.
10.15 Time. Time is of the essence in each provisions of this Agreement
of which time is an element.
10.16 Construction. This Agreement shall be construed in accordance with
its plain meaning and not against either party.
10.17 Choice of Law. This Agreement shall be governed by, and construed
in accordance with, the internal laws (as opposed to conflicts of law
provisions) of the State of California, excepting that the parties expressly
agree that Section 8.05(b) shall be governed by, and construed in accordance
with, the internal laws (as opposed to conflicts of law provisions) of the State
of Pennsylvania.
10.18 Public Announcements. Neither party shall make any public
announcements or public statements regarding the transactions contemplated
herein until after the Closing, unless approved in writing by the other, or
unless the disclosing party reasonably believes that disclosure is required by
law.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
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"BUYER" "SELLER"
ALPHA MICROSYSTEMS, ADVANCED TELECOMM OF PITTSBURGH,
a California corporation a Pennsylvania Business Trust
By: By:
-------------------------------- ---------------------------------
Its: Its:
--------------------------- ----------------------------
ADVANCED TELECOMM OF XXXXXX, INC.,
a Pennsylvania corporation
By:
---------------------------------
Its:
----------------------------
ADVANCED TELECOMM OF
WASHINGTON, D.C., INC.,
a Pennsylvania corporation
By:
---------------------------------
Its:
----------------------------
ADVANCED TELECOMM OF MARYLAND, INC.,
PARENT a Pennsylvania corporation
APPLIED CELLULAR TECHNOLOGY, INC.,
a Pennsylvania corporation By:
---------------------------------
Its:
----------------------------
By:
--------------------------------
Its:
---------------------------
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LIST OF EXHIBITS
Exhibit "A" Allocation of Purchase Price
Exhibit "B" Exceptions to Representations and Warranties
Exhibit "C" Spare Parts
Exhibit "D" Tools & Equipment
Exhibit "E" Vehicles
Exhibit "F" Leases and Security Deposits
Exhibit "G" Employees and ERISA Plans
Exhibit "H" Xxxx of Sale
Exhibit "I" Blanket Assignment
Exhibit "J" Subleases/License for Leased Premises
Exhibit "K" Service Responsibility
Exhibit "L" Seller Vehicle Lease
