EXECUTION COPY
ASSET PURCHASE AGREEMENT
BY AND AMONG
DUALSTAR TECHNOLOGIES CORPORATION,
PARACOMM INC.,
AND
XXXXXXXXX, L.L.C.,
PCM ACQUISITIONS CORP.
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DATED AS OF JULY 9, 2003
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TABLE OF CONTENTS
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ARTICLE I DEFINITIONS.............................................................................................1
ARTICLE II PURCHASE AND SALE OF ASSETS............................................................................1
Section 2.1 Description of Assets........................................................................1
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Section 2.2 Preservation of Books and Records............................................................3
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Section 2.3 Assumed Liabilities..........................................................................4
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Section 2.4 Intentionally Omitted........................................................................4
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Section 2.5 Liabilities Not Assumed......................................................................4
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ARTICLE III PURCHASE PRICE........................................................................................4
Section 3.1 Purchase Price...............................................................................4
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Section 3.2 Determination of Pre-Closing Adjustments to Purchase Price...................................5
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Section 3.3 Cash Collections.............................................................................5
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Section 3.4 Prorations...................................................................................5
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Section 3.5 Purchase Price Allocation....................................................................6
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Section 3.6 Post-Closing Audit...........................................................................6
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Section 3.7 Post-Closing Purchase Price Adjustment.......................................................7
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Section 3.8 Final Purchase Price.........................................................................8
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ARTICLE IV Closing................................................................................................8
Section 4.1 Closing......................................................................................8
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Section 4.2 Deliveries by Seller and the Seller's Parent.................................................8
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Section 4.3 Deliveries by Buyer and Buyer's Parent.......................................................9
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ARTICLE V Representations And Warranties.........................................................................10
Section 5.1 Representations of Buyer and Buyer's Parent.................................................10
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Section 5.2 Representations of Seller and Seller's Parent...............................................11
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ARTICLE VI Covenants.............................................................................................22
Section 6.1 Covenants Regarding Seller's Conduct of the Business Pending the Closing....................22
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Section 6.2 No Other Negotiations.......................................................................23
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Section 6.3 Additional Covenants........................................................................24
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Section 6.4 Announcements...............................................................................24
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Section 6.5 Access to Records...........................................................................25
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Section 6.6 Transition of Clients.......................................................................25
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Section 6.7 Environmental Audit.........................................................................25
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Section 6.8 Sales and Transfer Taxes....................................................................25
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ARTICLE VII Conditions Precedent To Obligations Of Seller And The parent.........................................26
Section 7.1 Conditions to Obligations of Seller.........................................................26
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ARTICLE VIII Conditions Precedent To Obligations Of Buyer........................................................26
Section 8.1 Conditions to Obligations of Buyer..........................................................26
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Section 8.2 No Remaining Outstanding Debt of Seller.....................................................27
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Section 8.3 Operation of the Business...................................................................27
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Section 8.4 Consents....................................................................................27
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Section 8.5 Opinion of Counsel of Seller................................................................28
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Section 8.6 Fairness Opinion............................................................................28
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Section 8.7 Preliminary Adjustment Report...............................................................28
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ARTICLE IX Indemnification.......................................................................................28
Section 9.1 Survival of Representations, Warranties and Agreement.......................................28
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Section 9.2 Indemnification.............................................................................28
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Section 9.3 Limitations on Indemnification..............................................................29
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Section 9.4 Certain Tax Matters.........................................................................30
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Section 9.5 Procedure for Indemnification with Respect to Third Party Claims............................30
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Section 9.6 Set Off and Recoupment......................................................................31
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ARTICLE X Termination, Amendment And Waiver......................................................................31
Section 10.1 Termination.................................................................................31
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Section 10.2 Results of Termination......................................................................32
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Section 10.3 Amendment...................................................................................32
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ARTICLE XI Miscellaneous.........................................................................................32
Section 11.1 Non-Competitions; Non-Disclosure; Non-Solicitation..........................................32
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Section 11.2 Expenses....................................................................................33
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Section 11.3 Notices.....................................................................................33
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Section 11.4 Specific Performance........................................................................34
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Section 11.5 Third Party Beneficiaries...................................................................34
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Section 11.6 Entire Agreement............................................................................34
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Section 11.7 Binding Effect, Benefits, Assignments.......................................................34
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Section 11.8 Applicable Law..............................................................................35
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Section 11.9 Jurisdiction................................................................................35
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Section 11.10 Severability.............................................................................35
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Section 11.11 Bulk Sales...............................................................................35
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Section 11.12 Further Assurances.......................................................................35
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Section 11.13 Counterparts.............................................................................35
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Section 11.14 Headings.................................................................................35
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Exhibits
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A Xxxx of Sale, Assumption and Assignment Agreement
B Waiver
C Opinion of counsel to Seller and Seller's Parent
Schedules
2.1(a)(i) Material Contracts
2.1(a)(ii) Unbilled Services
2.1(a)(iii) Permits
2.1(a)(v) Personal Property
2.1(a)(vii) Real Property Leases
2.1(a)(viii) Personal Property Leases
2.1(a)(ix) Intellectual Property
2.1(a)(x) Miscellaneous Assets
2.1(a)(xi) Causes of Action
2.1(b)(ii) Excluded Real Estate Assets
2.3 Assumed Liabilities
3.5 Purchase Price Allocation
5.2(b) Consents
5.2(e) Material Changes
5.2(f) Liabilities
5.2(j) Intellectual Property
5.2(k) Litigation
5.2(n) Transactions with Affiliates
5.2(x) Vendors, Suppliers, Subscribers and Customers
5.2(y) Land Use
5.2(z)(i) Rights of Entry
5.2(z)(ii) Subscribers
5.2(bb) Indebtedness
Annex I: Index of Defined Terms
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ASSET PURCHASE AGREEMENT
THIS AGREEMENT dated as of July 9, 2003, by and among
Xxxxxxxxx, L.L.C., a New York limited liability company ("Buyer's Parent"), PCM
Acquisitions Corp., a Delaware Corporation and wholly-owned subsidiary of
Buyer's Parent ("Buyer"), ParaComm Inc., a Delaware corporation ("Seller"), and
DualStar Technologies Corporation, a Delaware corporation and sole shareholder
of Seller ("Seller's Parent").
R E C I T A L S:
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WHEREAS, Seller is engaged in the business of providing
subscription television and cable services from various locations (the
"Locations") in Florida (hereinafter referred to as the "Business");
WHEREAS, Seller's Parent has issued to Buyer's Parent that
certain Second Amended and Restated Promissory Note (the "Old Note"), dated as
of December 1, 1999, in the principal amount of $12,500,000; and
WHEREAS, Buyer desires to purchase and Seller desires to sell
substantially all of the operating assets used in the Business, upon the terms
and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual promises herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
The defined terms in this Agreement are referenced in Annex I.
All definitions are to be equally applicable to the singular, plural, masculine,
feminine and neuter forms of the terms herein defined.
ARTICLE II
PURCHASE AND SALE OF ASSETS
Section 2.1 Description of Assets. (a) Upon the terms and
subject to the conditions set forth in this Agreement, at the Closing (as
hereinafter defined), Seller shall sell, convey, transfer, assign and deliver to
Buyer, and Buyer shall purchase, acquire and take assignment and delivery from
Seller, of all right, title and interest of Seller, free and clear of all liens,
claims and encumbrances of any nature ("Liens"), other than any Lien held by
Buyer's Parent, in and to all of the assets, properties, rights (contractual or
otherwise) and business of Seller that are owned by Seller and are used in
connection with the Business other than the Excluded Assets (as hereinafter
defined), including, without limitation, those set forth below (collectively,
the "Assets"):
(i) all contracts (including, without limitation, contracts
for the provision of cable services or Right of Entry Agreements),
rights of way, agreements, contract rights, license agreements,
customer contracts, supplier agreements and other franchise rights and
agreements, purchase and sales orders, quotations and executory
commitments, instruments, guarantees, indemnifications, arrangements
and understandings, whether oral or written, to which Seller is a party
(whether or not legally bound thereby) and used in conducting the
Business (other than insurance policies) (the "Contracts") as listed on
Schedule 2.1(a)(i);
(ii) all unbilled services and work in process relating to
or arising out of the operation of the Business, all of which are
listed on Schedule 2.1(a)(ii);
(iii) all franchises, licenses, permits, consents,
authorizations, approvals and certificates of any regulatory,
administrative or other governmental agency or body used in conducting
the Business (to the extent the same are transferable) (the "Permits")
including, without limitation, the Permits listed on Schedule
2.1(a)(iii), such Schedule to include all Permits that are material to
the Business;
(iv) All books of account, customer lists, client lists,
employee lists, files, papers, records and telephone numbers used in
conducting the Business;
(v) all inventory, machinery, equipment, tooling, parts,
furniture, supplies, vehicles, receivables, office furniture and
equipment (the "Personal Property"), including the Personal Property
listed on Schedule 2.1(a)(v), such Schedule to include all Personal
Property that is used to operate the Business;
(vi) all of the right, title and interest of Seller in the
benefits of all insurance covering the loss of or damage to the Assets
or the Business;
(vii) the leases of Real Property listed on Schedule
2.1(a)(vii) (the "Real Property Leases"), along with all appurtenant
rights, easements and privileges appertaining or relating thereto and
construction in progress, if any, and leasehold improvements relating
to the Real Property subject to such lease;
(viii) all leases of equipment or other tangible Personal
Property used in conducting the Business (collectively, the "Personal
Property Leases") including, without limitation, the Personal Property
Leases listed on Schedule 2.l(a)(viii), such Schedule to include all of
the Personal Property Leases that are material to the Business;
(ix) all patents, inventions, trade secrets, processes,
proprietary rights, proprietary knowledge, computer software,
trademarks, names, service marks, trade names, copyrights, symbols,
logos, franchises and permits related thereto that are used in
conducting the Business and all applications therefor, registrations
thereof and licenses, sublicenses or agreements in respect thereof,
which Seller owns or has the right to use or to which Seller is a party
and all filings, registrations or issuances of any of the foregoing
with or by any federal, state, local or foreign regulatory,
administrative or
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governmental office (collectively, the "Intellectual Property")
including, without limitation, the Intellectual Property listed on
Schedule 2.l(a)(ix);
(x) all security deposits, prepaid expenses and other
miscellaneous assets of the Business (the "Miscellaneous Assets")
including, without limitation, the Miscellaneous Assets listed on
Schedule 2.1(a)(x);
(xi) all causes of action, judgments, claims or demands of
whatever kind or description relating to the Business which Seller has
or may have against any other Person other than Seller's Parent (the
"Causes of Action") including, without limitation, the Causes of Action
listed on Schedule 2.1(a)(xi) but excluding Causes of Action relating
to any assets and properties retained by Seller;
(xii) all accounts receivable of the Business subject to
Article III hereof; and
(xiii) all goodwill relating to the Business.
For purposes of this Agreement, "Person" shall mean any
individual, partnership, corporation, limited liability company, association,
joint stock company, trust, joint venture, unincorporated organization,
governmental entity or any department, agency or political subdivision thereof.
(b) Notwithstanding the foregoing, there shall be excluded
from the Assets (i) all contracts or leases not specified on Schedule 2.1(a),
(ii) all real estate assets specified by Buyer on Schedule 2.1(b), (iii) all
corporate minute books, stock records, tax returns and supporting schedules,
books of original financial entry and internal accounting documents and records
(all which shall be subject to Buyer's right to inspect and copy from time to
time) (collectively, "Books and Records") and (iv) Causes of Action relating to
assets and properties retained by Seller and, in Buyer's sole discretion, any
Contracts, or other Assets not disclosed by Seller on the relevant schedules
hereto (collectively, the "Excluded Assets").
Section 2.2 Preservation of Books and Records. For a period
of five (5) years following the Closing, Seller will preserve and maintain all
Books and Records in its possession. If Seller desires to dispose of any such
Books and Records at the end of such five (5) year period or before the
expiration of such five (5) year period, Seller will first give written notice
thereof to Buyer and will, at Buyer's option and expense, appropriately package
and deliver such Books and Records to Buyer at such location as Buyer shall
designate. If upon receiving written notice of Seller's desire to dispose of
Books and Records, Buyer does not direct Seller to deliver such Books and
Records within 60 days, then Seller may dispose of such Books and Records
without violating the terms of this Agreement.
Section 2.3 Assumed Liabilities. Buyer shall assume only
those liabilities relating to the Assets to the extent listed on Schedule 2.3.
The liabilities and obligations of Seller being assumed by Buyer and listed on
Schedule 2.3 are hereinafter collectively referred to as the "Assumed
Liabilities."
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Section 2.4 Intentionally Omitted.
Section 2.5 Liabilities Not Assumed. With the exception of
the Assumed Liabilities, as set forth in Schedule 2.3, Buyer shall not by
execution and performance of this Agreement or otherwise, assume or otherwise be
responsible for any liability or obligation of any kind or nature of Seller or
Seller's Parent (the "Excluded Liabilities"), whether relating to the Business
or any of Seller's or Seller's Parent's other assets, operations, businesses or
activities, or claims of such liability or obligation, matured or unmatured,
liquidated or unliquidated, fixed or contingent, known or unknown or whether
arising out of occurrences prior to, at or after the Closing Date. The Excluded
Liabilities shall include, but are not limited to, operating liabilities such as
accounts payable and accrued expenses, accrued commissions, taxes, customer
deposits, amounts payable under Contracts and other agreements, product
liability claims and other liabilities of a similar nature, kind and general
magnitude, and liabilities or obligations relating to environmental matters,
taxes, indebtedness, COBRA health continuation coverage, ERISA (as hereinafter
defined), employee benefit plans maintained under Section 3(3) of ERISA and
other employee plans, accrued employee benefits and bonuses, including, without
limitation, accrued vacation pay, severance liabilities arising as a result of
this Agreement or commitments to Seller's employees who continue with the
Business which arose prior to Closing (except as otherwise specifically
assumed), severance liability to employees not hired by Buyer and any liability
not specified to be one of the Assumed Liabilities.
ARTICLE III
PURCHASE PRICE
Section 3.1 Purchase Price. Upon the terms and subject to
the conditions set forth in this Agreement, in consideration for the sale,
assignment, transfer and delivery of the Assets to Buyer and for each of
Seller's and Seller's Parent's non-competition agreements as set forth in
Section 11.1 hereof, at the Closing, Buyer shall pay to Seller the aggregate
amount of Three Million Twenty Five Thousand Dollars ($3,025,000) (the "Purchase
Price"), subject to adjustments as provided for in this Agreement. Immediately
prior to the Closing, Seller's Parent shall exchange the Old Note for two
promissory notes, each of which shall have terms identical to the terms of the
Old Note, except that the principal amount of one note will be equal to the
Purchase Price, as adjusted pursuant to Section 3.2 (the "Purchase Price Note")
and the principal amount of the other note shall be equal to the difference
between the principal amount of the Old Note (the "Principal Amount") and that
of the Purchase Price Note (the "New Note"). The Purchase Price will be payable
through the assignment by Buyer of the Purchase Price Note to the Seller. Buyer
and Buyer's Parent will deliver at Closing a written waiver, in the form
attached hereto as Exhibit B (the "Waiver") by the Buyer's Parent of accrued and
unpaid interest only insofar as such interest relates to the portion of the
Principal Amount being used for the purchase of the Assets. Buyer and Buyer's
Parent hereby waive any right to early or pre-payment penalties under the Old
Note that may be triggered by consummation of the transaction contemplated by
this Agreement, but only insofar as such penalties relate to the portion of the
Principal Amount being used for the purchase of the Assets in accordance with
the terms of the Old Note.
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Section 3.2 Determination of Pre-Closing Adjustments to
Purchase Price. (a) At least five (5) business days prior to the Closing Date,
Seller shall provide Buyer with a certificate (the "Purchase Price Adjustment
Certificate") estimating the amount of each of the following: (i) the Pro Rated
Items (as defined below), (ii) the value of the inventory to be purchased by
Buyer hereunder (other than damaged or obsolete inventory) to be valued at
Seller's actual out-of-pocket cost (the "Seller Inventory Amount"), (iii) the
value of all outstanding receivables relating to the Business (the "Seller
Receivable Amount"), (iv) the value of all outstanding trade payables relating
to the Business as of the Closing Date (the "Seller Payable Amount") and (v) the
number of Subscribers served by the Business (the "Seller Subscriber Number"),
attaching such information and documents on which such calculations were based.
(b) The Purchase Price shall be reduced by the sum of the
Pro-Rated Items, the Seller Receivable Amount and the Seller Payable Amount (the
"Closing Purchase Price Adjustment") and the Principal Amount of the Purchase
Price Note shall be correspondingly adjusted.
Section 3.3 Cash Collections. Cash and cash equivalents
held by Seller at 12:01 A.M. the day of the Closing shall be retained by Buyer.
Section 3.4 Prorations. The Closing shall be deemed to
occur as of 12:01 A.M. on the Closing Date and for all purposes, any adjustments
under this Agreement shall be deemed to be made as of such time. Seller and
Buyer shall pro-rate between them, as of the Closing Date, all sewer, water,
gas, electrical and similar utility charges applicable to the Business, all Real
Property, Personal Property and other taxes, rents and other charges under the
Real Property Leases and Personal Property Leases transferred to Buyer,
inventory tax and liabilities in respect of periods ending on or prior to the
Closing Date for wages, salaries, bonuses, commissions, severance, pension or
welfare benefits including, without limitation, with respect to any 401(k)
plans, accrued sick days or accrued vacation days for employees or former
employees of Seller and other similar employee benefits (collectively, the "Pro
Rated Items"). The Pro Rated Items shall be estimated at the Closing Date, and
the Purchase Price shall be appropriately adjusted, at the Closing Date, but
shall be subject to further review by Buyer.
Section 3.5 Purchase Price Allocation. Seller and Buyer
hereby agree that the aggregate purchase price for the Assets shall be allocated
for purposes of this Agreement and for federal, state and local tax purposes as
set forth on Schedule 3.5 hereto. Such allocation shall be made in accordance
with the provisions of Section 1060 of the Internal Revenue Code of 1986, as
amended (the "Code"). Seller and Buyer also agree to file Internal Revenue
Service Form 8594 consistently with the foregoing and in accordance with Section
1060 of the Code.
Section 3.6 Post-Closing Audit. (a) As soon as practicable,
and in no event later than forty-five (45) days after the Closing Date, Buyer
will deliver to Seller a report (the "Preliminary Audit"), based on its
observations, of its conclusion as to (i) the Seller Inventory Amount (the
"Buyer Inventory Amount"), (ii) Seller Payable Amount (the "Buyer Payable
Amount"), (iii) Seller Pro Rated Items (the "Buyer Pro Rated Items"), (iv) and
Seller Receivable Amount (the "Buyer Receivable Amount") and (v) the aggregate
number of
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Subscribers, which shall be no less than 3,075 Subscribers (the "Buyer
Subscriber Number"). Seller and Seller's Parent shall make available all Books
and Records reasonably requested by Buyer to permit the preparation, audit and
review of the Preliminary Audit.
(b)(i) Within twenty (20) days following Seller's receipt of
the Preliminary Audit, Seller shall notify Buyer in writing of any objection
that it may have to such Preliminary Audit, which notice shall specify in
reasonable detail the nature of such objection (the "Objection Notice"). During
and after preparation of the Preliminary Audit, Buyer shall make available to
Seller and its representatives the Buyer's books, records and documents used in
connection with the preparation of the Preliminary Audit. Buyer and Seller shall
use reasonable efforts to resolve such objections within ten (10) days following
Buyer's receipt of the Objection Notice.
(ii) In the event that Buyer and Seller are unable to
resolve their differences within such 10 day period, the items in
dispute will be submitted for determination as promptly as practicable
to a nationally recognized accounting firm independent of Buyer,
Seller and Seller's Parent to be agreed upon by the parties (the
"Arbitration Accountants"), who shall make a determination only as to
each of the items in dispute, which determination shall be conclusive
and binding upon the parties hereto. Each of Seller, Seller's Parent
and Buyer agrees to give the Arbitration Accountants prompt and
reasonable access to all such books, records and documents and
personnel in its possession or under its control as may be reasonably
related to the disputed items. The reasonable fees and expenses of the
Arbitration Accountants shall be shared equally between Buyer, on the
one hand, and Seller and Seller's Parent on the other.
(iii) Each item as agreed to by the parties pursuant to
clause (b)(i) above or as finally determined by the Arbitration
Accountants, together with each item of the Buyer Inventory Amount,
the Buyer Payable Amount, the Buyer Receivable Amount, the Buyer Pro
Rated Items and the Buyer Subscribers Number not in dispute shall be
referred to as the "Audited Inventory Amount", the "Audited Payable
Amount", the "Audited Receivable Amount", the "Audited Pro Rated
Items" and the "Audited Subscribers Number", respectively.
Section 3.7 Post-Closing Purchase Price Adjustment. (a) On
the date which is seventy-five (75) days following the Closing Date, the
Purchase Price shall be adjusted by the parties hereto pursuant to the
provisions of this Section 3.7 to the extent necessary.
(b) If the Audited Inventory Amount is greater than the Seller
Inventory Amount estimated in the Purchase Price Adjustment Certificate, then
the difference shall result in a corresponding increase to the Purchase Price.
If the Audited Inventory Amount is less than the Seller Inventory Amount
estimated in the Purchase Price Adjustment Certificate, then the difference will
result in a corresponding decrease to the Purchase Price.
(c) If the Audited Receivable Amount is greater than the
Seller Receivable Amount estimated in the Purchase Price Adjustment Certificate,
then the difference shall result in a corresponding increase to the Purchase
Price. If the Audited Receivable Amount is less than
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the Seller Receivable Amount estimated in the Purchase Price Adjustment
Certificate, then the difference shall result in a corresponding decrease to the
Purchase Price.
(d) If the Audited Pro Rated Amount is greater than the Seller
Pro Rated Amount estimated in the Purchase Price Adjustment Certificate, then
the difference shall result in a corresponding decrease to the Purchase Price.
If the Audited Pro Rated Amount is less than the Seller Pro Rated Amount
estimated in the Purchase Price Adjustment Certificate, then the difference
shall result in a corresponding increase to the Purchase Price.
(e) If the Audited Buyer Payables is greater than the Seller
Payable Amount estimated in the Purchase Price Adjustment Certificate, then the
difference shall result in a corresponding increase to the Purchase Price. If
the Audited Buyer Payables is less then the Seller Payable Amount estimated in
the Purchase Price Adjustment Certificate, Buyer will pay to Seller such amount.
(f) Seller represents that as of August 1, 2002 Seller had
3,075 subscribers in the properties being sold hereunder. In the event that the
Audited Subscribers Number is less than Buyer Subscribers Number, the Purchase
Price shall be reduced, on a per Subscriber basis, by $925 per Subscriber
shortfall from the Buyer Subscribers Number.
(g) The adjustments contemplated by clauses (a) through (f)
above shall be netted against each other, with any positive or negative
difference resulting in a corresponding increase or decrease, as applicable, to
the Purchase Price.
Section 3.8 Final Purchase Price. If the aggregate Purchase
Price is adjusted pursuant to Section 3.7, within three (3) days of such
determination, the Principal Amount of the New Note shall be adjusted
accordingly by the Seller's Parent and Seller's Parent shall promptly deliver a
new promissory note to Buyer to replace the adjusted New Note (with a
corresponding increase in the Principal Amount in the event of a downward
adjustment of the Purchase Price and a corresponding decrease in the Principal
Amount in the event of an upward adjustment of the Purchase Price).
ARTICLE IV
CLOSING
Section 4.1 Closing. The transactions contemplated by this
Agreement shall close (the "Closing") and all deliveries to be made at the time
of Closing shall take place at such date (the "Closing Date") and time as the
parties shall agree, but in no event later than the date which is 60 days after
the date hereof (the "Termination Date") at the offices of Xxxxxxx Xxxx & Xxxxx
LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, XX 00000, or at such other place or date as may
be agreed upon from time to time in writing by Seller, Seller's Parent, Buyer
and Buyer's Parent.
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Section 4.2 Deliveries by Seller and the Seller's Parent.
At or prior to the Closing, Seller and Seller's Parent shall deliver to Buyer
and Buyer's Parent, duly and properly executed, the following:
(a) Good and sufficient Xxxx of Sale, Assignment and
Assumption Agreement, in the form attached hereto as Exhibit A, conveying,
selling, transferring and assigning to Buyer title to all of the Assets other
than the Excluded Assets, free and clear of all Liens and confirming Buyer's
assumption of the Assumed Liabilities (the "Xxxx of Sale, Assignment and
Assumption Agreement"), together with the written consents of all parties
necessary in order to duly transfer such title.
(b) The Purchase Price Note.
(c) The New Note.
(d) A certificate of the Secretary of the State of Delaware
dated as of a recent date as to the existence and good standing of each of
Seller's Parent and Seller in such state.
(e) An officer's certificate of each of Seller's Parent and
Seller in accordance with Section 8.1(d).
(f) An opinion of counsel to Seller and Seller's Parent in the
form attached hereto as Exhibit C.
(g) Evidence, in form and substance reasonably satisfactory to
Buyer and its counsel, as to the satisfaction of the other conditions precedent
to the performance of its obligations specified in Article VIII.
(h) Such other separate instruments of sale, assignment or
transfer that Buyer may reasonably deem necessary or appropriate in order to
perfect, confirm or evidence title to all or any part of the Assets.
(i) A fairness opinion in accordance with Section 8.6.
(j) Resolutions of the Board of Directors of Seller and
Seller's Parent approving the transactions contemplated hereby, such Resolutions
to be reasonably acceptable to the Buyer.
(k) A certificate of the Secretary or an Assistant Secretary
of each of Seller's Parent and Seller, dated as of the Closing Date, certifying
in such detail as Buyer may reasonably request with respect to the resolutions
adopted by the governing body of each of Seller's Parent and Seller authorizing
the execution, delivery, and performance of this Agreement and the incumbency of
the officers executing this Agreement and any agreement, certificate, document
or instrument furnished pursuant hereto.
(l) Copies of all Consents.
(m) A cross-receipt, duly executed by Seller's Parent and
Seller.
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(n) Release of all Liens.
(o) Any other documents that Buyer may reasonably request
prior to the Closing in order to effectuate the transactions contemplated
hereby.
Section 4.3 Deliveries by Buyer and Buyer's Parent. On or
prior to the Closing, Buyer and Buyer's Parent shall deliver to Seller and
Seller's Parent, all duly and properly executed (if applicable), the following:
(a) The Old Note or an affidavit of lost instrument in a form
reasonably acceptable to Seller and Seller's Parent.
(b) The Purchase Price Note together with an appropriate
instrument of transfer assigning such Purchase Price Note to the Seller.
(c) The Xxxx of Sale, Assignment and Assumption Agreement.
(d) The Waiver.
(e) An officer's certificate of Buyer and Buyer's Parent in
accordance with Section 7.1(d).
(f) A Cross-receipt, duly executed by Buyer and Buyer's
Parent.
(g) Such other separate instruments of assumption that Seller
may reasonably deem necessary or appropriate in order to confirm or evidence
Buyer's assumption of the Assumed Liabilities.
(h) Any other documents that Seller or Seller's Parent may
reasonably request prior to the Closing in order to effectuate the transactions
contemplated hereby.
(i) Resolutions of the Board of Directors of Buyer and Buyer's
Parent approving the transactions contemplated hereby, specifically including
the reduction of the Principal Amount of the Old Note and the Waiver by Buyer's
Parent, such Resolutions to be reasonably acceptable to the Seller and Seller's
Parent.
(j) A certificate of the Secretary or an Assistant Secretary
of each of Buyer's Parent and Buyer, dated as of the Closing Date, certifying in
such detail as Seller and Seller's Parent may reasonably request with respect to
the resolutions adopted by the governing body of each of Buyer's Parent and
Buyer authorizing the execution, delivery, and performance of this Agreement and
the incumbency of the officers executing this Agreement and any agreement,
certificate, document or instrument furnished pursuant hereto.
(k) The written Waiver from Buyer's Parent referred to in
Section 3.1.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
Section 5.1 Representations of Buyer and Buyer's Parent.
Buyer and Buyer's Parent, for good and valuable consideration, the receipt of
which is hereby acknowledged, hereby jointly and severally represent and warrant
to Seller and to Seller's Parent as of the date hereof and as of the Closing
Date that:
(a) Corporate Organization; Requisite Authority to Conduct
Business. Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Buyer's Parent is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of New York. Buyer and Buyer's Parent have full power and
authority to enter into this Agreement, to perform its obligations hereunder and
to consummate the transactions contemplated hereby; and this Agreement, on or
prior to the Closing, has been duly authorized and approved by all requisite
organizational action and no further action on the part of Buyer or Buyer's
Parent will be necessary to authorize the execution and delivery by them of, and
the performance of their obligations under, this Agreement. There are no
corporate, contractual, statutory or other restrictions of any kind upon the
power and authority of Buyer or Buyer's Parent to execute and deliver this
Agreement and to consummate the transactions contemplated hereunder and no
action, waiver or consent by any federal, state, municipal or other governmental
department, commission or agency ("Governmental Authority") is necessary to make
this Agreement a valid instrument binding upon Buyer or Buyer's Parent in
accordance with its terms.
(b) Execution and Delivery. Neither Buyer nor Buyer's Parent
is required to submit any notice, report or other filing with any Governmental
Authority in connection with the execution, delivery or performance of this
Agreement. This Agreement has been duly executed and delivered by Buyer and
Buyer's Parent and when executed and delivered by Seller and Seller's Parent in
accordance with its terms will constitute, upon the approval by all requisite
organizational action, the legal, valid and binding obligations of Buyer and
Buyer's Parent, enforceable against Buyer and Buyer's Parent in accordance with
its terms, except (i) as such enforceability may be limited by or subject to any
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally, (ii) as such obligations are subject to
general principles of equity and (iii) as rights to indemnity may be limited by
federal or state securities laws or by public policy.
(c) No Conflicts; Absence of Defaults. The execution, delivery
and performance of this Agreement by Buyer and Buyer's Parent and the
consummation of the transactions contemplated hereby does not and will not
conflict with or violate (a) the organizational or governing documents of Buyer
or Buyer's Parent or (b) any material law, administrative regulation or rule or
court order, judgment or decree applicable to Buyer or Buyer's Parent; nor will
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby constitute a material breach of, or any event
of default under, any material contract or agreement to which Buyer or Buyer's
Parent is bound, or by which Buyer or Buyer's Parent may be bound or affected.
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(d) Broker. No broker, finder or investment banker is entitled
to any brokerage or finder's fee or other commission from Buyer in connection
with the transactions contemplated hereby based upon the arrangements made by or
on behalf of Buyer.
Section 5.2 Representations of Seller and Seller's Parent.
Each of Seller and Seller's Parent, for good and valuable consideration, the
receipt of which is hereby acknowledged, hereby jointly and severally represent
and warrant to Buyer as of the date hereof and as of the Closing Date that:
(a) Corporate Existence; Subsidiaries. Seller is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and is duly qualified as a foreign corporation in the State of
Florida. Seller has all necessary corporate power to own, operate or lease the
Assets and to carry on the Business as presently conducted, and holds all
Permits required by any Governmental Authority in connection therewith. Complete
and correct copies of the certificate of incorporation of Seller and all
amendments thereto, certified by the Secretary of State of the State of
Delaware, and the by-laws of Seller, and all amendments thereto, certified by
the secretary of Seller have previously been delivered to Buyer. Seller is
qualified to transact business as a foreign corporation in each jurisdiction in
which the ownership of the Assets or the transaction of the Business requires
such qualification, except where the failure to be so qualified would not, in
the aggregate, have a Material Adverse Effect on Seller.
(b) Authorization; Validity. Each of Seller and Seller's
Parent has all requisite power and authority, corporate or otherwise, to enter
into this Agreement and all documents and instruments required to be executed by
each such party (collectively, the "Seller's Documents"), to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby without the approval of any third party except
as listed on Schedule 5.2(b). All necessary action including, without
limitation, the approval of Seller's board of directors and its shareholder, has
been taken by Seller and Seller's Parent with respect to the execution, delivery
and performance by Seller and Seller's Parent of this Agreement and Seller's
Documents and the consummation of the transactions contemplated hereby and
thereby and no further authorization will be necessary to authorize the
execution and delivery by them hereof and thereof, and the performance of their
respective obligations hereunder or thereunder. There are no corporate,
contractual, statutory or other restrictions of any kind upon the power and
authority of Seller or Seller's Parent to execute and deliver this Agreement and
Seller's Documents and to consummate the transactions contemplated hereunder and
thereunder and no action, waiver or consent by any Governmental Authority is
necessary to make this Agreement and Seller's Documents, as appropriate, a valid
instrument binding upon Seller and Seller's Parent in accordance with their
respective terms. This Agreement has been duly executed and delivered by Seller
and Seller's Parent and constitutes, and Seller's Documents when executed at the
Closing will constitute, legal, valid and binding obligations of Seller and
Seller's Parent when this Agreement is executed by Buyer and Buyer's Parent ,
enforceable against each such party in accordance with their respective terms,
except (i) as such enforceability may be limited by or subject to any
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally, (ii) as such obligations are subject to
general principles of
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equity and (iii) as rights to indemnity may be limited by federal or state
securities laws or by public policy.
(c) No Breach of Statute or Contract. Neither the execution
and delivery of this Agreement or any of Seller's Documents nor the consummation
by Seller and Seller's Parent of the transactions contemplated hereby and
thereby, nor compliance by Seller and Seller's Parent with any of the provisions
hereof and thereof will violate or cause a default under any statute (domestic
or foreign), judgment, order, writ, decree, rule or regulation of any court or
governmental authority applicable to Seller or Seller's Parent or the Assets;
breach or conflict with any of the terms, provisions or conditions of the
certificate of incorporation or by-laws of Seller or Seller's Parent; violate,
conflict with or breach any agreement, contract, mortgage, deed of trust,
instrument, indenture or license to which Seller or Seller's Parent is a party
or by which Seller or Seller's Parent or is or may be bound or by which the
Assets or the Business may be bound, or constitute a default (in and of itself
or with the giving of notice, passage of time or both) thereunder, or result in
the creation or imposition of any encumbrance upon, or give to any other party
or parties any claim, interest or right, including rights of termination or
cancellation in, or with respect to, the Assets; or result in the loss of any
license, franchise, legal privilege or permit possessed by Seller or Seller's
Parent or give a right of termination to any party to any agreement or other
instrument to which Seller or Seller's Parent is a party or by which any of its
properties are bound. Neither Seller nor Seller's Parent is required to submit
any notice, report or other filing with any Governmental Authority in connection
with the execution, delivery or performance of this Agreement or Seller's
Documents.
(d) Financial Statements. Seller has delivered to Buyer its
unaudited financial statements for the year ended December 31, 2002 (the
"Financial Statements"), which shall include a profit and loss statement and
balance sheet with reference to the Business and the Assets for the year 2002.
Seller and Parent represent that the Financial Statements are true, correct and
complete in all material respects, have been prepared from the books and records
of Seller, and present fairly the results of operations of the Business as of
the dates and for the periods indicated.
(e) Absence of Certain Changes or Events. Except as disclosed
on Schedule 5.2(e), since December 31, 2002, and solely with respect to the
Business and Assets, there has not been with respect to Seller:
(i) Any material adverse change in the Business or Assets
(financial or otherwise), or combination thereof which reasonably could
be expected to result in any such material adverse change (a "Material
Adverse Effect") provided, however, that financial losses in the
ordinary course of business or reduction in the amount of subscribers
being conveyed hereunder, in the ordinary course of business, shall not
constitute a Material Adverse Effect, so long as such occurrences shall
not result in losses in excess of $5,000.
(ii) Other than in the usual and ordinary course of
business, any increase in amounts payable by Seller to or for the
benefit of or committed to be paid by Seller to or for the benefit of
any director, officer, consultant, agent or employee of
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Seller, in any capacity, whether in the form of salary, bonus,
consulting fee, directors fee or otherwise, or in any benefits granted
under any bonus, stock option, profit sharing, pension, retirement,
deferred compensation, insurance, or other direct or indirect benefit
plan with respect to any such person;
(iii) Any transaction entered into or carried out other than
in the ordinary and usual course of its business including, without
limitation, any transaction resulting in the incurrence of liabilities
or obligations, so long as such liabilities or obligations shall not,
individually or in the aggregate, exceed $5,000;
(iv) Any material change made in the methods of doing business
or in the accounting principles or practices or the method of
application of such principles or practices;
(v) Any Lien imposed or agreed to be imposed on or with
respect to the Assets which will not be discharged prior to the Closing
except for financing statements filed by Personal Property lessors as a
matter of notification only;
(vi) Any sale, lease or other disposition of, or any agreement
to sell, lease or otherwise dispose of any of the Assets, excluding
purchases and sales of inventory in the ordinary course of business,
individually in excess of $5,000, or in the aggregate in excess of
$25,000;
(vii) Any purchase of or any agreement to purchase capital
assets or any lease or any agreement to lease, as lessee, any capital
assets, individually in excess of $5,000 or in the aggregate in excess
of $25,000;
(viii) Any modification, waiver, change, amendment, release,
rescission or termination of, or accord and satisfaction with respect
to any material term, condition or provision of any contract,
agreement, permit, license or other instrument to which Seller is a
party, other than any satisfaction by performance in accordance with
the terms thereof in the usual and ordinary course of its business;
(ix) Any damage, destruction or similar loss, whether or not
covered by insurance having a Material Adverse Effect on the Business
or the Assets;
(x) any cancellation or termination of its current insurance
(or reinsurance) policies or any lapse of the coverage thereunder,
unless simultaneously with such termination, cancellation or lapse,
replacement policies providing coverage equal to or greater than
coverage remaining under those canceled, terminated or lapsed are in
full force and effect;
(xi) any agreement or commitment to enter into other material
agreements, commitments or contracts (including, without limitation,
any transaction resulting in the incurrence of liabilities or
obligations), except agreements, commitments or contracts made in the
ordinary course of business and not in excess of current requirements;
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(xii) any amendments to its certificate of incorporation or
by-laws or merger with or into or consolidation with any other Person,
subdivision or in any way reclassification of the character of its
business;
(xiii) (A) any employment agreement or amendments to any
employment agreement; any contract with any labor union or association
representing any employee; or (B) any adoption, entrance into or
amendment to any employee benefit plan or any changes in the actuarial
methods or assumptions used in funding any defined benefit pension
plan, or any changes in the assumptions or factors used in determining
benefit equivalencies thereunder;
(xiv) any adoption of a plan of liquidation or resolutions
providing for the liquidation, dissolution, merger, consolidation or
other reorganization of the Business;
(xv) any waiver of right of material value to the Business or
Assets;
(xvi) any revaluation of any portion the Business or Assets
including, without limitation, any write-down of the value of inventory
or other assets or any write-off of notes or accounts receivable other
than in the ordinary course of business in a manner consistent with
past practice;
(xvii) any changes of its business policies, including,
without limitation, advertising, marketing, pricing, purchasing,
personnel, sales, returns, budget or product acquisition policies other
than in the ordinary course of business and consistent with Seller's
past practices;
(xviii) any transaction between Seller, Seller's Parent or any
affiliate or associate of Seller or Seller's Parent other than on an
arm's length basis; or
(xix) any agreement to do any of the foregoing.
(f) Liabilities. Except as set forth on Section 5.2(f),
Seller has no indebtedness or liability or obligation of any nature (whether
liquidated, unliquidated, accrued, absolute, contingent or otherwise and whether
due or to become due) in respect of the Business except for any such liabilities
to be expressly assumed by Buyer or excluded hereunder.
(g) Taxes and Tax Returns.
(i) For purposes of this Agreement, (A) "Taxes" shall mean all
taxes, charges, fees, levies or other assessments, including, without
limitation, income, gross receipts, excise, Property, use, sales,
occupancy, license, payroll and franchise taxes, imposed by the United
States, or any state, local or foreign government or subdivision or
agency thereof whether computed on a unitary, combined or any other
basis; and such term shall include any interest and penalties or
additions to tax; and (B) "Tax Return" shall mean any report, return,
statement, form or other information required
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to be filed with, supplied to or otherwise made available to a taxing
authority in connection with Taxes.
(ii) Seller has (A) filed with the appropriate taxing
authorities all Tax Returns required to be filed for any period ending
on or before the Closing Date (or are properly on extension), and all
such filed Tax Returns are true, correct and complete in all material
respects, and (B) has paid in full all Taxes which are due and payable,
there are no Liens for Taxes upon the assets of Seller except for
statutory Liens for current Taxes not yet due and payable. Seller and
Seller's Parent have neither received nor have knowledge of any notice
of audit, deficiency or assessment or proposed audit from any taxing
authority with respect to Seller or the assets of Seller. None of
Seller's Tax Returns is currently being audited by any applicable
taxing authority. There have been no waivers of statutes of limitations
by Seller with respect to any Tax Returns which relate to Seller.
Seller has not filed a request with the Internal Revenue Service for
changes in accounting methods within the last two years which change
would effect the accounting for tax purposes, directly or indirectly,
of Seller. Seller has not filed any election under Section 341(f) of
the Code. Seller has complied in all material respects with all
applicable laws, rules and regulations relating to the payment and
withholding of Taxes and has withheld all amounts required by law to
be withheld from the wages or salaries of employees and independent
contractors, and is not liable for any Taxes for failure to comply
with such laws, rules and regulations.
(h) Employee Benefit Plans: Employees. Seller has not
incurred any liability under any pension plan subject to Title IV of ERISA or
any other benefit plan or program.
(i) Title to Assets; Leases.
(i) Seller has and will have on the Closing Date good
and marketable title, or valid leasehold rights (in the case
of leased Assets), to all Assets purported to be owned or
leased by it or used in the operation of the Business, in each
case, free and clear of all Liens, other than any Liens held
by Buyer's Parent. On the Closing Date, Seller will convey to
Buyer good and marketable title to the Assets free and clear
of all Liens. Except as set forth on Schedule 5.2(i),
Schedules 2.1(a)(i) through 2.1(a)(xiii) set forth a complete
and accurate list of (A) all Real Property leased by Seller in
the conduct of the Business (B) all vehicles owned or leased
by Seller, (C) all Personal Property owned by Seller and used
in connection with the Business, including without limitation,
all inventory, machinery, equipment, tooling, parts,
furniture, supplies, office equipment, including all invoices
received therefor, to the extent available, (D) all leases of
equipment or other Personal Property used in the conduct of
the Business and (E) all other owned or leased Assets with a
value in excess of $5,000. No financing statement under the
Uniform Commercial Code or similar law naming Seller or
Seller's Parent as debtor has been filed in any jurisdiction
in respect of the Assets, and neither Seller nor Seller's
Parent is a party to or bound under any agreement or legal
obligation authorizing any party to file any such financing
statement.
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(ii) Schedule 2.1(a)(vii), sets forth with respect
to each Real Property Lease, the commencement date, termination date,
renewal options, if any, and annual base rents. Each such Real Property
Lease is valid and enforceable in accordance with its terms in all
material respects and is in full force and effect. Except as set forth
on Schedule 5.2(b), no consent or approval of any landlord or other
third party in connection with the Real Property Leases is necessary
for Seller and Seller's Parent to enter into and execute this Agreement
and consummate the transactions contemplated hereby. To the knowledge
of Seller and Seller's Parent, no other party to any Real Property
Lease is in default of its obligations thereunder, and neither Seller
nor Seller's Parent (or any other party to any such Lease) has at any
time delivered or received any notice of default which remains uncured
under any such Real Property Lease and, as of the Closing Date, no
event has occurred which, with the giving of notice or the passage of
time, or both, would constitute a default under any such Real Property
Lease, except for defaults the consequence of which in the aggregate
would not have a Material Adverse Effect.
(j) Intellectual Property.
(i) Schedule 2.1(a)(viii) lists all intellectual
property owned or licensed by Seller and material to the Business,
including but not limited to registered and unregistered trademarks,
trade names, service marks, certification marks, domain names,
copyrights and registration applications for the above, and licenses to
and from third parties relating to any of the above.
(ii) Except as set forth on Schedule 5.2(j), Seller
owns or has valued and enforceable license(s) to use all the
Intellectual Property and pays no royalties with respect thereto.
Except as set forth on Schedule 5.2(j), each such license is valid,
binding and in full force and effect; and no event of default or event
or condition that, after notice or lapse of time or both, would
constitute a violation, breach or event of default thereunder on the
part of Seller, or to the knowledge of Seller or Seller's Parent, any
other party hereto, has occurred.
(iii) Except as set forth on Schedule 5.2(j), Seller
owns or has the right to use, all material trade secrets, including
know-how, inventions, designs, processes, computer software and
documentation for such software and technical data required for or
incident to the development manufacture, operation and sale of all
products and services sold or proposed to be sold by Seller in
connection with the Business, free and clear of any Liens, including
without limitation, all claims of current and former employees,
consultants, officers, directors and stockholders of Seller.
(k) Legal Proceedings, Claims, Investigations, etc. To the
best knowledge of Seller and Seller's Parent, except as set forth on Schedule
5.2(k) hereto, there is no legal, administrative, arbitration or other action or
proceeding or governmental investigation pending, or to the knowledge of Seller
and Seller's Parent, threatened, against Seller, or any director, officer or
employee thereof relating to the Business or the Assets. Neither Seller nor
Seller's Parent has knowledge of any facts or conditions which might give rise
to any order of condemnation, appropriation, or other taking of the Assets or
the Business. Neither Seller nor
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Seller's Parent has been informed of any violation of or default under, any
laws, ordinances, regulations, judgments, injunctions, orders or decrees
(including without limitation, any immigration laws or regulations) of any
court, governmental department, commission, agency, instrumentality or
arbitrator applicable to Seller, the Assets or Business. Seller is not currently
subject to any material judgment, order, injunction or decree of any court,
arbitral authority, administrative agency or other Governmental Authority that
could have an adverse effect on the Business or Assets.
(l) Insurance. Seller has insurance sufficient for the type
and nature of its business. Seller is not in default with respect to any
provision contained in any insurance policy, and has not failed to give any
notice or present any claim under any insurance policy in due and timely
fashion. Prior to the Closing, all such policies are in full force and effect.
All payments with respect to such policies are current and neither Seller nor
any of the Shareholders has received any notice threatening a suspension,
revocation, modification or cancellation of any such policy.
(m) Material Contracts. Schedule 2.1(a)(i) lists all
agreements, contracts, indebtedness, liabilities and other obligations to which
Seller is a party or by which it is bound relating to the Business or Assets
("Material Contracts") (other than ROEs, the locations covered by which are to
be listed on Schedule 5.2(aa) which (a) are for a term longer than twelve (12)
months; (b) involve receipts or expenditures by Seller greater than $5,000 in
any twelve-month period; (c) involve the creation of a Lien on any of the Assets
other than as permitted herein; (d) require Seller to indemnify any other party
for any liability; or (e) was not entered into in the ordinary course of
business. Copies of such written, and summaries of such oral, agreements,
contracts, indebtedness, liabilities and obligations have been delivered or made
available to Seller. Except as set forth on Schedule 2.1(f), each of the
contracts or agreements listed on Schedule 2.1(f) hereto is valid, binding and
in full force and effect, and no event of default or event or condition that,
after notice or lapse of time or both, would constitute a violation, breach or
event of default thereunder on the part of Seller, or to the knowledge of
Seller, any other party thereto, has occurred, other than any such matter as
would not have a Material Adverse Effect on Seller. Other than as set forth on
Schedule 2.1(f), none of such contracts or agreements contain any nonassignment
provisions that would be triggered by this Agreement or the consummation of the
transactions contemplated hereby.
(n) Certain Transactions. Except as set forth on Schedule
5.2(n), neither Seller, nor any officer, director nor, to the knowledge of
Seller or Seller's Parent, any employee of Seller, nor any member of any such
person's family is presently a party to any transaction with Seller, relating to
the Business, including without limitation, any contract, agreement or other
arrangement (i) providing for the furnishing of services by, (ii) providing for
the rental of real or personal property from, or (ii) otherwise requiring
payments to (other than for services as officers, directors or employees of
Seller), any such person or any corporation, partnership, trust or other entity
in which any such person has a substantial interest as a stockholder, officer,
director, trustee or partner.
(o) Broker. No broker, finder or investment banker is entitled
to any brokerage or finder's fee or other commission from Seller or Seller's
Parent, or to the knowledge of Seller and
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Seller's Parent, from Buyer, in connection with the transactions contemplated
hereby based on the arrangements made by or on behalf of Seller or Seller's
Parent.
(p) Environmental Matters.
(i) Seller is not the subject of, or being threatened
to be the subject of (A) any enforcement proceeding, or (B) any
investigation, brought in either case under any Federal, state or local
environmental law, rule, regulation, or ordinance at any time in effect
or (C) any third party claim relating to environmental conditions on or
off the properties of Seller. Seller has not been notified that it must
obtain any permits and licenses or file documents for the operation of
its business under federal, state and local laws relating to pollution
protection of the environment. Seller has not been notified of any
conditions on or off the properties of Seller which will give rise to
any liabilities, known or unknown, under any federal, state or local
environmental law, rule, regulation or ordinance, or as the result of
any claim of any third party. For the purposes of this Section 5.2(p),
an investigation shall include, but is not limited to, any written
notice received by Seller which relates to the onsite or offsite
disposal, release, discharge or spill of any waste, waste water,
pollutant or contaminants.
(ii) To the best knowledge, after diligent inquiry,
there are no toxic wastes or other toxic or hazardous substances or
materials, pollutants or contaminants which Seller (or, to the best
knowledge of Seller and Seller's Parent, any previous occupant of
facilities of Seller or Seller's Parent) Seller has used, stored or
otherwise held in or on any of the facilities of Seller, which, are
present at or have migrated from the facilities, whether contained in
ambient air, surface water, groundwater, land surface or subsurface
strata. The facilities have been maintained by Seller in material
compliance with all environmental protection, occupational, health and
safety or similar laws, ordinances, restrictions, licenses, and
regulations. Seller has not disposed of or arranged (by contract,
agreement or otherwise) for the disposal of any material or substance
that was generated or used by Seller at any off-site location that has
been or is listed or proposed for inclusion on any list promulgated by
any Governmental Authority for the purpose of identifying sites which
pose a danger to health and safety. There have been no environmental
studies, reports and analyses made or prepared in the last five years
relating to the facilities of Seller. Seller has not installed any
underground storage tanks in any of its facilities and, to the best
knowledge of Seller or Seller's Parent, none of such facilities
contains any underground storage tanks.
(q) Illegal Payments. To the best of their knowledge, neither
Seller nor Seller's Parent has, directly or indirectly, paid or delivered any
fee, commission or other sum of money or item of property, however
characterized, to any finder, agent, government official or other party, in the
United States or any other country, which is in any manner related to the Assets
or Business , which any such Person knows or has reason to believe to have been
illegal under any federal, state or local laws or the laws of any other country
having jurisdiction. Neither Seller nor Seller's Parent has not participated,
directly or indirectly, in any boycotts affecting any of its actual or potential
customers.
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(r) Licenses. To the best knowledge of Seller and Seller's
Parent, Seller is the holder of all state, federal and local licenses, permits
and approvals, including, without limitation, permits and approvals, required to
conduct the Business as it is presently being conducted. All such Permits are in
good standing, valid and effective, and free and clear of any Liens or other
conditions or restrictions which might limit their full utilization as
authorized by any Governmental Authority. Schedule 2.1(a)(iii) lists each Permit
held by Seller and its date of expiration.
(s) Compliance with Law. To the best knowledge of Seller and
Seller's Parent, Seller is in compliance with all laws, ordinances, regulations
and orders (including those pertaining to environmental matters) applicable to
the Business and the Assets and has no notice or knowledge of any violations,
whether actual, claimed or alleged, thereof. All revenues and proceeds collected
or to be collected from Subscribers are collectible in compliance with all laws,
ordinances, regulations and orders applicable to the Business and the Assets.
(t) Labor Matters. Neither Seller nor Seller's Parent has
received any notice from any labor union or group that it represents or intends
to represent Seller's employees. Seller has complied in all material respects
with all applicable laws affecting employment and employment practices, terms
and conditions of employment and wages and hours. Seller has not received any
notice of and there is no complaint alleging unfair labor practices against
Seller pending, or to the knowledge of Seller and Seller's Parent, threatened
before the National Labor Relations Board or any other charges or complaints
pending, or to the knowledge of Seller and Seller's Parent, threatened before
the Equal Employment Opportunity Commission, any state or local Human Rights
Commission or any other state or local agency in respect of labor or employment
matters. No labor strike, material dispute, slowdown or stoppage has occurred
with respect to Seller's employees and there is no labor strike, material
dispute, slowdown or stoppage pending or threatened with respect to Seller's
employees. There are no pending grievances or arbitration proceedings against
Seller with respect to Seller's operation of the Business.
(u) Books of Account; Records. The general ledgers, books of
account and other records of Seller in respect of the Business are complete and
correct in all material respects and have been maintained in accordance with
GAAP and the matters contained therein are fairly and accurately reflected in
the Financial Statements. All financial information in respect of the Business
that has been provided to Buyer or its agents by Seller and/or Seller's Parent
is complete and correct.
(v) Complete Disclosure. No representation or warranty made by
Seller or Seller's Parent in this Agreement, and no exhibit, schedule,
statement, certificate or other writing furnished to Buyer by or on behalf of
Seller or Seller's Parent, pursuant to this Agreement 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 contained herein and therein not misleading.
(w) Condition of the Assets. All of the Assets being sold
hereunder are sold "as is".
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(x) Disputes. There are no pending or, to the best of Seller's
knowledge, threatened disputes between Seller and any of its Locations, vendors,
suppliers, customers or other parties which in any way relate to Seller's
operation of the Business, no party has notified Seller of its intention to
cancel or terminate its relationships with Seller and no party has cancelled or
terminated its relationship with Seller in the past twelve (12) months, which
termination or cancellation may result in a Material Adverse Effect. Schedule
5.2(x) lists all vendors, suppliers, Subscribers, customers or other parties
which have commercial dealings with Seller relating to the Business.
(y) Land Use. The past and current use by Seller of 000 X.
Xxxxxxx 00, Xxxxx 0, Xxxxxxxx, Xxxxxxx 00000 and each other Location complies in
all material respects with and in no material way violates, (a) any applicable
statute, law, regulation, rule, ordinance or order of any kind whatsoever
(including, without being limited to, any building, fire, subdivision and zoning
statute, law, code, ordinance, rule, regulation, approval or order, or urban
redevelopment plan or other governmental or quasi-governmental requirement)
affecting the Location or any part thereof, (b) any building or occupancy
permit, (c) any condition, easement, right-of-way, covenant, agreement or
restriction of record affecting or otherwise relating to the Location, or (d)
any term or provision of any Lease, except for such noncompliance or violations
as would not reasonably be expected to have a Material Adverse Effect on Seller
or the Business. No current use by Seller of the Location is dependent on a
nonconforming use or other governmental approval, license or permit the absence
of which would materially limit Seller or the Business, as currently operated.
There is no pending or, to the knowledge of Seller or Seller's Parent,
threatened condemnation of all or any part of the Locations. To the knowledge of
Seller or Seller's Parent, there are no occupancy rights (written or oral),
leases or tenancies presently affecting the Locations, other than as set forth
on Schedule 5.2(y).
(z) Right of Entry; Subscribers.
(i) (i) Each MDU (defined below) complex with 50 or
more units as to which Seller has an XXX (defined below) for the
purposes of providing subscription wireless or satellite cable
television services to one or more Subscribers, as of the date hereof,
is set forth on Schedule 5.2(z)(i). "MDU" means each dwelling unit
contained in any house or building containing two or more dwelling
units, as well as each dwelling unit contained in any apartment
building complex, condominium or cooperative housing development,
mobile home or trailer park or other multi-family swelling until
building complex, as to which Seller has a right of entry ("XXX") to
provide subscription, wireless or satellite cable television services,
including, if identified on Schedule 5.2(z)(i), units under
construction or to be constructed. Schedule 5.2(z)(i) contains the
address and a description of the nature of each such MDU complex,
including the number of units in such MDU. Schedule 5.2(z)(i) sets
forth a lists of each MDU complex as to which Seller has an XXX
consisting on a trailer or mobile home park. No XXX listed has been
revoked, rescinded or otherwise withdrawn.
(ii) The following information is set forth on
Schedule 5.2(z)(ii): (A) the aggregate number of MDUs, on an MDU
complex-by-MDU complex basis, to whom Seller provided subscription
wireless or satellite cable television services as of the
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date hereof (the "Subscribers"); (B) the billing names and addresses
of each Subscriber; and (C) a description of the wireless or satellite
cable services provided by Seller to each Subscriber and the charges
invoiced to each Subscriber therefor.
(aa) Accounts Receivable. All accounts receivable of Seller
arose only from bona fide transactions in the ordinary course of Seller's
business. No material amount included in the accounts receivable of Seller as of
the Closing Date has been released for an amount materially less than the value
at which it was included or is or will be regarded as unrecoverable in whole or
in material part, except to the extent there shall have been an appropriate
reserve therefor. To the best knowledge of Seller and Seller's Parent, such
receivables are not subject to any material counterclaim, refusal to pay or set
off.
(bb) Indebtedness. Except as set forth in the Financial
Statements or on Schedule 5.2(bb), Seller does not have any obligations for
money borrowed or under any guarantees and does not have any obligations under
any agreements or arrangements to borrow money or to enter into any such
guarantee.
(cc) Joint Sellers. Seller is not a participant, as a
partner or otherwise, in any joint venture or common or pooled risk business
enterprises.
(dd) Powers of Attorney. No person has any power of
attorney to act on behalf of Seller other than such powers to so act as normally
pertain to the officers of Seller.
(ee) Broker. Neither Seller nor Seller's Parent has not
employed any broker, finder or agent, or agreed to pay or incurred any brokerage
fee, finder's fee or commission with respect to the transactions contemplated by
this Agreement.
(ff) Company Subsidiaries. Seller has no subsidiaries, and
Seller does not own of record or beneficially, directly or indirectly, (a) any
shares of outstanding capital stock or securities convertible into capital stock
of any other corporation, nor (b) any participating interest in any partnership,
joint venture or other non-corporate business enterprises.
ARTICLE VI
COVENANTS
Section 6.1 Covenants Regarding Seller's Conduct of the
Business Pending the Closing. Seller and Seller's Parent covenant and agree that
between the date of this Agreement and the Closing Date, Seller will carry on
the Business in the ordinary course and consistent with past practice, including
without limitation, to continue to maintain, repair and service the Assets on a
regular basis consistent with past practice and to replace any broken or
inoperable Assets, and to maintain all of the Assets in good condition
consistent with past practice, and will use its best efforts to (a) preserve its
business organizations intact, (b) retain the services of its present employees,
and (c) preserve the goodwill of its customers (including the Subscribers) and
suppliers, and will not, except in the ordinary course of business, purchase or
lease any Assets or incur any liability or enter into any other extraordinary
transaction, (d)
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maintain in effect all Permits necessary for the Business and (e) pay all of its
obligations (including to vendors) in the ordinary course consistent with past
practice. By way of amplification and not limitation, Seller shall not (and
Seller's Parent shall not permit Seller to) (except as contemplated hereunder),
between the date of this Agreement and the Closing Date, directly or indirectly,
do any of the following without the prior written consent of Buyer:
(a) change the general character of the Business;
(b) amend its organizational documents;
(c) have any changes made in the allocation of its ownership
interests in a manner that could have an adverse effect on the Assets or
Business;
(d) enter into, or make or permit any amendment of (or
relinquish any right under), any Material Contract, other than in the ordinary
course of business;
(e) enter into any joint venture or partnership or, acquire,
by merger or otherwise, any substantial portion of the assets or securities of,
or make any investment in, any other entity;
(f) enter into, amend or make any payment under any
employment, consulting or severance agreement with, or grant any severance pay
to, any employee, officer or director or increase the compensation of any such
Person except in accordance with policies, practices or agreements in effect on
the date hereof;
(g) establish any new employee benefit plan or broaden
eligibility for, or increase the benefits provided by, any such plan except to
the extent required by law or any insurance carrier providing benefits under an
existing plan;
(h) violate in any material respect any law, rule, judgment,
award or decree in a manner;
(i) enter into any agreement or arrangement with any of its
affiliates that would survive the Closing Date or sell, transfer or otherwise
dispose of any of the Business or Assets to any of such affiliates;
(j) make any acquisition (by merger, consolidation, or
acquisition of stock or assets or otherwise) of any person, except as
contemplated by this Agreement;
(k) except in the ordinary course of business and in a manner
consistent with past practice, sell, pledge, dispose of, or encumber or
authorize or propose the sale, pledge, disposition or encumbrance of any of the
Assets;
(l) incur any indebtedness for borrowed money, assume,
guarantee, endorse or otherwise become responsible for the obligations of any,
or make any loans or advances to any person, except in the ordinary course of
business and consistent with past practice;
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(m) authorize any single capital expenditure or series of
related capital expenditures which, individually or in the aggregate, will be in
excess of $10,000;
(n) other than as contemplated by this Agreement, release or
assign any indebtedness owed to it or any claims held by it, except in the
ordinary course of business and consistent with past practice; or
(o) take, or agree in writing or otherwise to take, any of the
foregoing actions or any action which would make any of its representations or
warranties contained in this Agreement untrue or incorrect in any material
respect as of the date when made or as of a future date.
Section 6.2 No Other Negotiations. Solely with respect to
the Business and Assets, Seller and Seller's Parent agree that, between the date
hereof and the Closing Date, each party will not, and that they will cause
Seller's and Seller's Parent's directors, officers, agents, representatives,
affiliates, stockholders and any other Person acting on its behalf not to
directly or indirectly, (i) solicit offers, inquiries or proposals for, or
entertain any offer, inquiry or proposal to enter into, any transaction that has
as a purpose a business combination or merger, an issuance or sale of a
substantial portion of debt or equity of Seller, a sale of a substantial portion
of the assets of Seller (other than the sale of inventory in the ordinary course
of business), a financing transaction of any type, or similar transaction
involving Seller (any of the foregoing, a "Competing Transaction"), (ii) provide
information to any other person regarding Seller (except in the ordinary course
of business), or (iii) conduct any discussions or negotiations, or enter into
any agreement, arrangement or understanding, regarding a Competing Transaction.
Seller and Seller's Parent will promptly notify Buyer if Seller or Seller's
Parent receives any such offer, inquiry or proposal and the details thereof, and
keep Buyer informed with respect of each such offer, inquiry or proposal. Seller
will provide Buyer with copies of all such offers, inquiries or proposals which
are in writing.
Section 6.3 Additional Covenants. Seller, Seller's Parent
and Buyer covenant and agree:
(a) Best Efforts. To proceed diligently and to use reasonable
efforts to take or cause to be taken all actions and to do or cause to be done
all things necessary, proper and advisable to consummate the transactions
contemplated by this Agreement. Seller's Parent, as the sole stockholder of
Seller, hereby approves this transaction and represents that the transactions
contemplated by this Agreement have been approved by the board of directors of
Seller.
(b) Compliance. To comply in all material respects with all
applicable rules and regulations of any Governmental Authority in connection
with the execution, delivery and performance of this Agreement and the
transactions contemplated hereby; to use all reasonable efforts to obtain in a
timely manner all necessary waivers, consents and approvals and to take, or
cause to be taken, all other actions and to do, or cause to be done, all other
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement.
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(c) Notice. To give prompt notice to the other party of (a)
the occurrence, or failure to occur, of any event whose occurrence or failure to
occur, would be likely to cause any representation or warranty contained in this
Agreement to be untrue or incorrect in any material respect at any time from the
date hereof to the Closing Date and (b) any material failure on its part, or on
the part of any of its officers, directors, employees or agents, to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder; provided, however, that the delivery of any such notice shall
not limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
Section 6.4 Announcements. Unless required by applicable
law or regulatory authority, none of the parties hereto shall issue any report,
statement or press release to the public, the trade or the press or any third
party relating to this Agreement and the transactions contemplated hereby,
except as mutually agreed to in writing by the parties hereto. Copies of any
such reports, statements or press releases, including any announcements or
disclosures mandated by law or regulatory authorities shall be delivered to each
party hereto prior to their release. Neither Seller nor Seller's Parent shall
disclose the name of Buyer or the terms of this Agreement and the transactions
contemplated hereby, in any document, release or other communication, prepared,
issued or transmitted by such party, or any director, officer, employee, agent
or representative of such party, without Buyer's prior written authorization,
unless required by applicable law or regulatory authority in which case Seller
shall provide Buyer with written notice at least 30 days prior to the required
disclosure. Notwithstanding the foregoing, Buyer may disclose information
regarding this Agreement and the transactions contemplated hereby to potential
investors and financing sources. Nothing in this Section 6.4 shall apply to any
announcements made prior to the execution of this Agreement.
Section 6.5 Access to Records. Between the date hereof and
the first to occur of (i) the Closing Date or (ii) the 31st day after the date
hereof, Seller and Seller's Parent shall provide Buyer and its agents with full
access to the properties and records of Seller upon reasonable notice during
normal business hours and shall allow Buyer and its agents, at Buyer's expense,
to make copies of such documents, records and other information pertaining to
the Business as Buyer may request for the purpose of performing due diligence.
The furnishing of any information to Buyer or any investigation made by Buyer or
its authorized representatives shall not affect or otherwise diminish or obviate
the representations and warranties made in this Agreement by Seller or Seller's
Parent, as the case may be, and Buyer's right to rely thereon.
Section 6.6 Transition of Clients. Each of Seller and
Seller's Parent shall use its best efforts to insure the orderly transfer from
Seller to Buyer of all of the customers (including Subscribers) of Seller.
Section 6.7 Environmental Audit. Buyer may order a Phase I
environmental audit of the properties leased by Seller, which audit shall be
conducted by a firm selected by Buyer at Buyer's expense; provided that such
audit shall be ordered prior to the 31st day after the date hereof. Seller shall
cooperate with Buyer in the conduct of such audits. In the event such audit
indicates the need for further testing or evaluation of such properties, Buyer
shall have the option to order such additional testing or evaluation, at its
sole expense. No later than sixty (60) days from the execution of this
Agreement, Buyer shall notify Seller in writing of
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any objections which it has to the environmental condition of any of such
properties and deliver a copy of the environmental audit to Seller.
Section 6.8 Sales and Transfer Taxes. Seller shall pay all
transfer, sales, use and other similar Taxes ("Transfer Taxes"), if any, imposed
on or in connection with the purchase, sale or transfer of the Assets to, and
the assumption of the Assumed Liabilities by, Buyer pursuant to this Agreement.
Any Tax Returns that are required to be filed in connection with Transfer Taxes
shall be prepared and filed when due by Seller in cooperation with Buyer, and
shall be consistent with the allocation of the Purchase Price as determined
under Section 3.5.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER AND THE PARENT
The obligations of Seller and Seller's Parent under this
Agreement are subject to the satisfaction, on or prior to the Closing Date,
unless waived in writing by Seller, of each of the following conditions:
Section 7.1 Conditions to Obligations of Seller.
(a) Representations and Warranties. Buyer's representations
and warranties set forth in Section 5.1 of this Agreement shall have been true
and correct when made and shall be true and correct in all material respects at
and as of the Closing as if such representations and warranties were made as of
the Closing.
(b) Performance of Agreement. All covenants, conditions and
other obligations under this Agreement which are to be performed or complied
with by Buyer as of the Closing Date shall have been performed and complied with
in all material respects on or prior to the Closing including, the delivery of
funds and the execution of instruments and documents in accordance with this
Agreement.
(c) No Adverse Proceeding. There shall be no pending or
threatened claim, action, litigation or proceeding, judicial or administrative,
or governmental investigation against Buyer, Seller or Seller's Parent for the
purpose of enjoining or preventing the consummation of this Agreement, or
otherwise claiming that this Agreement or the consummation hereof is illegal.
(d) Certificate. Buyer shall have delivered to Seller and the
Seller's Parent a certificate, dated the Closing Date, executed by Buyer's chief
executive officer to the effect that the conditions set forth in subsections
(a), (b) and (c) of this Section 7.1 have been satisfied.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
The obligations of Buyer under this Agreement are subject to
the satisfaction, on or prior to the Closing Date, unless waived in writing by
Buyer, of each of the following conditions:
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Section 8.1 Conditions to Obligations of Buyer.
(a) Representations and Warranties. The representations and
warranties of Seller and Seller's Parent set forth in Section 5.2 of this
Agreement shall have been true and correct when made and shall be true and
correct in all material respects at and as of the Closing as if such
representations and warranties were made as of the Closing.
(b) Performance of Agreement. All covenants, conditions and
other obligations under this Agreement which are to be performed or complied
with by Seller and Seller's Parent as of the Closing Date shall have been
performed and complied with in all material respects on or prior to the Closing
including, without limitation, the execution of instruments and documents in
accordance with this Agreement.
(c) No Adverse Proceeding. There shall be no pending or
threatened claim, action, litigation or proceeding, judicial or administrative,
or governmental investigation against Buyer, Seller or Seller's Parent for the
purpose of enjoining or preventing the consummation of this Agreement, or
otherwise claiming that this Agreement or the consummation hereof is illegal.
(d) Certificates. Seller shall have delivered to Buyer (a) a
certificate dated the Closing Date, executed by its chief executive officer to
the effect that the conditions set forth in subsections (a), (b) and (c) of this
Section 8.1 have been satisfied and (ii) a certificate dated the Closing Date,
executed by its secretary to the effect that (A) the certificate of
incorporation and by-laws of Seller shall have not been amended since the date
upon which certified copies of each had been delivered to Buyer and remain in
full force and effect and (B) the officers executing this Agreement and Seller's
Documents on behalf of Seller are duly elected and hold the offices set forth
therein, with copies of resolutions approved by the board of directors and the
Seller's Parent attached as an exhibit thereto.
(e) Completion of Due Diligence Review by Buyer. Buyer shall
have satisfactorily completed its due diligence review of the business, assets,
liabilities and management of Seller, which due diligence review shall be
conducted between the earlier of (i) the Closing Date and (ii) the date that is
thirty (30) days after the date hereof.
Section 8.2 No Remaining Outstanding Debt of Seller. Seller
shall not have any obligations to employees which are not Pro Rated Items, any
outstanding accounts payable, liabilities or debt, or capital lease obligations
or Liens encumbrances of any kind remaining as of the Closing Date (other than
accounts payable, liabilities and debt being paid by Seller concurrently with
the Closing and the Assumed Liabilities), including (i) liens for taxes, fees,
levies, imposts, duties or governmental charges of any kind which are not yet
delinquent or are being contested in good faith by appropriate proceedings which
suspend the collection thereof; (ii) liens for mechanics, materialmen, laborers,
employees, suppliers or other which are not yet delinquent or are being
contested in good faith by appropriate proceedings; (iii) liens created in the
ordinary course of business in connection with the leasing or financing of
office, computer and related equipment and supplies; (iv) easements and similar
encumbrances ordinarily created for xxxxxx utilization and enjoyment of Assets;
and (v) liens or defects in title or
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leasehold rights. Satisfactory evidence of the payment of all indebtedness shall
be furnished to Buyer.
Section 8.3 Operation of the Business. No Material Adverse
Effect shall have occurred between the date hereof and the Closing Date.
Section 8.4 Consents. The consent of each Governmental
Authority and each other Person whose consent is required for the consummation
of the transactions contemplated by this Agreement or for the assignment of any
of the Assets to Buyer shall have been obtained (the "Consents"), or Buyer shall
have waived in writing the receipt of such consent.
Section 8.5 Opinion of Counsel of Seller. Buyer shall have
received the opinion of counsel to Seller and Seller's Parent, dated the Closing
Date, in the form attached hereto as Exhibit C.
Section 8.6 Fairness Opinion. Seller shall have received a
fairness opinion satisfactory to Buyer with respect to the Purchase Price from
an independent financial advisor agreed upon by Buyer and Seller, which shall be
Xxxxxx Capital Corporation.
Section 8.7 Preliminary Adjustment Report. The Preliminary
Adjustment Report referred to in Section 3.3(a) shall have been timely received.
ARTICLE IX
INDEMNIFICATION
Section 9.1 Survival of Representations, Warranties and
Agreement. Subject to the limitations set forth in this Article IX and
notwithstanding any investigation conducted at any time with regard thereto by
or on behalf of Buyer, Buyer's Parent, Seller or Seller's Parent, all
representations and warranties of Buyer, Buyer's Parent, Seller and Seller's
Parent in this Agreement (other than Sections 5.2(g), (h), (i) and (p) and
Section 11.12) (each of which shall survive for the applicable statute of
limitations including all extensions thereof)) shall survive the execution,
delivery and performance of this Agreement for a period of eighteen (18) months
following the Closing Date and shall be deemed to have been made again by Buyer,
Buyer's Parent, Seller and Seller's Parent at and as of the Closing Date. The
obligation of indemnity provided herein shall survive the Closing.
Section 9.2 Indemnification.
(a) Subject to the limitations set forth in this Article IX,
each of Seller and Seller's Parent jointly and severally shall indemnify and
hold harmless Buyer from and against any and all losses, liabilities, damages,
demands, claims, suits, actions, judgments or causes of action, assessments,
costs and expenses including, without limitation, interest, penalties,
reasonable attorneys' fees, any and all reasonable expenses incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever, and any and all amounts paid in settlement
of any claim or litigation (collectively, "Damages"), asserted against,
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resulting to, imposed upon, or incurred or suffered by Buyer as a result of or
arising from the following (individually an "Indemnifiable Claim" and
collectively "Indemnifiable Claims" when used in the context of Buyer as the
Indemnified Party (as defined below)):
(i) Any inaccuracy in or breach of any of the
representations, warranties or agreements made in this Agreement by
Seller and/or Seller's Parent or the non-performance of any covenant or
obligation to be performed by Seller and/or Seller's Parent under this
Agreement;
(ii) Any liability to third parties imposed upon
Buyer as transferee of the Business or the Assets, or otherwise
relating to the conduct of the Business on or prior to the Closing
Date, except with respect to Assumed Liabilities;
(iii) Any liability other than an Assumed Liability
imposed upon Buyer and arising out of or relating to any of Seller's or
Seller's Parent's other assets, operations, businesses or activities
which are not a part of the Business or the Assets, including without
limitation, any Excluded Assets;
(iv) Any misrepresentation in or any omission by or
on behalf of Seller or Seller's Parent under this Agreement; or
(v) Any claim for brokers' or finders' fees arising
out of the transactions contemplated herein by any Person retained or
engaged by Seller or Seller's Parent in connection with the
transactions herein.
(b) Subject to the limitations set forth in this Article IX,
Buyer and Buyer's Parent shall jointly and severally indemnify and hold harmless
each of Seller and Seller's Parent from and against any and all Damages asserted
against, resulting to, imposed upon, or incurred or suffered by Seller or
Seller's Parent as a result of or arising from the following (individually an
"Indemnifiable Claim" and collectively "Indemnifiable Claims" when used in the
context of Seller or Seller's Parent as the Indemnified Party):
(i) Any liability imposed upon Seller or Seller's
Parent as a result of the conduct of the Business or use of the Assets
after the Closing Date;
(ii) The nonperformance or nonpayment by Buyer of any
of the Assumed Liabilities; or
(iii) Any misrepresentation in or any omission by or
on behalf of Buyer or Buyer's Parent under this Agreement.
(iv) Any claim for brokers' or finders' fees arising
out of the transactions contemplated herein by any Person retained or
engaged by Buyer or Buyer's Parent in connection with the transactions
herein.
(c) Without duplication of Damages, Buyer or Seller shall be
deemed to have suffered Damages arising out of or resulting from the matters
referred to in subsections (a) and
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(b) above if the same shall be suffered by Buyer's Parent or Seller's Parent,
respectively, or any subsidiary, affiliate, shareholder, officer, employee,
agent or representative of Buyer or Seller, respectively.
Section 9.3 Limitations on Indemnification. Anything to the
contrary herein not withstanding, the obligation of indemnity provided herein is
subject to the following limitations: (a) the aggregate total of all
Indemnifiable Claims shall in no event exceed $3,000,000, (b) no Indemnifiable
Claim shall be eligible for indemnification unless and until the total of all
Indemnifiable Claims exceeds $300,000, and (c) any and all payments due from any
party for indemnification hereunder shall be in the form of an adjustment, up or
down, to the New Note.
Section 9.4 Certain Tax Matters. Seller and Seller's Parent
jointly and severally agree to indemnify, defend and hold Buyer and each of its
directors and officers harmless from and against any and all Losses that Buyer
or any of its affiliates may incur or become subject to arising out of or due to
any and all federal, state and local tax liability (including interest,
penalties and additions to taxes), if any, arising out of the operation of the
Business or ownership of the Assets for any period prior to or including the
Closing Date, except that this Section 9.4 shall not apply to any Assumed
Liabilities or matters related thereto.
Section 9.5 Procedure for Indemnification with Respect to
Third Party Claims. The Indemnified Party shall give the Indemnifying Party
prompt written notice of any third party claim, demand, assessment, suit or
proceeding to which the indemnity set forth in this Article IX applies, which
notice to be effective must describe said claim in reasonable detail (the
"Indemnification Notice"). Notwithstanding the foregoing, the Indemnified Party
shall not have any obligation to give any notice of any assertion of liability
by a third party unless such assertion is in writing, and the rights of the
Indemnified Party to be indemnified hereunder in respect of any third party
claim shall not be adversely affected by its failure to give notice pursuant to
the foregoing unless and, if so, only to the extent that, the Indemnifying Party
is materially prejudiced thereby. The Indemnifying Party shall have the right to
control the defense or settlement of any such action subject to the provisions
set forth below in the event such claim solely involves an action for monetary
damages and could not affect the Indemnified Party's business going forward, but
the Indemnified Party may, at its election, participate in the defense of any
action or proceeding at its sole cost and expense. Notwithstanding the
foregoing, if there exists a conflict of interest, in the written opinion of
counsel to the Indemnified Party , which opinion and counsel are reasonably
satisfactory to the Indemnifying Party, that would make it inappropriate for the
same counsel to represent both the Indemnified Party, on the one hand, and the
Indemnifying Party, on the other hand, in connection with any Indemnifiable
Claim, then the Indemnified Party shall be entitled to retain its own counsel as
is reasonably satisfactory to the Indemnifying Party at the Indemnifying Party's
expense. In the event that such Indemnified Party shall seek indemnification as
provided herein, such Indemnified Party shall make available to the Indemnifying
Party, at its expense, all witnesses, pertinent records, materials and
information in the Indemnified Party's possession or under the Indemnified
Party's control relating thereto as is reasonably required by the Indemnifying
Party. Should the Indemnifying Party fail to defend any such Indemnifiable Claim
(except for failure resulting from the Indemnified Party's failure to timely
give notice of such Indemnifiable Claim), then, in addition
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to any other remedy, the Indemnified Party may settle or defend such action or
proceeding through counsel of its own choosing and may recover from the
Indemnifying Party the amount of such settlement, demand, or any judgment or
decree and all of its costs and expenses, including reasonable fees and
disbursements of counsel. Except as permitted in the preceding sentence, the
Indemnifying Party shall not be liable for any settlement solely for monetary
damages effected without its written consent, which consent shall not be
unreasonably withheld; provided, however, if such approval is unreasonably
withheld, the liability of the Indemnifying Party shall be limited to the amount
of the proposed compromise or settlement and the amount of the Indemnified
Party's reasonable counsel fees incurred in defending such claim, as permitted
by the preceding sentence, at the time such consent is unreasonably withheld.
Section 9.6 Set Off and Recoupment. In addition to any
other available remedies, the Indemnified Party shall have the right of set off
and recoupment against additional amounts coming due to the Indemnifying Party
under any of Seller's or Buyer's Documents or in the event that any claim or
other right of indemnification arises in favor of the Indemnified Party under
this Agreement. The Indemnified Party may proceed directly against the
Indemnifying Party with respect to any obligations of Indemnifying Party to the
Indemnifed Party. The party against whom such set off and recoupment is claimed
retain the right to lawfully contest any such set off or recoupment in an action
to collect any amounts due the party so claiming under this Agreement, or
Buyer's or Seller's Documents or such other ancillary instruments. The inclusion
of this special set off or recoupment provision shall not effect the
availability, if any, of rights of set off or recoupment arising at law or in
equity.
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
Section 10.1 Termination. This Agreement may be terminated
and the transactions contemplated by this Agreement abandoned at any time prior
to the Closing:
(a) By mutual written consent of Buyer and Seller; or
(b) By either Buyer or Seller if the transactions contemplated
by this Agreement shall not have been consummated on or before the Termination
Date, unless extended pursuant to Section 4.1 of this Agreement; provided,
however, that the right to terminate this Agreement pursuant to this Section
10.1(b) will not be available to any party, who fails intentionally and
willfully to perform any of its material obligations under this Agreement which
failure results in the failure of such transactions to be consummated by such
time;
(c) By Seller if (i) any condition specified in Article VII
hereto has not been met, or waived by Seller and Seller's Parent, at such time
as such condition can no longer be satisfied, (ii) Seller and Seller's Parent
are not in breach of their respective obligations under this Agreement, (iii)
Seller and Seller's Parent have given Buyer written notice of all reasons for
the proposed termination and (iv) Buyer has not cured or is in the process of
curing any such condition within 10 days of receiving Seller's notice; or
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(d) By Buyer if (i) any condition specified in Article VIII of
this Agreement has not been met, or waived by Buyer, at such time as such
condition can no longer be satisfied, (ii) Buyer is not in breach of its
obligations under this Agreement, (iii) Buyer has given Seller and Seller's
Parent written notice of all reasons for the proposed termination and (iv)
neither Seller nor Seller's Parent has cured or is in the process of curing any
such condition within 10 days of receiving Buyer's notice; or
(e) By either Buyer or Seller if a court of competent
jurisdiction or Governmental Authority shall have issued a final, non-appealable
order, decree or ruling (which order, decree or ruling the parties hereto shall
use their best efforts to lift), permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement, except if such
action was commenced by Buyer.
Section 10.2 Results of Termination. In the event of any
termination of this Agreement in accordance with Sections 10.1(a), (b) or (e)
hereof, this Agreement shall forthwith become void and there shall be no
liability under this Agreement on the part of any party hereto or their
respective affiliates, officers, directors, employees or agents by virtue of
such termination. In the event of any termination of this Agreement in
accordance with Section 10.1(c) or (d), the parties reserve their rights to take
any action permitted by law, including, without limitation, as provided in
Section 11.4 hereof.
Section 10.3 Amendment. This Agreement may be amended only
by the written agreement of Buyer, Buyer's Parent, Seller and Seller's Parent.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Non-Competitions; Non-Disclosure;
Non-Solicitation.
(a) During the period commencing on the date first written
above and continuing through the fifth anniversary of the Closing Date, neither
Seller nor Seller's Parent shall, individually or jointly with others, directly
or indirectly, own, manage, operate, join, control, participate in, invest in,
or otherwise be connected with, in any manner, whether as an officer, director,
employee, partner, investor or otherwise, any business entity that is engaged or
otherwise involved in the Business within the State of Florida, or operate under
any derivative using the name "ParaComm", without first obtaining the prior
written consent of Buyer, which may be withheld for any reason in the sole
discretion of Buyer.
(b) In the course of operation of the business of Seller,
Seller and Seller's Parent have received, and will continue to receive
information that gives Seller an advantage over its competitors, and which is
confidential and proprietary, relating to names and preferences of customers,
the costs and profits of particular lines, products and markets, technological
data, computer programs, know-how, potential acquisitions, sources of financing,
corporate operating and financing strategies, expansion plans and similar
related information (together, the "Confidential Material"). At no time during
the period commencing on the date first written
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above and continuing through the fifth anniversary of the Closing Date, shall
Seller or Seller's Parent, individually or jointly with others, for the benefit
of itself or any third party, publish, disclose, use, or authorize anyone else
to publish, disclose, or use any Confidential Material. Seller and Seller's
Parent severally, acknowledge that any disclosure of the Confidential Material
would cause material and irrevocable harm to Buyer and its business.
(c) At no time during the period commencing on the date first
written above and ending on the fifth anniversary of the Closing Date, shall
Seller or Seller's Parent, for itself or on behalf of any other Person, directly
or indirectly, through an agent or otherwise, (i) contact any employee of Buyer
for the purpose of hiring, diverting or otherwise soliciting such employee; or
(ii) contact any customer (including Subscribers), client or business partner of
Buyer for the purpose of soliciting, diverting or taking away any customer
(including Subscribers), client or business partner from Buyer.
(d) Seller and Seller's Parent acknowledge and agree that
Buyer's remedy at law for any breach of any of Seller's or Seller's Parent's
obligations under this Section 11.1 would be inadequate, and agree and consent
that temporary and permanent injunctive relief may be granted in a proceeding
which may be brought to enforce any provision of this Section 11.1 without the
necessity of proof of actual damage.
Section 11.2 Expenses. Except as otherwise provided herein,
Buyer and Buyer's Parent, on the one hand, and Seller and Seller's Parent, on
the other hand, acknowledge and agree that all costs and expenses, including,
without limitation attorneys', brokers' or finders' fees, incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid by
the party incurring such costs and expenses regardless of the termination of
this Agreement or the failure to consummate the transactions contemplated
hereby.
Section 11.3 Notices. All notices, requests, demands and
other communications which are required or may be given under this Agreement
shall be in writing and shall be deemed to have been duly given when delivered
personally or by facsimile transmission (and a copy is mailed by regular mail
within 24 hours of such transmission), in either case with receipt acknowledged,
or three days after being sent by registered or certified mail, return receipt
requested, postage prepaid:
(a) If to Buyer or to Buyer's Parent to:
c/o Cerberus Partners, L.P.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Neporent
with a copy (which shall not constitute notice) to:
Xxxxxxx Xxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxxx, Esq.
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(b) If to Seller or to Seller's Parent to:
c/o DualStar Technologies Corporation
00 Xxxx Xxxxxx, 00xx Xxxxx
Xxxxx Xxxxxx XX 00000
Attn: Xxxxxxx Xxxxx
with a copy (which shall not constitute notice) to:
Xxxxxxxx Xxxx, LLP
One Chase Xxxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxx
or to such other address as any party shall have specified by notice in writing
to the other in compliance with this Section 11.3.
Section 11.4 Specific Performance. The parties hereto
recognize that, because of the nature of the subject matter of this Agreement,
it would be impractical and extremely difficult to determine actual damages in
the event of a breach of this Agreement. Accordingly, if Seller or Seller's
Parent commits a breach, or threatens to commit a breach, of any of the
provisions of this Agreement, Buyer shall have the right to seek and receive a
temporary restraining order, injunction or other equitable remedy relating to
the prevention or cessation of such breach or threatened breach, including,
without limitation, the right to have the provisions of this Agreement
specifically enforced by any court having equity jurisdiction, it being
acknowledged and agreed that any such breach or threatened breach will cause
irreparable injury and that money damages will not provide an adequate remedy.
Section 11.5 Third Party Beneficiaries. Nothing herein,
expressed or implied, is intended or shall be construed to confer upon or give
to any person, firm, corporation or legal entity, other than the parties hereto,
any rights, remedies or other benefits under or by reason of this Agreement.
Section 11.6 Entire Agreement. This Agreement constitutes
the entire agreement among the parties hereto with respect to the subject matter
hereof and thereof and supersedes all prior agreements, representations and
understandings among the parties hereto.
Section 11.7 Binding Effect, Benefits, Assignments. This
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective affiliates, successors and assigns; nothing in this
Agreement, expressed or implied, is intended to confer on any other Person,
other than the parties hereto or their respective successors and assigns, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement. This Agreement may not be assigned without the prior written consent
of the other parties hereto; provided,
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however, that Buyer may assign its rights and obligations under this Agreement
without the consent of the other parties so long as any such assignee shall also
assume Buyer's obligations hereunder.
Section 11.8 Applicable Law. This Agreement and they legal
relations between the parties hereto shall be governed by and construed in
accordance with the laws of the State of New York, without regard to conflicts
of law rules of such state.
Section 11.9 Jurisdiction. Each of the parties hereto
hereby irrevocably submits to the non-exclusive jurisdiction of the United
States District Court for the Southern District of New York sitting in New York
over any action or proceeding arising out of or relating to this Agreement and
the transactions contemplated hereby and each of the parties hereto hereby
irrevocably agrees that all claims in respect of such action or proceeding may
be heard and determined in such court. Each of the parties hereto hereby
irrevocably waives, to the fullest extent legally possible, the defense of an
inconvenient forum to the maintenance of such action or proceeding.
Section 11.10 Severability. With respect to any provision
of this Agreement finally determined by a court of competent jurisdiction to be
unenforceable, such court shall have jurisdiction to reform such provision so
that it is enforceable to the maximum extent permitted by law, and all the
parties hereto shall abide by such court's determination. In the event that any
provision of this Agreement cannot be reformed, such provision shall be deemed
to be severed from this Agreement, but every other provision of this Agreement
shall remain in full force and effect.
Section 11.11 Bulk Sales. Seller and Seller's Parent
represent and warrant that no bulk sales law of any state is applicable to the
transactions contemplated by this Agreement. Seller and Seller's Parent, jointly
and severally, hereby agree to defend, indemnify and forever hold Buyer harmless
from and against any and all liability (including any claims, suits or demands
against Buyer), loss, cost (including reasonable attorney's fees), expense or
damage of any kind which Buyer may suffer as a result of any provision of any
applicable bulk sales law.
Section 11.12 Further Assurances. At, and from time to time
after the date first written above, at the request and expense of Buyer but
without further consideration, Seller or Seller's Parent will execute and
deliver such other instruments of conveyance, assignment, transfer, and delivery
and take such other action as Buyer reasonably may request in order more
effectively to convey, transfer, assign and deliver to Buyer, and to place Buyer
in possession and control of, any of the rights, properties, assets and business
intended to be sold, conveyed, transferred, assigned and delivered hereunder, or
to assist in the collection or reduction to possession of any and all of such
rights, properties, and assets or to enable Buyer to exercise and enjoy all
rights and benefits of Seller or Seller's Parent with respect thereto.
Section 11.13 Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
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Section 11.14 Headings. The headings and captions in this
Agreement are included for purposes of convenience only and shall not affect the
construction or interpretation of any of its provisions.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year hereinabove first set forth.
BUYER:
-----
PCM ACQUISITIONS CORP.
By: ________________________________
Name:
Title:
BUYER'S PARENT:
--------------
XXXXXXXXX, L.L.C.
By: ________________________________
Name:
Title:
SELLER:
------
PARACOMM INC.
By: ________________________________
Name:
Title:
PARENT:
------
DUALSTAR TECHNOLOGIES CORPORATION
By: ________________________________
Name:
Title:
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ANNEX I
INDEX OF DEFINED TERMS
Arbitration Accountants Section 3.6(b)(ii)
Assets Section 2.1(a)
Assumed Liabilities Section 2.3
Audited Inventory Amount Section 3.6(b)(iii)
Audited Payable Amount Section 3.6(b)(iii)
Audited Pro Rated Items Section 3.6(b)(iii)
Audited Receivable Amount Section 3.6(b)(iii)
Audited Subscribers Number Section 3.6(b)(iii)
Xxxx of Sale, Assignment and Assumption Agreement Section 4.2(a)
Books and Records Section 2.1(b)
Business Recitals
Buyer Introduction
Buyer Inventory Amount Section 3.6(a)
Buyer Payable Amount Section 3.6(a)
Buyer Pro Rated Items Section 3.6(a)
Buyer Receivable Amount Section 3.6(a)
Buyer Subscriber Number Section 3.6(a)
Buyer's Parent Introduction
Causes of Action Section 2.1(a)(xi)
Closing Section 4.1
Closing Date Section 4.1
Closing Purchase Price Adjustment Section 3.2(b)
Code Section 3.4
Competing Transaction Section 6.2
Confidential Material Section 11.1(b)
Consents Section 8.4
Contracts Section 2.1(a)(i)
Damages Section 9.2(a)
Excluded Assets Section 2.1(b)
Excluded Liabilities Section 2.5
Financial Statements Section 5.2(d)
Governmental Authority Section 5.1(a)
Indemnifiable Claim Section 9.2(a)
Indemnification Notice Section 9.5
Intellectual Property Section 2.1(a)(ix)
Lease Section 5.2(i)(ii)
Liens Section 2.1(a)
Locations Recitals
Material Adverse Effect Section 5.2(e)(i)
Material Contracts Section 5.2(m)
MDU Section 5.2(z)(i)
Miscellaneous Assets Section 2.1(a)(x)
New Note Section 3.1
Objection Notice Section 3.6(b)(i)
Old Note Recitals
Permits Section 2.1(a)(iii)
Person Section 2.1(a)
Personal Property Section 2.1(a)(v)
Personal Property Leases Section 2.1(a)(viii)
Preliminary Audit Section 3.6(a)
Principal Amount Section 3.1
Pro Rated Items Section 3.3
Purchase Price Section 3.1
Purchase Price Adjustment Certificate Section 3.2(a)
Purchase Price Note Section 3.1
Real Property Leases Section 2.1(a)(vii)
XXX Section 5.2(z)(i)
Seller Introduction
Seller Inventory Amount Section 3.2(a)
Seller Payable Amount Section 3.2(a)
Seller Receivable Amount Section 3.2(a)
Seller Subscriber Number Section 3.2(a)
Seller's Documents Section 5.2(b)
Seller's Parent Introduction
Subscribers Section 5.2(z)(ii)
Tax Return Section 5.2(g)(i)
Taxes Section 5.2(g)(i)
Termination Date Section 4.1
Transfer Taxes Section 6.8
Waiver Section 3.1
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