EXHIBIT 2.6
ASSET PURCHASE AGREEMENT
BY AND AMONG
LDMI TELECOMMUNICATIONS, INC.
a Michigan corporation
AND
MPOWER COMMUNICATIONS CORP.
a Nevada corporation
and
MPOWER LEASE CORP.
a Nevada corporation
February 6, 2003
TABLE OF CONTENTS
I. PURCHASE AND SALE OF ACQUIRED ASSETS 1
1.1 Purchase and Sale 1
1.2 Acquired Assets 1
1.3 Transfer of Title to Acquired Assets 3
1.4 Excluded Assets 3
1.5 Certain Liabilities Assumed 3
1.6 Liabilities Not Assumed 3
1.7 Purchase Price 4
1.8 Revenue-Based Consideration 6
1.9 Procedure for Calculating the Revenue-Based
Consideration 7
1.10 Allocation 8
II. CLOSING 8
2.1 Closing Dates 8
2.2 Deliveries at Closings 9
2.3 Third Party Consents 9
III. REPRESENTATIONS AND WARRANTIES OF SELLER 10
3.1 Organization 10
3.2 Authority and Enforceability 10
3.3 Third-Party Consents 10
3.4 No Conflict or Violation 10
3.5 Financial Condition and Liabilities 11
3.6 Absence of Certain Changes 11
3.7 Inventories and Supplies 13
3.8 Title 13
3.9 Condition of Assets 13
3.10 Leased Real Property 13
3.11 Leased Personal Property 14
3.12 Employment/Consulting Matters 14
3.13 Employee Benefit Plans 16
3.14 Material Contracts 17
3.15 Clients/Customers 18
3.16 Tax Returns and Taxes 18
3.17 Licenses and Permits 19
3.18 Intellectual Property Rights 19
3.19 No Pending Litigation or Proceedings 19
3.20 Compliance with Laws 20
3.21 Occupational Safety 20
3.22 Environmental Matters 20
3.23 Insurance Coverage 22
(i)
3.24 Products Liability and Warranty Claims 22
3.25 Insider Interests 22
3.26 Brokers and Finders 23
3.27 Accounts Payable 23
IV. REPRESENTATIONS AND WARRANTIES OF BUYER 23
4.1 Organization 23
4.2 Authority and Enforceability 23
4.3 Third-Party Consents 23
4.4 No Conflict or Violation 23
4.5 Financing 24
4.6 No Pending Litigation or Proceedings 24
4.7 Brokers and Finders 24
V. COVENANTS 24
5.1 Access to Information 24
5.2 Conduct of Business 25
5.3 Consents; Termination of Encumbrances 25
5.4 Best Efforts 25
5.5 Further Assurances 25
5.6 Update Schedules 26
5.7 Payments Received; Checks and Drafts 26
5.8 Employees 26
5.9 Endorsement Authorization 27
5.10 Cooperation in Litigation 27
5.11 Cooperation in Tax Matters 27
5.12 Exclusivity 28
5.12 Press Releases 28
5.14 Expenses of Transfer 28
VI. CONDITIONS TO CLOSING 28
6.1 Conditions to Obligations of Buyer at Each Closing 28
6.2 Conditions to Obligations of Seller at Each Closing 30
VII. INDEMNIFICATION 32
7.1 Indemnification By Seller 32
7.2 Indemnification by Buyer 33
7.3 Tax Benefits/Costs 33
7.4 Defense of Claims 33
7.5 Survival of Representations and Warranties 35
7.5 Right of Setoff 35
7.7 Remedies 35
7.8 Limitations on Indemnity Claims 35
7.9 Tax Treatment of Indemnity Payments 35
VIII. TERMINATION 36
(ii)
8.1 Termination 36
8.2 Effect of Termination 37
IX. OTHER PROVISIONS 37
9.1 Specific Performance 37
9.2 Dispute Resolution 38
9.3 Annexes, Exhibits and Schedules 38
9.4 Amendment 38
9.5 Extension; Waiver 38
9.6 Entire Agreement; No Third Party Beneficiaries 39
9.7 Governing Law 39
9.8 Accounting Terms 40
9.9 Certain Definitions 40
9.11 Notices 40
9.12 Counterparts; Headings 41
9.13 Expenses 41
9.14 Successors and Assigns 41
9.15 Partial Invalidity 41
9.16 Bulk Transfer Laws 42
EXHIBITS
A Assumption Agreement
B Xxxx of Sale
INDEX OF SCHEDULES
Schedule 1.2(a) - Equipment
Schedule 1.2(d) - Computer Software
Schedule 1.4 - Excluded Assets
Schedule 1.5 - Assumed Liabilities
Schedule 1.10 - Purchase Price Allocation
Schedule 3.3 - Seller Third-Party Consents
Schedule 3.6 - Absence of Certain Changes
Schedule 3.8A - Title (Permitted Encumbrances)
Schedule 3.8B - Title (All Assets)
Schedule 3.10 - Leased Real Property
Schedule 3.11 - Leased Personal Property
Schedule 3.12 - Employee/Consulting Matters
Schedule 3.13 - Employee Benefit Plans
Schedule 3.14(a) - (c) - Material Contracts
(iii)
Schedule 3.15 - Clients/Customers
Schedule 3.16 - Tax Returns
Schedule 3.17 - Licenses and Permits
Schedule 3.19 - No Pending Litigation or Proceedings
Schedule 3.20 - Compliance with Laws
Schedule 3.21 - Occupational Safety
Schedule 3.22(a) - (d) - Environmental Matters
Schedule 3.23 - Insurance Coverage
Schedule 3.24 - Products Liability and Warranty
Schedule 3.25 - Insider Interests
Schedule 4.3 - Buyer Third Party Consents
Schedule 9.10 - Transfer Expenses
(iv)
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made as of February
6, 2003, by and between LDMI TELECOMMUNICATIONS, INC., a Michigan corporation,
("Buyer"), and MPOWER COMMUNICATIONS CORP., a Nevada corporation ("MCC") and
MPOWER LEASE CORP., a Nevada corporation ("MLC" and, collectively with MCC, the
"Seller").
The Seller is a facilities-based communications provider offering an
integrated bundle of broadband data and voice communication services to small-
and medium-sized business customers (collectively, the "Services"). Such
Services, as conducted in the state of Ohio, are referred to herein as the
"Business."
Seller wishes to sell to Buyer, and Buyer wishes to purchase from
Seller, the Acquired Assets (as defined in Section 1.2), upon the terms and
subject to the conditions of this Agreement.
NOW THEREFORE, in consideration of the foregoing premises and the
respective covenants, representations, warranties and conditions hereinafter set
forth, and for other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties agree as follows:
I. PURCHASE AND SALE OF ACQUIRED ASSETS
1.1 Purchase and Sale. Upon the terms and subject to the conditions of
this Agreement, Seller agrees to sell, assign, transfer, convey and deliver, or
cause to be sold, assigned, transferred, conveyed and delivered, to Buyer and
Buyer agrees to purchase, (i) at the First Closing (as defined in Section 2.1)
all Acquired Assets other than the Regulated Assets and (ii) at the Second
Closing (as defined in Section 2.1), the Regulated Assets (as defined in Section
2.1); provided that, all the Acquired Assets, including the Regulated Assets,
shall be free and clear of all Liens (as defined in Section 9.10), encumbrances,
liabilities or obligations, except those expressly assumed by Buyer pursuant to
Section 1.5.
1.2 Acquired Assets. The term "Acquired Assets" means all of the
business, assets, properties, goodwill and rights owned by the Seller and
primarily used or primarily held for use in connection with the operation of the
Business, of whatever kind and nature, real or personal, tangible or intangible,
other than the Excluded Assets (as defined in Section 1.4), including, but not
limited to, the following:
(a) all equipment (as defined in the Uniform Commercial Code of the State of
Ohio, Ohio Rev. Code Xxx. ss.1309 (the "UCC")) and, to the extent not otherwise
constituting equipment as defined above, all other items of tangible personal
property, in each case whether or not capitalized on the Seller's books,
including, without limitation, the items listed on Schedule 1.2(a);
(b) all trade accounts receivable and other rights to payment
from customers of the Seller for products or services to be provided on
or after the First Closing Date, all
other accounts or notes receivable of the Seller to the extent related
to the Business, and any claim, remedy or other right related to any
of the foregoing, in each case for periods occurring on or after the
First Closing Date ("Accounts Receivable"), with payments of Accounts
Receivable remitted from one party to the other, as applicable, in
accordance with Section 5.7(a).
(c) all rights in, to and under all leases of tools, furniture,
machinery, supplies, vehicles, equipment and other items of personal
property listed on Schedule 3.11 and excluding such leased personal
property if Buyer does not expressly assume the relevant lease;
(d) all rights of the Seller to computer software, and related
documentation, licensed to Seller by third parties primarily utilized
in the Business, as listed on Schedule 1.2(d);
(e) all real property, leasehold and other interests in real
property of the Seller listed on Schedule 3.11, in each case together
with all buildings, improvements, fixtures and all appurtenances
thereto;
(f) to the extent transferable, all right, title and interest
of Seller in, to and under all contracts, agreements, purchase orders,
customer orders and work orders primarily related to the Business,
including those listed on Schedule 3.14(a);
(g) all rights, claims, causes of action and choses in action
against third parties (including, but not limited to, rights against
suppliers under warranties covering any inventory, machinery or
equipment) arising after the First Closing as a result of the operation
of the Business after the First Closing;
(h) original versions, or, where more practicable, copies of all
books and records primarily relating to the Business (and reasonable
access to all books and records relating to the Business), including,
but not limited to, financial, accounting and personnel records,
property records, production records, engineering records,
environmental compliance records, files, invoices, customer lists and
records (including, without limitation, names of any applicable
contacts, addresses, nature and volume of orders, and date of
purchases), auditors lists and records, supplier lists and records and
other data owned or used by Seller relating to the Acquired Assets
described in subparagraphs (a) through (j) of this Section 1.2;
(i) inventory of customer premises equipment and any computer
equipment/laptops computers utilized by the employees in the Business;
and
(j) all other tangible and intangible assets of the Seller
primarily relating to the Business, including deposits by customers of
the Business, if any, and whether or not
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carried at value or listed on the books and records of Seller, and
whether or not in the possession of Seller or others.
1.3 Transfer of Title to Acquired Assets. The sale, assignment,
conveyance, transfer and delivery by Seller of the Acquired Assets shall be made
at the First Closing or the Second Closing, as applicable, by such general
warranty deeds, bills of sale, assignments, licenses, endorsements and other
appropriate instruments of transfer as shall be necessary to vest in Buyer, as
of the appropriate closing date, good and marketable title to the Acquired
Assets, free and clear of all Liens, except for the Assumed Liabilities (as
defined in Section 1.5). Any (i) sales, use, value added, stamp, recording,
registration, transfer or similar taxes (excluding any state of Michigan single
business tax liability, but including any interest, penalties or additions to
tax with respect thereto), and (ii) expenses for outside counsel reasonably
incurred in connection with any such Taxes, in each of (i) and (ii) above,
incurred solely due to the conveyance of the Acquired Assets from Seller to
Buyer, and any transfer document recording fees will be paid by the Buyer, and
the Buyer shall hold the Seller harmless against any such Taxes and the parties
shall file such applications and documents as shall permit any such Taxes to be
assessed and paid on or prior to the First Closing in accordance with any
available pre-sale filing procedure.
1.4 Excluded Assets. Notwithstanding anything else contained in this
Agreement, the Acquired Assets will not include any assets owned by the Seller
not used or held for use primarily in the conduct of the Business, including,
but not limited to, the assets of the Seller used in the Business set forth in
Schedule 1.4 (the "Excluded Assets").
1.5 Certain Liabilities Assumed. Upon the terms and subject to the
conditions of this Agreement, Buyer shall execute and deliver to the Company on
the First Closing Date or the Second Closing Date, as applicable, an agreement
in the form attached hereto as Exhibit A (the "Assumption Agreement") pursuant
to which Buyer shall assume and agree to pay, perform and discharge (subject to
the limitations in Section 1.6), only those obligations and liabilities of the
Company set forth in Schedule 1.5, and with respect to which Buyer succeeds to
the rights of the Seller thereunder, to the extent that such obligations and
liabilities accrue from and after the applicable closing date, but not including
any liabilities or obligations of Seller arising from acts or omissions of
Seller prior to such closing date (the "Assumed Liabilities").
1.6 Liabilities Not Assumed. Except as set forth in Section 1.5, Buyer
shall not assume and shall not be responsible to pay, perform or discharge any
other obligations, liabilities, contracts or commitments of Seller of any kind
or nature whatsoever (the "Excluded Liabilities"). Seller shall pay and satisfy
when due all Excluded Liabilities where failure to pay or satisfy such Excluded
Liabilities may impair Buyer's use of or benefit from the Acquired Assets or
cause Buyer to be held liable for such Excluded Liabilities. Without limiting
the generality of the foregoing and notwithstanding anything to the contrary in
this Agreement, the Excluded Liabilities shall include, but not be limited to,
the following:
(a) any obligations or liabilities of Seller arising or incurred in
connection with the negotiation, preparation, investigation and
performance of this Agreement (except as
3
otherwise provided pursuant to this Agreement or the Management
Agreement (as defined in Section 6.1(h)) and, except as contemplated
by the Operative Agreements (as defined in Section 3.2), the
transactions contemplated hereby, including, without limitation, fees
and expenses of counsel, accountants, consultants, advisers and
others;
(b) any product liability or similar claim for injury to person or
property which arises out of or is based upon any express or implied
representation, warranty, agreement or guarantee made by the Seller,
or by reason of the improper performance or malfunctioning of a
product or service, improper design or manufacture, failure to
adequately package, label or warn of hazards or other related product
defects of any products at any time manufactured or sold or any defect
in service performed by the Seller on or prior to the First Closing
Date;
(c) any obligations or liabilities of the Seller arising under
or in connection with any Employee Plan providing benefits to any
present or former employee of the Seller;
(d) any obligations or liabilities of the Seller for any present or
past employees, agents or independent contractors of the Seller,
including, without limitation, any workers' compensation claims and
employee severance claims; provided, however, that the Assumed
Liabilities will include all residual payments for the period from the
First Closing to the Second Closing due from Seller to agents solely
for customer accounts being transferred to Buyer pursuant to this
Agreement;
(e) any obligations or liabilities with respect to the litigation,
investigations and other matters set forth on Schedule 3.19;
(f) any obligations or liabilities for any Taxes (as defined
in Section 3.16) of Seller (other than allocated to the Buyer pursuant
to Section 1.3 hereof) attributable to the Acquired Assets or the
Business and relating to any period or portion thereof ending prior to
the First Closing Date; and
(g) any other obligation or liability of the Seller of any
kind or nature, whether now in existence or hereafter arising (except
as otherwise provided pursuant to this Agreement or the Management
Agreement), not constituting Assumed Liabilities.
1.7 Purchase Price.
(a) The purchase price for the Acquired Assets shall be One Million
One Hundred Thousand Dollars ($1,100,000) (the "Initial Purchase Price"),
subject to certain prorations as described in Section 1.7(b) and adjustments
pursuant to Section 1.7(c), plus the Revenue-Based Consideration as described in
Section 1.8 (the Initial Purchase Price and the Revenue-Based Consideration,
collectively, the "Purchase Price"). The Initial Purchase Price shall be
deposited by Buyer not later than five business days after the date of this
Agreement into an escrow account to be held by JPMorgan Chase Bank (the "Escrow
Agent") in accordance with the terms of that certain Escrow Agreement, dated as
of the date of this Agreement, among
4
the Buyer, the Seller and the Escrow Agent (the "Escrow Agreement"), and to be
paid at the First Closing by wire transfer to an account specified by Seller in
accordance with the terms of the Escrow Agreement.
(b) The Purchase Price will be subject to adjustments for expenses
associated with the Acquired Assets that are prorated between Buyer and Seller,
including, but not limited to:
(i) All real property, personal property or similar ad valorem
Taxes levied with respect to the Acquired Assets for any taxable
period (or portion thereof) ending prior to the First Closing Date,
whether imposed or assessed before or after the First Closing Date,
shall be prorated between Seller and Buyer as of 12:01 A.M. on the
First Closing Date. If any such Taxes are paid by Buyer, on the one
hand, or Seller, on the other hand, the proportionate amount of such
Taxes allocable to the other party pursuant to the first sentence
hereof shall be paid by such other party to Buyer or Seller, as the
case may be, promptly after the receipt by such other party of written
notice of the payment of such Taxes. If a refund of any such Taxes is
received by the Buyer, on the one hand, or the Seller, on the other
hand, the proportionate amount of such refund attributable to Taxes
allocable to the other party pursuant to the first sentence hereof
shall be paid over to such other party promptly following the receipt
of any such refund. Any personal property taxes will be prorated based
upon fiscal year of the relevant taxing authority.
(ii) All installments of special assessments or other charges
on or with respect to the Acquired Assets payable by Seller for any
period in which the First Closing Date shall occur, including, without
limitation, base rent, common area maintenance, royalties, all
municipal, utility or authority charges for water, sewer, electric or
gas charges, garbage or waste removal, and cost of fuel, shall be
apportioned as of the First Closing Date and each party shall pay its
proportionate share promptly upon the receipt of any xxxx, statement
or other charge with respect thereto. If such charges or rates are
assessed either based upon time or for a specified period, such
charges or rates shall be prorated as of 12:01 A.M. on the First
Closing Date. If such charges or rates are assessed based upon usage
of utility or similar services, such charges shall be prorated based
upon meter readings taken on the First Closing Date.
(iii) All refunds, reimbursements, installments of base rent,
additional rent, license fees or other use related revenue receivable
by any party to the extent attributable to the operation of the
Business for any period in which the First Closing shall occur shall
be prorated so that Seller shall be entitled to that portion of any
such installment applicable to the period up to but not including the
First Closing Date and Buyer shall be entitled to that portion of any
such installment applicable to any period from and after the First
Closing Date, and if Buyer or Seller, as the case may be, shall
receive any such payments after the First Closing Date, they shall
promptly remit to such other parties their share of such payments.
5
(iv) All prepayments made by Seller with respect to the
Acquired Assets or the Business, including but not limited to advance
payments on maintenance agreements and deposits, shall be prorated so
that Seller shall be entitled to that portion of any such payment
applicable to the period after and including the First Closing Date,
and in the case of any deposits, the full amount of the deposit shall
be the amount of the adjustment.
Notwithstanding the foregoing, neither party shall be entitled to
prorations pursuant to this Section 1.7(b) for expenses that have been refunded
or otherwise paid by third parties, or to the extent any party is reimbursed for
such expenses pursuant to the terms of any of the Operative Agreements. The
prorations pursuant to this Section 1.7(b) may be calculated after the First
Closing Date, as each item to be prorated (including without limitation any such
Tax, obligation, assessment, charge, refund, reimbursement, rent installment,
fee or revenue) accrues or comes due, provided that, in any event, any such
proration shall be calculated not later than thirty (30) days after the party
requesting proration of any item obtains the information required to calculate
such proration of such item, and the party owing the prorated amount shall pay
such amount to the other party as soon as practicable but in no event more than
5 Business Days after the final determination of such amount.
(c) The Purchase Price will be subject to further adjustment for any
reimbursement due Buyer pursuant to paragraph 3 of that certain Letter of Intent
between the Buyer and Mpower Holding Corporation, dated January 7, 2003,
regarding the transactions contemplated by this Agreement.
1.8 Revenue-Based Consideration. Subject to adjustment as provided
herein, the "Revenue-Based Consideration" will be equal to the sum of (i) the
total revenue generated during the thirty day period ending March 10, 2003 (the
"Second Month Revenue Period") by the customers of the Business as of January 8,
2003 for Services provided to such customers by Seller prior to January 8, 2003,
net of allowance for bad debt, sales credits and other normal and customary
adjustments, calculated in accordance with U.S. generally accepted accounting
principles, consistently applied ("GAAP"), multiplied by two (the "Second Month
Consideration") and (ii) the total revenue generated during the thirty day
period ending May 9, 2003 (the "Fourth Month Revenue Period") by the customers
of the Business as of January 8, 2003 for Services provided to such customers by
the Seller prior to January 8, 2003, net of allowance for bad debt, sales
credits and other normal and customary adjustments (the "Fourth Month
Consideration"). The Revenue-Based Consideration shall be adjusted by deducting
a credit (the "RBC Credit") of 1/2 of the Transfer Expenses (as defined in
Section 9.10) incurred by Buyer pursuant to Section 5.14; provided, however,
that the RBC Credit shall have a maximum value of $400,000. The amount of the
Revenue-Based Consideration shall be paid by wire transfer by Buyer to an
account specified by Seller. As soon as practicable, but in no event more than 2
business days, after the calculation of each of the Second Month Consideration
and the Fourth Month Consideration becomes binding and conclusive on the parties
pursuant to Section 1.9, or, if later, on the First Closing Date, Buyer shall
make the wire transfer payment provided for in this Section 1.8.
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1.9 Procedure for Calculating the Revenue-Based Consideration.
(a) Within 15 business days after the end of each of the Second
Month Revenue Period and the Fourth Month Revenue Period, Buyer shall deliver to
Seller a detailed statement of the calculation of the Second Month Consideration
and the Fourth Month Consideration, as applicable (each, a "Revenue-Based
Consideration Calculation").
(b) If Seller accepts the Revenue-Based Consideration Calculation
by written notice of such acceptance to Buyer, the Revenue-Based Consideration
Calculation will be deemed binding and conclusive on each of the Seller and the
Buyer. The Revenue-Based Consideration Calculation will also be binding and
conclusive on the Seller and the Buyer unless, on or prior to 10 business days
after the delivery of the Revenue-Based Consideration Calculation to the Seller,
the Seller gives written notice to the Buyer of an objection to any item of the
Revenue-Based Consideration Calculation, including a reasonable description of
the nature and amount of the item objected to. If such an objection is made, any
item not objected to shall be binding and conclusive on the parties. If the
parties are unable to reach agreement with respect to any item objected to
within 10 business days after the Seller's notice of objection (the "Settlement
Period"), the joint determination of the respective certified public accountants
of the Buyer and the Seller as to any such item shall be binding and conclusive
on the parties. If such certified public accountants cannot agree within 30 days
after the expiration of the Settlement Period, at the option of either the
Buyer, on the one hand, or the Seller, on the other hand, any item so disputed
shall be submitted to a third, nationally recognized, certified public
accounting firm mutually selected by the parties (the "Reviewing Accountants");
provided, however, that in the event the parties have selected Reviewing
Accountants pursuant to Section 1.9(b) of that certain Asset Purchase Agreement,
dated January 8, 2003, by and between Buyer and Seller regarding the sale of
Seller's business located in the state of Michigan (the "Michigan Asset Purchase
Agreement"), the Reviewing Accountants selected pursuant to this Section 1.9(b)
shall be the same Reviewing Accountants as selected pursuant to the Michigan
Asset Purchase Agreement. If issues are submitted to the Reviewing Accountants
for resolution, Seller and Buyer shall furnish or cause to be furnished to the
Reviewing Accountants such work papers and other documents and information
relating to the disputed issues as the Reviewing Accountants may request and are
available to that party or its agents and shall be afforded the opportunity to
present to the Reviewing Accountants any material relating to the disputed
issues and to discuss the issues with the Reviewing Accountants Any
determination made by the Reviewing Accountants shall be binding upon the
parties and a judgment may be entered upon such determination.
(c) Each party shall bear the cost of its own independent public
accountants for services rendered pursuant to this Section 1.9. The fees and
expenses of the Reviewing Accountants incurred in connection with services
rendered pursuant to this Section 1.9 shall be borne by the Seller and the Buyer
in inverse proportion to the award granted to the Seller and the Buyer by the
Reviewing Accountants, unless (i) the Reviewing Accountants determine that such
dispute on the part of the Seller was frivolous, in which case the fees and
expenses shall be borne solely by the Seller, or (ii) the Reviewing Accountants
determine that Revenue-Based
7
Consideration Calculation originally delivered by Buyer to Seller was not in
good faith, negligently prepared or blatantly in error, in which case the fees
and expenses shall be borne solely by the Buyer. For example, if the dispute
relates to $10,000 in Net Revenue Adjustment, and the Reviewing Accountants
award $6,000 to party A and $4,000 to party B, then the Reviewing Accountant's
fees and expenses shall be apportioned as follows: B shall pay 60% and A shall
pay 40% of such fees and expenses.
1.10 Allocation; Characterization for Tax Purposes. (a) The sum of the
Purchase Price and the Assumed Liabilities will be allocated among the Acquired
Assets as set forth on Schedule 1.10. Seller and Buyer each hereby covenant and
agree that it will not take a position on any Tax Return, before any
governmental agency charged with the collection of any income tax, or in any
judicial proceeding, that is in any way inconsistent with the terms of this
Section 1.10. Any subsequent adjustments to the sum of the Purchase Price and
the Assumed Liabilities will be reflected in the allocation hereunder in a
manner consistent with Section 1060 of the Internal Revenue Code of 1986, as
amended (the "Code") and the treasury regulations thereunder. Each of the Seller
and the Buyer agrees to cooperate with the other in preparing Internal Revenue
Form 8594 for filing by each and to furnish the other with a copy of such form
prepared in draft within a reasonable period before its filing is due.
(b) Buyer and Seller agree that for all purposes relating to Taxes the
transactions contemplated by this Agreement shall be regarded as a sale of the
Acquired Assets by Seller to Buyer as of the First Closing Date. Buyer and
Seller agree that Buyer shall report all income and expenses incurred on or
after the First Closing Date that are attributable to the Acquired Assets as the
income or expenses of the Buyer, notwithstanding the fact that the Seller will
continue to hold title to certain Acquired Assets for a period of time after the
First Closing Date.
II. CLOSING
2.1 Closing Dates. (a) Subject to the conditions set forth in this
Agreement, the purchase and sale of the Acquired Assets (other than the
Regulated Assets) pursuant to this Agreement (the "First Closing") shall take
place at the offices of Buyer's counsel, at 000 Xxxxxxxxxxx Xxxxxx, Xxxxxxx,
Xxxxxxxx 00000, at 10:00 o'clock A.M., local time, at the later of (i) Xxxxx 0,
0000 (xx) the third Business Day following the satisfaction or waiver of all
conditions to the obligations of the parties set forth in Sections 6.1 and 6.2,
or (iii) at such other time, place and date as shall be mutually agreed on by
Buyer and Seller in writing. The date on which the First Closing is to occur is
herein referred to as the "First Closing Date" and the First Closing shall be
deemed to be effective as of the opening of business on the First Closing Date.
On and after the First Closing Date until the Second Closing Date
(hereinafter defined), Seller will continue to hold naked title to such customer
base of the Business included in the Acquired Assets as may not be legally
transferred to Buyer under applicable federal or state laws or regulations until
the passage of a period of notification (the "Regulated Assets"), and will
cooperate with Buyer with respect to such assets pursuant to the Management
Agreement and will use reasonable efforts to keep them intact, in each case at
Buyer's expense.
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(b) The closing of the transfer of the Regulated Assets to Buyer
(the "Second Closing") will occur (i) no later than the third business day
following the satisfaction and fulfillment or waiver of the conditions to the
obligations of the parties set forth on Sections 6.1 and 6.2 (the "Second
Closing Date") or (ii) at such other time, place and date as shall be mutually
agreed on by Buyer and Seller in writing.
2.2 Deliveries at Closings.
(a) At the First Closing:
(i) Seller shall deliver to Buyer (A) an appropriately executed
general assignment and xxxx of sale in the form attached hereto as
Exhibit B ("Xxxx of Sale") and such deeds, assignments and other
instruments of transfer relating to the Acquired Assets in form and
substance reasonably satisfactory to Buyer and its counsel, (B) the
various agreements, certificates and other documents and instruments
referred to in Section 6.1, (C) a receipt for the Initial Purchase
Price and (D) such other documents as Buyer or its counsel may
reasonably request to demonstrate satisfaction of the conditions and
compliance with the transactions set forth in this Agreement; and
(ii) Buyer shall deliver to Seller (A) the Initial Purchase
Price, (B) the various agreements, certificates and other documents
and instruments referred to in Section 6.2, and (C) such other
documents as Seller or its counsel may reasonably request to
demonstrate satisfaction of the conditions and compliance with the
agreements set forth in this Agreement.
(b) At the Second Closing:
(i) Seller shall deliver to Buyer (A) such xxxx of sale, deeds,
assignments and other instruments of transfer relating to the
Regulated Assets in form and substance reasonably satisfactory to the
Buyer and its counsel and (B) such other documents as Buyer or its
counsel may reasonably request to demonstrate satisfaction of the
conditions and compliance with the agreements set forth in this
Agreement.
(ii) Buyer shall deliver to Seller such documents as Seller or
its counsel may reasonably request to demonstrate satisfaction of the
conditions and compliance with the agreements set forth in this
Agreement.
2.3 Third Party Consents. To the extent that Seller's rights under any
agreement, contract, commitment, lease, Permits or other asset to be assigned to
Buyer hereunder may not be assigned without the consent of another person which
has not been obtained, this Agreement shall not constitute an agreement to
assign the same if an attempted assignment would constitute a breach thereof or
be unlawful, and Seller shall use its reasonable best efforts to obtain any such
required consent(s) as promptly as possible. If any such consent shall not be
obtained or if any attempted assignment would be ineffective or would impair
Buyer's rights under the asset in question so that Buyer would not in effect
acquire the benefit of all such rights, Seller shall use
9
its reasonable best efforts after the First Closing to act as Buyer's agent in
order to obtain for it the benefits thereunder and shall use its reasonable best
efforts to cooperate with Buyer in any other reasonable arrangement designed to
provide such benefits to Buyer.
III. REPRESENTATIONS AND WARRANTIES OF SELLER
The Seller represents and warrants to Buyer that the following
representations and warranties are correct and complete on the date hereof and
will be correct and complete as of the First Closing Date.
3.1 Organization. Each of MCC and MLC is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation. The Seller is licensed or qualified as a foreign corporation in
any jurisdiction where the Acquired Assets are located or in which the operation
of the Business requires qualification or registration. The Seller has all
requisite corporate power and authority to own, lease and operate its properties
and assets used or held for use in connection with the operation of the Business
and to carry on the Business as and where now being conducted.
3.2 Authority and Enforceability. The Seller has full power and
authority to enter into this Agreement and to carry out the transactions
contemplated hereby. The execution, delivery and performance by Seller of this
Agreement, the Transition Services Agreement (as defined in Section 6.1(g)), the
Noncompetition Agreement (as defined in Section 6.1(g)), and the other
agreements and documents to be executed and delivered pursuant to the provisions
of this Agreement (the "Operative Documents") have been or prior to First
Closing will be duly authorized by all necessary action on the part of the
Seller. This Agreement and the Operative Documents have been duly executed and
delivered by the Seller and constitute the legal, valid and binding obligation
of the Seller enforceable in accordance with their respective terms.
3.3 Third-Party Consents. Except as set forth on Schedule 3.3, no
material consent, authorization or approval of, and no registration or filing
with, any third parties or any governmental or regulatory body or authority, is
required for the execution, delivery and performance of this Agreement and the
Operative Documents by the Seller and the consummation of the transactions
contemplated hereby and thereby.
3.4 No Conflict or Violation. The execution, delivery and performance
of this Agreement and the Operative Documents, the consummation by Seller of the
transactions contemplated hereby and thereby, and the compliance with the terms
hereof and thereof do not and will not (with or without notice, the passage of
time, or both), (a) violate any provision of the Certificate of Incorporation of
the Seller, (b) violate, conflict with or result in a breach of or constitute a
default under, any term, condition, or provision of any agreement, contract,
mortgage, lease or other instrument, document or understanding related to the
Business to which Seller is a party, by which Seller may have rights or by which
any of the Acquired Assets or the Business may be bound or affected, (c) violate
any law, ordinance, code, rule, regulation, order, judgment, injunction, award
or decree of any court, arbitrator, administrative agency, or
10
governmental body or authority applicable to the Seller or the Acquired Assets,
(d) give any person the right to terminate, modify, accelerate or otherwise
change the existing rights or obligations of Seller relating to the Business or
the Acquired Assets, or (e) result in the creation of any Lien on any of the
Acquired Assets.
3.5 Financial Condition and Liabilities. The Company has previously
delivered to Buyer a true and complete copy of the fixed asset register and
schedule of liabilities of the Business, each as of November 30, 2002, and the
unaudited statement of income of the Business for the twelve months then ended,
each of which have been prepared from the books and records of the Seller (the
"Financial Information"). Such fixed asset register lists all of the assets of
the Business as of the date indicated which, individually or as an asset
category (i.e., POTS cards), have a fair market value of at least $10,000, such
schedule of liabilities list all of the liabilities or obligations of the
Business as of the date indicated which, individually, obligate the Seller to
make payments of $10,000 or more (each such liability or obligation, a
"Significant Liability"), and such statement of income presents fairly the
results of operations of the Business for the period indicated. The Business has
no Significant Liability of any nature, whether due or to become due, fixed,
contingent, accrued or otherwise, including liabilities for or in respect of
federal, state, local and foreign taxes and any interest or penalties relating
thereto, except (a) to the extent fully reflected as a liability in the schedule
of liabilities included in the Financial Information and (b) liabilities
incurred in the ordinary course of business since November 30, 2002, none of
which, individually or in the aggregate, has been materially adverse to the
Business.
3.6 Absence of Certain Changes. Except as set forth on Schedule 3.6,
since November 30, 2002, the Seller has not, with respect to the Business:
(a) incurred any material liability or obligation, fixed,
contingent, accrued, or otherwise, other than liabilities incurred in
the ordinary course of business consistent with past practice, or
discharged or satisfied any Lien or paid any material liabilities,
other than in the ordinary course of business consistent with past
practice, or failed to pay or discharge when due any material
liabilities (individually or in the aggregate), or failed to perform
any material obligations (individually or in the aggregate);
(b) mortgaged, pledged or subjected any of the Acquired Assets
to any mortgage, lien, pledge, security interest, conditional sales
contract or other encumbrance of any nature whatsoever;
(c) made or suffered any amendment or termination of any material
agreement, contract, commitment, lease or plan material to the
Business, or canceled, modified or waived any material debts or claims
material to the Business held by it or waived any rights material to
the Business;
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(d) sold or in any way transferred or otherwise disposed of any of
its assets or property material to the Business except for sales of
inventory and other transfers and dispositions in the ordinary course
of business;
(e) suffered any material casualty, damage, destruction or loss, or
any material interruption in use, of any material assets or properties
of the Business, whether or not covered by insurance, or suffered any
material repeated, recurring or prolonged shortage, cessation or
interruption of supplies or utility or other services required to
conduct the Business;
(f) suffered any Material Adverse Effect (as defined in Section
9.10);
(g) made or committed to make any capital expenditures or capital
additions or betterments to any Acquired Asset exceeding in the
aggregate $10,000;
(h) encountered any labor union organization activity, had any
actual or overtly threatened employee strikes, work stoppages,
slow-downs or lock outs, or had any material change in its relationship
with any of its employees, salesmen, distributors, or independent
contractors;
(i) made any change in the rate of compensation, commission,
bonus, or other remuneration payable, or paid or agreed to pay any
bonus, extra compensation, pension, severance, vacation pay, loan or
advance, to any member, managing partner, officer, employee, salesman,
consultant, auditor or distributor other than regularly scheduled
increases about which Buyer has received prior written notice;
(j) changed any of the accounting principles followed by it or
the methods of applying such principles or revalued any of its assets;
(k) transferred or granted any rights under, or entered into any
settlement regarding the breach or infringement of, any United States
or foreign license, patent, copyright, trademark, service xxxx, trade
name, or invention material to the Business, or modified any existing
rights with respect thereto;
(l) instituted, settled, or agreed to settle any litigation,
action, proceeding, or arbitration related to the Acquired Assets or
the Business;
(m) failed to replenish its inventories or supplies in a
normal and customary manner consistent with the Seller's prior
practices or made any purchase commitment other than in the ordinary
course of business; or
(n) except for the execution of this Agreement, entered into
any material transaction other than in the ordinary course of business
consistent with past practice.
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3.7 Inventories and Supplies. Other than supplies used in the normal
course of operating the Business, of which the Seller will have on hand at the
First Closing amounts consistent with the past practices of the Business, and
inventory as described in Section 1.2(i), the Acquired Assets do not include any
inventory.
3.8 Title. The Seller has good and marketable title to all of the
Acquired Assets free and clear of all Liens of any nature whatsoever, other than
those encumbrances set forth on Schedule 3.8A (the "Permitted Encumbrances").
Except as set forth on Schedule 3.8B, the Acquired Assets include all the assets
and properties which are necessary to conduct the Business in substantially the
manner as presently conducted, and to perform all of the contracts, leases,
agreements, commitments, purchase orders, work orders, customer orders, and
other arrangements of the Business. Except for the Acquired Assets, there are no
properties or assets necessary to conduct the Business that are owned by any
person other than the Seller which are not to be leased or licensed to Buyer
under valid, current lease or license arrangements.
3.9 Condition of Assets. All of the buildings, structures and fixtures
leased by the Seller and used or held in connection with the Business are in
good operating condition and repair, subject only to ordinary wear and
maintenance, and are usable in the regular and ordinary course of business. All
of the personal property owned or leased by the Seller that is material to the
Business is in good operating condition and repair, subject only to ordinary
wear and maintenance, and is usable in the regular and ordinary course of
business.
3.10 Leased Real Property. The Seller does not own any real property
used in the Business. Schedule 3.10 contains a true, correct and complete
schedule of all real property leased or subleased to the Seller and used in the
Business, including all modifications, amendments and supplements thereto (the
"Leased Real Property"). The Leased Real Property is the only real property the
Seller has used in the Business. The Seller has delivered to Buyer correct and
complete copies of the leases and subleases (including all amendments thereto)
listed in Schedule 3.10. With respect to each lease and sublease listed in
Schedule 3.10 (provided, however, that Seller makes no representation or
warranty regarding Lessor or Sublessor's performance with third parties or
government authorities):
a. The lease or sublease is legal, valid, binding, enforceable and in
full force and effect;
b. Subject to the written consent of the Lessor or Sublessor in
accordance with the terms and conditions of the lease and/or sublease described
in Schedule 3.10, the lease or sublease will continue to be legal, valid,
binding, enforceable and in full force and effect on identical terms following
the First Closing;
c. Neither the Seller nor, to the best of the Seller's knowledge, any
other party to the lease or sublease is in breach or default, and, to the best
of the Seller's knowledge, no event has occurred which, with notice or lapse of
time or both, would constitute such a breach or default or permit termination,
modification or acceleration under the lease or sublease;
13
d. Neither the Seller nor, to the best of the Seller's knowledge, any
other party to the lease or sublease has repudiated any provision thereof;
e. There are no material disputes, oral agreements or forbearance
programs in effect as to the lease or sublease;
f. The Seller has not assigned, transferred, conveyed, mortgaged,
deeded in trust or encumbered any interest in the leasehold or subleasehold;
g. All facilities leased or subleased thereunder have received all
material approvals of governmental authorities (including licenses and permits)
required in connection with the operation thereof and have been operated and
maintained in accordance with all material applicable laws, rules and
regulations; and
h. All facilities leased or subleased thereunder are maintained in
accordance with normal industry practice, are in good condition and repair
(normal wear and tear excepted), and are supplied with utilities and other
services necessary for the operation of said facilities.
3.11 Leased Personal Property. Schedule 3.11 contains a correct and
complete list of all leases and other agreements obligating Seller to make
annual lease payments in excess of $5,000 under which the Seller leases, holds
or operates any tools, furniture, machinery, equipment, vehicles or other
personal property owned by any other person and used in the Business. The Seller
has delivered to Buyer true, correct and complete copies of all such leases and
agreements. All of such leases and agreements are valid, binding, enforceable
and in full force and effect, there is no payment default or other material
default thereunder and no event has occurred which, with notice or lapse of time
or both, would constitute a default or permit termination, modification or
acceleration thereunder.
3.12 Employment/Consulting Matters.
(a) Schedule 3.12 lists the name, date of hire and/or appointment,
location and current annual salary, commissions, allowances or wage
rates, along with any arrangement to increase such annual salary,
commissions, allowances or wage rates, of each employee of the Seller
who works in the Business, and who is paid at an annual rate in excess
of $10,000 per annum, together with a statement of the nature of the
services rendered.
(b) Schedule 3.12 lists the names and addresses of all agents
or agencies of the Seller (including powers of attorney) with power or
authority to bind the Seller in any material respect relating to the
Business, and the purpose and scope of authority of such agency.
(c) The Seller has made all applicable unemployment
contributions and interest due with respect to all of its employees who
work in the Business under all applicable state laws.
14
(d) Except as disclosed on Schedule 3.12:
(i) the Seller is not a party to any collective bargaining
agreement or other contract or agreement with any labor
organization or other representative of any of its employees who
work in the Business, nor is any such contract or agreement
presently being negotiated;
(ii) there is no unfair labor practice, charge or complaint
pending or, to Seller's knowledge, threatened against or
otherwise affecting the employees of the Seller who work in the
Business;
(iii) there is no labor strike, slowdown, work stoppage,
dispute, lockout or other labor controversy in effect, threatened
against or otherwise affecting the Business, and the Business has
not experienced any such labor controversy within the past five
years;
(iv) no grievance is pending or, to the knowledge of the
Seller, threatened from any employee of the Seller who works in
the Business;
(v) the Seller is not a party to any employment agreement or
consulting agreement with any person or entity working in or
related to the Business, nor is any such contract or agreement
presently being negotiated;
(vi) no action, suit, complaint, charge, arbitration, inquiry,
proceeding or investigation by or before any court, governmental
agency, administrative agency or commission brought by or on
behalf of any employee, prospective employee, former employee,
retiree, labor organization or other representative of the
employees of the Seller working in the Business is pending or, to
the knowledge of the Seller, threatened;
(vii) the Seller is not a party to or otherwise bound by, any
consent decree with, or citation by, any government agency
relating to employees who work in the Business or employment
practices, wages, hours, and terms and conditions of employment
with respect to the Business;
(viii) the Seller has paid in full, or accrued in its
financial books and records, to all employees of the Seller who
work in the Business, all wages, salaries, commissions, bonuses,
benefits and other compensation due to such employees or
otherwise arising under any policy, practice, agreement, plan,
program, statute or other law;
(ix) to the knowledge of the Seller, the services of all
essential employees and consultants of the Seller who work in the
Business will continue to be available on the same terms and at
the same locations for the continuation of the Business after
consummation of the transactions contemplated hereby.
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3.13 Employee Benefit Plans.
(a) Schedule 3.13 contains a true and complete list of all
employment-related plans, including but not limited to, employment or
consulting agreements, collective bargaining and supplemental
agreements, pension, profit sharing, incentive, bonus, deferred
compensation, retirement, stock option, stock purchase, severance,
medical and hospitalization, insurance, vacation, salary continuation,
sick pay, welfare, fringe benefit and other employee benefit plans,
contracts, programs, policies and arrangements, whether written or
oral, which the Seller maintains or maintained, or under which the
Seller has or had any obligations with respect to any employee of the
Seller who works or has worked in the Business, now or at any time
during the past five years (the "Employee Plans").
(b) Except as set forth in Schedule 3.13, (i) the Seller has
no unfunded liabilities in connection with any of the Employee Plans;
(ii) all contributions, premium payments and other payments due from
the Seller to or under such Employee Plans have been paid in a timely
manner; and (iii) all additional contributions, premium payments and
other payments due on or before the First Closing Date shall have been
paid by that date.
(c) Between the date of this Agreement and the First Closing
Date, no Employee Plan will be, (i) terminated (whether partially or
otherwise), nor will any proceedings be initiated by the Seller to
terminate any such Employee Plan; (ii) amended in any manner which
would directly or indirectly increase the benefits accrued or to be
accrued by any participant thereunder; or (iii) amended in any manner
which would materially increase the cost of maintaining such Employee
Plan.
(d) Except as set forth in Schedule 3.13, with respect to each
of the Employee Plans:
(i) each Employee Plan has been established, maintained,
funded and administered in all material respects in accordance
with its governing documents, and all applicable provisions of
the Employee Retirement Income Security Act of 1974 ("ERISA"),
the Code, other applicable law, and all regulations thereunder;
(ii) there is no litigation, disputed claim (other than
routine claims for benefits), governmental proceeding, audit,
inquiry or investigation pending or, to the knowledge of the
Seller, threatened with respect to any such Employee Plan, its
related assets or trusts, or any fiduciary, administrator or
sponsor of such Employee Plan;
(iii) neither any such Employee Plan nor any other person or
entity has engaged in a "prohibited transaction" (as defined in
ERISA Section 406 or Code Section 4975) with respect to such
Employee Plan, for which no individual or class exemption exists;
and
16
(iv) each Employee Plan which is a "group health plan"
(as defined in Code Section 5000(b)(1)) has complied and will
comply at all times (whether before, on, or after the First
Closing Date) in all respects with the applicable requirements of
ERISA Sections 601 and 602, Code Section 162(k) (through December
31, 1988) and Code Section 4980B (commencing on January 1, 1989).
(e) Except as set forth in Schedule 3.13, with respect to each
Plan which is an "employee pension benefit plan" (as defined in ERISA
Section 3(2)):
(i) each such Plan which is intended to qualify as a tax-
qualified retirement plan under Code Section 410(a) has received
a favorable determination letter(s) from the Internal Revenue
Service (copies of which have been delivered to Buyer) as to
qualification of such Plan covering the period of its adoption
through the First Closing Date; all amendments required to
maintain such qualification have been timely adopted; nothing has
occurred, whether by action or failure to act, which has resulted
in or could cause the loss of such qualification (whether or not
eligible for review under the Internal Revenue Service's Closing
Agreement Program, Voluntary Compliance Resolution program or any
similar governmental agency program); and each trust thereunder
is exempt from tax pursuant to Code Section 501(a); and
(ii) no such Plan is a "multiemployer plan" (as defined
in ERISA Section 3(37), and the Seller is not, and has not been,
a participating employer under a multiemployer plan.
3.14 Material Contracts.
(a) Schedule 3.14(a) lists and includes copies of all contracts,
leases (other than those described in Schedule 3.10, which are
incorporated by reference into Schedule 3.14(a)), agreements,
commitments, purchase orders, work orders, customer orders, and other
arrangements, including all amendments thereto, to which the Seller is
a party and which are primarily related to the Business, except for
those contracts, leases, commitments, purchase orders, work orders,
and agreements (i) which were entered into in the ordinary course of
business and (ii) under which the obligations (other than the duty to
maintain confidential information related to auditing contracts) of
the Seller have been or shall be fully discharged within ninety (90)
days from the date such obligation was entered into, and (iii) which
individually involve an obligation or liability on the part of the
Seller in any amount less than Ten Thousand Dollars ($10,000) (the
"Material Contracts").
(b) All of the Material Contracts are valid and binding
obligations of the Seller and, except as set forth on Schedule
3.14(b), do not require the consent of any other party thereto to the
sale of the Business or the Acquired Assets to Buyer hereunder to
continue to be valid and binding. Except as set forth in Schedule
3.14(b), (i) none of the payments
17
required to be made by the Seller under any of the Material Contracts
has been prepaid more than thirty (30) days prior to the due date of
such payment thereunder, and (ii) to the knowledge of the Seller,
there is not any existing default, or event which, with notice or
lapse of time, or both, would constitute a default under any of the
Material Contracts.
(c) Except as set forth on Schedule 3.14(c), the Seller is not
a party to any of the following:
(i) any indenture, mortgage, note, guaranty, letter of
credit, installment obligation, agreement, or other instrument
relating to the borrowing of money or the guaranteeing of any
obligation for the borrowing of money which in any way encumbers
the Acquired Assets; or
(ii) any agreement, contract, or other commitment that would
limit the ability of the Seller (or any manager or officer
thereof) to conduct the Business (x) as presently conducted or
(y) as presently being conducted in a new geographic area (other
than the fact that the Business is only licensed in the State of
Ohio) or in any line of business, or to use or disclose any
information in the possession of the Seller related to the
Business.
(d) To the knowledge of the Seller, all prior contracts, leases,
agreements and instruments of the Seller related to the Business have
been fully performed by the Seller, and Seller has no ongoing or
unfulfilled obligations thereunder.
(e) All Material Contracts with customers of the Business are
terminable by Seller, without liability, upon thirty days written
notice.
3.15 Clients/Customers. Except as set forth on Schedule 3.15, the
Seller does not have any knowledge of any intention of, or indication by, a
Significant Client/Customer (as defined below) to terminate its business
relationship with the Seller or to limit or alter its business relationship with
the Seller in any material respect. As used in this Agreement, "Significant
Client/Customer" means any of the ten (10) largest clients or customers of the
Business, by dollar volume, during the twelve month period ended December 31,
2002. Schedule 3.15 contains a true and correct list of the Significant
Clients/Customers. Except as set forth on Schedule 3.15, the Seller has made no
payments to any client or customer of the Business or given value of any kind to
any client or customer of the business in consideration of such client or
customer's business other than as reflected on the Financial Information.
3.16 Tax Returns and Taxes. Except as set forth on Schedule 3.16, (a)
the Seller has (i) timely filed, with respect to those Tax Returns (as defined
herein) previously due, and will timely file in the future, with respect to
those Tax Returns not yet due, all material federal, state, local and foreign
tax returns, reports, statements and other similar filings (the "Tax Returns")
which include any periods prior to the First Closing Date and are required to be
filed by the Seller with respect to any federal, state, local or foreign income,
payroll, withholding, excise,
18
sales, use, personal property, occupancy, business, mercantile, real estate,
capital stock, franchise or other taxes (the "Taxes"); and (ii) timely paid, or
will timely pay, all material Taxes, interest, penalties, assessments and
deficiencies due or assessed pursuant to such Tax Returns; (b) all such Tax
Returns properly reflect the liabilities of the Seller for Taxes for the
periods, properties or events covered thereby in all material respects; (c) no
extensions of time in which to file any Tax Returns for the State of Ohio or any
jurisdiction within the State of Ohio have been executed or filed with any
taxing authority; (d) the Seller has not received any notice of assessment of
additional Taxes and has not executed or filed with any taxing authority any
agreement extending the period of assessment of any Taxes; (e) there are no
claims, examinations, proceedings or proposed deficiencies for material Taxes
pending or, to the knowledge of the Seller, threatened against the Seller (f)
the Seller is current in the payment of all withholding and other employee Taxes
for the State of Ohio or any jurisdiction in the State of Ohio which are due and
payable; (g) the accruals for Taxes contained in the books of the Seller are
adequate to cover all outstanding liabilities for Taxes of the Seller for all
periods or portions thereof ending on the First Closing Date; and (h) to the
knowledge of Seller, no claim has ever been made by an authority in a
jurisdiction where Seller does not file Tax Returns that it is or may be subject
to taxation by that jurisdiction.
3.17 Licenses and Permits. The Seller owns, holds, possesses or
lawfully uses all material franchises, licenses, permits, orders, certificates,
approvals and other governmental authorizations which are necessary to own or
lease and operate the Acquired Assets and to conduct the Business as now
conducted by it ("Permits"). Set forth on Schedule 3.17 is a correct and
complete list of the Permits. The Seller has fulfilled and performed its
obligations under each of the Permits, and no event has occurred which
constitutes or, after notice or lapse of time or both, would constitute a
material breach or material default under any of the Permits or would permit
revocation or termination of any of the Permits. The Permits are in full force
and effect and are renewable by their terms or in the ordinary course of
business without the need to comply with any special qualification procedures or
to pay any amounts other than routine filing fees. None of the Permits will be
adversely affected by consummation of the transactions contemplated hereby.
3.18 Intellectual Property Rights. The manufacture, advertising, sale
or use of any products manufactured or sold by the Seller did not and does not
infringe (nor has any claim been made that any such action infringes) the
intellectual property rights of others.
3.19 No Pending Litigation or Proceedings. Except as set forth on
Schedule 3.19, there is no litigation, investigation, arbitration or proceeding
pending or, to the knowledge of Seller, threatened against Seller relating to or
affecting the Business or any of Seller's properties or assets used in the
Business, at law or in equity, by or before any court, arbitrator or
governmental or regulatory official, body or authority, nor does Seller know of
any reasonably likely basis for any such litigation, arbitration, investigation
or proceeding, the result of which could have a Material Adverse Effect on the
Business, the Acquired Assets or the transactions contemplated hereby. There are
presently no outstanding judgments, decrees or orders of any
19
court or any governmental or administrative agency against the Seller relating
to or affecting the Business or any of Seller's properties or assets used in the
Business.
3.20 Compliance with Laws. Except as set forth on Schedule 3.20, the
Business has been conducted in compliance with all material applicable laws,
statutes, rules, regulations and orders of all governmental and regulatory
entities, whether federal, state, local or foreign. No notice, citation, summons
or order has been assessed and no investigation or review is pending or, to the
knowledge of the Seller, threatened by any governmental or other entity with
respect to any alleged violation by the Seller of any such laws, statutes,
rules, regulations or orders.
3.21 Occupational Safety. All of the Seller's facilities used or held
for use in connection with the Business are maintained and operated in
compliance with all applicable material federal and state occupational safety
and health statutes and the rules and regulations promulgated thereunder. Except
as set forth in Schedule 3.21, solely with respect to the Business, neither the
Seller nor its predecessors are or have been subject to an investigation by the
U. S. Department of Labor, litigation over compliance with such rules and
regulations or any fine, penalty or citation relating to or arising out of a
violation or alleged violation of any federal or state occupational safety and
health statute and such rules and regulations.
3.22 Environmental Matters.
(a) Except as set forth in Schedule 3.22(a), the Seller is and,
for the past three years, has been in material compliance with all
applicable Environmental Laws (as hereinafter defined) on the Leased
Real Property. Except as set forth in Schedule 3.22(a), the Seller has
not, within the past three years, received any written communication
from a governmental or regulatory department or authority, citizens
group, or director, officer, employee, person, or agent, alleging that
the Seller is not in compliance with or has violated any Environmental
Laws on the Leased Real Property.
(b) Except as set forth in Schedule 3.22(b), there is no
Environmental Claim (as hereinafter defined) pending or, to the
knowledge of the Seller, threatened against the Seller with respect to
the Leased Real Property or the Business or, to the knowledge of the
Seller, pending or threatened against any person or entity whose
liability for such Environmental Claim the Seller has retained or
assumed either contractually, by operation of law or otherwise, related
to the Leased Real Property or the Business.
(c) Except as set forth in Schedule 3.22(c), to the knowledge
of the Seller, there are no past or present actions, activities,
circumstances, conditions, events or incidents, including, without
limitation, the handling, manufacture, treatment, storage, use,
generation, release, emission, discharge, presence or disposal of any
Materials of Environmental Concern (as hereinafter defined), that could
form the basis of any meritorious Environmental Claim against the
Seller with respect to the Leased Real Property or against any person
or entity whose liability for any Environmental Claim the
20
Seller has retained or assumed either contractually, by operation of
law or otherwise, in each case related to the Leased Real Property or
the Business.
(d) Except as set forth in Schedule 3.22(d), there is no asbestos
contained in or forming part of any building, building component,
equipment, structure or office space presently owned, occupied, leased
or used by the Seller that is friable and requires, pursuant to
applicable Environmental Laws, removal or replacement for the purpose
of protecting human health or the environment on the Leased Real
Property.
(e) For purposes of this Section 3.22, the following definitions
will apply:
(i) "Environmental Laws" means the Comprehensive Environmental
Response, Compensation and Liability Act, as amended by the
Superfund Amendments and Reauthorization Act (42 U.S.C. ss. 9601
et seq.) and/or the Solid Waste Disposal Act, as amended by the
Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et
seq.) and/or the Toxic Substances Control Act (15 U. S.C. ss.
2601 et seq.) and/or the Federal Insecticide, Fungicide and
Rodenticide Act (7 U.S.C. ss. 136 et seq.) and/or the Clean Air
Act (42 U.S.C. ss. 7401 et seq.) and/or the Federal Water
Pollution Control Act (33 U.S.C. ss. 1251 et seq.) and/or the
Safe Drinking Water Act (42 U.S.C. ss. 3 00f et seq.) and/or the
Emergency Planning and Community Right To Know Act of 1986 (42
U.S.C. ss. I 100 1 et. seq.) and/or, in each case, any
equivalent, comparable or complimentary statute of the State of
Ohio or any other applicable governmental body or agency,
including any amendments or extensions thereof, in all cases in
effect as of the First Closing Date.
(ii) "Materials of Environmental Concern" means any substance:
(A) the presence of which requires investigation or
remediation under any Environmental Laws; or
(B) which is defined as a "hazardous waste," "hazardous
substance," "hazardous material," "toxic substance,"
"special waste," "regulated waste," "pollutant" or
"contaminant" under any Environmental Laws; or
(C) which is identified under any Environmental Laws as
toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic or hazardous and is
restricted or regulated by any governmental or regulatory
authority, agency, department, commission, board, agency or
instrumentality of the United States, any foreign country or
any state or any political subdivision thereof; or
21
(D) without limitation, which includes or contains
gasoline, diesel fuel or other petroleum hydrocarbons or
byproducts.
(iii) "Environmental Claim" means any claim, order,
investigation, action, suit, proceeding, injunction or demand, in
each case in writing, relating to any Environmental Laws,
including, without limitation, any claim, order, investigation,
action, suit, proceeding, injunction or demand brought by any
governmental or regulatory authority, agency, department,
commission, board, agency or instrumentality of the United
States, any foreign country or any state or any political
subdivision thereof, and any written notice advising the Seller
of any of the foregoing.
3.23 Insurance Coverage. The Seller presently maintains, and has for
the past three years maintained, adequate liability, casualty, property loss and
other insurance coverages upon its properties with respect to the conduct of the
Business. Schedule 3.23 sets forth a complete and correct list of all insurance
policies maintained by the Seller and relating to the Business, and indicating
for each policy the insurance company, type of coverage, annual premium and
whether the terms of such policy provide for retrospective premium adjustments.
There is no material default with respect to any provision contained in any such
policy, nor has there been any failure to give any notice or present any claim
under any such policy for any matter related to the Business in a timely fashion
or in the manner or detail required by the policy. No notice of cancellation or
non-renewal with respect to, or disallowance of any claim for any matter related
to the Business under, any such policy has been received by the Seller. The
Seller has not been refused any insurance related to the Business, nor has its
coverage been limited by any insurance carrier to which it has applied for
insurance or with which it has carried insurance during the last five years.
3.24 Products Liability and Warranty Claims. Except as set forth on
Schedule 3.24:
(a) Seller has made no oral or written warranties with respect
to the quality or absence of defects of the products or services of the
Business which are in force as of the date of this Agreement;
(b) there are no liabilities of or claims against the Seller
and, to the knowledge of the Seller, no liabilities or claims are
threatened against the Seller, with respect to any product liability
(or similar claim) of the Business or product warranty (or similar
claim) of the Business that relates to any product or service of the
Business manufactured or sold by the Seller;
(c) Seller has no knowledge of any facts or circumstances
which might reasonably give rise to any of the liabilities or claims
described in subsection (b) above.
3.25 Insider Interests. Except as set forth on Schedule 3.25, no
manager or executive of the Seller has any interest in any property, real or
personal, tangible or intangible, used in or
22
pertaining to the Business, and no such person has any business relationship
with the Seller pertaining to the Business, except as such manager or executive.
3.26 Brokers and Finders. The Seller has not employed any broker or
finder or incurred any liability for any financial advisory fees, brokerage
fees, commissions or finders' fees, and no broker or finder has acted directly
or indirectly for the Seller in connection with this Agreement or the
transactions contemplated herein.
3.27 Accounts Payable. Seller has no material dispute relating to the
Business with any client, consultant, auditor or supplier and shall not withhold
or offset payments to such consultant, auditor or supplier nor institute or
threaten litigation or take any other extraordinary actions.
IV. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Seller as follows:
4.1 Organization. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Michigan. Buyer has
all requisite corporate power and authority to own, lease and operate its
properties and assets and to carry out its business as and where now being
conducted.
4.2 Authority and Enforceability. The execution, delivery and
performance by Buyer of this Agreement and the Operative Documents have been
duly authorized by all necessary corporate action on the part of Buyer. This
Agreement and the Operative Documents have been duly executed and delivered by
Buyer and constitute the legal, valid and binding obligation of Buyer,
enforceable in accordance with their respective terms.
4.3 Third-Party Consents. Except as set forth on Schedule 4.3, no
consent, authorization or approval of, and no registration or filing with, any
third parties or any governmental or regulatory body or authority is required
for the execution, delivery and performance of this Agreement and the Operative
Documents by Buyer and the consummation of the transactions contemplated hereby.
4.4 No Conflict or Violation. The execution, delivery and performance
of this Agreement and the Buyer Documents, the consummation by Buyer of the
transactions contemplated hereby and thereby, and the compliance with the terms
hereof and thereof by Buyer do not and will not (with or without notice, the
lapse of time, or both) (a) violate any provision of the Articles of
Incorporation or Bylaws of Buyer, (b) violate, conflict with or result in a
breach of or constitute a default under, any term, condition, or provision of
any agreement, contract, mortgage, lease or other instrument, document or
understanding to which Buyer is a party, by which it may have rights or by which
any of its assets may be bound or affected, (c) violate any law, ordinance,
code, rule, regulation, order, judgment, injunction, award or decree of any
court, arbitrator, administrative agency or governmental body or authority
applicable to Buyer or its assets.
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4.5 Financing. The Buyer has access to all funds necessary to
consummate all of the transactions contemplated by this Agreement and all
ancillary agreements related hereto.
4.6 No Pending Litigation or Proceedings. There is not currently in
effect, and no action pending or, to the knowledge of Buyer, threatened the
effect of which could be, any order of any court or other governmental or
administrative authority or arbitrator allowing any third party to obtain
damages against Buyer as a result of the consummation of the transactions
contemplated by this Agreement or restraining, enjoining, or otherwise
preventing Buyer from the carrying out of this Agreement or the consummation of
the transactions contemplated by this Agreement.
4.7 Brokers and Finders. Except for Xxxxx Brothers Xxxxxxxx & Co., the
Buyer has not employed any broker or finder or incurred any liability for any
financial advisory fees, brokerage fees, commissions or finders' fees, and no
broker or finder has acted directly or indirectly for the Buyer in connection
with this Agreement or the transactions contemplated herein.
V. COVENANTS
5.1 Access to Information. (a) Subject to state and federal legal
restrictions, from the date of this Agreement until the Second Closing, the
Seller will afford to the officers, employees, accountants, attorneys and
authorized representatives of Buyer reasonable access to the facilities,
properties, books and records and employees of the Seller used or held for use
in the Business in order that Buyer may have full opportunity to make such
investigation as it shall desire at reasonable times and upon reasonable notice.
Subject to state and federal legal restrictions, the Seller shall provide
reasonable access by Buyer to the Significant Clients/Customers. Subject to
state and federal legal restrictions, the Seller will furnish Buyer with such
additional financial and operating data and other information relating to the
Business, including the properties, assets, financial condition and prospects of
the Business, as Buyer may reasonably request from time to time. If this
Agreement is terminated prior to either the First or Second Closing, upon
Seller's request, all books, records and other material obtained by the Buyer
from the Seller, including copies thereof, will be returned by Buyer, and Buyer
will not disclose or use any confidential information so obtained. The Buyer
will afford to the officers, employees, accountants, attorneys and authorized
representatives of the Seller reasonable access, at reasonable times and upon
reasonable prior notice, to all books, records and other material related to the
Business received by Buyer (including, but not limited to, invoices from ILECs
and other carriers) reasonably necessary for (i) Seller to be able to verify
that all credits and offsets associated with any Excluded Assets have been
properly returned to the Seller and (ii) for the purposes of calculating the
Revenue-Based Compensation.
(b) For a period of seven years after the Second Closing Date, Buyer
will maintain the books and records relating to the Business in a manner that
allows the Seller to reasonably access information necessary to facilitate the
resolution of any claims made against, or incurred by, the Seller for the
operation of the Business and the Acquired Assets prior to the Second
24
Closing and, at reasonable times and upon reasonable prior notice, will allow
the Seller reasonable access to such books and records.
5.2 Conduct of Business. Except as otherwise contemplated by this
Agreement and pursuant to the Management Agreement, during the period from the
date of this Agreement and continuing until the First Closing, the Seller agrees
to operate the Business in the ordinary course and consistent with past
practices and to use its reasonable best efforts to: (a) preserve the Business
intact and conserve the goodwill related thereto, (b) preserve intact the
present business organization of the Business, keep available the services of
present key employees, (c) preserve present relationships with consultants,
auditors, suppliers, customers, lenders and others having business dealings with
them, (d) maintain in full force and effect all Permits required for the
operation of the Business as presently conducted, (e) maintain consistent with
past practices of the Seller, all of the buildings, offices and other properties
used or held for use in the Business, and (f) not knowingly do any act or omit
any act or permit any omission to act which will cause a material breach or
default under any of the contracts, commitments or obligations included in the
Acquired Assets or Assumed Liabilities. During the period from the date of this
Agreement to the First Closing Date, without the prior written consent of Buyer,
the Seller will not engage in any activity, take any action, or enter into any
transaction of the type described in Section 3.6.
5.3 Consents. The Seller will use its reasonable best efforts to
obtain, prior to the First Closing Date, (i) all consents, authorizations and
registrations specified on Schedule 3.3 other than consents, authorizations and
registrations required solely for the transfer of the Regulated Assets, and (ii)
a landlord release and waiver, in such form as reasonably provided by Buyer,
from the owners of locations where the equipment described in Section 1.2(a) is
located, so long as Seller is seeking consents from such owners in accordance
with this Section 5.3. Seller shall use its reasonable best efforts to obtain,
prior to the Second Closing Date, all consents, authorizations and registrations
that are required for the transfer of the Regulated Assets, including those
consents, authorizations and registrations specified on Schedule 3.3
(collectively, the "Regulatory Authorizations").
5.4 Best Efforts. Subject to the terms and conditions of this
Agreement, each of the parties shall use its reasonable best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary or desirable to consummate the transactions provided for in this
Agreement. Seller shall cooperate with Buyer to transfer the customers of the
Business to the Buyer in any manner reasonably requested by Buyer and at the
expense of the Buyer. Seller hereby consents to Buyer filing UCC-1 financing
statement after the First Closing Date giving notice of Buyer's interest in the
Accounts Receivable.
5.5 Further Assurances. The Seller, after the First Closing, without
further consideration but with all reasonable expenses paid by the Buyer, shall
execute, acknowledge, and deliver any further deeds, assignments, conveyances,
and other assurances, documents, and instruments of transfer, reasonably
requested by Buyer, and shall take any other action consistent with the terms of
this Agreement that may reasonably be requested by Buyer for the purpose of
assigning, transferring, granting, conveying, and confirming the Acquired Assets
or any part of
25
the Acquired Assets to Buyer or to better enable Buyer to complete, perform or
discharge any of the liabilities or obligations assumed by Buyer. Each of the
parties hereto will cooperate with the other and execute and deliver to the
other parties hereto such other instruments and documents and take such other
actions as may be reasonably requested from time to time by any other party
hereto as necessary to carry out, evidence and confirm the intended purposes of
this Agreement.
5.6 Update Schedules. Seller shall promptly disclose to Buyer any
material information contained in its representations and warranties or the
Schedules which, because of an event occurring after the date hereof, is
incomplete or is no longer correct as of all times after the date hereof until
the First Closing Date; provided, however, that none of such disclosures shall
be deemed to modify, amend or supplement the representations and warranties of
Seller or the Schedules hereto for the purpose of Article III hereof, unless
Buyer shall have consented thereto in writing.
5.7 Payments Received; Checks and Drafts.
(a) The Seller and the Buyer agree that, on and after the First
Closing Date, they will hold and will promptly transfer and deliver to the
other, from time to time as and when received by them, any cash, checks with
appropriate endorsements (using their best efforts not to convert such checks
into cash), or other property that they may receive on or after the First
Closing Date which properly belongs to the other party, including without
limitation any insurance proceeds, and will account to the other for all such
receipts.
(b) The Buyer will be entitled to audit the records of the
Seller with respect to the accuracy of any payments owed pursuant to Section
6.7(a). Such audit will be during normal business hours. The Seller will
reasonably cooperate with the Buyer and its auditors in the exercise of the
Buyer's right to perform such audit. Subject to reasonable confidentiality
requirements, the Buyer will be entitled to make extracts and copies of all
records reasonably necessary for it to exercise its audit report.
(c) The Seller will honor (whether presented before, on, or
after the First Closing) all checks and drafts drawn by it on or prior to the
First Closing to pay trade payables and accrued expenses of the Business.
5.8 Employees. Buyer shall have no obligation to hire any of the
Seller's employees; provided, however, that Buyer shall be free to negotiate
with and, as of the First Closing Date, hire any of the Seller's employees
engaged in the Business, and the Seller shall cooperate with Buyer and encourage
such employees to accept employment with Buyer. The Seller shall be responsible
and liable for any salary, wages, bonuses, commissions, and any other
compensation or benefits, as well as any actions or causes of action including,
but not limited to, unemployment compensation claims and workers' compensation
claims and claims for race, age, and sex discrimination and sexual harassment
that any of its employees assert attributable to the period of employment with
Seller. Except as otherwise set forth herein, the Seller shall be
26
responsible and liable for any vacation or sick leave time accrued through the
First Closing Date. The Seller shall be solely responsible for all obligations
under the Consolidated Omnibus Budget Reconciliation Act ("COBRA") with respect
to such employees. Seller agrees not to, directly or indirectly, solicit or
offer employment to or employ any of the Seller's employees engaged in the
Business who are employed by Buyer until after termination of such employees
employment with Buyer; provided, however, that Seller may solicit such employees
through general, pubic solicitation for new employees for Seller's business and
hire such employees who initiate contact with Seller regarding employment.
Seller will be solely responsible for any notification and liability under the
Worker Adjustment and Retraining Notification Act, as amended, relating to the
termination of employees of the Seller occurring on or prior to the First
Closing. Other than employees of Seller hired as of the First Closing Date,
Buyer will not hire any employees of the Seller engaged in the Business prior to
the First Closing for a period of 90 days after the First Closing Date unless
Buyer reimburses, or causes such employee to reimburse, Seller for the full
value of all severance or other benefits paid to such employee with respect to
any change of employment resulting from the transactions contemplated by this
Agreement. Effective as of the First Closing, the Buyer shall give employees of
the Seller hired by Buyer credit for their accrued, unused vacation or paid time
off as of the First Closing Date, not to exceed $70,000 in the aggregate.
5.9 Endorsement Authorization. Effective as of the First Closing Date,
the Seller appoints Buyer its attorney-in-fact to open all mail relating to the
Business addressed to the Seller and to endorse in the name of the Seller any
checks, drafts, or other instruments received which include payment of accounts
accrued after the First Closing Date. Buyer promptly will send to the Seller all
mail not relating to the Acquired Assets or the Business, except personal mail
of any employee or former employee of the Business.
5.10 Cooperation in Litigation. If, after the First Closing Date,
Seller or Buyer shall require the participation of officers and employees
employed by the other to aid in the defense or settlement of litigation or
claims by third parties, and so long as there exists no conflict of interest
between the parties, Seller and Buyer shall use their reasonable best efforts to
make such officers and employees available to participate in such defense,
provided that the party requiring the participation of such officers or
employees shall pay all reasonable out-of-pocket costs, charges and expenses
arising from such participation.
5.11 Cooperation in Tax Matters. The Seller and the Buyer shall provide
each other with such cooperation and information as either of them reasonably
may request of the other in filing any Tax Return, amended Tax Return or claim
for refund, determining a liability for Taxes or a right to a refund of Taxes or
in conducting any audit or other proceeding in respect of Taxes, in each case,
to the extent relating to the Acquired Assets or the Business, including using
best efforts to make officers and employees available for such purposes,
provided that the party requiring the participation of such officers or
employees shall pay all reasonable out-of-pocket costs, charges and expenses
arising from such participation.
27
5.12 Exclusivity. Seller grants to Buyer the exclusive right to acquire
the Business and the Acquired Assets unless and until this Agreement is
terminated as provided in Section 8.1. Seller shall not (i) solicit, initiate or
encourage the submission of any proposal or offer from any person relating to
the acquisition of any of the Acquired Assets or (ii) participate in any
discussions or negotiations regarding, furnish any information with respect to,
assist or participate in, or facilitate in any other manner any effort or
attempt by any person to do or seek any of the foregoing. Seller will notify
Buyer immediately if any person makes any proposal or offer with respect to any
of the foregoing.
5.13 Press Releases. Except as required by applicable law, no party to
this Agreement shall give notice to third parties or otherwise make any public
statement or releases concerning this Agreement or the transactions contemplated
hereby except for such written information as shall have been approved in
writing as to form and content by the other party to this Agreement, which
approval shall not be unreasonably withheld.
5.14 Expenses of Transfer. All Transfer Expenses shall be paid by the
Buyer.
VI. CONDITIONS TO CLOSING
6.1 Conditions to Obligations of Buyer at Each Closing. The obligations
of Buyer to consummate the transactions provided for by this Agreement are
subject, in the discretion of Buyer to waive such condition, to the satisfaction
at or prior to the First Closing of each of the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Seller set forth in Article III of this Agreement (i)
that are not qualified as to "materiality" shall be true and correct in
all material respects as of the First Closing Date and (ii) that are
qualified as to materiality shall be true and correct as of the First
Closing Date, except, in either (i) or (ii), to the extent such
representations and warranties are made as of another date, in which
case such representations and warranties shall be true and correct in
all material respects or true and correct, as the case may be, as of
that date.
(b) Covenants. The Seller shall have performed and complied
with, in all material respects, all agreements and covenants required
by this Agreement to be performed by it prior to or at the First
Closing Date.
(c) Material Adverse Effect. Since the date of this Agreement,
there shall not have occurred any Material Adverse Effect.
(d) Consents. Except for (i) the passage of the requisite
period of time of notification of customers of the Business informing
them of the transfer of those customers from Seller to Buyer pursuant
to 47 C.F.R. 64.1120(e), (ii) obtaining required approvals from the
Public Utilities Commission of Ohio ("PUCO") to transfer control of
assets from Buyer to Seller as required by the Ohio Revised Code Title
49 and (iii) the
28
completion of Application for Tariff Abandonment by Seller to the PUCO
reflecting a withdrawal of service in the Columbus and Cleveland
markets, all material consents, authorizations, assignments,
registrations, and waivers from third parties and governmental
agencies necessary to permit the transactions contemplated by this
Agreement, including, but not limited to, release of Seller and
assignment to Buyer of circuits used in connection with the Business
from each of MCI Worldcom, Inc., Time Warner Telecom General
Partnership and SBC, Inc., on terms acceptable to Buyer, in its sole
discretion, shall have been obtained. Buyer shall have obtained, on
commercially reasonable terms, licenses from each of Northern Telecom
Inc. and Lucent Technologies necessary to operate the equipment
related to such licensed software included in the Acquired Assets.
(e) Seller's Certificates. The president or a vice president
of the Seller will have executed and delivered to the Buyer a
certificate to the effect that each of the conditions specified in
Section 6.1(a) - (d) is satisfied in all respects. The secretary of the
Seller will have executed and delivered to the Buyer a certificate
certifying as to the incumbency of the officers of Seller authorized to
close the transactions contemplated by this Agreement, and Seller will
have delivered a certified copy of the appropriate proceedings of the
Board of Directors of Seller authorizing and approving this Agreement
and the transactions and documents contemplated hereby.
(f) Xxxx of Sale. The Seller shall have executed and delivered
to the Buyer the Xxxx of Sale.
(g) Transition Services Agreement. Seller and Buyer shall have
completed negotiation of, and shall have reasonably agree to the form
and substance of a Transition Services Agreement (the "Transition
Services Agreement"), and Seller shall have delivered such agreement to
Buyer.
(h) Noncompetition Agreement; Management Agreement. Seller and
Buyer shall have completed negotiation of, and shall have reasonably
agreed to the form and substance of a Noncompetition Agreement (the
"Noncompetition Agreement") and Management Agreement (the "Management
Agreement"), and Seller shall have delivered such agreements to Buyer.
(i) Customer Service Outside the Business. Seller and Buyer
shall have completed negotiation of, and shall have reasonably agreed
to the form and substance of an agreement or agreements relating to the
division of revenue and expenses associated with contracts or
agreements with customers of the Business involving Services provided
outside the Business, and the Seller shall have executed and delivered
such agreement or agreements to the Buyer.
(j) No Proceeding. There will not be in effect at the First
Closing, and no action will be pending or threatened the effect of
which could be, any order of any court
29
or other governmental or administrative authority or arbitrator
allowing any third party to obtain damages against Buyer as a result
of the consummation of the transactions contemplated by this Agreement
or restraining, enjoining, or otherwise preventing Buyer from the
carrying out of this Agreement or the consummation of the material
transactions contemplated by this Agreement.
The obligations of Buyer to consummate the transactions provided for by
this Agreement are subject, in the discretion of Buyer to waive such condition,
to the satisfaction at or prior to the Second Closing of each of the following
conditions:
(x) Covenants. The Seller shall have performed and complied
with, in all material respects with all agreements and covenants
required by this Agreement to be performed by it prior to or at the
Second Closing Date.
(y) Consents. All Regulatory Authorizations shall have been
obtained, including those set forth on Schedules 3.3 and 4.3.
(z) No Proceeding. There will not be in effect at the Second
Closing, and no action will be pending or threatened the effect of
which could be, any order of any court or other governmental or
administrative authority or arbitrator allowing any third party to
obtain damages against Buyer as a result of the consummation of the
transactions contemplated by this Agreement or restraining, enjoining,
or otherwise preventing Buyer from the carrying out of this Agreement
or the consummation of the material transactions contemplated by this
Agreement.
6.2 Conditions to Obligations of Seller at Each Closing. The
obligations of Seller to consummate the transactions provided for by this
Agreement are subject, in the discretion of Seller to waive such condition, to
the satisfaction at or prior to the First Closing Date of the following
conditions:
(a) Representations and Warranties. The representations and
warranties of the Buyer set forth in Article IV of this Agreement shall
be true and correct in all material respects at and as of the First
Closing as if such representations and warranties were made at the
First Closing.
(b) Covenants. The Buyer shall have performed and complied with, in
all material respects, all agreements and covenants required by this
Agreement to be performed by it prior to or at the First Closing Date.
(c) Buyer's Certificates. The president or a vice president of
the Buyer will have executed and delivered to the Buyer a certificate
to the effect that each of the conditions specified in Section 6.2(a) -
(b) is satisfied in all respects. The secretary of the Buyer will have
executed and delivered to the Seller a certificate certifying as to the
incumbency of the officers of Buyer authorized to close the
transactions contemplated by this Agreement, and Buyer will have
delivered a certified copy of the appropriate
30
proceedings of the Board of Directors of Buyer authorizing and
approving this Agreement and the transactions and documents
contemplated hereby.
(d) Consents. Except for (i) the passage of the requisite period of
time of notification of customers of the Business informing them of
the transfer of those customers from Seller to Buyer pursuant to 47
C.F.R. 64.1120(e), (ii) obtaining required approvals from the PUCO to
transfer control of assets from Buyer to Seller as required by the
Ohio Revised Code Title 49 and (iii) the completion of Application for
Tariff Abandonment by Seller to the PUCO reflecting a withdrawal of
service in the Columbus and Cleveland markets, all material consents,
authorizations, assignments, registrations, and waivers from third
parties and governmental agencies necessary to permit the transactions
contemplated by this Agreement, including, but not limited to, release
of Seller and assignment to Buyer of circuits used in connection with
the Business from each of MCI Worldcom, Inc., Time Warner Telecom
General Partnership and SBC, Inc., on terms acceptable to Buyer, in
its sole discretion, shall have been obtained.
(e) Assumption Agreement. The Buyer shall have executed and
delivered to the Seller the Assumption Agreement.
(f) Transition Services Agreement. Seller and Buyer shall have
completed negotiation of, and shall have reasonably agreed to the form
and substance of the Transition Services Agreement, and Buyer shall
have delivered such agreement to Seller.
(g) Noncompetition Agreement; Management Agreement; Transition
Services Agreement. Seller and Buyer shall have completed negotiation
of, and shall have reasonably agreed to the form and substance of the
Noncompetition Agreement and the Management Agreement, and Buyer shall
have delivered such agreements to Seller.
(h) No Proceeding. There will not be in effect at the First
Closing, and no action will be pending or threatened the effect of
which could be, any order of any court or other governmental or
administrative authority or arbitrator allowing any third party to
obtain damages against Seller as a result of the consummation of the
transactions contemplated by this Agreement or restraining, enjoining,
or otherwise preventing Seller from the carrying out of this Agreement
or the consummation of the material transactions contemplated by this
Agreement.
The obligations of Seller to consummate the transactions provided for
by this Agreement are subject, in the discretion of Seller to waive such
condition, to the satisfaction at or prior to the Second Closing Date of the
following conditions:
(x) Covenants. The Buyer shall have performed and complied with, in
all material respects, all agreements and covenants required by this
Agreement to be performed by it prior to or at the Second Closing
Date.
31
(y) Consents. All Regulatory Authorizations shall have been
obtained, including those set forth on Schedules 3.3 and 4.3.
(z) No Proceeding. There will not be in effect at the Second
Closing, and no action will be pending or threatened the effect of
which could be, any order of any court or other governmental or
administrative authority or arbitrator allowing any third party to
obtain damages against Seller as a result of the consummation of the
transactions contemplated by this Agreement or restraining, enjoining,
or otherwise preventing Seller from the carrying out of this Agreement
or the consummation of the material transactions contemplated by this
Agreement.
VII. INDEMNIFICATION
7.1 Indemnification By Seller. Notwithstanding any investigation of the
business and assets of the Seller by or on behalf of Buyer, the Seller shall
indemnify, defend and hold harmless Buyer, its successors and assigns, and its
officers, directors, employees, agents and affiliates ("Buyer's Indemnified
Persons") from and against any and all losses, liabilities, claims, obligations,
damages, deficiencies, actions, judgments, regulatory, legislative or judicial
proceedings or investigations, assessments, levies, fines, penalties, costs and
Legal Expenses (as defined below) (collectively, "Losses") arising out of, based
upon or in any way relating to the following:
(a) any misrepresentation in or breach of any representation
or warranty or nonfulfillment of any covenant, agreement or other
obligation of the Seller set forth in this Agreement or in any document
delivered to Buyer pursuant to the provisions of this Agreement,
including, but not limited to, the Transition Services Agreement;
(b) any Excluded Liability;
(c) any claims by parties other than Buyer to the extent
caused by acts or omissions of Seller on or prior to the First Closing
Date, including, but not limited to, claims for Losses which arise or
arose out of Seller's operation of the Business or by virtue of
Seller's ownership of the Business on or prior to the First Closing
Date;
(d) any claims which arise out of (i) the entry of any decree,
judgment or order adjudicating any or all of the Seller or any of its
subsidiaries or affiliates as bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization of any of the Seller
or any of its subsidiaries or affiliates under any bankruptcy or
similar law, or (ii) entry of a decree, order or judgment appointing a
receiver, liquidator, trustee or assignee in bankruptcy or insolvency
for any of the Seller, or any of its subsidiaries or affiliates, or for
the winding up or liquidation of the affairs of any of the foregoing;
32
(e) any claims which arise out of (i) the institution by any
of the Seller, or any of its subsidiaries or affiliates of proceedings
to be adjudicated a voluntary bankrupt, or consent by any of the
foregoing to the filing of an bankruptcy proceeding against it, (ii)
any of the Seller, or any of its subsidiaries or affiliates filing a
petition or answer or consent seeking reorganization under any
bankruptcy or similar law or statute, or consenting to the filing of
any such petition, or consenting to the appointment of a custodian,
receiver, liquidator, trustee, or assignee in bankruptcy or insolvency
of it or any substantial part of its assets or property, or (iii) any
of the Seller, any of its subsidiaries or affiliates making a general
assignment for the benefit of creditors, or admission in writing of its
inability to pay its debts as they become due; and
(f) enforcement of this Section 7.1.
"Legal Expenses" means reasonable attorneys', accountants',
investigators', and experts' fees, and expenses reasonably sustained or incurred
in connection with the defense or investigation of any Losses.
7.2 Indemnification by Buyer. Buyer shall indemnify, defend and hold
harmless Seller from and against any and all Losses arising out of, based upon
or in any way relating to the following:
(a) any misrepresentation in or breach of any representation
or warranty or nonfulfillment of any covenant, agreement or other
obligation of Buyer set forth in this Agreement or in any document
delivered to Seller pursuant to the provisions of this Agreement;
(b) any Assumed Liability;
(c) any claims by parties other than Seller to the extent
caused by the acts or omissions of Buyer after the First Closing Date,
including, but not limited to, claims for Losses which arise out of
Buyer's use or ownership of the Acquired Assets after the First Closing
Date; and
(d) enforcement of this Section 7.2.
7.3 Tax Benefits/Costs. Any indemnification obligation hereunder shall
be reduced by any Tax Benefit realized by the Indemnified Party or its
affiliates as the result of payment of the liability on which the indemnity
claim is based. Any indemnification obligation hereunder shall be increased by
any additional taxes incurred by the Indemnified Party or its affiliates as a
result of payment of such indemnification claim. For this purpose, "Tax Benefit"
shall mean the Tax savings attributable to any deduction, expense, loss, credit
or refund to the Indemnified Party or its affiliates, when incurred or received.
7.4 Defense of Claims. If any legal proceedings shall be instituted or
any claim is asserted by any third party in respect of which any party hereto
may have an obligation to
33
indemnify another party, the party asserting such right to indemnity (the
"Indemnified Party") shall give the party from whom indemnity is sought (the
"Indemnifying Party") written notice thereof within 30 days, but any failure to
so notify the Indemnifying Party shall not relieve it from any liability that it
may have to the Indemnified Party other than to the extent the Indemnifying
Party is actually prejudiced thereby. The Indemnifying Party shall have the
right, at its option and expense, to participate in the defense of such
proceeding or claim, but not to control the defense, negotiation or settlement
thereof, which control shall at all times rest with the Indemnified Party,
unless the Indemnifying Party (i) admits in writing its liability to the
Indemnified Party hereunder with respect to such proceeding or claim; and (ii)
furnishes satisfactory evidence of its financial ability to indemnify the
Indemnified Party, in which case, the Indemnifying Party may assume such control
at its expense through counsel reasonably satisfactory to such Indemnified
Party, and the Indemnified Party will fully cooperate as reasonably requested by
the Indemnifying Party in the defense or settlement of such matter; provided,
however, that:
(a) the Indemnified Party shall be entitled to participate in
the defense of such claim and to employ counsel at its own expense to
assist in the handling of such claim; provided, however, that the
employment of such counsel shall be at the expense of the Indemnifying
Party if the Indemnified Party determines in good faith that such
participation is appropriate in light of defenses not available to the
Indemnifying Party, conflicts of interest or other similar
circumstances;
(b) the Indemnifying Party shall obtain the prior written
approval of the Indemnified Party before entering into any settlement
of such claim or ceasing to defend against such claim (with such
approval not to be unreasonably withheld);
(c) no Indemnifying Party shall consent to the entry of any
judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by each claimant or plaintiff to
each Indemnified Party of a release from all liability in respect of
such claim; and
(d) the Indemnifying Party shall not be entitled to control
(but shall be entitled to participate at its own expense in the defense
of), and the Indemnified Party shall be entitled to have sole control
over, the defense or settlement of any claim to the extent the claim
seeks an order, injunction, non-monetary or other equitable relief
against the Indemnified Party which, if successful, could materially
interfere with the business, operations, assets, condition (financial
or otherwise) or prospects of the Indemnified Party.
After written notice by the Indemnifying Party to the Indemnified Party of its
election to assume control of the defense of any such action, the Indemnifying
Party shall not be liable to such Indemnified Party hereunder for any Legal
Expenses subsequently incurred by such Indemnified Party in connection with the
defense thereof other than reasonable costs of investigation and of liaison
counsel for the Indemnified Party; provided, however, that the Indemnifying
Party shall
34
be liable for such Legal Expenses if the Indemnified Party determines in good
faith that the incurrence of the same is appropriate in light of defenses not
available to the Indemnifying Party, conflicts of interest or other similar
circumstances. If the Indemnifying Party does not assume control of the defense
of such claim as provided in this Section 7.3, the Indemnified Party shall have
the right to defend such claim in such manner as it may deem appropriate at the
cost and expense of the Indemnifying Party, and the Indemnifying Party will
promptly reimburse the Indemnified Party therefore in accordance with this
Section 7.3. The reimbursement of fees, costs and expenses required by this
Section 7.3 shall be made by periodic payments during the course of the
investigations or defense, as and when bills are received or expenses incurred.
7.5 Survival of Representations and Warranties. The representations and
warranties of each party, contained in this Agreement shall survive the First
Closing Date for a period of 18 months, except for the representation and
warranty contained in the first sentence of Section 3.8 (Title), which shall
survive indefinitely, and the representations and warranties contained in
Section 3.16 (Tax Returns and Taxes), which shall survive for 60 days longer
than any applicable statute of limitations.
7.6 Right of Setoff. Upon notice to Seller specifying in reasonable
detail the basis therefore, Buyer may set off any amount to which it may be
entitled under this Article VII against amounts otherwise payable to Seller as
the Net Revenue Adjustment and deposit such amount in escrow, pending resolution
of such indemnification claim in accordance with Section 9.2 of this Agreement.
Neither the exercise of nor the failure to exercise such right of setoff will
constitute an election of remedies or limit Buyer in any manner in the
enforcement of any other remedies that may be available to it.
7.7 Remedies. The rights and remedies of each party hereto arising by
reason of the breach of any representation or warranty, or the default in any
covenant, condition or undertaking by any other party hereto, shall not be
limited to those set forth in this Agreement.
7.8 Limitations on Indemnity Claims. Notwithstanding anything to the
contrary in this Agreement, the maximum amount of indemnifiable Losses which may
be recovered from any Indemnifying Party arising out of or resulting from the
causes set forth in Sections 7.1(a), 7.1(f), 7.2(a) and 7.2(d) shall be an
amount equal to the Purchase Price. Further, an Indemnifying Party shall not be
liable for any claim for indemnification pursuant to this Article VII unless and
until the aggregate amount of indemnifiable Losses which may be recovered from
the Indemnifying Party equals or exceeds $25,000.
7.9 Tax Treatment of Indemnity Payments. The parties agree to treat all
payments made by either to or for the benefit of the other under any indemnity
provisions of this Agreement and for any misrepresentations or breach of
warranties or covenants as adjustments to the Purchase Price or as capital
contributions for Tax purposes and that such treatment shall govern for purposes
hereof.
35
7.10 Limitation on Environmental Liability. The Buyer acknowledges and
agrees that its sole and exclusive remedy against the Seller for any
environmental liability or any environmental, health or safety matter, including
natural resources, related in any way to this Agreement or the transactions
contemplated hereby is based (i) on conditions or circumstances in existence
before the First Closing Date and (ii) on the representations and warranties set
forth in Section 3.22 of Article III. In furtherance of the foregoing, form and
after the First Closing Date, (A) the Buyer will fully release the Seller from
any environmental liability incurred by the Buyer, its parents, subsidiaries,
divisions and affiliates, their predecessors, successors and assigns, and their
officers, directors, employees, agents and related partners, and (B) the Buyer
hereby waives, on its behalf and on behalf of its parents, subsidiaries,
divisions and affiliates, their predecessors, successors and assigns, and their
officers, directors, employees, agents and partners, to the fullest extent
permitted under applicable law, any claim or remedy against the Seller now or
hereafter available under any applicable Environmental Law, whether or not in
existence on the date hereof.
VIII. TERMINATION
8.1 Termination. This Agreement may be terminated at any time prior to
First Closing:
(a) by mutual consent of Buyer and Seller;
(b) by either Buyer or Seller if there has been a material
breach of any representation, warranty, covenant or agreement on the
part of the other party set forth in this Agreement;
(c) by Buyer or Seller if the First Closing shall not have
occurred by April 28, 2003 by reason of the material failure of the
other party to meet any of the conditions specified in Sections 6.1 or
6.2, as the case may be, and such failure has not been waived by the
terminating party (unless the failure results primarily from
terminating party itself breaching any representation, warranty or
covenant contained in this Agreement);
(d) by either Buyer or Seller if a court of competent
jurisdiction or governmental, regulatory or administrative agency or
commission shall have issued an order, decree or ruling or taken any
other action, in each case permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement
and such order, decree, ruling or other action shall have become final
and nonappealable; or
(e) by Seller if the First Closing shall not have occurred by
May 5, 2003 by reason of the failure of the Seller to obtain all
consents as required by Section 6.1(d), unless such condition is waived
by Buyer and Buyer indemnifies Seller for all costs and expenses
incurred as a result of the consummation of the transactions
contemplated by this Agreement without obtaining such consents.
36
This Agreement may be terminated at any time after the First Closing
but prior to Second Closing:
(x) by mutual consent of Buyer and Seller;
(y) by either Buyer or Seller if a court of competent
jurisdiction or governmental, regulatory or administrative agency or
commission shall have issued an order, decree or ruling or taken any
other action, in each case permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement
and such order, decree, ruling or other action shall have become final
and nonappealable; or
(z) by either Buyer or Seller by written notice to the other
party if the Second Closing shall not have been consummated on or
before May 12, 2003; provided, however, that the right to terminate
this Agreement under this Section 8.1(z) shall not be available to any
party whose failure to fulfill any obligation under this Agreement
shall have been the cause of, or shall have resulted in, the failure of
the Second Closing to occur on or prior to such date.
8.2 Effect of Termination. In the event of termination of this
Agreement by either Seller or Buyer, as provided above, this Agreement shall
forthwith terminate and there shall be no liability on the part of either Seller
or Buyer or the Seller's or the Buyer's officers or directors, except for
liabilities arising from a material breach by a party hereto of any of its
representations, warranties, covenants or agreements set forth in this
Agreement; provided, however, that the obligations of the parties set forth in
Section 9.12 (Expenses) hereof shall survive such termination. Upon termination
of this Agreement after the First Closing but prior to the Second Closing,
Seller will immediately, without demand, return any portion of the Purchase
Price received by Seller as of the date of termination and the parties hereto
agree to work together and use their reasonable best efforts to return the
operation of the Acquired Assets to the status quo immediately prior to the
First Closing Date, including Seller having the benefit of all revenues and
accounts receivable associated with the Acquired Assets and Seller having
responsibility for all expenses and liabilities (other than those liabilities
caused by the negligence of the Buyer) with respect to the Acquired Assets
arising from and after the First Closing Date.
IX. OTHER PROVISIONS
9.1 Specific Performance. Each party acknowledges that the other party
will be irreparably harmed in the event of a breach or threatened breach of the
provisions of this Agreement. In the event of a breach or threatened breach, the
aggrieved party will be entitled to an injunction, without posting a bond,
restraining the breaching party from engaging in any of the activities
prohibited by the Agreement, whether such activities actually have been engaged
in or are threatened. Nothing herein will be construed as prohibiting a party
from pursuing any other available remedies at law or in equity for such breach
or threatened breach, including the recovery of damages.
37
9.2 Dispute Resolution.
(a) Any dispute arising under this Agreement shall be settled
by arbitration in Detroit, Michigan, in accordance with the Commercial
Arbitration Rules of the American Arbitration Association, except as
provided in Section 9.1(d). It is the intention of the parties that the
arbitration award will be final and binding, shall not be appealable
and that a judgment of any circuit court having jurisdiction thereof
may be rendered upon the award, and enforcement may be had according to
its terms. This agreement to arbitrate shall be specifically
enforceable against each of the parties.
(b) When a matter has been submitted for arbitration, within
thirty (30) days of such submission, Buyer will choose an arbitrator
and Seller will choose an arbitrator, and an additional arbitrator
independent of the parties will be selected unanimously by the two
arbitrators chosen by the parties. The dispute shall then be resolved
by majority vote of the three arbitrators. If the arbitrator chosen by
Buyer and the arbitrator chosen by Seller cannot agree upon a third
independent arbitrator within thirty (30) days of their appointment,
the independent third arbitrator will be selected according to the
procedures of the American Arbitration Association or any successor to
the function thereof.
(c) The parties hereto agree that an action to compel
arbitration pursuant to this Agreement may be brought in any court of
competent jurisdiction. Application may also be made to any such court
for confirmation of any decision or award of the arbitrators, for an
order of enforcement and for other remedies which may be necessary to
effectuate such decision or award. The parties hereto hereby consent to
the jurisdiction of the arbitrators and of such court and waive any
objection to the jurisdiction of such arbitrator and court.
(d) The parties agree that each party shall be responsible for
its arbitration costs and expenses (including its attorneys' fees) and
shall not be permitted to seek such costs or expenses from the other
party in any arbitration proceeding.
9.3 Annexes, Exhibits and Schedules. All Annexes, Exhibits and
Schedules referred to herein are intended to be and hereby are specifically made
a part of this Agreement.
9.4 Amendment. This Agreement and the Exhibits and Schedules hereto may
not be amended except by an instrument in writing signed on behalf of each of
the parties hereto.
9.5 Extension; Waiver. At any time prior to the applicable closing
date, the parties hereto may (a) extend the time for the performance of any of
the obligations or other acts of the other party hereto, (b) waive any
inaccuracies in the representations and warranties of the other party contained
herein or in any document delivered pursuant hereto and (c) waive compliance by
the other party with any of the agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid if set forth in an instrument in writing signed on behalf of such party.
Failure by any party to assert any of its
38
rights hereunder will not constitute a waiver of such rights. Any waiver of a
term or condition herein will not be construed as a waiver of a subsequent
breach or waiver of the same term or condition, or waiver of any other term or
condition of this Agreement.
9.6 Entire Agreement; No Third Party Beneficiaries. This Agreement,
together with the Annexes, Exhibits and Schedules hereto, (a) constitutes the
entire Agreement between the parties pertaining to the subject matter hereof and
supersedes all prior and contemporaneous agreements, understandings,
negotiations and discussions, whether oral or written, of the parties, and (b)
is not intended to confer upon any person other than the parties hereto any
rights or remedies hereunder.
9.7 Governing Law. This Agreement shall be governed by, construed,
interpreted and the rights of the parties determined in accordance with the laws
of the State of Michigan (regardless of the laws that might be applicable under
principles of conflicts of law). Each of the parties hereto hereby irrevocably
and unconditionally consents to submit to the exclusive jurisdiction of the
courts of the State of Michigan and of the United States, in each case located
in the County of Oakland, for any litigation arising out of or relating to this
Agreement (and agrees not to commence any litigation relating thereto except in
such courts), and further agrees that service of any process, summons, notice or
document by U.S. registered mail to its respective address set forth in this
Agreement shall be effective service of process for any litigation brought
against it in any such court. Each of the parties hereto hereby irrevocably and
unconditionally waives any objection to the laying of venue of any litigation
arising out of this Agreement or the transactions contemplated hereby in the
courts of the State of Michigan or the United States, in each case located in
the County of Oakland, and hereby further irrevocably and unconditionally waives
and agrees not to plead or claim in any such court that any such litigation
brought in any such court has been brought in an inconvenient forum.
Section 9.8. Waiver of Jury Trial
THE PARTIES HERETO HEREBY WAIVE TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. THE PARTIES HERETO
(A) CERTIFY THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THAT FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTY HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, AS APPLICABLE,
BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION
9.8.
39
9.9 Accounting Terms. All accounting terms used herein which are not
expressly defined in this Agreement shall have the respective meanings given to
them in accordance with GAAP on the date hereof.
9.10 Certain Definitions. For purposes of this Agreement:
"Lien" shall mean any pledge, lien (including without limitation any
tax lien), charge, claim, encumbrance, security interest, mortgage,
option, restriction on transfer (including without limitation any
buy-sell agreement or right of first refusal or offer), forfeiture,
penalty, license, equity or other right of another person of every
nature and description whatsoever.
"Material Adverse Effect" shall mean any circumstance, change in or
effect on the Business that is materially adverse to the results of
operations or the financial condition of the Business, taken as a
whole.
"To the knowledge," or "known," and words of similar import shall mean
the knowledge of a person after due and reasonable investigation.
"Transfer Expenses" shall means the transfer expenses set forth on
Schedule 9.10.
9.11 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or mailed by
registered or certified mail, postage prepaid, return receipt requested (such
mailed notice to be effective on the date such receipt is acknowledged) as
follows:
If to Buyer, addressed to:
LDMI Telecommunications, Inc.
0000 Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
(000) 000-0000; fax (000) 000-0000
Attention: President
With a copy to:
Xxxxxx Xxxxxxx PLLC
000 Xxxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
(000) 000-0000; fax (000) 000-0000
Attention: Xxxxxx X. Xxxxxx, Esq.
40
If to Seller, addressed to:
Mpower Communications Corp.
000 Xxxxx'x Xxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
(000) 000-0000; fax (000) 000-0000
Attention: Xxxxxxx Xxxxxxxxx, Esq.
With a copy to:
Shearman & Sterling
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
(000) 000-0000; fax (000) 000-0000
Attention: Xxxx Xxxxxx, Esq.
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
9.12 Counterparts; Headings. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement will be
binding on any party hereto once signed by such party and a signature by
facsimile, with an original hard copy to follow, will be deemed to be due
execution. The headings of the several Articles and Sections herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
9.13 Expenses. Regardless of whether the transactions contemplated
hereby are consummated, each party hereto shall pay its or their own costs and
expenses, including legal, accounting, consulting and other professional fees,
incurred in connection with the negotiation, preparation, investigation, and
performance by such party of this Agreement and the transactions contemplated
hereunder.
9.14 Successors and Assigns. This Agreement, and all rights and powers
granted hereby, will bind and inure to the benefit of the parties hereto and
their respective successors and assigns.
9.15 Partial Invalidity. Insofar as possible, each provision of this
Agreement shall be interpreted so as to render it valid and enforceable under
applicable law and severable from the remainder of this Agreement. A finding
that any provision is invalid or unenforceable in any jurisdiction shall not
affect the validity or enforceability of any other provision or the validity or
enforceability of such provision under the laws of any other jurisdiction.
41
9.16 Bulk Transfer Laws. The Buyer hereby waives compliance by the
Seller with any applicable bulk sale or bulk transfer laws of any jurisdiction
in connection with the sale of the Acquired Assets to the Buyer hereunder.
[Signatures on next page.]
42
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
LDMI TELECOMMUNICATIONS, INC.
By: /s/ Xxxxxxx X. X'Xxxxx
--------------------------
Its: Chief Executive Officer
-------------------------
MPOWER COMMUNICATIONS CORP.
By: /s/ Xxxxxxx Xxxxxxxxx
--------------------------
Its: Senior Vice President
and General Counsel
-------------------------
MPOWER LEASE CORP.
By: /s/ Xxxxxxx Xxxxxxxxx
--------------------------
Its: Senior Vice President
and General Counsel
-------------------------
