EXHIBIT 10.5
ASSET PURCHASE AGREEMENT
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Agreement made as of September 23, 1998 by and among Voyager Information
Networks, Inc., a Michigan corporation ("Buyer"), EXEC-PC, Inc., a Wisconsin
corporation ("Seller"), Xxxxxx X. Xxxxxxx and Xxxxxx Xxxxxxx (together, the
"Principals").
WHEREAS, subject to the terms and conditions hereof, Seller desires to
sell, transfer and assign to Buyer, and Buyer desires to purchase from Seller,
all of the properties, rights and assets used or held for use in connection with
the Internet service business and related businesses of Seller (the "Business").
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
SECTION 1.PURCHASE AND SALE OF ASSETS.
1.1 Sale of Assets. Upon the terms and subject to the conditions set
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forth in this Agreement, and the performance by the parties hereto of their
respective obligations hereunder, Seller agrees to sell, assign, transfer and
deliver to Buyer, and Buyer agrees to purchase from Seller, all of Seller's
right, title and interest in and to all of the properties, assets and business
of the Business of every kind and description, tangible and intangible, real,
personal or mixed, and wherever located, but excluding the Excluded Assets (as
defined in Section 1.2 below), including without limitation, the following:
(a) Equipment. All free standing kiosks, servers, routers, modems,
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domain name addresses and numbers provided by Internic ("IP addresses"),
computers, electronic devices, test equipment and all other fixed assets,
equipment, furniture, fixtures, leasehold improvements, parts, accessories,
inventory, office materials, software, supplies and other tangible personal
property of every kind and description owned by Seller and used or held for use
in connection with the Business, in each case together with any additions
thereto between the date of this Agreement and the Closing Date (as defined
below), all as set forth on Schedule 1.1(a) attached hereto (collectively,
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"Equipment");
(b) Contracts. All of the rights of Seller under and interest of
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Seller in and to all contracts relating to the Business (other than the Excluded
Contracts (as defined below)), including, without limitation, original contracts
for the provision of Internet connectivity, dedicated service, web-hosting, web-
domain, dial-up services, web-development and Internet commerce, a true, correct
and complete list of which contracts is attached hereto as Schedule 1.1(b)
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(collectively, the "Contracts") (but not including any Restricted Contract (as
defined in Section 4.4) until such time as the consent to assignment thereof is
obtained by Seller or, in the event of a Contract which is not assignable, until
a new Contract is obtained);
(c) Intellectual Property. All Intellectual Property (as defined in
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Section 2.20), all as set forth on Schedule 1.1(c) attached hereto;
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(d) Licenses and Authorizations. All rights associated with the
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licenses, permits, easements, registrations and authorizations issued or granted
to Seller by any governmental authority with respect to the operation of the
Business, including, without limitation, those licenses and authorizations
listed on Schedule 1.1(d) attached hereto, and all applications therefor,
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together with any renewals, extensions, or modifications thereof and additions
thereto (other than any of the foregoing which, by their terms, may not be
assigned or transferred by Seller);
(e) Current Assets; Accounts Receivable. All Current Assets of Seller
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(as such term is hereinafter defined) and all accounts receivable of Seller
incurred in the ordinary course of business and which are determined in
accordance with Seller's historical accounting practices, a complete list of
which is attached hereto as Schedule 1.1(e) (the "Accounts Receivable");
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(f) Goodwill. All of the goodwill of Seller in, and the going concern
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value of, the Business, and all of the business and customer lists, proprietary
information, and trade secrets related to the Business; and
(g) Records. All of Seller's customer logs, location files and
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records, employee records, and other business files and records, in each case
relating to the Business.
The assets, properties and business of Seller being sold to and purchased
by Buyer under this Section 1.1 are referred to herein collectively as the
"Assets."
1.2 Excluded Assets. There shall be excluded from the Assets and retained
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by Seller, to the extent in existence on the Closing Date, the following assets
(the "Excluded Assets"):
(a) Other Assets. All other assets of Seller which are not used or
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held for use in connection with the Business or otherwise necessary to the
operation of the Business now or after the Closing Date as set forth on Schedule
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1.2(a) attached hereto;
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(b) Excluded Contracts. All of Seller's right, title and interest in,
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to and under the Contracts listed on Schedule 1.2(b) attached hereto (the
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"Excluded Contracts");
(c) Insurance. All contracts of insurance (including any cash
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surrender value thereof) and all insurance proceeds of settlement and insurance
claims made by Seller on or before the Closing Date as set forth on Schedule
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1.2(c) attached hereto;
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(d) Tax Items. All claims, rights and interest in and to any refunds
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for federal, state or local Taxes (as defined below) for periods prior to the
Closing Date as set forth on Schedule 1.2(d) attached hereto;
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(e) Corporate Records. All of Seller's corporate and other
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organizational records;
(f) Certain Records. Any general accounting, personnel, or payroll
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records of the Seller not related to the Business or that the Seller is required
to retain by law;
(g) Fiduciary Assets. Any assets of the Seller constituting a pension
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trust or other segregated fund for the benefit of any employees of the Business;
(h) Cash. Cash, cash deposits, certificates of deposit, marketable
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securities and/or cash equivalents;
(i) Certain Rights. To the extent such rights benefit or protect any
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business or activities of the Seller which are not part of the Business and the
Assets, the Seller's rights under all noncompetition, confidentiality,
intellectual property assignment, research and development or similar agreements
or other restrictions on competition and confidentiality;
(j) Certain Permits. Any governmental permit, license or
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authorization issued or granted to Seller by any governmental authority that is
not assignable or transferable to Buyer; and
(k) Rights Under Agreement. Any rights that accrue or will accrue to
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the Seller under this Agreement.
1.3 Assumed Liabilities; Excluded Liabilities; Employees.
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(a) Assumed Liabilities. Buyer shall, on and as of the Closing Date,
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accept and assume, and shall become and be fully liable and responsible for, and
other than as expressly set forth herein Seller and the Principals shall have no
further liability or responsibility for or with respect to, (a) liabilities and
obligations arising out of events occurring on and after the Closing Date
related to Buyer's ownership of the Assets and Buyer's operation of the Business
after the Closing Date; (b) all obligations and liabilities of Seller which are
to be performed after the Closing Date arising under the Contracts, including,
without limitation, Seller's obligations to Subscribers (as defined herein)
under such Contracts for (i) Subscriber deposits held by Seller as of the
Closing Date in the amount for which Buyer receives a credit pursuant to Section
1.6, (ii) Subscriber advance payments held by Seller as of the Closing Date for
services to be rendered in connection with the Business in the amount for which
Buyer receives a credit pursuant to Section 1.6, and (iii) the delivery of
Internet connectivity service to Subscribers (whether under the Contracts or
otherwise) after the Closing Date; (c) the Current Liabilities (as hereinafter
defined) of Seller; (d) any Long-term Liabilities or other liabilities or claims
specifically assumed by Buyer in writing at the Closing and for which there is
an adjustment to the Purchase Price pursuant to Section 1.6(b) hereof; and (e)
the following liabilities and obligations with respect to the Business: (i) all
liabilities and obligations under the Worker Adjustment and Retraining
Notification Act of 1988 and
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Sections 109.07 and 109.075 of the Wisconsin Statutes; (ii) all liabilities and
obligations with respect to health insurance coverage, to the extent assumed by
the Buyer, as provided in Section 1.3(c) below; and (iii) all liabilities and
obligations for vacation pay, sick pay and holiday pay with respect to the
Transferred Employees (as defined below) (but only to the extent Buyer receives
credit therefor pursuant to Section 1.6(a) hereof) ((a), (b), (c), (d) and (e)
together, the "Assumed Liabilities"). The assumption of the Assumed Liabilities
by Buyer hereunder shall not enlarge any rights of third parties under contracts
or arrangements with Buyer or Seller or any of their respective affiliates or
subsidiaries. No parties other than Buyer, Seller and the Principals shall have
any rights under this Agreement.
(b) Excluded Liabilities. It is expressly understood that, except for
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the Assumed Liabilities, Buyer shall not assume, pay or be liable for any
liability or obligation of Seller of any kind or nature at any time existing or
asserted, whether, known, unknown, fixed, contingent or otherwise, not
specifically assumed herein by Buyer, including, without limitation, any
liability or obligation relating to, resulting from or arising out of the
Excluded Assets, including, without limitation, the Excluded Contracts. The
liabilities which are not assumed by Buyer under this Agreement are hereinafter
sometimes referred to as the "Excluded Liabilities."
(c) Employees, Wages and Benefits.
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(i) As of the Closing Date, Buyer shall offer employment to all
persons who, as of the Closing Date, are employed in the operation of the
Business. Persons who as of the Closing Date and within three (3) months
thereafter become such employees of Buyer and accept such offer of
employment are referred to herein as "Transferred Employees."
(ii) Buyer agrees to provide group health plan coverage to the
Transferred Employees on substantially similar terms as provided by Seller
prior to the Closing Date and for a minimum of sixty (60) days following
the Closing Date. In addition, Buyer shall provide to each employee of
Seller who is not hired by Buyer a COBRA notice in accordance with 29
U.S.C. (S)(S)601-607 and assume all liability and obligations for providing
COBRA, or, to the extent required by applicable law, other health coverage
for such employees. All Transferred Employees will receive credit for
prior service with Seller for eligibility purposes with respect to Buyer's
group health plan.
(iii) Buyer shall not be obligated under and hereby specifically
disclaims any assumption of any liability with respect to any employee
benefit plan policy, practice or agreement to which Seller is a party or
under which any of Seller's employees or former employees is covered,
except as otherwise provided herein.
1.4 The Closing. The transactions contemplated by this Agreement shall
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take place at a closing (the "Closing") to be held at 10:00 a.m., local time, at
the offices of Xxxxxxx &
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Xxxx, S.C., 000 Xxxxx Xxxxx Xxxxxx, Xxxxxxxxx, XX 00000, on the date which is
three (3) business days after satisfaction or waiver of the conditions set forth
in Sections 6.5 and 7.5 hereof, or at such other time and place as shall be
mutually agreed upon in writing by Buyer and Seller (the "Closing Date").
1.5 Purchase Price. In consideration of the sale by Seller to Buyer of
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the Assets, and subject to the assumption by Buyer of the Assumed Liabilities
and satisfaction of the conditions contained herein, Buyer shall pay to Seller
at the Closing an amount (as adjusted in accordance with Section 1.6 below, the
"Purchase Price") equal to $26,150,000 as follows:
(a) Buyer shall deliver the sum of $24,900,000, as adjusted in
accordance with Section 1.6, below, to Seller by bank cashier's check or bank
wire transfer pursuant to payment instructions delivered by Seller to Buyer at
least two (2) business days prior to the Closing; and
(b) Buyer shall deposit the sum of $1,250,000 (the "Escrow Deposit")
with Boston Safe Deposit and Trust Company as Escrow Agent under the Escrow
Agreement in the form attached hereto as Exhibit A (the "Escrow Agreement").
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The Escrow Deposit shall be held, administered and distributed in accordance
with the terms of the Escrow Agreement, and shall be Buyer's exclusive remedy
for any and all claims made pursuant to Section 10 hereof.
1.6 Adjustments to Purchase Price. The Purchase Price shall be adjusted
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at the Closing in the manner set forth below:
(a) The Purchase Price will be increased or decreased, as the case may
be, on a dollar-for-dollar basis, by the Working Capital Excess or
Deficiency, as applicable, as of the opening of business on the Closing
Date.
For the purposes of this Agreement, the following terms shall
have the following meanings:
(i) "Working Capital" shall mean the difference between
Seller's Current Assets and Current Liabilities;
(ii) "Current Assets" shall mean and include all Accounts
Receivable of Seller outstanding on the Closing Date, all prepaid
expenses (including postal deposits), and all other current assets
which have value to the business at the Closing and which are used in
the operation of Seller's Business, in each case as determined in
accordance with Seller's historical accounting practices;
(iii) "Current Liabilities" shall mean and include accounts
payable, accrued expenses, all accrued but unpaid taxes, all deferred
revenues (as determined in accordance with Seller's past practices), the
amount of any liabilities to employees for sick pay, holiday pay, the pro-
rated amount of any
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vacation pay, or other expenses which are assumed by Buyer at the Closing
pursuant to and as contemplated by Section 1.3(a), as applicable, the pro-
rated amount of any liability to employees for bonuses under employment
agreements, and all other current liabilities incurred in the operation of
Seller's Business and reflected on Seller's balance sheet, but shall not
include the current portion of any bank debt or line of credit, in each
case as determined in accordance with Seller's historical accounting
practices;
(iv) "Deficiency" shall mean the amount by which the Current
Liabilities exceeds the Current Assets; and
(v) "Excess" shall mean the amount by which the Current Assets
exceeds the Current Liabilities.
(b) The Purchase Price shall be decreased, on a dollar-for-dollar
basis, by the amount of any Long-term Liabilities that are assumed by Buyer at
the Closing. For purposes hereof, "Long-term Liabilities" shall mean and
include any term loans (including, without limitation, bank debt, lines of
credit and the current portion of any other debt), the present value of any
capital leases and operating leases not stated or reserved for on Seller's
balance sheet, which the parties hereto agree is Two Million Seven Hundred Forty
Three Thousand Thirty-Nine Dollars ($2,743,039), and the other liabilities of
Seller not included as part of the Current Liabilities which are assumed by
Buyer at the Closing, as determined in accordance with Seller's historical
accounting practices, all of which are set forth on Schedule 1.6(b) attached
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hereto. In the event Seller elects to pay-off some of the Long-term Liabilities
consisting of bank debt at the Closing, then the calculation thereof shall be
decreased by such amount and Seller shall obtain a pay-off letter from the
third-party lender to evidence the discharge of such obligation at the Closing
and such payoff shall be made directly as part of the wire transfer of the
Purchase Price.
(c) (i) No later than five (5) days prior to the Closing, Buyer and
Seller shall prepare a statement in substantially the form and presentation
of Schedule 1.6(c) attached hereto (the "Estimated Adjustment Statement")
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which sets forth (i) the Company's estimated Working Capital and the amount
of any estimated Deficiency or Excess, as the case may be, as of the
Closing Date, and (ii) the Long-term Liabilities Adjustment ((i) and (ii)
together, the "Estimated Adjustment"). The Purchase Price payable at the
Closing shall be increased on a dollar-for-dollar basis to the extent of
any positive Estimated Adjustment or decreased on a dollar-for-dollar basis
to the extent of any negative Estimated Adjustment, as the case may be, set
forth on such Estimated Adjustment Statement.
(ii) No later than forty-five (45) days following the Closing,
Seller shall prepare and deliver to Buyer a statement (the "Final
Adjustment Statement") setting forth the actual Working Capital, and the
amount of any actual Deficiency or Excess, as the case may be, as well as
any other changes to the Working Capital
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component of the Estimated Adjustment, as of the Closing Date, it being
understood that no adjustment shall be made to the Long-term Liability
calculation after the Closing Date. In connection with the preparation of
such Final Adjustment Statement, Seller and its authorized representatives
shall have full access to the relevant books and records of Buyer and
Buyer's authorized representatives and employees to the extent necessary to
complete such Final Adjustment Statement. Subject to Section 1.6(d)(iii)
below, within ten (10) days following the delivery of such Final Adjustment
Statement to Buyer, Seller or Buyer, as the case may be, shall pay to the
other party, by wire transfer of immediately available funds, the
difference between the Estimated Adjustment, as shown on the Estimated
Adjustment Statement, and the actual adjustment, as shown on the Final
Adjustment Statement.
(iii) In the event Buyer objects to the Final Adjustment
Statement, Buyer shall notify Seller in writing of such objection within
the ten (10) day period following the delivery thereof, stating in such
written objection the reasons therefor and setting forth the Buyer's
calculation of Buyer's actual Working Capital at the Closing. Upon receipt
by Seller of such written objection, the parties shall attempt to resolve
the disagreement concerning the Final Adjustment Statement through
negotiation. If Seller and Buyer cannot resolve such disagreement
concerning the Final Adjustment Statement within thirty (30) days following
the end of the foregoing 10-day period, the parties shall submit the matter
for resolution to a nationally recognized firm of independent certified
public accountants not affiliated with either party, with the costs thereof
to be shared equally by the parties. Such accounting firm shall deliver a
statement setting forth its own calculation of the final adjustment to the
parties within thirty (30) days of the submission of the matter to such
firm. Any payment shown to be due by a party on the statement of such
accounting firm shall be paid to the other party promptly but in no event
later than five (5) days following the delivery of such statement by such
accounting firm to the parties.
1.7 Purchase Price Allocation. At least ten (10) days prior to the
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Closing, Buyer and Seller shall agree on the allocation of the Purchase Price as
set forth on Schedule 1.7 attached hereto. Such allocation shall be binding
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upon Buyer and Seller for all purposes (including financial accounting purposes,
financial and regulatory reporting purposes and tax purposes). Buyer and Seller
each further agrees to file its Federal income tax returns and its other tax
returns reflecting such allocation, Form 8594 and any other reports required by
Section 1060 of the Code.
1.8 Records and Contracts. To the extent not previously provided to
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Buyer, at the Closing, Seller shall deliver to Buyer all of the Contracts, with
such assignments thereof and consents to assignments as are necessary to assure
Buyer of the full benefit of the same (other than as provided in Sections 4.4
and 6.5 hereof). Seller shall also deliver to Buyer at the Closing constructive
possession of all of Seller's files and records constituting Assets.
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1.9 Further Assurances. Seller, from time to time after the Closing at
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the request of Buyer and without further consideration, shall execute and
deliver further instruments of transfer and assignment and take such other
action as Buyer may reasonably require to more effectively transfer and assign
to, and vest in, Buyer the Assets free and clear of all Liens (as defined in
Section 2.8).
1.10 Sales and Transfer Taxes. All sales, transfer, use, recordation,
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documentary, stamp, excise taxes, personal property taxes, fees and duties
(including any real estate transfer taxes) under applicable law incurred in
connection with this Agreement or the transactions contemplated thereby will be
borne and paid by Seller, and Seller shall promptly reimburse Buyer for the
payment of any such tax, fee or duty which Buyer is required to make under
applicable law.
1.11 Transfer of Subject Assets. At the Closing, Seller shall deliver or
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cause to be delivered to Buyer good and sufficient instruments of transfer
transferring to Buyer title to all of the Assets. Such instruments of transfer
shall be in form and substance reasonably satisfactory to Buyer and its counsel.
1.12 Accounts Receivable. Buyer shall receive from Seller and Seller shall
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transfer to Buyer all of the Accounts Receivable at the Closing. For a period
of ninety (90) days after the Closing (the "Buyer Collection Period"), Buyer
shall have the sole and exclusive right to collect the Accounts Receivable. So
long as the Accounts Receivable are in Buyer's possession, neither Seller nor
its agents shall make any solicitation for collection purposes nor institute
litigation for the collection of any amounts due thereunder, except for such
Accounts Receivable which Buyer has consented to Seller's collection thereof
prior to the expiration of the Buyer Collection Period. All payments received
by Buyer during the Buyer Collection Period from any person obligated with
respect to any of the Accounts Receivable shall be for Buyer's account. Any
payment made by an account debtor to Buyer with respect to such an Account
Receivable shall be applied to such Account Receivable before it is applied to
any outstanding account receivable from such account debtor arising from sales
made by the Buyer after the Closing Date. The payment by an account debtor
shall be applied to such Account Receivable in inverse order of aging,
commencing with the oldest invoice. Buyer shall use commercially reasonable
efforts to collect Accounts Receivable during the Buyer Collection Period. All
of the right, title and interest in and to the Accounts Receivable which are
aged for more than thirty (30) days as of the Closing Date and that are not
collected during the Buyer Collection Period shall be assigned to Seller at the
end of the Buyer Collection Period at fair value, after which Buyer shall have
no further right or obligation with respect to the Accounts Receivable and
hereby agrees to promptly remit to the Seller any payment on such uncollected
accounts which it may thereafter receive; provided, however, that nothing
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contained in this Section 1.12 shall be construed to grant Seller any right with
respect to any accounts receivable accrued in connection with Buyer's operation
of the Business on or after the Closing Date. Following the Buyer Collection
Period, Buyer shall make available to Seller, upon the reasonable request of
Seller, copies of all of its records relating to any uncollected Accounts
Receivable assigned to Seller and agrees that Seller may commence legal
proceedings or take
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such other action as it considers appropriate to collect any such uncollected
Account Receivable. Notwithstanding anything provided in this Section 1.12 to
the contrary, Seller shall not be required to repurchase any such uncollected
Account Receivable if the reason for nonpayment by such account debtor is any
right of setoff or other claim arising out of any act or omission of the Buyer
after the Closing.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLER AND PRINCIPALS. In order to
induce Buyer to enter into this Agreement, Seller and the Principals jointly and
severally hereby make the following representations and warranties to Buyer. As
used in this Agreement, the phrase "To the knowledge of Seller" shall mean and
include only the facts and other information which are, on the date such
representations and warranties are made, within the actual knowledge of each of
Xxxxxx Xxxxxxx, Xxxx Xxxx, Xxxxxx Xxxxxxx, Xxxxxxx Xxxxxxxxxxx, Xxxx Xxxxxxxx,
Xxxxx Xxxxxxx, Xxxx Xxxxx, Xxxxxxx Xxxxxx and Xxxxx Xxxxxxxx, without any
independent verification or investigation by them of the facts or other
information stated.
2.1 Organization; Subsidiaries.
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(a) Except as set forth on Schedule 2.1(a), Seller is a corporation
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duly organized, validly existing and in good standing under the laws of the
State of Wisconsin, with full corporate power and authority to own or lease its
properties and to conduct its business in the manner and in the places where
such properties are owned or leased or such business is currently conducted or
proposed to be conducted. The copies of Seller's Articles of Incorporation and
by-laws, each as amended to date, heretofore delivered to Buyer's counsel are
complete and correct. Seller is not in violation of any term of its Articles of
Incorporation or by-laws. Except as set forth on Schedule 2.1(a), Seller is
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duly qualified to do business in the state of its organization, and, to the
knowledge of Seller and Principals, is duly qualified as a foreign corporation
in each jurisdiction in which the character or location of the properties owned
or leased by Seller in the operation of the Business makes qualification to do
business as a foreign corporation necessary, except for such jurisdictions where
failure to so qualify would not have a Material Adverse Effect. For the
purposes of this Agreement, a "Material Adverse Effect" shall mean a material
adverse effect upon the assets, properties, business, prospects, condition
(financial or other) or results of operations of Seller or the Business, taken
as a whole.
(b) Except as set forth on Schedule 2.1(b), Seller has no
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subsidiaries and does not own any securities issued by any other business
organization or governmental authority, except U.S. Government securities, bank
certificates of deposit and money market accounts acquired as short-term
investments in the ordinary course of its business. Except as set forth on
Schedule 2.1(b), Seller does not own or have any direct or indirect interest in
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or control over any corporation, partnership, joint venture or entity of any
kind.
2.2 Required Action. All actions and proceedings necessary to be taken by
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or on the part of Seller in connection with the transactions contemplated by
this Agreement have
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been duly and validly taken, and this Agreement and each other agreement,
document and instrument to be executed and delivered by or on behalf of Seller
pursuant to, or as contemplated by, this Agreement (collectively, the "Seller
Documents") has been duly and validly authorized, executed and delivered by
Seller and no other action on the part of Seller or its stockholders is required
in connection therewith. Each of Seller and the Principals have full right,
authority, power and capacity to execute and deliver this Agreement and each
other Seller Document and to carry out the transactions contemplated hereby and
thereby. This Agreement and each other Seller Document constitutes, or when
executed and delivered will constitute, the legal, valid and binding obligation
of each of Seller and the Principals enforceable in accordance with its
respective terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally or by the application of general principles of equity.
2.3 No Conflicts.
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(a) Except as set forth on Schedule 2.3, the execution, delivery and
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performance by Seller of this Agreement and each other Seller Document does not
and will not (i) violate any provision of the Articles of Incorporation or by-
laws of Seller, in each case as amended to date, (ii) except as will not result
in a Material Adverse Effect, constitute a violation of, or conflict with or
result in any breach of, acceleration of any obligation under, right of
termination under, or default under, any agreement or instrument to which Seller
is a party or by which Seller or the Assets is bound, (iii) except as will not
result in a Material Adverse Effect, violate any judgment, decree, order,
statute, rule or regulation applicable to Seller or the Assets, (iv) except as
set forth in Sections 4.4, 6.5 and 7.5 hereof, require Seller to obtain any
approval, consent or waiver of, or to make any filing with, any person or entity
(governmental or otherwise) that has not been obtained or made or (v) result in
the creation or imposition of any Lien on any of the Assets.
(b) The execution, delivery and performance by each of the Principals
of this Agreement and each other Seller Document does not and will not (i)
constitute a violation of, or conflict with or result in any breach of,
acceleration of any obligation under, right of termination under, or default
under, any agreement or instrument to which each such Principal is a party or by
which such Principal is bound, (ii) violate any judgment, decree, order,
statute, rule or regulation applicable to each such Principal, (iii) require
such Principal to obtain any approval, consent or waiver of, or to make any
filing with, any person or entity (governmental or otherwise) that has not been
obtained or made, or (iv) result in the creation or imposition of any Lien on
any of the Assets.
2.4 Taxes.
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(a) Except as set forth on Schedule 2.4, Seller has paid or caused to
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be paid all federal, state, local, foreign and other taxes, including, without
limitation, income taxes, estimated taxes, alternative minimum taxes, excise
taxes, sales taxes, use taxes, value-added taxes, gross receipts taxes,
franchise taxes, capital stock taxes, employment and payroll-related
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taxes, withholding taxes, stamp taxes, transfer taxes, windfall profit taxes,
environmental taxes and property taxes, whether or not measured in whole or in
part by net income, and all deficiencies, or other additions to tax, interest,
fines and penalties owed by it (collectively, "Taxes"), required to be paid by
it through the date hereof whether disputed or not.
(b) Seller has in accordance with applicable law filed all federal,
state, local and foreign tax returns required to be filed by it through the date
hereof, and to the knowledge of Seller and the Principals, all such returns
correctly and accurately set forth the amount of any Taxes relating to the
applicable period. A list of all federal, state, local and foreign income tax
returns filed with respect to Seller for taxable periods ended on or after
December 31, 1993, is set forth in Schedule 2.4 attached hereto, and said
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schedule indicates those returns that have been audited or currently are the
subject of an audit. Seller has delivered to Buyer correct and complete copies
of all federal, state, local and foreign income tax returns listed on said
schedule, and of all examination reports and statements of deficiencies assessed
against or agreed to by Seller with respect to said returns.
(c) Neither the Internal Revenue Service nor any other governmental
authority is now asserting or, to the knowledge of Seller or the Principals,
threatening to assert against Seller any deficiency or claim for additional
Taxes. No claim has ever been made by an authority in a jurisdiction where
Seller does not file reports and returns that Seller is or may be subject to
taxation by that jurisdiction. There are no security interests on any of the
Assets of Seller that arose in connection with any failure (or alleged failure)
to pay any Taxes. Seller has never entered into a closing agreement pursuant to
Section 7121 of the Internal Revenue Code of 1986, as amended (the "Code").
(d) Except as set forth in Schedule 2.4, there has not been any audit
------------
of any tax return filed by Seller, no audit of any tax return of Seller is in
progress, and Seller has not been notified by any tax authority that any such
audit is contemplated or pending. Except as set forth in Schedule 2.4, no
------------
extension of time with respect to any date on which a tax return was or is to be
filed by Seller is in force, and no waiver or agreement by Seller is in force
for the extension of time for the assessment or payment of any Taxes.
(e) Seller has never been (and has never had any liability for unpaid
Taxes because it once was) a member of an "affiliated group" (as defined in
Section 1504(a) of the Code). Seller has never filed, and has never been
required to file, a consolidated, combined or unitary tax return with any other
entity. Except as set forth in Schedule 2.1(b), Seller does not own and has
---------------
never owned a direct or indirect interest in any trust, partnership, corporation
or other entity and therefore Buyer is not acquiring from Seller an interest in
any entity. Except as set forth in Schedule 2.4, Seller is not a party to any
------------
tax sharing agreement.
(f) Seller is, and at all times since January 2, 1992 has been, a
"small business corporation" with a valid election pursuant to Section 1362(a)
of the Code and applicable state law.
11
(g) Seller is not a "foreign person" within the meaning of Section
1445 of the Code and Treasury Regulations Section 1.1445-2.
(h) For purposes of this Agreement, all references to Sections of the
Code shall include any predecessor provisions to such Sections and any similar
provisions of federal, state, local or foreign law.
2.5 Compliance with Laws. Except as set forth on Schedule 2.5 and
-------------------- ------------
Schedule 2.7, Seller's operation of the Business and the Assets is in compliance
------------
in all material respects with all applicable statutes, ordinances, orders, rules
and regulations promulgated by any federal, state, municipal or other
governmental authority (including the Federal Communications Commission), and,
to the knowledge of Seller and the Principals, Seller has not received notice of
a violation or alleged violation of any such statute, ordinance, order, rule or
regulation within the last three (3) years.
2.6 Insurance. The physical properties and tangible Assets are insured to
---------
the extent disclosed in Schedule 2.6, and all insurance policies and
------------
arrangements of Seller in effect as of the date hereof are disclosed in said
Schedule. Said insurance policies and arrangements are in full force and
effect, all premiums with respect thereto are currently paid, and Seller is in
compliance in all material respects with the terms thereof. Except as set forth
on Schedule 2.6, said insurance is adequate and customary for the business
------------
engaged in by Seller and is sufficient for compliance by Seller with all
requirements of law and all agreements and leases to which Seller is a party.
2.7 Contracts. Except for the Excluded Contracts, the Contracts
---------
constitute all leases, contracts and arrangements, whether oral or written,
under which Seller is bound or to which Seller is a party which relate to the
Business or Assets. To the knowledge of Seller and the Principals, Schedule
--------
1.1(b) attached hereto contains a true, correct and complete list of all
------
Contracts (and a description of each oral arrangement, if any). Each Contract
is valid, in full force and effect and binding upon Seller and, to the knowledge
of Seller and the Principals, the other parties thereto in accordance with its
terms. Except as set forth on Schedule 2.7 and except as will not result in a
------------
Material Adverse Effect, neither Seller nor, to the knowledge of Seller and the
Principals, any other party is in default under or in arrears in the
performance, payment or satisfaction of any agreement or condition on its part
to be performed or satisfied under any Contract, nor does any condition exist
that with notice or lapse of time or both would constitute such a default, and
no waiver or indulgence has been granted by any party under any Contract.
Except as set forth on Schedule 2.7, Seller has not received notice of, and each
------------
of Seller and the Principals has no knowledge of, any fact which would result in
a termination, repudiation or breach of any Contract. Seller has provided Buyer
with true and complete copies of all of such Contracts, as amended, other than
Contracts with Subscribers. With respect to Subscriber Contracts, Seller has
provided Buyer with representative forms of such Contracts which Seller
reasonably believes to be the form utilized by it for all such Subscribers.
12
2.8 Title. Seller has good and marketable title to all of the Assets free
-----
and clear of all mortgages, pledges, security interests, charges, liens,
restrictions and encumbrances of any kind (collectively, "Liens") whatsoever,
except for the Liens set forth on Schedule 2.8 (other than those Liens which are
------------
marked with an * on such schedule, which shall be released at or prior to the
Closing) which are to be transferred to Buyer in connection with the transfer of
the Assets (the "Permitted Liens"). Upon the sale, assignment, transfer and
delivery of the Assets to Buyer hereunder and under the Seller Documents, there
will be vested in Buyer good, marketable and indefeasible title to the Assets
free and clear of all Liens, except for the Permitted Liens. Except for the
Excluded Assets, the Assets include all of the assets and properties (i) held
for use by Seller to conduct the Business as presently conducted and (ii)
necessary for Buyer to operate the Business in the same manner as such business
is currently operated by Seller. Except as set forth on Schedule 2.8, all of
------------
the tangible Assets, taken as a whole, are in good repair, have been well
maintained and are in good operating condition, ordinary wear and tear excepted,
do not require any material modifications or repairs, and comply in all material
respects with applicable laws, ordinances and regulations. Seller has delivered
complete and true copies of all real property leases (the "Leases") set forth on
Schedule 1.1(b). Except as set forth on Schedule 2.8, Seller holds good, clear,
--------------- ------------
marketable, valid and enforceable leasehold interest in the real property
subject to the Leases (the "Leased Real Property"), to the knowledge of Seller
and the Principals, subject only to the right of reversion of the landlord or
lessor under the Leases, free and clear of all other prior or subordinate
interests, including, without limitation, mortgages, deeds of trust, ground
leases, leases, subleases, assessments, tenancies, claims, covenants,
conditions, restrictions, easements, judgments or other encumbrances or matters
affecting title, and free of encroachments onto or off of the leased real
property. There are no material defects in the physical condition of any
improvements constituting a part of the Leased Real Property, including, without
limitation, structural elements, mechanical systems, roofs or parking and
loading areas, and all of such improvements, taken as a whole, are in good
operating condition and repair, have been well maintained, ordinary wear and
tear excepted. All water, sewer, gas, electric, telephone, drainage and other
utilities required by law or necessary for the current or planned operation of
the Leased Real Property have been installed and connected pursuant to valid
permits, and are sufficient to service the Leased Real Property.
2.9 No Litigation. Except as set forth in Schedule 2.9, Seller is not now
------------- ------------
involved in nor, to the knowledge of Seller and the Principals, is Seller
threatened to be involved in any litigation or legal or other proceedings
related to or affecting the Business or any Asset or which would prevent or
hinder the consummation of the transactions contemplated by this Agreement.
Seller has not been operating the Business under, and the Business is not
subject to, any order, injunction or decree of any court of federal, state,
municipal or other governmental department, commission, board, agency or
instrumentality.
2.10 Employees; Labor Matters.
------------------------
Seller employs approximately 78 full-time employees and 15 part-time
employees and reasonably believes it generally enjoys good employer-employee
relationships. Set forth on
13
Schedule 2.12 hereto is a list of all such employees, including the name, date
-------------
of hire and wages of such employees. To the knowledge of Seller and the
Principals, Seller is not delinquent in payments to any of its employees for any
wages, salaries, commissions, bonuses or other direct compensation for any
services performed for it to the date hereof or amounts required to be
reimbursed to such employees. Upon termination of the employment of any of said
employees, neither Seller nor Buyer will, by reason of the acquisition
transaction or anything done prior to the Closing, be liable to any of said
employees for any bonus or compensation payments, except as set forth in
Schedule 2.10 and except for accrued sick, vacation and holiday pay, if any.
-------------
Seller does not have any policy, practice, plan or program of paying severance
pay or any form of severance compensation in connection with the termination of
employment, except as set forth in such Schedule 2.10. Except as set forth on
-------------
Schedule 2.10, Seller is in compliance in all material respects with all
-------------
applicable laws and regulations respecting labor, employment, fair employment
practices, work place safety and health, terms and conditions of employment, and
wages and hours. There are no charges of employment discrimination or unfair
labor practices, nor are there any strikes, slowdowns, stoppages of work, or any
other concerted interference with normal operations existing, pending or, to the
knowledge of Seller and the Principals, threatened against or involving Seller.
No question concerning representation exists respecting any group of employees
of Seller. There are no grievances, complaints or charges that have been filed
against Seller under any dispute resolution procedure (including, but not
limited to, any proceedings under any dispute resolution procedure under any
collective bargaining agreement) that might have an adverse effect on Seller or
the conduct of its business and no arbitration or similar proceeding is pending
and no claim therefor has been asserted. No collective bargaining agreement is
in effect or is currently being or is about to be negotiated by Seller. Seller
has received no information to indicate that any of its employment policies or
practices is currently being audited or investigated by any federal, state or
local government agency. Seller is, and at all times since November 6, 1986 has
been, in compliance with the requirements of the Immigration Reform Control Act
of 1986.
2.11 Financial Statements. Attached hereto as Schedule 2.11 are copies of
-------------------- -------------
the balance sheet of Seller as at July 31, 1998 (the "Base Balance Sheet") and
the statements of income and expense of Seller for July 31, 1998 (collectively
the "Financial Statements"). The Financial Statements have been prepared in
accordance with Seller's historical accounting practices during the periods
covered thereby (except for the absence of footnotes with respect to unaudited
financials), in all material respects, present fairly and accurately the
financial condition of the Business at the dates of said statements and the
results of operations of the Business for the periods covered thereby. Except
as set forth in Schedule 2.11, as of the date of the Base Balance Sheet (the
-------------
"Base Balance Sheet Date"), Seller had no liabilities or obligations of any kind
with respect to the Business, whether accrued, contingent or otherwise, that are
not disclosed and adequately reserved against on the Base Balance Sheet. Except
as set forth in Schedule 2.11, as of the date hereof and at the Closing, Seller
-------------
had and will have no liabilities or obligations of any kind with respect to the
Business, whether accrued, contingent or otherwise, that are not disclosed and
adequately reserved against on the Base Balance Sheet, other than immaterial
liabilities incurred in the ordinary course of business which would not be
14
reflected in the Base Balance Sheet under generally accepted accounting
principles, applied consistently.
2.12 Business Since the Base Balance Sheet Date. Since the Base Balance
------------------------------------------
Sheet Date and except as set forth on Schedule 2.12:
-------------
(a) there has been no material adverse change in the Business or in
the Assets, operations or financial condition of the Business;
(b) the Business has, in all material respects, been conducted in the
ordinary course of business and in substantially the same manner as it was
conducted before the date of the Base Balance Sheet Date;
(c) there has not been any material obligation or liability
(contingent or other) incurred by Seller with respect to the Business, whether
or not incurred in the ordinary course of business;
(d) there has not been any purchase, sale or other disposition, or any
agreement or other arrangement, oral or written, for the purchase, sale or other
disposition, of any material properties or assets of the Business, whether or
not in the ordinary course of business;
(e) there has not been any mortgage, encumbrance or lien placed on any
of the Assets, nor any payment or discharge of a material lien or liability of
Seller which was not reflected on the Base Balance Sheet;
(f) there has not been any damage, destruction or loss, whether or not
covered by insurance, adversely affecting the Business or Assets;
(g) there has not been any change in the collection, payment and
accounting policies used by Seller in the Business; and
(h) there has not been any agreement or understanding, whether in
writing or otherwise, for Seller to take any of the actions specified above.
2.13 Licenses. As of the date of this Agreement, Seller is the holder of
--------
all licenses, permits and authorizations with respect to the Business (the
"Authorizations"). The Authorizations constitute all of the licenses, permits
and authorizations required for operation of the Business as now operated. All
of the Authorizations are in full force and effect and, to the knowledge of
Seller and the Principals, no licenses, permits or authorizations of any
governmental department or agency are required for the operation of the Business
which have not been duly obtained. As of the date hereof, there is not pending
or, to the knowledge of Seller and the Principals, threatened any action by or
before any governmental agency to revoke, cancel, rescind or modify any of the
Authorizations.
15
2.14 Approvals; Consents. Except as set forth on Schedule 2.14 attached
------------------- -------------
hereto, no approval, consent, authorization or exemption from or filing with any
person or entity not a party to this Agreement is required to be obtained or
made by Seller in connection with the execution and delivery of this Agreement
and the Seller Documents and the consummation of the transactions contemplated
hereby and thereby.
2.15 Customers and Suppliers. Seller reasonably believes that its
-----------------------
relations with its customers and suppliers, including its Subscribers, taken as
a whole, are good and there are not pending or, to Seller's knowledge,
threatened claims or controversies with any customer or suppliers, or any
Subscribers, that is material to the Assets or the Business.
2.16 Subscribers. Schedule 2.16(a) attached hereto sets forth, as of the
----------- ----------------
date hereof, the Subscribers of the Business as listed by class and type. For
purposes of this Agreement, the term "Subscriber" shall mean any active
subscriber to Internet services offered by Seller in the Business who has
subscribed to a service for at least one month and has paid at least one xxxx,
including, without limitation, any person who receives dial-up Internet access
through the Business (a "Dial-up Subscriber"), any person who receives Internet
access from Seller offering higher data transmission rates than available from
dial-up access (a "Dedicated Subscriber"), any Subscriber who has an integrated
services digital network account ("ISDN Subscriber"), and any person with a web
page on Seller's server and to whom Seller provides Internet access (a "Web-
hosting Subscriber"). Set forth on Schedule 2.16(b) attached hereto is a
----------------
listing of all such accounts which receive complimentary Internet services or
Internet services at a discounted rate in connection with extraordinary
promotions offered by Seller outside the ordinary course of business.
2.17 Brokers. Except for Corporate Development Resources, Inc. ("CDR"),
-------
whose fees shall be paid by Seller at or before Closing, Seller has not retained
any broker or finder or other person who would have any valid claim against any
of the parties to this Agreement for a commission or brokerage fee in connection
with this Agreement or the transactions contemplated hereby.
2.18 Collectibility of Accounts Receivable. Subject to the provisions of
-------------------------------------
Section 1.12, all of the Accounts Receivable of Seller which are aged less than
thirty (30) days as of the Closing Date are or will be as of the Closing Date
bona fide, valid and enforceable claims, and, to the knowledge of Seller and the
Principals, subject to no setoff or counterclaim. Seller has no accounts or
loans receivable from any person, firm or corporation which is affiliated with
Seller or from any director, officer or employee of Seller, or from any of their
respective spouses or family members.
2.19 Banking Relations. All of the arrangements which Seller has with any
-----------------
banking institution are summarized in Schedule 2.19, indicating with respect to
-------------
each of such arrangements the type of arrangement maintained (such as checking
account, borrowing arrangements, safe deposit box, etc.) and the person or
persons authorized in respect thereof. To the knowledge of Seller and the
Principals, Schedule 2.19 hereto sets forth all of the
-------------
16
guarantees of Seller's indebtedness and liabilities related to the Business or
the Assets by the Principals (the "Guarantees"), all of which shall be
discharged at the Closing. Buyer and Seller agree that in the event Seller
notifies Buyer, after the Closing, of the existence of any personal guarantees
of Seller's indebtedness or obligations with respect to the Business or the
Assets which exist as of the Closing Date and of which the Seller has no
knowledge, Buyer shall use reasonable best efforts to assist Seller, and Seller
shall use reasonable best efforts to assist Buyer, following the Closing to
discharge such guarantees.
2.20 Intellectual Property.
---------------------
(a) Set forth on Schedule 2.20 hereto are all computer programs and
-------------
related documentation sold, marketed, licensed and distributed by Seller (the
"Products"). All of the Intellectual Property of Seller is set forth on
Schedule 2.20 attached hereto. For purposes hereof, the term "Intellectual
-------------
Property" includes: (i) all patents, patent applications, patent rights, and
inventions and discoveries and invention disclosures (whether or not patented)
(collectively, "Patents"); (ii) the name "EXEC-PC", all trade names including
"EXEC-PC Interactive", trade dress, logos, packaging design, slogans, Internet
domain names, registered and unregistered trademarks and service marks and
applications (collectively, "Marks"); (iii) all copyrights in both published and
unpublished works, including, without limitation, all compilations, databases
and computer programs, and all copyright registrations and applications, and all
derivatives, translations, adaptations and combinations of the above
(collectively, "Copyrights"); (iv) all know-how, trade secrets, confidential or
proprietary information, customer lists, IP addresses, research in progress,
algorithms, data, designs, processes, formulae, drawings, schematics,
blueprints, flow charts, models, prototypes, techniques, Beta testing procedures
and Beta testing results (collectively, "Trade Secrets"); (v) Seller's web-sites
(including the domain name "xxx.xxxxxx.xxx" and any other similar domain names);
(vi) all goodwill, franchises, licenses, permits, consents, approvals, technical
information, telephone numbers, and claims of infringement against third parties
(the "Rights"); and (vii) all contracts relating to the Products and the
Intellectual Property to which Seller is a party or is bound, including, without
limitation, all nondisclosure and/or confidentiality agreements entered into by
persons in connection with disclosures by Seller (collectively,"Assigned
Contracts").
(b) Except as described in Schedule 2.20, to the knowledge of Seller
-------------
and the Principals, Seller has exclusive ownership of, and has good, valid and
marketable title to, all of the Intellectual Property, free and clear of any
Liens, and has the right to use all of the Intellectual Property without payment
to any third party. Except as set forth on Schedule 2.14 and Schedule 2.20,
------------- -------------
Seller's rights in all of such Intellectual Property are freely transferable
subject to filing documents of transfer. There are no claims or demands pending
or, to the knowledge of Seller and the Principals, threatened of any other
person pertaining to any of such Intellectual Property and no proceedings have
been instituted, or are pending or, to the knowledge of Seller and the
Principals, threatened against Seller and/or its officers, employees and
consultants which challenge the validity and enforceability of Seller's rights
in respect of the Intellectual Property. The Intellectual Property constitutes
all of the assets of Seller used in
17
designing, creating and developing the Products, and represent all of such
Intellectual Property necessary for the operation of Seller's Business as
currently conducted.
All former and current employees, consultants and contractors of Seller
have executed written instruments with Seller that assign to Seller all rights
to any inventions, improvements, discoveries, or information relating to the
business of Seller. No employee, consultant or contractor of Seller has entered
into any agreement that restricts or limits in any way the scope or type of work
in which the employee, consultant or contractor may be engaged or requires the
employee, consultant or contractor to transfer, assign, or disclose information
concerning his work to anyone other than Seller.
(c) Schedule 2.20 sets forth a complete and accurate list and summary
-------------
description of all of Seller's Patents, if any. Any issued Patents are
currently in compliance with formal legal requirements (including without
limitation payment of filing, examination and maintenance fees and proofs of
working or use), are valid and enforceable, and are not subject to any
maintenance fees or taxes or actions falling due within ninety (90) days after
the Closing Date. In each case where a Patent is held by Seller by assignment,
the assignment has been duly recorded with the U.S. Patent and Trademark Office
and all other jurisdictions of registration. No Patent has been or is now
involved in any interference, reissue, re-examination or opposition proceeding.
To the knowledge of Seller and the Principals, there is no potentially
interfering Patent of any third party. Any products made, used or sold under
the Patents have been marked with the proper patent notice.
(d) Schedule 2.20 sets forth a complete and accurate list and summary
-------------
description of all of Seller's Marks. All Marks that have been registered with
the United States Patent and Trademark Office and/or any other jurisdiction are
currently in compliance with formal legal requirements (including, without
limitation, the timely post-registration filing of affidavits of use and
incontestability and renewal applications), are valid and enforceable, and are
not subject to any maintenance fees or taxes or actions falling due within
ninety (90) days after the Closing Date. In each case where a Trademark is held
by Seller by assignment, the assignment has been duly recorded with the U.S.
Patent and Trademark Office and all other jurisdictions of registration. No
Xxxx has been or is now involved in any opposition, invalidation or cancellation
proceeding and, to the knowledge of Seller and the Principals, no such action is
threatened with respect to any of the Marks. All products and materials
containing a Xxxx xxxx the proper notice where permitted by law.
(e) Schedule 2.20 sets forth a complete and accurate list and summary
-------------
description of all of Seller's Copyrights. All the Copyrights have been
registered with the United States Copyright Office and are currently in
compliance with formal legal requirements, are valid and enforceable, and are
not subject to any fees or taxes or actions falling due within ninety (90) days
after the Closing Date. In each case where a Copyright is held by Seller by
assignment, the assignment has been duly recorded with the U.S. Copyright Office
and all other jurisdictions of registration. None of the source or object code,
algorithms, or structure included in the Products is copied from, based upon, or
derived from any other source or
18
object code, algorithm or structure in violation of the rights of any third
party. Any substantial similarity of the Products to any computer program owned
by any third party did not result from the Products being copied from, based
upon, or derived from any such computer software program in violation of the
rights of any third party. All copies of works encompassed by the Copyrights
have been marked with the proper copyright notice.
(f) Seller has taken all reasonable security measures (including,
without limitation, entering into appropriate confidentiality and nondisclosure
agreements with all officers, directors, employees, consultants and contractors
of Seller and any other persons with access to the Trade Secrets) to protect the
secrecy, confidentiality and value of all Trade Secrets. To the knowledge of
Seller and the Principals, there has not been any breach by any party to any
such confidentiality or non-disclosure agreement. The Trade Secrets have not
been disclosed by Seller to any person or entity other than employees or
contractors of Seller who had a need to know and use the Trade Secrets in the
course of their employment or contract performance. Except as set forth on
Schedule 2.20, (i) Seller has not directly or indirectly granted any rights or
-------------
interests in the source code of the Products, and (ii) since Seller developed
the source code of the Products, Seller has not provided, licensed or disclosed
the source code of the Products to any person or entity. Seller has the right
to use, free and clear of claims of third parties, all Trade Secrets. To the
knowledge of Seller and the Principals, there is not any assertion that the use
by Seller of any Trade Secret violates the rights of any third party.
(g) To the knowledge of Seller and the Principals, Seller has the
exclusive right to use, license, distribute, transfer and bring infringement
actions with respect to the Intellectual Property. Except as set forth on
Schedule 2.20, Seller (i) has not licensed or granted to anyone rights of any
-------------
nature to use any of its Intellectual Property and (ii) is not obligated to and
does not pay royalties or other fees to anyone for its ownership, use, license
or transfer of any of its Intellectual Property.
(h) All licenses or other agreements under which Seller is granted
rights by others in Intellectual Property are listed in Schedule 2.20. Except
-------------
as set forth on Schedule 2.20, all such licenses or other agreements are in full
-------------
force and effect, to the knowledge of Seller and the Principals there is no
material default by any party thereto, and all of the rights of Seller
thereunder are freely assignable. True and complete copies of all such licenses
or other agreements, and any amendments thereto, have been provided to Buyer,
and Seller has no reason to believe that the licensors under the licenses and
other agreements under which Seller is granted rights and has granted rights to
others do not have and did not have all requisite power and authority to grant
the rights purported to be conferred thereby.
(i) All licenses or other agreements under which Seller has granted
rights to others in Intellectual Property are listed in Schedule 2.20. All such
-------------
licenses or other agreements are in full force and effect, and to the knowledge
of Seller and the Principals there is no material default by any party thereto.
True and complete copies of all such licenses or other agreements, and any
amendments thereto, have been provided to Buyer.
19
(j) Seller has no obligation to any other person to maintain, modify,
improve or upgrade the Products other than in the ordinary course of business
consistent with past practices of Seller.
(k) None of the Products manufactured and sold, nor any process or
know-how used, by Seller infringes or is alleged to infringe any patent,
trademark, service xxxx, trade name, copyright or other proprietary right or is
a derivative work based on the work of any other person.
(l) Except as set forth on Schedule 2.9, there are no (i) actions,
------------
suits, claims, investigations or other proceedings involving the Products, the
Intellectual Property, or the Rights by or before any governmental authority or
arbitrator pending or, to the knowledge of Seller and the Principals, threatened
against Seller, or (ii) judgments, decrees, injunctions, or orders involving the
Products, the Intellectual Property or the Rights of any governmental authority
or arbitrator against Seller. Seller is not in default under any such judgment,
decree, injunction or order.
(m) The Products perform in accordance with their published
specifications and documentation and as Seller has warranted to its customers.
Seller has reviewed the areas within its businesses and operations which could
be adversely affected by, and has developed a program to address on a timely
basis, the "Year 2000 Problem" (i.e., the risk that applications used by Seller
or its suppliers and/or providers may be unable to recognize and properly
perform date-sensitive functions involving certain dates prior to and any date
after December 31, 1999). Seller reasonably believes that the "Year 2000
Problem" will not have a Material Adverse Effect.
2.21 Absence of Restrictions. Seller has not entered into any other
-----------------------
agreement or arrangement with any other party with respect to the sale, transfer
or any other disposition of the Business or the Assets, in whole or in part.
2.22 Permits; Burdensome Agreements. Schedule 2.22 lists all permits,
------------------------------ -------------
registrations, licenses, franchises, certifications and other approvals
(collectively, the "Approvals") required from federal, state or local
authorities in order for Seller to conduct its Business. Seller has obtained
all such Approvals, which are valid and in full force and effect, and is
operating in compliance therewith. Such Approvals include, but are not limited
to, those required under federal, state or local statutes, ordinances, orders,
requirements, rules, regulations, or laws pertaining to environmental
protection, public health and safety, worker health and safety, buildings,
highways or zoning. Except as disclosed in Schedule 2.22 and Schedule 2.14 and
------------- -------------
except as contemplated in Section 4.4, such Approvals will be available and
assigned to Buyer and remain in full force and effect upon Buyer's purchase of
the Assets, and no further Approvals will be required in order for Buyer to
conduct the business currently conducted by Seller subsequent to the Closing.
Except as disclosed in Schedule 2.22 or in any other schedule hereto, to the
-------------
knowledge of Seller and the Principals, Seller is not subject to or
20
bound by any agreement, arrangement, judgment, decree or order which may have a
Material Adverse Effect.
2.23 Transactions with Interested Persons. Except as set forth in Schedule
------------------------------------ --------
2.23 hereto, neither Seller, nor any stockholder, officer, supervisory employee
----
or director of Seller or, to the knowledge of Seller or the Principals, any of
their respective spouses or family members owns directly or indirectly on an
individual or joint basis any material interest in, or serves as an officer or
director or in another similar capacity of, any competitor or supplier of
Seller, or any organization which has a material contract or arrangement with
Seller.
2.24 Employee Benefit Programs.
-------------------------
(a) Schedule 2.24 lists every Employee Program (as defined below) that
-------------
has been maintained (as defined below) by Seller at any time during the three-
year period ending on the Closing Date.
(b) Each Employee Program which has ever been maintained by Seller or
an Affiliate (as defined below) and which has at any time been intended to
qualify under Section 401(a) or 501(c)(9) of the Code has received a favorable
determination or approval letter from the Internal Revenue Service ("IRS")
regarding its qualification under such section and has, in fact, been
continuously qualified under the applicable section of the Code since the
effective date of such Employee Program through and including the Closing Date
(or if earlier, the date that all of such Employee Program's assets were
distributed). No material event or omission has occurred which would cause any
such Employee Program to lose its qualification under the applicable Code
section.
(c) Seller does not know, and has no reason to know, of any material
failure of any party to comply with any laws applicable to the Employee Programs
that have been maintained by Seller. With respect to any Employee Program ever
maintained by Seller or any Affiliate, there has occurred no "prohibited
transaction," as defined in Section 406 of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") or Section 4975 of the Code, or
breach of any duty under ERISA or other applicable law (including, without
limitation, any health care continuation requirements or any other tax law
requirements, or conditions to favorable tax treatment, applicable to such
plan), which could result, directly or indirectly (including, without
limitation, through any obligation of indemnification or contribution), in any
taxes, penalties or other liability to Buyer. No litigation, arbitration, or
governmental administrative proceeding (or investigation) or other proceeding
(other than those relating to routine claims for benefits) is pending or, to the
knowledge of Seller or the Principals, threatened with respect to any such
Employee Program.
(d) Neither Seller nor any Affiliate (i) has ever maintained any
Employee Program which has been subject to Title IV of ERISA (including, but not
limited to, any Multiemployer Plan (as defined below)) or (ii) has ever provided
health care or any other non-pension benefits to any employees after their
employment is terminated (other than as
21
required by part 6 of subtitle B of title I of ERISA) or has ever promised to
provide such post-termination benefits.
(e) With respect to each Employee Program maintained by Seller within
the three (3) years preceding the Closing, complete and correct copies of the
following documents (if applicable to such Employee Program) have previously
been delivered to Buyer: (i) all documents embodying or governing such Employee
Program, and any funding medium for the Employee Program (including, without
limitation, trust agreements) as they may have been amended; (ii) the most
recent IRS determination or approval letter with respect to such Employee
Program under Code Section 401 or 501(c)(9), and any applications for
determination or approval subsequently filed with the IRS; (iii) the three most
recently filed IRS Forms 5500, with all applicable schedules and accountants'
opinions attached thereto; (iv) the summary plan description for such Employee
Program (or other descriptions of such Employee Program provided to employees)
and all modifications thereto; (v) any insurance policy (including any fiduciary
liability insurance policy) related to such Employee Program; (vi) any documents
evidencing any loan to an Employee Program that is a leveraged employee stock
ownership plan; and (vii) all other materials reasonably necessary for Buyer to
perform any of its responsibilities with respect to any Employee Program
subsequent to the Closing (including, without limitation, health care
continuation requirements).
(f) For purposes of this section:
(i) "Employee Program" means (A) all employee benefit plans
within the meaning of ERISA Section 3(3), including, but not limited to,
multiple employer welfare arrangements (within the meaning of ERISA Section
3(4)), plans to which more than one unaffiliated employer contributes and
employee benefit plans (such as foreign or excess benefit plans) which are
not subject to ERISA; and (B) all stock or cash option plans, restricted
stock plans, bonus or incentive award plans, severance pay policies or
agreements, deferred compensation agreements, supplemental income
arrangements, vacation plans, and all other employee benefit plans,
agreements, and arrangements not described in (A) above. In the case of an
Employee Program funded through an organization described in Code Section
501(c)(9), each reference to such Employee Program shall include a
reference to such organization.
(ii) An entity "maintains" an Employee Program if such entity
sponsors, contributes to, or provides (or has promised to provide) benefits
under such Employee Program, or has any obligation (by agreement or under
applicable law) to contribute to or provide benefits under such Employee
Program, or if such Employee Program provides benefits to or otherwise
covers employees of such entity, or their spouses, dependents, or
beneficiaries.
(iii) An entity is an "Affiliate" of Seller if it would have ever
been considered a single employer with Seller under ERISA Section 4001(b)
or part of the same "controlled group" as Seller for purposes of ERISA
Section 302(d)(8)(C).
22
(iv) "Multiemployer Plan" means a (pension or non-pension)
employee benefit plan to which more than one employer contributes and which
is maintained pursuant to one or more collective bargaining agreements.
2.25 Environmental Matters.
---------------------
(a) Except as set forth in Schedule 2.25, (i) Seller has never
-------------
generated, transported, used, stored, treated, disposed of, or managed any
Hazardous Waste (as defined below); (ii) to the knowledge of Seller and the
Principals, no Hazardous Material (as defined below) has ever been or is
threatened to be spilled, released, or disposed of at any site presently or
formerly owned, operated, leased, or used by Seller, or has ever been located in
the soil or groundwater at any such site; (iii) to the knowledge of Seller and
the Principals, no Hazardous Material has ever been transported from any site
presently or formerly owned, operated, leased, or used by Seller for treatment,
storage, or disposal at any other place; (iv) to the knowledge of Seller and the
Principals, Seller does not presently own, operate, lease, or use, nor has it
previously owned, operated, leased, or used any site on which underground
storage tanks are or were located; and (v) to the knowledge of Seller and the
Principals, no lien has ever been imposed by any governmental agency on any
property, facility, machinery, or equipment owned, operated, leased, or used by
Seller in connection with the presence of any Hazardous Material.
(b) Except as set forth in Schedule 2.25, (i) to the knowledge of
-------------
Seller and the Principals, Seller has no liability under, nor has it ever
violated, any Environmental Law (as defined below); (ii) to the knowledge of
Seller and the Principals, Seller, any property owned, operated, leased, or used
by Seller, and any facilities and operations thereon are presently in compliance
with all applicable Environmental Laws; (iii) Seller has never entered into or
been subject to any judgment, consent decree, compliance order, or
administrative order with respect to any environmental or health and safety
matter or received any request for information, notice, demand letter,
administrative inquiry, or formal or informal complaint or claim with respect to
any environmental or health and safety matter or the enforcement of any
Environmental Law; and (iv) Seller has no knowledge or reason to know that any
of the items enumerated in clause (iii) of this subsection will be forthcoming.
(c) Except as set forth in Schedule 2.25 hereto, to the knowledge of
-------------
Seller and the Principals, no site owned, operated, leased, or used by Seller
contains any asbestos or asbestos-containing material, any polychlorinated
biphenyls (PCBs) or equipment containing PCBs, or any urea formaldehyde foam
insulation.
(d) Seller has provided to Buyer copies of all documents, records, and
information held by Seller concerning any environmental or health and safety
matter relevant to Seller, whether generated by Seller or others, including,
without limitation, environmental audits, environmental risk assessments, site
assessments, documentation regarding off-site disposal of Hazardous Materials,
spill control plans, and reports, correspondence, permits,
23
licenses, approvals, consents, and other authorizations related to environmental
or health and safety matters issued by any governmental agency.
(e) For purposes of this Section 2.25, (i) "Hazardous Material" shall
mean and include any hazardous waste, hazardous material, hazardous substance,
petroleum product, oil, toxic substance, pollutant, contaminant, or other
substance which may pose a threat to the environment or to human health or
safety, as defined or regulated under any Environmental Law; (ii) "Hazardous
Waste" shall mean and include any hazardous waste as defined or regulated under
any Environmental Law; (iii) "Environmental Law" shall mean any environmental or
health and safety-related law, regulation, rule, ordinance, or by-law at the
foreign, federal, state, or local level, whether existing as of the date hereof,
previously enforced, or subsequently enacted; and (iv) "Seller" shall mean and
include Seller and all other entities for whose conduct Seller is or may be held
responsible under any Environmental Law.
2.26 HSR Matters. Neither Seller nor any "ultimate parent entity" (as such
-----------
term is defined in the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended, and the rules and regulations thereunder (the "HSR Act")) of Seller had
"annual net sales" (as defined in the HSR Act) for the previous fiscal year or
"total assets" (as defined in the HSR Act) as of the date hereof, equal to or
greater than $10,000,000.
2.27 Disclosure. To the knowledge of Seller and the Principals, the
----------
representations, warranties and statements contained in this Agreement and in
the certificates, exhibits and schedules delivered by Seller and the Principals
to Buyer pursuant to this Agreement do not contain any untrue statement of a
material fact, and, when taken together, do not omit to state a material fact
required to be stated therein or necessary in order to make such
representations, warranties or statements not misleading in light of the
circumstances under which they were made. There are no facts known to Seller or
the Principals which presently or may in the future have a Material Adverse
Affect which have not been specifically disclosed herein or in a Schedule
furnished herewith, other than general economic or regulatory conditions
affecting the Internet services industry generally.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF BUYER. As a material inducement
to Seller entering into this Agreement, Buyer hereby represents and warrants to
Seller as follows:
3.1 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 power and authority to conduct its business as it is now conducted and
to own, lease and operate its properties and assets.
3.2 Required Action. All actions and proceedings necessary to be taken by
---------------
or on the part of Buyer in connection with the transactions contemplated by this
Agreement have been duly and validly taken, and this Agreement and each other
agreement, document and instrument to be executed and delivered by or on behalf
of Buyer pursuant to, or as
24
contemplated by, this Agreement (collectively, the "Buyer Documents") has been
duly and validly authorized, executed and delivered by Buyer. Buyer has full
right, authority, power and capacity to execute and deliver this Agreement and
each other Buyer Document and to carry out the transactions contemplated hereby
and thereby. This Agreement and each other Buyer Document constitutes, or when
executed and delivered will constitute, the legal, valid and binding obligations
of Buyer enforceable in accordance with its respective terms.
3.3 No Conflicts. The execution, delivery and performance by Buyer of
------------
this Agreement and each other Buyer Document does not and will not (a) violate
any provision of the Articles of Incorporation or by-laws of Buyer, as amended
to date, (b) constitute a violation of, or conflict with or result in any breach
of, acceleration of any obligation under, right of termination under, or default
under, any agreement or instrument to which Buyer is a party or by which it is
bound, (c) violate any judgment, decree, order, statute, rule or regulation
applicable to Buyer, (d) require Buyer to obtain any approval, consent or waiver
of, or to make any filing with, any person or entity (governmental or otherwise)
that has not been obtained or made. The officers who execute this Agreement and
the other Buyer Documents contemplated hereby on behalf of Buyer have and shall
have all requisite power to do so in the name of and on behalf of Buyer.
SECTION 4. COVENANTS OF SELLER. Seller covenants and agrees that, from the
date hereof until consummation of the transactions contemplated hereby at the
Closing, Seller shall:
4.1 Access to Premises and Records. Seller shall give Buyer and its
------------------------------
representatives, at reasonable times and with reasonable prior notice, free
access to the properties, books and records of the Business and to the Assets
and will furnish to Buyer and its representatives such information regarding the
Business and the Assets as Buyer or its representatives may from time to time
reasonably request in order that Buyer may have full opportunity to make a
diligent investigation consistent with this Agreement; provided, however, that
-------- -------
Buyer's activities shall not unreasonably disrupt the business or operations of
Seller. In addition to, and not in limitation of the foregoing, Seller shall
provide Buyer with access to and copies of the records of all: (a) Accounts
Receivable, (b) Subscriber billing, (c) pre-paid accounts, (d) accounts for
which no remuneration is received by Seller and (e) general reports with respect
to each category of service provided by the Business.
4.2 Continuity and Maintenance of Operations of the Business. Except as
--------------------------------------------------------
to actions which Buyer has been advised and to which Buyer has consented to in
writing, and except as specifically permitted or required by this Agreement,
Seller shall:
(a) Operate the Business in the ordinary course consistent with past
practices, use its commercially reasonable efforts to keep available the
services of the employees who are involved in the operation of the Business, and
use reasonable best efforts to preserve any beneficial business relationships
with Subscribers, customers, suppliers and others having business dealings with
Seller relating to the Business;
25
(b) Use and operate the Assets in a manner consistent with past
practice and maintain the Assets in good operating condition, ordinary wear and
tear excepted;
(c) Maintain adequate inventories of spare Equipment consistent with
past practices;
(d) Maintain insurance upon the Assets in such amounts and types as in
effect on the date of this Agreement as set forth in Schedule 2.6 attached
------------
hereto;
(e) Keep all of its business books, records and files in the ordinary
course of business in accordance with past practices, and provide Buyer with
access thereto upon its reasonable request; provided, however, that such access
-------- -------
does not unreasonably disrupt the business or operations of Seller;
(f) Continue to implement its procedures for disconnection and
discontinuance of service to subscribers whose accounts are delinquent in
accordance with those in effect on the date of this Agreement;
(g) Perform and comply in all material respects with the terms of the
Contracts and keep such Contracts in full force and effect; and
(h) Use commercially reasonable efforts to preserve the goodwill of
the Business.
4.3 Negative Covenants. Seller shall not, without the prior written
------------------
consent of Buyer:
(a) Sell, transfer, lease, assign or otherwise dispose of, or agree to
sell, transfer, lease, assign or otherwise dispose of, any Assets;
(b) Enter into any contract or commitment for the acquisition of goods
or services relating to the Business (other than in the ordinary course of
business) or which otherwise obligates Seller to perform in full or in part
beyond the Closing Date;
(c) Hire any new employees or enter into any employment arrangements
or otherwise increase the salary or compensation of any existing employees;
(d) Renegotiate, modify, amend or terminate any Contract (other than
Contracts with respect to Seller's Dial-up and Dedicated Subscribers);
(e) Create, assume, or permit to exist, or agree to incur, assume or
acquire, any Lien, claim or liability on the Assets;
26
(f) Make any modifications or changes to the existing rate schedules
or product offerings in effect with respect to the Business;
(g) Offer or employ any sales discounts, free services or other
extraordinary marketing practices or extraordinary promotions outside the
ordinary course of business and not consistent with Seller's past practices;
(h) Take any actions or permit its employees and agents to take any
actions which would materially interfere with or preclude the transactions
contemplated by this Agreement; and
(i) Cause or permit the provision for any new and material pension,
retirement or other employment benefits for employees who perform services in
connection with the conduct of the Business or any material increase in any
existing benefits (other than as required by law).
4.4 Consents.
--------
(a) Seller will use its reasonable best efforts to obtain, with
Buyer's assistance, as soon as practicable and at its expense, the consent of
all third parties under the Contracts for which the prior approval of such third
party is required pursuant to the terms of the Contract (each a "Restricted
Contract," and together the "Restricted Contracts"), in form and substance
reasonably satisfactory to Buyer. If any such consent or approval is not
obtained, or if any approval, consent or authorization for the Authorizations
described in Section 2.13 and 2.14 hereof is not obtained ("Restricted
Authorizations"), and the parties nonetheless consummate the transactions
contemplated hereby, Seller shall use reasonable best efforts to obtain such
consent after the Closing and secure an arrangement satisfactory to Buyer to
provide Buyer with the benefits of such Restricted Authorization or Restricted
Contract after Closing until such consent is obtained; provided, however, that
-------- -------
"reasonable best efforts" for these purposes shall not require Seller to
undertake extraordinary or unreasonable measures to obtain such authorizations,
approvals and consents, including, without limitation, the initiation or
prosecution of legal proceedings or the payment of fees in excess of customary
filing and processing fees. If Seller shall have complied with this Section
4.4(a), Buyer shall have no right to terminate this Agreement or to seek
indemnification or other remedies from Seller as a result of any failure by the
parties to obtain any such authorization, consent or approval or to provide any
such alternative arrangement with respect to any Restricted Contract or
Restricted Authorization.
(b) Notwithstanding the foregoing, with respect to the Restricted
Authorizations and the Restricted Contracts which have been marked with a * on
Schedule 2.14 (the "Material Restricted Authorizations" and the "Material
-------------
Restricted Contracts", respectively), Buyer and Seller agree that it shall be a
condition to Buyer's obligation to consummate the transactions contemplated
hereby that Seller obtain the consents to the assignment thereof; provided,
--------
however, that with respect to the Material Restricted
-------
27
Contracts with M&I First National Leasing Corp., Fleet Capital, 3Com Credit
Corporation and Ameritech Credit Corporation set forth on Schedule 2.14 (the
-------------
"Material Leases"), if the consent to the assignment of such Material Leases is
not obtained, in form and substance reasonably satisfactory to Buyer, prior to
October 1, 1998, then Buyer and Seller agree that such Material Leases will be
paid-in-full by Buyer at the Closing, including payment of all interest,
prepayment and termination penalties, and other charges related thereto, without
any further liability of Seller and the Principals to Buyer under such Material
Leases after the Closing (it being understood by the parties that the adjustment
to the Purchase Price as contemplated by Section 1.6(b) shall still apply).
(c) Nothing in this Agreement will constitute a transfer or an
attempted transfer of any Restricted Authorization or Restricted Contract which
by its terms or under applicable law or governmental rules or regulations
requires the consent or approval of a third party (including, without
limitation, a governmental authority) unless such consent or approval shall have
been obtained.
4.5 Notification of Certain Matters. Seller shall promptly notify Buyer
-------------------------------
of (i) any fact, event, circumstances or action the existence or occurrence of
which would cause any of Seller's representations or warranties under this
Agreement, or the disclosures in any schedules or exhibits attached hereto, not
to be true in any material respect and (ii) any failure on its part to comply
with or satisfy in any material respect any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement. Seller shall promptly
notify buyer in writing of the assertion, commencement or threat of any claim,
litigation, proceeding or investigation in which Seller is a party or in which
the Assets or Business may be affected and which could reasonably be expected to
be material or which relates to the transactions contemplated hereby. Prior to
the Closing, the Seller may modify, supplement or amend the Schedules. The
parties agree that Buyer shall be deemed to have waived, and Seller shall have
no obligation to indemnify Buyer with respect to, any breach by Seller of any
warranties and representations of Seller under this Agreement disclosed in any
modification, supplement or amendment in the Schedules made pursuant hereto,
except for such breaches of representations and warranties which are the result
of a breach or default by Seller with respect to any covenant of Seller made in
Section 4 of this Agreement, unless the Buyer shall notify Seller within three
(3) days of receipt thereof or at Closing, whichever is earlier, of Buyer's
election to terminate this Agreement, in which case Buyer shall be permitted to
terminate this Agreement as provided in Section 8.3 without either party having
any liability to the other party for indemnification or otherwise. If Buyer
does not so notify Seller, the Schedules shall be deemed modified by the
information disclosed in any such supplement or amendment and the same shall be
incorporated in the Schedules by reference.
4.6 Adverse Change. Seller shall promptly notify Buyer in writing of any
--------------
materially adverse developments affecting the Assets or the Business which
become known to Seller, including, without limitation, (i) any damage,
destruction or loss (whether or not covered by insurance) materially and
adversely affecting any of the Assets or the Business, (ii) any material notice
of violation, forfeiture or complaint under any material Contract, or (iii)
28
anything which, if not corrected prior to the Closing Date, would prevent Seller
from fulfilling any condition to Closing described in Section 6 hereof.
4.7 No Solicitation. Seller shall not, and Seller shall cause its
---------------
officers, employees, stockholders, agents and representatives (including,
without limitation, any investment banker, attorney or accountant retained by
Seller) and all other employees who perform services with respect to the
operation of the Business not to, initiate, solicit or encourage, directly or
indirectly, any inquiries or the making of any proposal with respect to the
Assets or the Business, or engage in any negotiations concerning, or provide to
any other person any information or data relating to, the Business, the Assets
or Seller for the purpose of, or have any discussions with, any person relating
to, or otherwise cooperate in any way with or assist or participate in,
facilitate or encourage, any inquiries or the making of any proposal which
constitutes, or may reasonably be expected to lead to, any effort or attempt by
any other person to seek or effect a transaction, or enter into a transaction
with any person or persons, other than Buyer, concerning the possible sale of
the Assets or Business, or the capital stock of Seller. Seller shall promptly
inform Buyer of any such inquiries or proposals and provide all pertinent
documentation related thereto.
4.8 Cooperation. Seller shall use its commercially reasonable efforts to
-----------
take all steps within its power and will cooperate with Buyer to cause to be
fulfilled those of the conditions to Buyer's obligations to consummate the
transactions contemplated by this Agreement that are dependent upon its actions,
and to execute and deliver such instruments and take such other reasonable
actions as may be necessary or appropriate in order to carry out the intent of
this Agreement and consummate the transactions contemplated hereby. Without
limiting the foregoing, Seller shall cooperate with all reasonable requests of
Buyer and its counsel in connection with Buyer's due diligence investigation of
the Business and Assets.
4.9 Expenses. Seller shall bear its own expenses incurred in connection
--------
with the negotiation and preparation of this Agreement and in connection with
all obligations required to be performed by it under this Agreement.
4.10 Financial Information. Seller shall, as promptly as practical after
---------------------
such information becomes available, deliver to Buyer copies of Seller's monthly
unaudited financial statements, prepared in accordance with Seller's historical
accounting practices, and in form and presentation as is reasonably acceptable
to Buyer.
4.11 Consummation of Agreement. Subject to the provisions of Section 8 of
-------------------------
this Agreement: (a) Seller shall use its reasonable best efforts to fulfill and
perform all conditions and obligations on its part to be fulfilled and performed
under this Agreement, and to cause the transactions contemplated by this
Agreement to be fully carried out on or before September 30, 1998; and (b)
Seller shall not take any action or omit to take any action that would or could
reasonably be expected to (i) result in any of the representations and
warranties of Seller being or becoming untrue in any respect that would cause
Section 6.1 not to be satisfied, (ii) result in
29
any conditions to Closing set forth in Section 6 of this Agreement not to be
satisfied, or (iii) result in a material violation of any provision of this
Agreement.
4.12 Confidentiality. Seller agrees that it and its representatives will
---------------
hold in strict confidence, and will not use, any confidential or proprietary
data or information obtained from Buyer with respect to its business or
financial condition except for the purpose of evaluating, negotiating and
completing the transactions contemplated hereby. Information generally known in
Buyer's industry or which has been disclosed to Seller by third parties which
have a right to do so shall not be deemed confidential or proprietary
information for purposes of this Agreement. If the transactions contemplated by
this Agreement are not consummated, Seller will return, and cause its respective
officers, members, agents and representatives to return, to Buyer (or certify
that they have destroyed) all copies of such data and information made available
to Seller (and its officers, members, agents and representatives) in connection
with the transaction.
4.13 Guarantees. Seller and the Principals agree to use their respective
----------
reasonable best efforts to assist Buyer in obtaining the release of all
Guarantees.
SECTION 5. COVENANTS OF BUYER. Buyer covenants and agrees that, from the date
hereof until consummation of the transactions contemplated hereby at the
Closing, Buyer shall:
5.1 Cooperation. Buyer shall use its reasonable best efforts to take all
-----------
steps within its power and will cooperate with Seller, to cause to be fulfilled
those of the conditions to Seller's obligations to consummate the transactions
contemplated by this Agreement that are dependent upon its actions and to
execute and deliver such instruments and take such other reasonable actions as
may be necessary or appropriate in order to carry out the intent of this
Agreement and consummate the transactions contemplated hereby.
5.2 Notification of Certain Matters. Buyer shall promptly notify Seller
-------------------------------
of any fact, event, circumstances or action the existence or occurrence of which
would cause Buyer's representations or warranties under this Agreement not to be
true in any material respect.
5.3 Expenses. Buyer shall bear its own expenses incurred in connection
--------
with the negotiation and preparation of this Agreement and in connection with
all obligations required to be performed by it under this Agreement.
5.4 Consummation of Agreement. Subject to the provisions of Section 8 of
-------------------------
this Agreement: (a) Buyer shall use its reasonable best efforts to fulfill and
perform all conditions and obligations on its part to be fulfilled and performed
under this Agreement, and to cause the transactions contemplated by this
Agreement to be fully carried out on or before September 30, 1998; and (b) Buyer
shall not take any action or omit to take any action that would or could
reasonably be expected to (i) result in any of the representations and
warranties of Buyer set forth in this Agreement being or becoming untrue in any
respect that would cause Section 7.1
30
not to be satisfied, (ii) result in any condition to the Closing set forth in
Section 7 not being satisfied, or (iii) result in a material violation of any
provision of this Agreement.
5.5 Confidentiality. Buyer agrees that it and its representatives will
---------------
hold in strict confidence, and will not use, any confidential or proprietary
data or information obtained from Seller with respect to its business or
financial condition except for the purpose of evaluating, negotiating and
completing the transactions contemplated hereby. Information generally known in
Seller's industry or which has been disclosed to Buyer by third parties which
have a right to do so shall not be deemed confidential or proprietary
information for purposes of this Agreement. If the transactions contemplated by
this Agreement are not consummated, Buyer will return, and cause its respective
officers, members, agents and representatives to return, to Seller (or certify
that they have destroyed) all copies of such data and information made available
to Buyer (and its officers, members, agents and representatives) in connection
with the transaction.
5.6 Guarantees. Buyer shall use its reasonable best efforts to assist
----------
Seller and the Principals in obtaining the release of all Guarantees.
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATION OF BUYER. Buyer's obligation to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions, unless otherwise waived by Buyer in writing:
6.1 Accuracy of Representations and Warranties. The representations and
------------------------------------------
warranties of Seller contained in this Agreement shall be true and correct in
all material respects at the Closing Date with the same effect as though made at
such time and the representations and warranties of Seller contained in this
Agreement which are qualified by materiality shall be true and correct in all
respects as of the Closing Date with the same effect as though made at such
time.
6.2 Performance of Agreements and Deliveries. Seller shall have performed
----------------------------------------
in all material respects all of its covenants, agreements and obligations under
this Agreement which are to be performed or complied with by Seller prior to or
upon the Closing Date and shall have delivered all documents and items required
to be delivered at or prior to the Closing, including, without limitation:
(a) A certificate, dated the Closing Date, from the President of
Seller to the effect that the conditions set forth in Sections 6.1 and 6.2
have been satisfied;
(b) A certificate, dated the Closing Date, from Seller's Secretary as
to the charter, by-laws, authority and the incumbency of all officers
executing the Seller Documents on behalf of Seller;
31
(c) A certified copy of Seller's Articles of Incorporation from the
Department of Financial Institutions of the State of Wisconsin, including
an Amendment to the Articles of Incorporation and any other required
documentation, all as certified by the Department of Financial Institutions
of the State of Wisconsin, which effectuate a change of Seller's name;
(d) A certificate of status from the Department of Financial
Institutions of the State of Wisconsin;
(e) Evidence, reasonably satisfactory to Buyer, of the removal of the
Principals from any bank, credit card, debit card, cellular phone accounts
and other accounts held in the name of Seller and which are to be assumed
by Buyer; and
(f) Such other certificates and instruments reasonably requested by
Buyer.
6.3 No Material Adverse Effect. None of the schedules, documents or other
--------------------------
information to be furnished by Seller to Buyer pursuant to this Agreement, shall
disclose any fact, circumstance or matter, or any change in or development in
connection with any matter disclosed in the original schedules or documents
previously delivered by Seller to Buyer, which has, or could reasonably be
expected to have, a material adverse effect on the Assets or on the Business;
and there shall have been no other changes or developments affecting either the
Assets or the Business since the Base Balance Sheet Date which have, or could
reasonably be expected to have, a material adverse effect on the Assets or
Business.
6.4 Asset Transfer. Seller shall have delivered to Buyer the following
--------------
instruments of transfer and assignment in accordance with the provisions hereof,
transferring to Buyer all of Seller's right, title and interest in and to the
Assets, free and clear of all Liens, except Permitted Liens:
(a) A Xxxx of Sale in the form attached hereto as Exhibit B;
---------
(b) An Assignment and Assumption Agreement in the form attached hereto
as Exhibit C;
---------
(c) An Assignment of Trademarks in the form attached hereto as Exhibit
-------
D;
-
(d) An Agreement to Assign Internet Domain Name in the form attached
hereto as Exhibit E;
---------
(e) Certificates of title with respect to all motor vehicles which are
included in the Assets, duly endorsed for transfer by Seller; and
(f) Such other instruments of transfer reasonably requested by Buyer.
32
6.5 Assignment of Contracts and Authorizations; Approvals. Subject to the
-----------------------------------------------------
provisions of Section 4.4 hereof, all Contracts shall have been duly and validly
assigned to Buyer by Seller and all consents and approvals required in
connection with the consummation of the transactions contemplated hereby under
any Material Restricted Contract or Material Restricted Authorization shall have
been obtained in form and substance satisfactory to Buyer and without conditions
materially and adversely affecting Buyer and which do not require Buyer to pay
money to any party to any such Contract or Authorization in excess of amounts
required to be so paid pursuant to the terms and conditions thereof or other
than pursuant to the terms of Section 4.4(b) hereof. Except as contemplated by
Section 4.4(b) hereof, all such Contracts and Authorizations shall remain in
full force and effect and shall not have been amended, modified or repudiated in
any material respect by either party thereto. Neither Seller nor, to the
knowledge of Seller and the Principals, the other party thereto, shall have
breached or defaulted under any Contract or Authorization. Seller shall not
have received notice of or have knowledge of any fact which could reasonably
result in the termination, repudiation or breach of any Contract or
Authorization.
6.6 Escrow Agreement. Seller shall have executed and delivered to Buyer
----------------
the Escrow Agreement and such Escrow Agreement shall be in full force and
effect.
6.7 Non-competition Agreement. Seller and each of the Principals shall
-------------------------
have executed and delivered to Buyer a Non-competition Agreement in
substantially the form attached hereto as Exhibit F (the "Non-competition
---------
Agreement"), and such Non-competition Agreement shall be in full force and
effect.
6.8 Employment Agreement. Xxxx Xxxx shall have executed and delivered to
--------------------
Buyer an Employment Agreement on terms and conditions which are reasonably
satisfactory to Buyer, and such agreement shall be in full force and effect.
6.9 Lease. The lease agreements (the "Leases") between Seller and Xxxxxxx
-----
Properties shall be amended in the form of Exhibit G attached hereto, and such
---------
Leases, as so amended, shall be in full force and effect.
6.10 Release of Liens. Seller shall have obtained and delivered to Buyer
----------------
at or prior to the Closing instruments (including UCC-3 termination statements)
releasing any and all Liens on the Assets, other than the Permitted Liens.
6.11 Subscribers. Seller shall have delivered to Buyer a certificate,
-----------
dated as of the Closing Date, certifying as to the number and type of
Subscribers delivered at Closing.
6.12 Opinion of Seller's Counsel. Buyer shall have received the opinion or
---------------------------
opinions of Xxxxxxx & Xxxx, S.C., counsel for Seller, dated the Closing Date,
substantially in the form of Exhibit H attached hereto.
---------
33
6.13 Broker's Fees; Waiver. Seller shall have paid at or prior to the
---------------------
Closing any and all fees or commissions due to CDR, and CDR shall have provided
Buyer with a release from any liability with respect to any fees or payments to
be made in connection with the transactions contemplated hereby.
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATION OF SELLER. The obligation of
Seller to consummate the transactions contemplated by this Agreement is subject
to the satisfaction, on or prior to the Closing Date, of the following
conditions, unless waived by Seller in writing:
7.1 Accuracy of Representations and Warranties. The representations and
------------------------------------------
warranties of Buyer contained in this Agreement shall be true and correct in all
material respects at the Closing Date with the same effect as though made at
such time, and the representations and warranties of Buyer contained in this
Agreement which are qualified by materiality shall be true and correct in all
respects as of the Closing Date with the same effect as though made at such
time.
7.2 Performance of Agreement and Deliveries. Buyer shall have performed
---------------------------------------
in all material respects all of its covenants, agreements and obligations under
this Agreement to be performed or complied with by Buyer prior to or upon the
Closing Date and shall have delivered all documents and items required to be
delivered at or prior to the Closing, including, without limitation:
(a) The tendering of the Purchase Price pursuant to Section 1.5
pending satisfaction of all the conditions set forth in Section 6;
(b) A certificate, dated the Closing Date, from the President of Buyer
to the effect that the conditions set forth in Sections 7.1 and 7.2 have been
satisfied;
(c) A certificate, dated the Closing Date, from Buyer's Secretary as
to the charter, by-laws, authority and the incumbency of all officers executing
the Buyer Documents on behalf of Buyer;
(d) A certified copy of Buyer's charter from the Secretary of State of
the State of Michigan; and
(e) A certificate of good standing from the Secretary of State of the
State of Michigan.
7.3 Escrow Agreement. Buyer shall have executed and delivered to Seller
----------------
the Escrow Agreement and such Escrow Agreement shall be in full force and
effect.
7.4 Guarantees. All Guarantees shall be released or Buyer shall have
----------
provided the Principals with an indemnity against any liability or loss with
respect thereto.
34
7.5 Consents. Buyer and Seller shall have either obtained the consent or
--------
approval with respect to the Material Leases or Buyer shall have tendered
payment-in-full for such outstanding liability, including interest, prepayment
and termination penalties and other charges, with respect to such Material
Leases.
SECTION 8. TERMINATION.
8.1 Events of Termination. This Agreement and the transactions
---------------------
contemplated by this Agreement may be terminated at any time prior to the
Closing:
(a) By the mutual written consent of Buyer and Seller.
(b) By Seller, if it is not in breach or default hereunder:
(i) if any representation or warranty of Buyer made herein is
untrue in any material respect and such breach is not cured within
thirty (30) days of Buyer's receipt of a notice from Seller that such
breach exists or has occurred;
(ii) if Buyer shall have defaulted in any material respect in the
performance of any material obligation under this Agreement and such
breach is not cured within thirty (30) days of Buyer's receipt of a
notice from Seller that such default exists or has occurred; and
(iii) if the conditions to Seller's obligations to consummate the
Closing as set forth in Section 7 cannot reasonably be satisfied or
performed on or before September 30, 1998 (unless such failure of
satisfaction, non-compliance or non-performance is the result,
directly or indirectly, of any action or failure to act on the part of
Seller, except as provided in Section 4.4 hereof).
(c) by Buyer, if it is not in breach or default hereunder:
(i) if any representation or warranty of Seller made herein is
untrue in any material respect and such breach is not cured within
thirty (30) days of Seller's receipt of a notice from Buyer that such
breach exists or has occurred;
(ii) if Seller shall have defaulted in any material respect in
the performance of any material obligation under this Agreement and
such breach is not cured within thirty (30) days of Seller's receipt
of a notice from Buyer that such default exists or has occurred; or
(iii) if the conditions to Buyer's obligations to consummate the
Closing as set forth in Section 6 cannot reasonably be satisfied or
performed on or before September 30, 1998 (unless such failure of
satisfaction,
35
non-compliance or non-performance is the result directly or indirectly
of any action or failure to act on the part of Buyer).
(d) By either Buyer or Seller (provided such party is not otherwise in
breach or default hereunder) if, as of October 1, 1998, the conditions contained
in Section 6.5 (only with respect to the Material Leases), with respect to
Buyer, and Section 7.5, with respect to Seller, have not been satisfied or
waived.
8.2 Manner of Exercise. In the event of the termination of this Agreement
------------------
by either Buyer or Seller pursuant to Section 8.1 notice thereof shall forthwith
be given to the other party in accordance with the provisions set forth in
Section 11 hereto and this Agreement shall terminate and the transactions
contemplated hereunder shall be abandoned without further action by Buyer or
Seller.
8.3 Effect of Termination; Liabilities. In the event of the termination
----------------------------------
of this Agreement pursuant to Section 8.1 and prior to the Closing, all
obligations of the parties hereunder (other than pursuant to Sections 4.12 and
5.5 hereof) shall terminate, and neither Seller nor Buyer shall have any further
liability hereunder, including for losses, liabilities, obligations, damages,
deficiencies, actions, suits, proceedings, demands, assessments, orders,
judgments, costs and expenses (including attorneys' fees) of any kind
whatsoever.
SECTION 9. POST-CLOSING COVENANTS; SURVIVAL.
9.1 Use of Trade Names. After the Closing Date, neither Seller, nor any
------------------
person controlling, controlled by or under common control with Seller, including
the Principals, will for any reason, directly or indirectly, for itself or any
other person, (a) use the name "EXEC-PC, Inc." or (b) use or disclose any trade
secrets, confidential information, know-how, proprietary information or other
intellectual property of Seller transferred pursuant to this Agreement.
9.2 Post-Closing Transitional Matters. For a period of ninety (90) days
---------------------------------
following the Closing, Seller and the Principals shall provide, without
additional cost to Buyer, such assistance as is reasonably requested by Buyer in
order to effect an orderly transition in the ownership and operation of the
Assets; provided, however, that such assistance shall not exceed ten (10) hours
-------- -------
per month, which includes time spent assisting Buyer over the telephone.
9.3 Survival. All representations, warranties, covenants, agreements and
--------
indemnities contained in this Agreement, or in any schedule, exhibit,
certificate, agreement, document or statement delivered pursuant hereto, are
material, shall be deemed to have been relied upon by the parties and, shall
survive the Closing for a period of six (6) months (the "Expiration Date")
regardless of any investigation conducted by or knowledge of any party hereto;
provided, however, that no party shall be entitled to indemnification from the
-------- -------
other party pursuant to Section 10 hereof with respect to any liability, claim
or loss which the other party has actual knowledge of at or prior to the
Closing, whether by reason of any written
36
information or written notice, including, without limitation, facts or
circumstances giving rise to any such liability, claim or loss, furnished to or
discovered by such party or its representatives or disclosed to such party in
this Agreement or in any schedule, exhibit, certificate, agreement or document
delivered pursuant hereto.
SECTION 10. INDEMNIFICATION.
10.1 Indemnification by Seller.
-------------------------
(a) Except as set forth in Section 9.3 hereof, Seller hereby agrees to
indemnify and hold harmless Buyer, its affiliates and its and their respective
directors, officers, stockholders, partners, members, employees, and agents
(individually, a "Buyer Indemnified Party" and collectively, "Buyer Indemnified
Parties"), against and in respect of all losses, liabilities, obligations,
damages, deficiencies, actions, suits, proceedings, demands, assessments,
orders, judgments, costs and expenses (including the reasonable fees,
disbursements and expenses of attorneys and consultants) of any kind or nature
whatsoever, but net of the proceeds from any insurance policies or other third
party reimbursement for such loss, to the extent sustained, suffered or incurred
by or made against any Buyer Indemnified Party, to the extent based upon,
arising out of or in connection with: (i) any breach of any representation or
warranty made by Seller in this Agreement or in any schedule, exhibit,
certificate, agreement or other instrument delivered pursuant to this Agreement;
(ii) any breach of any covenant or agreement made by Seller in this Agreement or
in any schedule, exhibit, certificate, financial statement, agreement or other
instrument delivered pursuant to this Agreement; (iii) any claim made by any
person or entity which relates to the operation of the Assets or the Business
which arises in connection with or on the basis of events, acts, omissions,
conditions or any other state of facts occurring on or existing before the
Closing Date (other than events, acts, omissions, conditions or any other state
of facts which Buyer has been provided specific written notice at or prior to
the Closing); and (iv) any claim which arises in connection with any liability
or obligation of Seller other than the Assumed Liabilities (and the liabilities
or obligations existing as of the Closing Date and the existence of which has
been disclosed by Seller in writing to Buyer).
(b) The following provisions shall apply with respect to this Section
10.1:
(i) all rights to indemnification under this Section 10.1 shall
expire on the Expiration Date and no Buyer Indemnified Party shall have the
right to make any claim hereunder after such date, except that if prior to
the Expiration Date a specific state of facts shall have become known which
may constitute or give rise to any claim as to which indemnity may be
payable and a Buyer Indemnified Party shall have given written notice of
such facts to Seller, then the right to indemnification with respect
thereto shall remain in effect without regard to when such matter shall
have been finally determined and disposed of, according to the date on
which notice of the applicable claim is given;
37
(ii) no indemnification shall be payable to any Buyer
Indemnified Party pursuant to this Section 10.1 with respect to any claim
unless and until the total of all claims for indemnification shall exceed
One Hundred Thousand Dollars ($100,000) in the aggregate, and then only to
the extent of the excess;
(iii) Seller's aggregate liability under this Section 10.1 shall
not exceed One Million Two Hundred Fifty Thousand Dollars ($1,250,000) in
the aggregate (except from claims made with respect to a breach of warranty
or representation under Sections 2.4, 2.8 (title only) and 2.27 (to the
extent, and only to the extent, it relates to matters covered by Section
2.4 or Section 2.8 (title only)), which shall have no limits and which
shall not count against the cap set forth herein);
(iv) a Buyer Indemnified Party shall only be entitled to its
actual, out-of-pocket damages and expenses, and no indemnification shall be
payable under this Section 10.1 for any consequential or special damages or
any expected profits or multiples thereof;
(v) if the Closing occurs, the rights to indemnification set
forth in this Section 10.1 shall be exclusive of all rights to
indemnification or other remedies that any Buyer Indemnified Party would
otherwise have in connection with the matters and transactions contemplated
by this Agreement; and
(vi) all claims for indemnification made under this Section 10.1
shall be recovered solely by proceeding against the Escrow Deposit pursuant
to the terms of the Escrow Agreement and this Section 10.1, and no such
claim may be recovered directly against Seller, its partners, or their
respective affiliates, directors, officers, stockholders, or agents (except
for claims made with respect to a breach of warranty or representation
under Sections 2.4, 2.8 (title only) and 2.27 (to the extent, and only to
the extent, it relates to matters covered by Section 2.4 or 2.8 (title
only))).
10.2 Indemnification by Buyer. Except as set forth in Section 9.3, Buyer
------------------------
agrees to indemnify and hold harmless Seller and its officers, directors,
stockholders, employees and agents (individually, a "Seller Indemnified Party"
and collectively, "Seller Indemnified Parties") at all times against and in
respect of all losses, liabilities, obligations, damages, deficiencies, actions,
suits, proceedings, demands, assessments, orders, judgments, costs and expenses
(including the reasonable fees, disbursements and expenses of attorneys and
consultants), of any kind or nature whatsoever, to the extent sustained,
suffered or incurred by or made against any Seller Indemnified Party, to the
extent based upon, arising out of or in connection with: (A) any breach of any
representation or warranty made by Buyer in this Agreement or in any schedule,
exhibit, certificate, agreement or other instrument delivered pursuant to this
Agreement; (B) any breach of any covenant or agreement made by Buyer in this
Agreement or in any schedule, exhibit, certificate, agreement or other
instrument delivered pursuant to this Agreement; (C) any claim made against
Seller which relates to, results from or
38
arises out of Buyer's operation of the Assets or the Business from and after the
Closing Date; and (D) the Assumed Liabilities.
10.3 Notice; Defense of Claims.
-------------------------
(a) Notice of Claims. Promptly after receipt by an indemnified party
----------------
of notice of any claim, liability or expense to which the indemnification
obligations hereunder would apply, the indemnified party shall give notice
thereof in writing to the indemnifying party, but the omission to so notify the
indemnifying party promptly will not relieve the indemnifying party from any
liability except to the extent that the indemnifying party shall have been
prejudiced as a result of the failure or delay in giving such notice or is
required to pay a greater amount with respect to any such claim or liability as
a result of the failure to provide prompt notice. Such notice shall state the
information then available regarding the amount and nature of such claim,
liability or expense and shall specify the provision or provisions of this
Agreement under which the liability or obligation is asserted.
(b) Third Party Claims. With respect to third party claims, if within
------------------
twenty (20) days after receiving the notice described in clause (a) above the
indemnifying party gives (i) written notice to the indemnified party stating
that (A) it would be liable under the provisions hereof for indemnity in the
amount of such claim if such claim were successful and (B) that it disputes and
intends to defend against such claim, liability or expense at its own cost and
expense and (ii) provides reasonable assurance to the indemnified party that
such claim will be promptly paid in full if required, then counsel for the
defense shall be selected by the indemnifying party (subject to the consent of
the indemnified party which consent shall not be unreasonably withheld) and the
indemnified party shall not be required to make any payment with respect to such
claim, liability or expense as long as the indemnifying party is conducting a
good faith and diligent defense at its own expense; provided, however, that the
assumption of defense of any such matters by the indemnifying party shall relate
solely to the claim, liability or expense that is subject or potentially subject
to indemnification. The indemnifying party shall have the right, with the
consent of the indemnified party, which consent shall not be unreasonably
withheld, to settle all indemnifiable matters related to claims by third parties
which are susceptible to being settled provided the indemnifying parties'
obligation to indemnify the indemnified party therefor will be fully satisfied
subject to the limits set forth herein. The indemnifying party shall keep the
indemnified party apprised of the status of the claim, liability or expense and
any resulting suit, proceeding or enforcement action, shall furnish the
indemnified party with all documents and information that the indemnified party
shall reasonably request and shall consult with the indemnified party prior to
acting on major matters, including settlement discussions. Notwithstanding
anything herein stated, the indemnified party shall at all times have the right
to fully participate in such defense at its own expense directly or through
counsel; provided, however, if the named parties to the action or proceeding
include both the indemnifying party and the indemnified party and representation
of both parties by the same counsel would be inappropriate under applicable
standards of professional conduct, the expense of separate counsel for the
indemnified party shall be paid by the indemnifying party. If no such notice of
intent to dispute and defend is given by the
39
indemnifying party, or if such diligent good faith defense is not being or
ceases to be conducted, the indemnified party shall, at the expense of the
indemnifying party, undertake the defense of (with counsel selected by the
indemnified party), and shall have the right to compromise or settle (exercising
reasonable business judgment), such claim, liability or expense. If such claim,
liability or expense is one that by its nature cannot be defended solely by the
indemnifying party, then the indemnified party shall make available all
information and assistance that the indemnifying party may reasonably request
and shall cooperate with the indemnifying party in such defense.
(c) Non-Third Party Claims. With respect to non-third party claims,
----------------------
if within twenty (20) days after receiving the notice described in clause (a)
above the indemnifying party does not give written notice to the indemnified
party that it contests such indemnity, the amount of indemnity payable for such
claim shall be as set forth in the indemnified party's notice, subject to the
limits set forth herein. If the indemnifying party provides written notice to
the indemnified party within such 20-day period that it contests such indemnity,
the parties shall attempt in good faith to reach an agreement with regard
thereto within thirty (30) days of delivery of the indemnifying party's notice.
If the parties cannot reach agreement within such 30-day period, the matter may
be submitted by either party for binding arbitration in accordance with the
provisions of Section 12.10 hereof.
SECTION 11. NOTICES. All notices and other communications required to be given
hereunder, or which may be given pursuant or relative to the provisions hereof,
shall be in writing and shall be deemed to have been given when delivered in
hand or by an overnight courier service, or mailed, postage prepaid, by first
class United States mail, certified return receipt requested, or transmitted by
facsimile (with transmission acknowledgment received, provided written notice
delivered by any of the other means of delivery specified in this Section 11
follows such facsimile), as follows:
If to Seller: EXEC-PC, Inc.
------------
0000 X. 000xx Xxxxxx
Xxx 000000
Xxx Xxxxxx, XX 00000
Facsimile: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxx
With a copy to: Xxxxxxx & Xxxx, S.C.
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000-0000
Facsimile: (000) 000-0000
Attn: Xxxx X. Xxxxxxx, Esq.
40
If to Buyer: Voyager Information Networks, Inc.
-----------
0000 X. Xxxxxxxx Xxxx
Xxxx Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attn: Xxxxxxxxxxx Xxxxx
With a copy to: Xxxxxxx, Procter & Xxxx XXX
Xxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attn: Xxxxx X. Xxxxx, P.C.
SECTION 12. MISCELLANEOUS.
12.1 Assignability; Binding Effect. This Agreement shall not be assignable
-----------------------------
by Buyer or Seller except with the written consent of the other, except that
Buyer may assign its rights hereunder either (i) to any affiliate of Buyer,
provided, however, that no assignment by Buyer shall in any way affect Buyer's
obligations or liabilities under this Agreement and Buyer acknowledges that it
shall remain primarily liable under this Agreement in the event of such an
assignment, (ii) as a result of any merger, reorganization or other
consolidation or (iii) in connection with the granting of a security interest to
its senior lenders. This Agreement shall be binding upon and shall inure to the
benefit of, the parties hereto and their respective successors, and assigns.
12.2 Headings. The subject headings used in this Agreement are included
--------
for purposes of convenience only and shall not affect the construction or
interpretation of any of its provisions.
12.3 Amendments; Waivers. This Agreement may not be amended or modified,
-------------------
nor may compliance with any condition or covenant set forth herein be waived,
except by a writing duly and validly executed by Buyer and Seller or, in the
case of a waiver, the party waiving compliance. No delay on the part of any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any waiver on the part of any party of any such right,
power or privilege, or any single or partial exercise of any such right, power
or privilege, preclude any further exercise thereof or the exercise of any other
such right, power or privilege.
12.4 Bulk Sales Law. Buyer hereby waives compliance by Seller of any
--------------
applicable bulk sales law and Seller agrees, to make full and timely payment
when due of all amounts owed by such Seller to its creditors. Except for the
Assumed Liabilities, Seller agrees to indemnify and hold Buyer harmless from,
and reimburse Buyer for, any loss, cost, expense, liability or damage (including
reasonable counsel fees and disbursements and expenses) which Buyer may suffer
or incur by virtue of the non-compliance by Seller with such laws.
41
12.5 Entire Agreement. This Agreement, together with the schedules and
----------------
exhibits hereto, constitutes the entire agreement between the parties with
respect to the subject matter hereof and there are no warranties,
representations or other agreements between the parties in connection with this
Agreement, except as specifically set forth in this Agreement, and supersedes
and cancels any and all prior or contemporaneous arrangements, understandings
and agreements between them relating to the subject matter hereof, including but
not limited to that certain letter dated July 2, 1998 between Buyer and Seller,
as amended.
12.6 Severability. In the event that any provision or any portion of any
------------
provision of this Agreement shall be held to be void or unenforceable, then the
remaining provisions of this Agreement (and the remaining portion of any
provision held to be void or unenforceable in part only) shall continue in full
force and effect.
12.7 Governing Law. This Agreement and the transactions contemplated
-------------
hereby shall be governed and construed by and enforced in accordance with the
laws of the State of Wisconsin, without regard to conflict of laws principles.
12.8 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which shall
constitute the same instrument.
12.9 Expenses. Each party shall pay its own expenses incident to the
--------
negotiation, preparation and performance of this Agreement and the transactions
contemplated hereby, including all fees and expenses of its counsel and
accountants for all activities of such counsel and accountants undertaken
pursuant to this Agreement, whether or not the transactions contemplated hereby
are consummated; provided, however, that in the event a filing is required to be
-------- -------
made pursuant to the HSR Act, Buyer shall pay all expenses associated therewith.
12.10 Dispute Resolution. Any dispute arising out of or relating to this
------------------
Agreement or the breach, termination or validity hereof shall be finally settled
by arbitration conducted expeditiously in accordance with the Center for Public
Resources Rules for Nonadministered Arbitration of Business Disputes (the "CPR
Rules"). The Center for Public Resources shall appoint a neutral advisor from
its National CPR Panel. The arbitration shall be governed by the United States
Arbitration Act, 9 U.S.C. (S)(S)1-16, and judgment upon the award rendered by
the arbitrators may be entered by any court having jurisdiction thereof. The
place of arbitration shall be Chicago, Illinois.
Such proceedings shall be administered by the neutral advisor in accordance
with the CPR Rules as he/she deems appropriate, however, such proceedings shall
be guided by the following agreed upon procedures:
(a) Mandatory exchange of all relevant documents, to be accomplished
within forty-five (45) days of the initiation of the procedure;
42
(b) No other discovery;
(c) Hearings before the neutral advisor which shall consist of a
summary presentation by each side of not more than three hours; such hearings to
take place in one or two days at a maximum; and
(d) Decision to be rendered not later than ten (10) days following
such hearings.
Each of the parties hereto (a) hereby unconditionally and irrevocably
submits to the jurisdiction of any United States District Court of competent
jurisdiction located in the State of Michigan for the purpose of enforcing the
award or decision in any such proceeding and (b) hereby waives, and agrees not
to assert in any civil action to enforce the award, any claim that it is not
subject personally to the jurisdiction of the above-named court, that its
property is exempt or immune from attachment or execution, that the civil action
is brought in an inconvenient forum, that the venue of the civil action is
improper or that this Agreement or the subject matter hereof may not be enforced
in or by such court, and (c) hereby waives and agrees not to seek any review by
any court of any other jurisdiction which may be called upon to grant an
enforcement of the judgment of any such court. Each of the parties hereto
hereby consents to service of process by registered mail at the address to which
notices are to be given. Each of the parties hereto agrees that its submission
to jurisdiction and its consent to service of process by mail is made for the
express benefit of the other parties hereto. Final judgment against any party
hereto in any such action, suit or proceeding may be enforced in other
jurisdictions by suit, action or proceeding on the judgment, or in any other
manner provided by or pursuant to the laws of such other jurisdiction; provided,
--------
however, that any party may at its option bring suit, or institute other
-------
judicial proceedings, in any state or federal court of the United States or of
any country or place where the other parties or their assets, may be found.
Notwithstanding the foregoing, it is specifically understood and agreed
that certain breaches of this Agreement will result in irreparable injury to the
parties hereto, that the remedies available to the parties at law alone will be
an inadequate remedy for such breach, and that, in addition to any other legal
or equitable remedies which the parties may have, a party may enforce its rights
by an action for specific performance and the parties expressly waive the
defense that a remedy in damages will be adequate.
[Remainder of page intentionally left blank]
43
IN WITNESS WHEREOF, Seller, the Principals and Buyer have caused this Asset
Purchase Agreement to be executed as of the date first above written.
SELLER:
EXEC-PC, INC.
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Chief Executive Officer
PRINCIPALS:
/s/ Xxxxxx X. Xxxxxxx
----------------------------------------
Xxxxxx X. Xxxxxxx
/s/ Xxxxxx Xxxxxxx
----------------------------------------
Xxxxxx Xxxxxxx
BUYER:
VOYAGER INFORMATION NETWORKS, INC.
By: /s/ Xxxxxxxxxxx Xxxxx
-------------------------------------
Name: Xxxxxxxxxxx Xxxxx
Title: Chief Executive Officer
44
