Exhibit 2.20
ASSET PURCHASE AGREEMENT
Agreement made as of March 21, 2000 by and among DURO Communications,
Inc., a Delaware corporation ("Buyer"), DURO Holding Corp., a Delaware
corporation ("DURO"), Wave Communications, Inc., a North Carolina corporation
("Wave"), Wave Communications Acquisition Subsidiary, Inc., a wholly-owned
subsidiary of Wave and a North Carolina corporation ("Wave Acquisition"), Wave
Training Subsidiary, Inc., a wholly-owned subsidiary of Wave and a North
Carolina corporation ("Wave Training", and together with Wave and Wave
Acquisition, collectively, the "Seller") and each of Xxxxxxx X. Xxxxx and Xxxx
Xxxxx, the sole stockholders of Wave (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 useful in connection with
Seller's Internet service business (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 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,
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, each such item with a value of $1,000 or
greater as set forth on Schedule 1.1(a) attached hereto (collectively, the
"Equipment"), including a brief description of each and the current location
thereof;
(b) Contracts. All of the rights of Seller under and interest of
Seller in and to all contracts relating to the Business (other than the Excluded
Contracts (as defined in Section 1.2(b) 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, all leases with respect to real property and all co-location
agreements, a true, correct and complete list of which material contracts is
attached hereto as Schedule 1.1(b) (collectively, the "Contracts");
(c) Intellectual Property. All of Seller's Intellectual Property (as
defined in Section 2.20), as set forth on Schedule 1.1(c) attached hereto;
(d) Licenses and Authorizations. All rights associated with the
licenses, licensing agreements, permits, easements, registrations, domains, IP
addresses and authorizations issued or granted to Seller by any governmental
authority or other third party 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, together with
any renewals, extensions, or modifications thereof and additions thereto;
(e) Current Assets; Accounts Receivable. All current assets of
Seller (the "Current Assets"), including inventory, prepaid expenses, security
deposits, advance payments and all accounts receivable of Seller incurred in the
ordinary course of business and included on Seller's balance sheet as of the
Closing Date (as defined in Section 1.4), as determined in accordance with
generally accepted accounting principles as consistently applied; a complete
list of such accounts receivable is attached hereto as Schedule 1.1(e)
("Accounts Receivable");
(f) Goodwill. All of the goodwill of Seller in, and the going
concern 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
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
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
held for use in connection with the Business or otherwise necessary to the
operation of the Business now or after the Closing Date and which are set forth
on Schedule 1.2(a) attached hereto;
(b) Excluded Contracts. All of Seller's right, title and interest
in, to and under the Contracts listed on Schedule 1.2(b) attached hereto (the
"Excluded Contracts");
(c) Insurance. All of Seller's insurance contracts and all insurance
proceeds of settlement and insurance claims made by Seller on or before the
Closing Date as set forth on Schedule 1.2(c) attached hereto;
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(d) Tax Items. All claims, rights and interest in and to any refunds
for federal, state or local Taxes (as defined in Section 2.4(a) below) for
periods prior to the Closing Date as set forth on Schedule 1.2(d) attached
hereto;
(e) Corporate Records. All of Seller's corporate and other
organizational records;
(f) Cash. All of Seller's cash on hand and in bank accounts;
(g) Xxxxx Online Stock. Wave's right, title and interest in any and
all of the shares of Boone Online, Inc., a North Carolina corporation ("Boone"),
owned beneficially or of record by Wave;
(h) Wave Acquisition Stock. Wave's right, title and interest in any
and all of the shares of Wave Acquisition, owned beneficially or of record by
Wave;
(i) Wave Training Stock. Wave's right, title and interest in any and
all of the shares of Wave Training, owned beneficially or of record by Wave; and
(j) Disputed Amounts. All claims, rights and interest in and to any
dispute Seller has with any third party regarding payment for goods or services
as of the date hereof (all such disputes, collectively, the "Disputed Amounts").
1.3 Assumed Liabilities; Excluded Liabilities; Employees.
(a) Assumed Liabilities. Buyer shall, on and as of the Closing Date,
accept and assume, and shall become and be fully liable and responsible for, and
other than as expressly set forth herein Seller shall have no further liability
or responsibility for or with respect to, (i) 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; (ii) accounts payable, advance payments by Subscribers (as defined in
Section 2.16), accrued expenses, all deferred revenues and any other current
liability of Seller as of the Closing Date (except the current portion of any
bank debt or line of credit to be paid pursuant to Section 1.5) included on
Seller's balance sheet, as determined in accordance with a tax accounting basis
which fairly and accurately reflects the financial conditions and results of the
Seller on a consolidated basis as consistently applied (the "Assumed Current
Liabilities"); and (iii) 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 under such Contracts for
(A) Subscriber deposits held by Seller as of the Closing Date in the amount for
which Buyer receives a credit pursuant to Section 1.6(a) below, (B) 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(a) below, and (C) the delivery of Internet
connectivity service to Subscribers (whether pursuant to a Contract or
otherwise) after the Closing Date ((i), (ii) and (iii) together,
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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, DURO, the Principals and Seller shall
have any rights under this Agreement.
(b) Excluded Liabilities. It is expressly understood that, except
for 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 (i) the
Excluded Assets, including, without limitation, the Excluded Contracts, (ii) any
liabilities associated with the Disputed Amounts, (iii) the employees of the
Business, including, without limitation, any obligation to provide any amounts
due to the employees under any pension, profit sharing or similar plan, any
bonus or other compensation plan, or related to vacation or other similar
employee benefits, or arising as a result of the transactions contemplated
hereby or (iv) except as specifically provided in Section 1.3(a) above, any fact
existing or event occurring prior to the Closing Date or relating to the
operation of the Business prior to the Closing Date. 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.
(i) Seller shall terminate all of its employees effective as
of the Closing Date and Buyer shall not assume or have any obligations or
liabilities with respect to such employees or such terminations,
including, without limitation, any severance obligation. Seller
acknowledges and agrees that Buyer has the right to interview and discuss
employment terms and issues with such employees prior to and after the
Closing.
(ii) Buyer specifically reserves the right, on or after the
Closing Date, to employ or reject any of Seller's employees or other
applicants in its sole and absolute discretion; provided that Buyer shall
provide to Seller a list of employees to whom Buyer intends to offer
employment at the Closing. Nothing in this Agreement shall be construed as
a commitment or obligation of Buyer to accept for employment, or otherwise
continue the employment of, any of Seller's employees, and no employee
shall be a third-party beneficiary of this Agreement.
(iii) Seller shall pay all wages, salaries, commissions, and
the cost of all fringe benefits provided to its employees which shall have
become due for work performed as of and through the day preceding the
Closing Date, and Seller shall collect and pay all Taxes in respect of
such wages, salaries, commissions and benefits. From and after the date of
this Agreement, Buyer shall assume the obligation for benefits to all
individuals entitled to such benefits as are required to be provided by
the continuation health care coverage requirements of Section 4980B of the
Code and
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Sections 601 through 607 of ERISA or similar state law as of the Closing
including, without limitation, with respect to any individual entitled to
such coverage prior to the Closing and any individual who loses health
care coverage as a result of the transactions contemplated by this
Agreement. The continuation period for group health benefits under Section
4980B of the Internal Revenue Code of 1986, as amended, by reason of an
employee's termination of employment with Seller shall be measured from
the actual date of termination of employment for such individual.
(iv) Seller acknowledges and agrees that Buyer shall not
acquire any rights or interests of Seller in, or assume or have any
obligations or liabilities of Seller under, any Employee Program (as
defined in Section 2.23 below) maintained by, or for the benefit of any
employees of Seller prior to the Closing Date, including, without
limitation, obligations for severance or vacation accrued but not taken as
of the Closing Date.
1.4 The Closing. The transactions contemplated by this Agreement shall
take place at a closing (the "Closing") to be held at 10:00 a.m., local time, at
the offices of Xxxxxxx, Procter & Xxxx LLP, on the date on which all of the
conditions to closing set forth in Sections 6 and 7 of this Agreement have been
satisfied or waived, 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 the
Assets, and subject to the assumption by Buyer of the Assumed Liabilities and
satisfaction of the conditions contained herein, at the Closing, Buyer shall
deliver to Seller an amount (as adjusted in accordance with Section 1.6 below,
the "Purchase Price") as follows:
(a) those amounts set forth on Schedule 1.5(a) attached hereto to
the persons set forth thereon;
(b) Buyer shall deliver to Seller by bank cashier's check or bank
wire transfer pursuant to payment instructions delivered by Seller to Buyer at
the Closing an amount equal to $6,917,580 (i) plus or minus, as applicable, the
Estimated Adjustment (as defined in Section 1.6(c) below); (ii) minus $38,180,
which is the amount of the Sprint set up fee previously incurred by Wave for the
benefit of Buyer and to be paid by Buyer; (iii) minus $1,377,483.50, which is
the aggregate of the amounts set forth on Schedule 1.5(a) hereto; and (iv) minus
the $40,000 in xxxxxxx money previously paid to the Seller pursuant to Section
5(g) of the Letter of Intent effective as of January 17, 2000 by and among the
Seller, Wave Acquisition Subsidiary and the Buyer (the "Adjusted Purchase
Price");
(c) DURO shall deliver to Seller 74,504 shares of DURO Class B
non-voting common stock (the "Shares"); and
(d) Buyer shall deposit the sum of $856,800 (the "Escrow Deposit")
with Boston Safe Deposit and Trust Company as Escrow Agent under the Escrow
Agreement in the
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form attached hereto and incorporated herein by reference as Exhibit A (the
"Escrow Agreement"), to be held, administered and distributed in accordance with
the terms of the Escrow Agreement, which, subject to the terms and conditions
thereof, shall have a term of one year commencing on the Closing Date. Interest
earned, if any, on the escrow account shall be payable and/or credited to the
Seller.
1.6 Adjustments to Purchase Price.
(a) Net Working Capital. The Purchase Price shall be decreased, on a
dollar-for-dollar basis, by the amount of Seller's Net Working Capital (as
defined herein) if such amount is negative, or increased dollar for dollar by
the amount of Seller's Net Working Capital if such amount is positive. "Net
Working Capital" means an amount equal to Current Assets minus Assumed Current
Liabilities as of the Closing Date.
(b) Revenues Adjustment Amount. The cash and stock portion of the
Purchase Price as set forth in Sections 1.5(b) and (c) above shall be decreased
on a pro-rata, dollar-for-dollar basis, by the Revenues Adjustment Amount (as
defined herein) in the event Recurring Revenues (as defined herein) for the 31
calendar days prior to the Closing are less than $340,000 (the "Target
Revenues"). For purposes hereof, the term "Revenues Adjustment Amount" shall
equal the product obtained by multiplying (i) $2,100 by (ii) the quotient
obtained by dividing (X) the Annualized Recurring Revenues Deficiency (as
defined herein), by (Y) one thousand dollars ($1,000). For purposes hereof,
"Recurring Revenues" shall mean revenues of Sellers from Subscribers (determined
on an accrual basis), calculated by multiplying the number of Subscribers as of
the Closing Date by the average monthly rate in effect as of the Closing Date
for such Subscribers, by type, excluding one-time set-up fees and other
ancillary charges. For purposes hereof, the term "Annualized Recurring Revenues
Deficiency" shall equal the product of (i) the difference between (A) the Target
Revenues and (B) Recurring Revenues, multiplied by (ii) twelve (12).
(c) Estimated Adjustment Statement. Prior to the Closing, Buyer and
Seller shall prepare a statement to be attached hereto as Schedule 1.6(c) (the
"Estimated Adjustment Statement") which sets forth (x) the estimated amount of
the Net Working Capital as of the Closing Date (the "Estimated Net Working
Capital") and (y) the estimated Revenues Adjustment Amount (the "Estimated
Revenues Adjustment Amount"). The Estimated Adjustment Statement shall
constitute a representation by Seller and the Principals as to the same being
materially true and correct as to the amounts set forth therein. The Purchase
Price payable at the Closing Date shall be decreased on a dollar-for-dollar
basis by the amount of the Estimated Revenues Adjustment Amount. The Purchase
Price payable at Closing shall be further reduced on a dollar-for-dollar basis
by the amount of the Estimated Net Working Capital if such number is negative.
The Purchase Price payable at Closing shall be increased on a dollar-for-dollar
basis by the amount of the Estimated Net Working Capital if such number is
positive. The net adjustment to the Purchase Price calculated under this
subsection (c) shall be referred to as the "Estimated Adjustment."
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(d) Final Adjustment Statement.
(i) No later than ninety (90) days following the Closing Date,
Buyer shall prepare and deliver to Seller a statement (the "Final
Adjustment Statement") setting forth the actual Net Working Capital and
the actual Revenues Adjustment Amount. Subject to Section 1.6(d)(ii)
below, within ten (10) days following the delivery of such Final
Adjustment Statement to Seller, Buyer or Seller, as the case may be, shall
pay to the other party, by wire transfer of immediately available funds,
the net difference between (x) the Estimated Net Working Capital, as shown
on the Estimated Adjustment Statement, and the actual Net Working Capital,
as shown on the Final Adjustment Statement and (y) the Estimated Revenues
Adjustment Amount, as shown on the Estimated Adjustment Statement, and the
actual Revenues Adjustment Amount, as shown on the Final Adjustment
Statement. The aggregate of any Disputed Amounts which are not finally
resolved by Seller to Buyer's satisfaction at or prior to the time the
Final Adjustment Statement is delivered will be subtracted from the actual
Net Working Capital amount.
(ii) In the event Seller objects to the Final Adjustment
Statement, Seller shall notify Buyer 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 Seller's
calculation of Seller's actual Net Working Capital at the Closing Date.
Upon receipt by Buyer of such written objection, the parties shall attempt
to resolve the disagreement concerning the Final Adjustment Statement
through negotiation. Notwithstanding any other dispute resolution
procedure provided for in this Agreement, if Buyer and Seller 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. As of the date the Final Adjustment
Statement is agreed upon by the parties and payment, if any, is made pursuant to
Section 1.6(d), Seller shall determine the allocation of the Purchase Price,
subject to Buyer's prior approval. Such allocation shall be binding 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 Internal Revenue Code of 1986, as amended (the "Code").
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1.8 Records and Contracts. To the extent not previously provided to 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. Seller shall also deliver to Buyer at the
Closing all of Seller's files and records constituting Assets.
1.9 Sales and Transfer Taxes. All sales, transfer, use, recordation,
documentary, stamp, excise taxes, real and personal property taxes (which shall
be pro rated between Buyer and Seller on a calendar basis), fees and duties
under applicable law incurred in connection with this Agreement or the
transactions contemplated hereby will be borne and paid by Seller, and Seller
shall promptly reimburse Buyer for the payment of any such tax, fee or duty
(except with regard to Buyer's pro rated real and personal property taxes as set
forth above) which Buyer is required to make under applicable law.
1.10 Transfer of Assets. At the Closing, Seller shall deliver or cause to
be delivered to Buyer good and sufficient instruments of transfer transferring
to Buyer title to all of the Assets, together with all required consents. Such
instruments of transfer (a) shall contain appropriate warranties and covenants
which are usual and customary for transferring the type of property involved
under the laws of the jurisdictions applicable to such transfers, (b) shall be
in form and substance reasonably satisfactory to Buyer and its counsel, (c)
shall effectively vest in Buyer good and marketable title to all of the Assets
free and clear of all Liens (as defined in Section 2.8 below), and (d) where
applicable, shall be accompanied by evidence of the discharge of all Liens
against the Assets.
1.11 Post-Closing Audits. The Seller and each of the Principals hereby
agree to provide such assistance as Buyer reasonably requests to enable Buyer
and its accountant to complete an audit of the pre-Closing financial statement
of the Business, including, without limitation, providing access to books and
records and executing management representation letters.
1.12 Credit Card Transactions. During the 90-day period following the
Closing Date, Seller agrees to allow Buyer to deposit credit card payments from
Subscribers that are made to Seller's account at Branch Banking & Trust Company.
Seller covenants and agrees to transfer such payments to Buyer on a weekly basis
or at such other time as reasonably requested by Buyer. At the end of such
90-day period, Buyer shall provide to Seller a statement of all such payments
that were made. Buyer agrees to indemnify Seller for all losses, damages,
chargebacks and claims arising from the arrangements described in this Section
1.12.
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SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLER AND THE PRINCIPALS.
In order to induce Buyer and DURO to enter into this Agreement, Seller and
each of the Principals hereby represent, jointly and severally, and warrant to
Buyer as follows:
2.1 Organization; Subsidiaries.
(a) Wave is a corporation duly organized, validly existing and in
good standing under the laws of the State of North Carolina. Seller has all
requisite power and authority to conduct its business as it is now conducted or
proposed to be conducted and to own, lease and operate its properties and
assets. The copies of Wave's Articles of Incorporation and By-laws each as
amended to date, heretofore delivered to Buyer's counsel are complete and
correct. Wave is not in violation of any term of the Articles of Incorporation
and/or By-laws. Wave is duly qualified to do business in its state of
incorporation, and is not required to be licensed or qualified to conduct its
business or own its property in any other jurisdiction.
(b) Except for Wave Acquisition, Wave Training and ownership in
Xxxxx, Seller has no 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. Seller does not
own or have any direct or indirect interest in 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
or on the part of Seller or the Principals in connection with the transactions
contemplated by this Agreement have been duly and validly taken or will have
been duly and validly taken prior to Closing, and this Agreement and each other
agreement, document and instrument to be executed and delivered by or on behalf
of Seller or the Principals pursuant to, or as contemplated by, this Agreement
(collectively, the "Seller Documents") has been or shall be duly and validly
authorized, executed and delivered by Seller or the Principals, as applicable,
and no other action on the part of the Principals or Seller or its officers,
directors or members shall be required in connection therewith. Each of the
Principals and Seller have full right, authority, power and capacity to execute
and deliver this Agreement and each other Seller Document to which it is a party
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 Seller and
the Principals, as applicable, enforceable in accordance with its respective
terms.
2.3 No Conflicts.
(a) The execution, delivery and performance by Seller of this
Agreement and each other Seller Document does not and will not (i) violate any
provision of the Articles
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of Incorporation and By-laws of Wave, Wave Acquisition or Wave Training, as
amended to date, (ii) 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) violate any judgment, decree, order,
statute, rule or regulation applicable to Seller or the Assets, (iv) 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 (as defined in
Section 2.8 below) on any of the Assets.
(b) The execution, delivery and performance by each Principal 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 such Principal is a party or by
which such Principal is bound, (ii) violate any judgment, decree, order,
statute, rule or regulation applicable to 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.
(a) Seller has paid or caused to 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 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 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, 1996, is set forth on Schedule 2.4 attached
hereto. 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 (the "IRS") nor any other
governmental authority is now asserting or, to the knowledge of Seller and 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
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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 Code.
(d) Except as set forth on Schedule 2.4(d) attached hereto, 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. 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. 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. Seller is not a party to any
tax sharing agreement.
(f) Seller is not a "foreign person" within the meaning of Section
1445 of the Code and Treasury Regulations Section 1.1445-2.
(g) 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. 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 Seller has not received notice of a violation or alleged
violation of any such statute, ordinance, order, rule or regulation.
2.6 Insurance. The physical properties and tangible Assets of Seller are
insured to the extent disclosed on Schedule 2.6 attached hereto, and all
insurance policies and arrangements of Seller in effect as of the date hereof
are disclosed on 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. 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. 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
11
to the Business or Assets. Schedule 1.1(b) attached hereto contains a true,
correct and complete list of all material Contracts. With respect to each oral
agreement or understanding involving the Business, Seller has provided a written
summary of the material terms of each such agreement or understanding on
Schedule 1.1(b). To Seller's knowledge, each Contract is valid, in full force
and effect and binding upon Seller and the other parties thereto in accordance
with its terms. Neither Seller nor, to the knowledge of Seller or 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. Seller
has not received notice of, and neither Seller nor the Principals have 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, other than with respect to the oral agreements or understandings
described on Schedule 1.1(b).
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"). 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. 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 or useful for Buyer to
operate the Business in the same manner as such business is currently operated
by Seller. All of the tangible Assets 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). Seller holds good, clear, marketable, valid and enforceable
leasehold interest in the real property subject to the Leases (the "Leased Real
Property"), 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 are in good operating condition and repair and have been well
maintained. 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. Seller does not
hold or own a fee interest in any real property.
2.9 No Litigation. Except as set forth on Schedule 2.9 attached hereto,
Seller is not now involved in nor, to the knowledge of Seller or the Principals,
is Seller threatened to be
12
involved in any litigation or legal or other proceedings related to or affecting
the Business or any Asset (including any Intellectual Property) 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 36 full-time
employees and 3 part-time employees and generally enjoys good employer-employee
relationships. Seller shall provide to Buyer a list of the employees of Seller
in connection with the Business at the Closing, including the name, date of hire
and wages of such employees. 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
transactions contemplated hereby or anything done prior to the Closing be liable
to any of said employees for so-called "severance pay" or any other payments,
except as set forth on Schedule 2.10 attached hereto. 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 on said Schedule. 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 or the Principals, threatened
against or involving Seller. No question concerning representation exists
respecting any group of employees of Seller. 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 its
inception 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 December 31, 1999 and January 31, 2000 (the
"Base Balance Sheet") and the statements of income and expense of Seller for the
twelve (12) months ended December 31, 1999 and the one (1) month ended January
31, 2000 (collectively the "Financial Statements"). The Financial Statements
have been prepared in accordance with a tax accounting basis applied
consistently during the periods covered thereby (except for the absence of
footnotes with respect to unaudited financial statements), are complete and
correct in all material respects and 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. 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
13
accrued, contingent or otherwise, that are not disclosed and adequately reserved
against on the Base Balance Sheet. As of the date hereof and at the Closing,
Seller does not have and will not have any material 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.
2.12 Business Since the Base Balance Sheet Date. Since the Base Balance
Sheet Date:
(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, materially adversely affecting the Business or Assets;
(g) there has not been any change in Seller's pricing, marketing,
customer service, billing, operational or promotional activities in any material
way from that which Seller was providing these activities directly prior to the
Base Balance Sheet Date; 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. To the best of Seller's knowledge, 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 no licenses, permits or authorizations of any
14
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 or the Principals, threatened any action by or
before any governmental agency to revoke, cancel, rescind or modify any of the
Authorizations, and there is not now issued, outstanding, pending or, to the
knowledge of Seller or the Principals, threatened any order to show cause,
notice of violation, notice of apparent liability, or notice of forfeiture or
complaint against Seller with respect to the Business.
2.14 Approvals; Consents. Except as set forth on Schedule 2.14 attached
hereto and to the best of Seller's knowledge (except that Seller shall be deemed
to have knowledge of the terms of any material contract or agreement to which it
is a party), 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. All of the approvals, consents and
authorizations listed on Schedule 2.14 shall be obtained by Seller at or prior
to the Closing, unless otherwise mutually agreed upon by Buyer and Seller as set
forth on Schedule 2.14.
2.15 Customers and Suppliers. To the best of Seller's knowledge, Seller's
relations with its customers and suppliers, including its Subscribers (as
defined in Section 2.16 below), are good and there are not pending or, to the
knowledge of Seller or the Principal, threatened claims or controversies with
any customer, supplier or Subscriber 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, type and
billing plan. For purposes of this Agreement, the term "Subscriber" shall mean
the Subscribers of the Business as listed by class, type and billing plan. For
purposes of this Agreement, the terms "Subscriber" shall mean any active
subscriber to Internet services offered by Seller in the Business who has
subscribed to a service for at least two months and has paid at least two bills
as of the Closing Date, including, without limitation, any person who receives
dial-up Internet access through the Business (a "Dial-up Subscriber"), any
person who receives dedicated Internet access from a Seller offering higher data
transmission rates than available from dial-up access (a "Dedicated
Subscriber"), and any person with a web page or domain name on Seller's server
and to whom Seller provides Internet access (a "Web-hosting/Domain-hosting
Subscriber"). Set forth on Schedule 2.16(b) attached hereto is a listing of all
accounts which receive complimentary Internet services or Internet services at a
promotional discounted rate. A list of those persons or corporations who, but
for the fact that they have not been active subscribers for at least two months
and have not paid two bills as of the Closing Date, otherwise would be
Subscribers is set forth on Schedule 2.16(c). Such persons and corporations will
be considered Subscribers solely for purposes of the Estimated Adjustment
Statement. A list of those persons or corporations who, but for the fact that
they are more than 30 days delinquent in payment of their invoice as of the
Closing Date, otherwise would be Subscribers is set forth on Schedule 2.16(c).
Such persons and corporations will be considered Subscribers solely for
15
purposes of the Estimated Adjustment Statement. However, the persons and
corporations listed on Schedule 2.16(c) will not be considered to be Subscribers
for purposes of the Final Adjustment Statement calculation unless as of the 60th
day after the Closing Date they (i) have been active subscribers for at least
two months and paid at least two bills and (ii) have paid all invoices that were
outstanding and more than 30 days delinquent on the Closing Date.
2.17 Brokers. Seller has a relationship with Avalon Partners ("Avalon")
which is an Excluded Contract as set forth on Schedule 1.2(b) and Seller shall
be solely responsible for any monies owing to Avalon pursuant to any agreement
or understanding Seller has with Avalon. Except as disclosed in the previous
sentence, 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. All of the Accounts Receivable
of Seller are or will be as of the Closing Date bona fide, valid and enforceable
claims, subject to no set off or counterclaim and, to Seller's knowledge, are
collectible in accordance with their terms. 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 completely and accurately described in Schedule 2.19
attached hereto, 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.
2.20 Intellectual Property.
(a) 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) Seller's rights to the names "Wave
Communications, Inc.," "The Wave," "Twave," "Abts," all trade names, trade
dress, logos, packaging design, slogans, any and all Internet domain names used
or useful in the business of Seller, 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.xxxxx.xxx," "xxx.xxxx.xxx,"
and
16
any other similar domain name); (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 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 on Schedule 2.20, 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. Seller's rights
in all of such Intellectual Property are freely transferable. There are no
claims or demands pending or, to the knowledge of Seller or the Principals,
threatened by 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 or 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 represents all of the assets of Seller of such class or type necessary
for the operation of Seller's Business as currently conducted.
All rights to any inventions, improvements, discoveries, or information
relating to the Business created, invented or developed by former and current
employees of the Seller have been assigned to Seller. To the best knowledge of
Seller or the Principals after inquiry, 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. All of the issued Patents are
currently in compliance with formal legal requirements (including, without
limitation, the 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 or the Principals, there is no potentially
interfering Patent of any third party. All 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 U.S. Patent and Trademark Office and/or any other
jurisdiction are identified on Schedule 2.20, are currently in compliance with
formal legal requirements (including, without limitation, the timely
post-registration filing of affidavits of use and incontestability and renewal
17
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 or 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, are identified on Schedule
2.20, 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. 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 non-disclosure
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 or 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. Seller has the right to use, free and
clear of claims of third parties, all Trade Secrets. To the knowledge of Seller
or the Principals, there is not any assertion that the use by Seller of any
Trade Secret violates the rights of any third party.
(g) 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 on Schedule 2.20. All such
licenses or other agreements are in full force and effect, to the knowledge of
Seller or 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
18
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 on Schedule 2.20. All such
licenses or other agreements are in full force and effect, and to the knowledge
of Seller or 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.
(j) 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 any material adverse effect on the
business or operations of Seller.
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 or encumbrance of the Business or the Assets, in whole
or in part.
2.22 Transactions with Interested Persons. Except as set forth on Schedule
2.22 hereto, neither Seller, nor any member, 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.
2.23 Employee Benefit Programs.
(a) Schedule 2.23 sets forth a list of every Employee Program (as
defined in Section 2.23(c) below) that has been maintained by the Seller or an
Affiliate (as defined herein) at any time during the six-year period ending on
the Closing Date. Each Employee Program which has ever been maintained by the
Seller or an Affiliate and which has 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 qualified under the
applicable section of the Code from 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 event or omission has
occurred which would cause any such Employee Program to lose its qualification
or otherwise fail to satisfy the relevant requirements to provide tax-favored
benefits under the applicable Code Section (including without limitation Code
Sections 105, 125, 401(a) and 501(c)(9)). With respect to any Employee Program
ever maintained by the Seller or any Affiliate, there has been no (i)
"prohibited transaction," as defined in Section
19
406 of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")
or Code Section 4975, or (ii) failure to comply with any provision of ERISA,
other applicable law, or any agreement which, in the case of either of (i) or
(ii), could subject the Seller or any Affiliate to liability either directly or
indirectly (including, without limitation, through any obligation of
indemnification or contribution) for any damages, penalties, or taxes, or any
other loss or expense. All payments and/or contributions required to have been
made (under the provisions of any agreements or other governing documents or
applicable law) with respect to all Employee Programs ever maintained by the
Seller or any Affiliate, for all periods prior to the Closing Date, either have
been made or have been accrued (and all such unpaid but accrued amounts are
described on Schedule 2.23). Each Employee Program ever maintained by the Seller
or an Affiliate has complied with the applicable notification and other
applicable requirements of the Consolidated Omnibus Budget Reconciliation Act of
1985.
(b) Neither the Seller nor any Affiliate (i) has ever maintained any
Employee Program which has been subject to title IV of ERISA or Code Section
412, including, but not limited to, any Multi employer Plan (as defined in
Section 3(37) of ERISA) or (ii) has ever provided health care or any other
non-pension benefits to any employees after their employment is terminated
(other than as required by part 6 of subtitle B of title I of ERISA) or has ever
promised to provide such post-termination benefits.
(c) For purposes of this section:
(i) "Employee Program" means all employee benefit plans within
the meaning of ERISA Section 3(3) as well as all other employee benefit
plans, agreements and arrangements of any kind.
(ii) An entity "maintains" an Employee Program if such entity
sponsors, contributes to, or provides benefits under or through such
Employee Program, or has any obligation (by agreement or under applicable
law) to contribute to or provide benefits under or through 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 the Seller if it would
have ever been considered a single employer with the Seller under ERISA
Section 4001(b) or part of the same "controlled group" as the Seller for
purposes of ERISA Section 302(d)(8)(C).
2.24 Environmental Matters.
(a) Except as set forth in Schedule 2.24, (i) Seller has not
generated, transported, used, stored, treated, disposed of, or managed any
Hazardous Waste (as defined in Section 2.24(c) below) at any time; (ii) to the
knowledge of Seller or the Principals, no Hazardous Material (as defined in
Section 2.24(c) below) has ever been or is threatened to be spilled, released,
or disposed of at any site associated with a structure presently or formerly
20
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 or the
Principals, no Hazardous Material has ever been transported from any site
associated with a structure presently or formerly owned, operated, leased, or
used by Seller for treatment, storage, or disposal at any other place; (iv)
Seller does not presently own, operate, lease, or use, and has not previously
owned, operated, leased, or used any site associated with a structure on which
underground storage tanks are or were located; and (v) no lien has ever been
imposed by any governmental agency on any property, facility, machinery, or
equipment owned, operated, leased, or used by either Seller in connection with
the presence of any Hazardous Material.
(b) Except as set forth on Schedule 2.24 and to the knowledge of
Seller or the Principals, (i) Seller does not have any liability under, nor has
it ever violated, any Environmental Law (as defined in Section 2.24(c) below);
(ii) Seller, nor any property associated with a structure owned, operated,
leased, or used by Seller, nor facilities or operations thereon are presently
not in compliance with all applicable Environmental Laws; (iii) Seller has not
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) neither Seller nor the Principals has any knowledge
or reason to know that any of the items enumerated in clause (iii) of this
subsection will be forthcoming.
(c) For purposes of this Agreement, (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; and (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.
2.25 Investment Representations. Seller represents to DURO that it has
such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of the investment in the Shares
contemplated by this Agreement and making an informed investment decision with
respect thereto. Seller represents that it is an "accredited investor" as such
term is defined in Rule 501 under the Securities Act of 1933, as amended (the
"Securities Act"). Seller represents to DURO that it is acquiring the Shares for
its own account, for investment only and not with a view to, or any present
intention of, effecting a distribution of such securities or any part thereof
except pursuant to a registration or an available exemption under applicable
law. Seller acknowledges that the Shares have not been registered under the
Securities Act or the securities laws of any state or other jurisdiction and
21
cannot be disposed of unless they are subsequently registered under the
Securities Act and any applicable state laws or exemption from such registration
is available.
2.26 Disclosure. The representations, warranties and statements contained
in this Agreement and in the certificates, exhibits and schedules delivered by
Seller 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
which presently or in the future may have a material adverse affect on the
Business, properties, Assets, prospects, operations or condition, financially or
otherwise, of Seller which has not been specifically disclosed herein or in a
Schedule furnished herewith, other than general economic or market conditions
affecting the Internet services industry generally.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF BUYER AND DURO.
As a material inducement to Seller and the Principals entering into this
Agreement, Buyer and DURO hereby represent and warrant to Seller and the
Principals as follows:
3.1 Organization. Each of Buyer and DURO is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Each of Buyer and DURO 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: Authority. All actions and proceedings necessary to
be taken by or on the part of Buyer and DURO 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 and DURO pursuant to, or as contemplated by,
this Agreement (collectively, the "Buyer Documents") has been duly and validly
authorized, executed and delivered by Buyer and DURO. Each of Buyer and DURO 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 each of Buyer and DURO enforceable in accordance with its
respective terms.
3.3 Issuance of Shares. As of the Closing, and after giving effect to the
transactions contemplated hereby, the Shares will have been duly authorized and
issued and will be fully paid and nonassessable and, assuming the accuracy of
the Seller's representations herein, will have been offered, issued, sold and
delivered in compliance with applicable federal and state securities laws and
not subject to any preemptive rights.
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3.4 No Conflicts. The execution, delivery and performance by each of Buyer
and DURO of this Agreement and each other Buyer Document to which it is a party
does not and will not (a) violate any provision of the Certificate of
Incorporation or By-Laws of Buyer or DURO, as applicable, 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 or DURO is a party or by which
it is bound, (c) violate any judgment, decree, order, statute, rule or
regulation applicable to Buyer or DURO, (d) require Buyer or DURO 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 or DURO have and shall have all requisite power to do so in the
name of and on behalf of Buyer or DURO, as applicable.
3.5 Litigation. There are no actions, suits, proceedings or
investigations, either at law or in equity, or before any commission or other
administrative authority in any United States or foreign jurisdiction, of any
kind now pending or, to Buyer's or DURO's knowledge, threatened involving Buyer
or DURO that (i) questions that validity of this Agreement or (ii) seeks to
delay, prohibit or restrict in any manner any action taken or contemplated to be
taken by Buyer or DURO under this Agreement.
3.6 Brokers. Except for fees payable to Rampart Associates, LLC, Buyer 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.
SECTION 4. COVENANTS OF SELLER.
Seller covenants and agrees that:
4.1 Access to Premises and Records. Subject to Section 5.1 of this
Agreement and to the terms and conditions of the Mutual Non-Disclosure Agreement
defined in Section 4.8, from the date hereof until consummation of the
transactions contemplated hereby at the Closing, 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. 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 xxxxxxxx,
(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.
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4.2 Continuity and Maintenance of Operations of the Business. Except as to
actions of 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 commercially reasonable efforts to preserve any beneficial business
relationships with Subscribers, customers, suppliers and others having business
dealings with Seller relating to the Business;
(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 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;
(d) 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;
(e) Continue to implement and enforce 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;
(f) Perform and comply in all material respects with the terms of
the Contracts and keep such Contracts in full force and effect; and
(g) Use its reasonable best 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 outside the
ordinary course of business;
(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;
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(e) Create, assume, or permit to exist, or agree to incur, assume or
acquire, any Lien, claim or liability on the Assets;
(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; or
(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. Seller will use its reasonable best efforts to obtain, 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; provided, however, that "reasonable best
effort" for this purpose shall not require Seller to undertake extraordinary or
unreasonable measures to obtain such 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.
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.
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)
25
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, members, 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 to not, 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 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, directors, 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, directors, agents and representatives) in
connection with the transaction. The Mutual Non-Disclosure Agreement by and
among Buyer, Seller and Rampart Associates, LLC (the "Mutual Non-Disclosure
Agreement") shall remain in full force and effect.
4.9 Use of Trade Names. After the Closing Date, neither Seller, nor any
person controlling, controlled by or under common control with Seller will for
any reason, directly or indirectly, for itself or any other person, (a) use the
names "Wave Communications," "Wave Training," "Wave Acquisition," "Twave," "The
Wave," "Abts," or any other Internet domain name used or useful in the business
of Seller, or any other 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.
4.10 Post-Closing Transitional Matters. For a period of ninety (90) days
following the Closing, Seller 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
26
operation of the Assets; provided, however, such post-Closing assistance shall
not, in any event, exceed ten (10) hours per week.
4.11 Collection of Assets. Subsequent to the Closing, Buyer shall have the
right and authority to collect all receivables and other items transferred and
assigned to Buyer by Seller hereunder and to endorse with the name of Seller any
checks received on account of such receivables or other items, and Seller agrees
that it will promptly transfer or deliver to Buyer from time to time, any cash
or other property that such Seller may receive with respect to any claims,
contracts, licenses, leases, commitments, sales orders, purchase orders,
receivables of any character or any other items included in the Assets.
4.12 Payment of Obligations. Seller shall pay all of the Excluded
Liabilities in the ordinary course of business as they become due.
4.13 Matters Relating to the Shares. Seller hereby covenants and agrees
that, in the event DURO makes an initial public offering of shares of its common
stock, upon the request of the underwriters of such offering, Seller will enter
into a "lock up" or similar agreement (on substantially the same terms as those
entered into by other stockholders of DURO) that restricts the ability of Seller
to resell shares of DURO stock during a defined period following the closing of
such initial public offering.
4.14 Further Assurances. Seller, from time to time after the Closing at
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.
SECTION 5. COVENANTS OF BUYER.
Buyer covenants and agrees that:
5.1 Confidentiality. Buyer agrees that, from the date hereof until
consummation of the transactions contemplated hereby at the Closing, Buyer 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, directors, 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, directors,
agents and representatives) in connection with the transaction.
27
5.2 Assumed Liabilities. From and after the Closing Date, Buyer shall pay
and/or perform the Assumed Liabilities in the ordinary course as they become
due.
5.3 Notification of Certain Matters. Buyer shall promptly notify Seller of
(i) any fact, event, circumstances or action the existence or occurrence of
which would cause any of Buyer'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. Buyer shall promptly
notify Seller 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.
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 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
Wave 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 Wave's Secretary as
to the Articles of Incorporation, the By-laws and the authority and the
incumbency of all officers executing the Seller Documents on behalf of Seller;
(c) A certified copy of Wave's Articles of Incorporation from the
Secretary of State of the State of North Carolina;
(d) An Amendment to Wave's Articles of Incorporation and any other
required documentation, which effect a change of Seller's name, which name
change shall take effect not more than five (5) days following the date of
Closing;
(e) A Certificate of Good Standing from the Secretary of State of
the State of North Carolina; and
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(f) Such other certificates and instruments reasonably requested by
Buyer.
6.2 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:
(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 Patents and Trademarks in the form attached
hereto as Exhibit D;
(d) An Assignment of Internet Domain Name in the form attached
hereto as Exhibit E; and
(e) Such other instruments of transfer reasonably requested by
Buyer.
6.3 Assignment of Contracts and Authorizations; Approvals. 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 Contract or Authorization or otherwise shall have
been obtained in form and substance reasonably 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.
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 or the
Principals, the other party thereto, shall have breached or defaulted under any
Contract or Authorization. Neither Seller nor the Principals shall have received
notice of or have knowledge of any fact which could result in the termination,
repudiation or breach of any material Contract or Authorization.
6.4 Non-Competition Agreements. 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.
6.5 Release of Liens. Seller shall have obtained and delivered to Buyer,
at or prior to the Closing instruments (including payoff letters, bills of sale
and UCC-3 termination statements) releasing any and all Liens on the Assets.
6.6 Opinion of Seller's Counsel. Buyer shall have received the opinion or
opinions of Xxxx, Young, Morphis, Bach and Xxxxxx L.L.P., Seller's counsel,
dated the Closing Date, substantially in the form of Exhibit G attached hereto.
29
6.7 Employment Agreement. Xxxxxxx X. Xxxxx shall have entered into an
Employment Agreement with Buyer in substantially the form attached hereto as
Exhibit H (the "Employment Agreement").
6.8 Closing Date Balance Sheet. No later than 30 days following the
Closing, Seller shall provide to Buyer a balance sheet dated as of the Closing,
as determined in accordance with a tax accounting basis consistently applied,
which is true and correct in all material respects and presents fairly and
accurately the financial condition of the Business as of the date of the Closing
and the results of operations for the Business for the period covered thereby
and includes, but is not limited to, Seller's accounts receivable, accounts
payable, and deferred and unearned revenue.
6.9 Shareholders Agreement. Wave shall have executed a counterpart
signature page to, and agreed to be bound by the terms, of that certain Amended
and Restated Shareholders Agreement by and among DURO and the investor parties
thereto dated as of December 30, 1999.
6.10 Escrow Agreement. Seller and the Principals shall have executed and
delivered to Buyer an Escrow Agreement in substantially the form attached hereto
as Exhibit A.
6.11 Hickory Lease. Xx. Xxxxxxx X. Xxxxx shall have entered into a lease
with Buyer relating to the Premises (as defined therein) located at NC 000
Xxxxxxx 000 XX, Xxxxxxx, XX 00000, dated the Closing Date, substantially in the
form of Exhibit J attached hereto (the "Hickory Lease").
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATION OF SELLER.
The obligations of Seller and the Principals 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 and the Principals in writing:
7.1 Performance of Agreement and Deliveries. Buyer 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 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) 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;
(b) A certificate, dated the Closing Date, from Buyer's Secretary as
to the Certificate of Incorporation, By-Laws, and the authority and the
incumbency of all officers executing the Buyer Documents on behalf of Buyer;
30
(c) A certified copy of Buyer's Certificate of Incorporation from
the Secretary of State of the State of Delaware; and
(d) A Certificate of Good Standing from the Secretary of State of
the State of Delaware.
7.2 Escrow Agreement. Buyer shall have executed and delivered to Seller
and the Principals an Escrow Agreement in substantially the form attached hereto
as Exhibit A.
7.3 Employment Agreement. Buyer shall have entered into the Employment
Agreement with Xxxxxxx X. Xxxxx.
7.4 Opinion of Buyer's Counsel. Seller shall have received the opinion or
opinions of Xxxxxxx, Procter & Xxxx llp, Buyer's counsel, dated the Closing
Date, substantially in the form of Exhibit I attached hereto.
7.5 Hickory Lease. Buyer shall have entered into the Hickory Lease with
Xx. Xxxxxxx X. Xxxxx.
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;
(iii) subject to Section 8.4 below, 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
March 31, 2000 (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); or
31
(iv) if the Closing has not occurred prior to April 30, 2000.
(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) subject to Section 8.4 below, 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
March 31, 2000 (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 Buyer); or
(iv) if the Closing has not occurred prior to April 30, 2000.
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 or Section 8.4 and prior to the Closing,
all obligations of the parties hereunder (other than pursuant to Sections 4.8
and 5.1 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; except upon termination of this Agreement pursuant to Sections
8.1(c)(i) and 8.1(c)(ii), Buyer shall be entitled to any remedy which it may
have, whether at law or in equity, and except upon termination of this Agreement
pursuant to Sections 8.1(b)(i) and 8.1(b)(ii), Seller shall be entitled to any
remedy which it may have, whether at law or in equity.
8.4 Waiver; Extension of Time for Performance. Seller may extend the time
for the performance of any of the obligations or other acts of Buyer hereunder,
waive any inaccuracies in the representations and warranties of Buyer contained
herein or in any document delivered pursuant hereto, or waive compliance by
Buyer with any of the agreements or conditions contained herein. Any such
extension or waiver shall be valid if set
32
forth in an instrument in writing signed by Seller. Buyer may extend the time
for the performance of any of the obligations or other acts of Seller, waive any
inaccuracies in the representations and warranties of Seller contained herein or
in any document delivered pursuant hereto, or waive compliance by Seller with
any of the agreements or conditions contained herein. Any such extension or
waiver shall be valid if set forth in an instrument in writing signed by Buyer.
SECTION 9. SURVIVAL. Each of the representations, warranties, agreements,
covenants and obligations herein or in any schedule, exhibit, certificate or
financial statement delivered by any party to the other party incident to the
transactions contemplated hereby are material, shall be deemed to have been
relied upon by the other party and shall survive the Closing until the
expiration of the statute of limitations applicable to such obligation or matter
regardless of any investigation and shall not merge in the performance of any
obligation by either party hereto.
SECTION 10. INDEMNIFICATION.
10.1 Indemnification by Seller and the Principals.
(a) Each of Seller and the Principals hereby agree, jointly and
severally, 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 or the Principals 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 or the Principals 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; (iv) any claim which arises in connection with any liability or
obligation of Seller other than the Assumed Liabilities; (v) any claim arising
from Seller's failure to file any Tax returns or pay any Taxes; (vi) any and all
claims, liabilities, losses, damages, costs and expenses (including without
limitation the reasonable fees and disbursements of counsel) arising out of any
failure of (A) Seller or any of its affiliates, service providers or agents or
(B) any Benefit Program, to comply with any provision of
33
ERISA, the Code, or other applicable law; and (vii) any claim arising from
Seller's agreement with Avalon Partnership effective as of July 6, 1999, or any
similar agreement, arrangement or understanding.
10.2 Indemnification by Buyer. Buyer agrees to indemnify and hold harmless
Seller and its officers, directors, managers, members, 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: (i) 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; (ii) 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; (iii) any claim made against Seller Indemnified Parties which
relates to, results from or arises out of Buyer's operation of the Assets or the
Business from and after the Closing Date; and (iv) 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. 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 (i) gives 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,
34
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. 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 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. 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 12.11
hereof.
10.4 Claims Against Escrow Deposit. In the event that any Buyer
Indemnified Party sustains or incurs damages, liabilities, losses, taxes, fines,
penalties, costs or expenses, including, without limitation, attorneys fees, for
which it is entitled to indemnification from Seller under this Agreement, in
addition to all other rights or remedies that Buyer may have (including the
right to collect directly from Seller), such Buyer Indemnified Party shall be
entitled to receive in cash from the Escrow Deposit an amount equal to the
damages, liabilities, losses, taxes, fines, penalties, costs and expenses,
including, without limitation, attorneys fees, sustained or incurred by such
Buyer Indemnified Party in accordance with the provisions of the Escrow
Agreement.
35
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 (i) if delivered or
sent by facsimile transmission, upon acknowledgment of receipt by the recipient,
(ii) if sent by a nationally recognized overnight courier, properly addressed
with postage prepaid, on the next business day (or Saturday or Sunday if sent
for delivery on such days), or (iii) if sent by registered or certified mail,
upon the earlier of the date on which receipt is acknowledged and the dated with
is three (3) days after deposit in the United States post office facilities
properly addressed with postage prepaid as follows:
If to Seller or the Principals: Xx. Xxxxxxx X. Xxxxx
000 XX Xxxxxxx 0000
Xxxxxxx, XX 00000
With a copy to: Xxxx, Young, Morphis, Bach and
Xxxxxx, L.L.P.
First Lawyers Building
000 0xx Xxxxxx XX
P.O. Drawer 2428
Xxxxxxx, XX 00000
Attn: T. Xxxx Xxxx, Esq.
If to Buyer: DURO Communications, Inc.
0000 Xxxxxxx Xxxx., Xxxxx 000
Xxxxxxxxxxx, XX 00000
Attn.: Xxxxx X. Xxxxxx, President
With a copy to: Xxxxxxx, Procter & Xxxx XXX
Xxxxxxxx Xxxxx
Xxxxxx, XX 00000
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 (a) to any affiliate of Buyer or
its owners, (b) as a result of any merger, reorganization or other
consolidation, or (c) in connection with the granting of a security interest to
its senior lender. This Agreement shall be binding upon and shall inure to the
benefit of, the parties hereto and their respective successors and permitted
assigns.
36
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. 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.
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 supersedes and cancels any and all
prior or contemporaneous arrangements, understandings and agreements between
them relating to the subject matter hereof.
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 North Carolina, 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.
37
12.10 Remedies. 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.
12.11 Dispute Resolution. Any dispute arising out of or relating to this
Agreement or the breach, termination or validity hereof shall be finally settled
solely and exclusively by arbitration conducted expeditiously in accordance with
the CPR Institute For Dispute Resolution Rules for Nonadministered Arbitration
of Business Disputes (the "CPR Rules"). The CPR Institute For Dispute Resolution
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. ss.ss.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 Charlotte, North
Carolina.
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;
(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 North Carolina 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
38
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, the parties may enforce their rights under
this Agreement in accordance with Section 12.10.
12.12 Third Party Rights. This Agreement is for the benefit of the parties
hereto and is not entered into for the benefit of, and shall not be construed to
confer any benefit upon, any other party or entity.
[Remainder of page intentionally left blank]
39
IN WITNESS WHEREOF, Seller, each of the Principals, and Buyer have caused
this Asset Purchase Agreement to be executed as of the date first above written.
SELLER:
WAVE COMMUNICATIONS, INC.
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------------
Xxxxxxx X. Xxxxx
President
WAVE COMMUNICATIONS ACQUISITION
SUBSIDIARY, INC.
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------------
Xxxxxxx X. Xxxxx
President
WAVE TRAINING SUBSIDIARY, INC.
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------------
Xxxxxxx X. Xxxxx
President
PRINCIPALS:
/s/ Xxxxxxx X. Xxxxx
------------------------------------------
Xxxxxxx X. Xxxxx
/s/ Xxxx Xxxxx
------------------------------------------
Xxxx Xxxxx
BUYER:
DURO COMMUNICATIONS, INC.
By: /s/ Xxxxx X. Xxxxxx
--------------------------------------
Xxxxx X. Xxxxxx, President
DURO HOLDING CORP.
By: /s/ Xxxxx X. Xxxxxx
--------------------------------------
Xxxxx X. Xxxxxx, President
LIST OF EXHIBITS AND SCHEDULES
SCHEDULES
Exhibit A - Form of Escrow Agreement
Exhibit B - Form of Xxxx of Sale
Exhibit C - Form of Assignment and Assumption Agreement
Exhibit D - Form of Assignment of Patents and Trademarks
Exhibit E - Form of Assignment of Internet Domain Name
Exhibit F - Forms of Non-Competition Agreement
Exhibit G - Form of Opinion of Seller's Counsel
Exhibit H - Form of Employment Agreement
Exhibit I - Form of Opinion of Buyer's Counsel
Exhibit J - Form of Lease
Schedule 1.1(a) Equipment
Schedule 1.1(b) Contracts
Schedule 1.1(c) Intellectual Property
Schedule 1.1(d) Licenses and Authorizations
Schedule 1.1(e) Accounts Receivable
Schedule 1.2(a) Excluded Assets
Schedule 1.2(b) Excluded Contracts
Schedule 1.2(c) Excluded Insurance
Schedule 1.2(d) Excluded Tax Items
Schedule 1.5(a) Bank and Lease Payoff Amounts
Schedule 1.6(c) Estimated Adjustment Statement
Schedule 2.4 Taxes
Schedule 2.4(d) Audits
Schedule 2.6 Insurance
Schedule 2.9 Litigation
Schedule 2.10 Employees; Labor Matters
Schedule 2.11 Financial Statements
Schedule 2.14 Approvals; Consents
Schedule 2.16(a) Subscribers
Schedule 2.16(b) Complimentary Accounts
Schedule 2.16(c) Disconnection Policy
Schedule 2.19 Banking Relations
Schedule 2.20 Intellectual Property
Schedule 2.22 Transactions with Interested Persons
Schedule 2.23 Employee Benefit Programs
Schedule 2.24 Environmental Matters
