Exhibit 10.1
EXECUTION COPY
ASSET PURCHASE AND CONTRIBUTION AGREEMENT
BY AND AMONG
XXXXXXX ENTERPRISES, INC.
STI PREPAID, LLC,
XXXXX XXXXXX,
TELCO GROUP, INC.,
STI PHONECARD INC.,
DIALAROUND ENTERPRISES INC.,
STI MOBILE INC.,
PHONECARD ENTERPRISES INC.,
VOIP ENTERPRISES INC.,
STI PCS, LLC,
TAWFIK & PARTNERS, SNC
STI PREPAID & CO.
STI PREPAID DISTRIBUTORS & CO.
AND
ST FINANCE, LLC
DATED AS OF
JANUARY 23, 2007
TABLE OF CONTENTS
PAGE
1. DEFINITIONS..........................................................................2
1.1 Certain Definitions...........................................................2
1.2 Other Definitions............................................................12
2. PURCHASE AND SALE OF ASSETS; CONTRIBUTION OF ASSETS; ASSUMPTION OF CERTAIN
LIABILITIES.........................................................................15
2.1 Purchase and Sale of Assets..................................................15
2.2 Excluded Assets..............................................................16
2.3 Contributions to Capital of ST Finance, the Buyer and DR Partnership;
and Assumption of Liabilities................................................17
2.4 Assumption of Liabilities....................................................17
2.5 Excluded Liabilities.........................................................18
2.6 Further Conveyances and Assumptions; Consent of Third Parties...............18
2.7 Bulk-Sales Laws..............................................................20
2.8 Purchase Price Allocation....................................................20
2.9 Right to Control Payment.....................................................21
2.10 Proration of Certain Expenses................................................21
2.11 Post-Initial Closing Receipts and Invoices...................................21
3. CONSIDERATION; INITIAL CLOSING......................................................21
3.1 Purchase Price...............................................................21
3.2 Determination of Final Working Capital.......................................22
4. CLOSING AND DELIVERIES..............................................................24
4.1 Initial Closing..............................................................24
4.2 Closing Deliveries by the Sellers............................................25
4.3 Closing Deliveries by the Buyer..............................................26
4.4 Closing Deliveries by ST Finance.............................................27
4.5 Initial Closing Deliveries by DR Entities....................................28
4.6 Initial Closing Deliveries by DR Partnership.................................28
4.7 Initial Closing Deliveries by ST.............................................28
5. REPRESENTATIONS AND WARRANTIES OF ST AND THE SELLERS................................29
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TABLE OF CONTENTS
(CONTINUED)
PAGE
5.1 Organization, Authority and Qualification of the Sellers and the
Subsidiaries.................................................................29
5.2 Qualification to Do Business.................................................29
5.3 Power and Authority of the Sellers...........................................29
5.4 Consents; No Conflict........................................................30
5.5 Assets.......................................................................30
5.6 Licenses.....................................................................31
5.7 Contracts....................................................................32
5.8 Real Property................................................................34
5.9 Environmental Matters........................................................34
5.10 Compliance with Laws.........................................................35
5.11 Intellectual Property........................................................35
5.12 Tangible Personal Property...................................................38
5.13 Financial Statements.........................................................39
5.14 Accounts and Notes Receivable and Payable....................................40
5.15 Conduct in the Ordinary Course; Absence of Material Adverse Effect..........40
5.16 Legal Proceedings............................................................42
5.17 Taxes; Tax Returns...........................................................42
5.18 Employment Matters...........................................................44
5.19 Labor........................................................................47
5.20 Undisclosed Liabilities......................................................48
5.21 Insurance....................................................................48
5.22 Inventories..................................................................48
5.23 Related Party Transactions...................................................48
5.24 Customers and Suppliers......................................................49
5.25 Banks, Powers of Attorney....................................................49
5.26 Full Disclosure..............................................................49
5.27 Certain Payments.............................................................50
5.28 Finders and Brokers..........................................................50
5.29 Regulatory Filings...........................................................50
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TABLE OF CONTENTS
(CONTINUED)
PAGE
6. REPRESENTATIONS AND WARRANTIES OF THE BUYER AND DR PARTNERSHIP......................50
6.1 Organization, Authority and Qualification of the Buyer and DR
Partnership..................................................................50
6.2 Qualification to Do Business.................................................50
6.3 Power and Authority of the Buyer and DR Partnership..........................51
6.4 Consents; No Conflict........................................................51
6.5 Finders and Brokers..........................................................51
6.6 Legal Proceedings............................................................52
6.7 Financing....................................................................52
6.8 No Prior Activities..........................................................52
6.9 Full Disclosure..............................................................52
6.10 Certain Payments.............................................................52
7. COVENANTS...........................................................................52
7.1 Access to Premises and Books and Records.....................................52
7.2 Interim Operation of the Sellers and the Subsidiaries........................53
7.3 Employee Matters.............................................................56
7.4 Consents.....................................................................57
7.5 HSR Notification.............................................................57
7.6 Notification of Certain Matters..............................................57
7.7 Updated Schedules............................................................58
7.8 Satisfaction of Conditions...................................................58
7.9 Publicity; Confidentiality...................................................58
7.10 Non-Competition; Non-Solicitation............................................59
7.11 Further Action...............................................................61
7.12 Existing Litigation..........................................................61
7.13 Non-Solicitation.............................................................61
7.14 Change of Name; Use of Name..................................................62
7.15 Agreed Upon Practices and Procedures.........................................62
7.16 Financial Information........................................................63
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TABLE OF CONTENTS
(CONTINUED)
PAGE
7.17 Covenant of ST...............................................................63
7.18 Audited Financial Statements.................................................63
7.19 WARN Act.....................................................................63
7.20 Employment Offers............................................................63
7.21 Covenant of the Buyer and DR Partnership.....................................64
7.22 Liability Insurance..........................................................64
7.23 Intellectual Property Covenant...............................................64
7.24 Transfer of DR Employees.....................................................64
8. CONDITIONS TO CLOSING...............................................................64
8.1 Initial Closing Conditions to the Obligations of the Buyer and the
Sellers......................................................................64
8.2 Initial Closing Conditions to the Obligations of the Buyer...................64
8.3 Initial Closing Conditions to Obligations of the Sellers.....................66
8.4 Dialaround Closing Conditions................................................66
9. TERMINATION.........................................................................67
9.1 Events of Termination........................................................67
9.2 Liabilities in Event of Termination..........................................67
10. INDEMNIFICATION.....................................................................68
10.1 Survival of Representations, Warranties and Covenants........................68
10.2 Indemnification by the Sellers...............................................69
10.3 Indemnification by BEI, the Buyer and DR Partnership.........................69
10.4 Third Party Claims...........................................................69
10.5 Limitations on Indemnification -- Sellers and ST.............................70
10.6 Limitations on Indemnification --BEI, the Buyer and DR Partnership..........71
10.7 Sole Remedy; Additional Provisions Relating to Indemnification..............72
10.8 Right of Offset..............................................................72
10.9 Tax Treatment of Indemnity Payments..........................................72
10.10 Litigation Expense Reimbursement.............................................73
10.11 Indemnification For Schedule 10.11 Matters...................................73
11. TAX MATTERS.........................................................................74
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TABLE OF CONTENTS
(CONTINUED)
PAGE
11.1 Transfer Taxes...............................................................74
11.2 Cooperation on Tax Matters...................................................74
11.3 Tax Treatment of Transactions................................................75
12. MISCELLANEOUS.......................................................................75
12.1 Parties Obligated and Benefited..............................................75
12.2 Notices......................................................................75
12.3 Waiver.......................................................................76
12.4 Captions.....................................................................76
12.5 Governing Law................................................................76
12.6 Terms........................................................................77
12.7 Rights Cumulative; Remedies..................................................77
12.8 Counterparts.................................................................77
12.9 Entire Agreement.............................................................77
12.10 Severability.................................................................77
12.11 Construction.................................................................77
12.12 Expenses.....................................................................77
12.13 Commercially Reasonable Efforts..............................................78
12.14 Waiver of Jury Trial.........................................................78
12.15 Alternate Dispute Resolution.................................................78
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INDEX OF SCHEDULES AND EXHIBITS
SCHEDULES
Schedule 1.1 Excluded Contracts
Schedule 2.4 Assumed Liabilities
Schedule 3.2(a) Sample Measurement Date Reference List
Schedule 3.2(b) Sample Working Capital and Average Gross Margin
Percentage Calculations
Schedule 5.23(b) Related Parties
Schedule 7.15 Practices and Procedures
Schedule 7.23 Intellectual Property Covenant
Schedule 10.5 Post-Initial Closing Covenants of the Sellers
Schedule 10.6 Post-Initial Closing Covenants of the Buyer
Schedule 10.11 Schedule 10.11 Matters
Schedule A Form of Pledge Agreement
Schedule B Form of Confidentiality and Non-Competition Agreement
Schedule C Form of DR Legal Opinion
Schedule D Form of Regulatory Legal Opinion
Schedule E Form of Xxxx of Sale
Schedule F Form of Assignment and Assumption Agreement
Schedule G Form of Dialaround Transition Services Agreement
Schedule H Form of Employment Agreement of ST
Schedule I Forms of Non-Foreign Status Affidavit
Schedule J Form of DR Partnership Agreement
Schedule K Form of Account Control Agreement
EXHIBITS
Exhibit A Form of Buyer Operating Agreement
Exhibit B Form of Registration Rights Agreement
INDEX OF DEFINED TERMS
Account Control Agreement..................2 Control....................................75
Action....................................71 Controlled Group Member...................45
Affiliate..................................2 Copyrights..................................8
Agreement..................................1 Deductible.................................72
Annual Reimbursement Period...............74 Dialaround..................................1
Appraisal.................................21 Dialaround Assets...........................4
Asset Acquisition Statement...............21 Dialaround Assumed Liabilities.............4
Assets.....................................3 Dialaround Closing.........................25
Assignment and Assumption Agreement.......26 Dialaround Closing BEI Assumed
Assumed DR Liabilities.....................2 Liabilities................................4
Assumed Liabilities........................3 Dialaround Closing BEI Purchased Assets....4
Audited Financial Statements..............40 Dialaround Closing Buyer Purchase Price...23
Average Gross Margin Percentage............3 Dialaround Closing Date...................26
Balance Sheet..............................3 Dialaround Closing STi Assumed
Xxxxxxx....................................1 Liabilities................................4
BEI........................................1 Dialaround Closing STi Purchased Assets....4
BEI Assumed Liabilities....................1 Dialaround Transition Services Agreement...4
BEI Purchased Assets.......................1 Disclosure Schedules.......................4
Best of the Buyer's Knowledge..............3 Documents...................................4
Best of the Sellers' Knowledge.............3 DR Cash.....................................4
Xxxx of Sale..............................26 DR Entities.................................4
Books and Records..........................3 DR Partnership..............................1
Business...................................3 DR Partnership Agreement...................5
Business Day...............................3 Employee Benefit Plan.....................45
Buyer......................................1 Employees...................................5
Buyer Cap.................................73 Employment Agreement......................28
Buyer Consideration.......................23 Encumbrance.................................5
Buyer Disclosure Schedules.................3 Enforceability Exceptions.................34
Buyer Operating Agreement..................2 Environmental Claims.......................5
Buyer Organizational Documents............51 Environmental Costs and Liabilities........5
Buyer Purchase Price......................22 Environmental Laws..........................5
Buyer Required Consents...................52 Environmental Permit.......................5
Buyer Uncapped Losses.....................73 ERISA.......................................5
Buyer's Perpetual Representations.........69 Excluded Assets............................17
Cap.......................................72 Excluded Contracts..........................5
Cash Shortfall Amount.....................23 Excluded Liabilities......................19
CLEC Agreements...........................34 Extraordinary Events......................72
COBRA.....................................45 FCC.........................................6
Code.......................................3 Final Statement............................24
Communications Act.........................3 Financial Statements......................40
Communications Laws.......................33 Former Employees............................6
Company Regulatory Licenses...............32 Furniture and Equipment....................6
Confidential Information..................60 GAAP........................................6
Confidentiality Agreement.................60 Governmental Authority.....................6
Contracts..................................4 Governmental Regulator.....................6
1
Hardware...................................6 Permitted Investments.....................10
Hazardous Substances.......................6 Person.....................................10
Hired Employees............................6 Personal Property Leases..................40
HSR Act....................................7 Phonecard Enterprises......................1
Indebtedness...............................7 Pledge Agreement...........................11
Indemnified Party.........................71 Post-Initial Closing Covenants............10
Indemnifying Party........................71 Pre-Initial Closing Covenants.............10
Independent Accounting Firm...............24 Provider Marks.............................63
Independent Appraiser.....................21 Provider Marks License....................63
Initial Closing...........................25 Purchase Price.............................22
Initial Closing Assumed Liabilities........7 Purchased Assets...........................16
Initial Closing BEI Assumed Liabilities....7 Purchased Contracts........................10
Initial Closing BEI Purchased Assets.......7 Purchased DR Assets.........................2
Initial Closing Cash Amount...............22 Purchased Intellectual Property...........10
Initial Closing Date......................25 Purchased Technology......................10
Initial Closing Purchase Price Adjustment.23 Real Property..............................10
Initial Closing Purchased Assets...........7 Real Property Leases......................35
Initial Closing STi Assumed Liabilities....7 Reference Balance Sheet Date..............10
Initial Closing STi Purchased Assets.......7 Registration Rights Agreement.............28
Intellectual Property......................8 Regulatory Legal Opinion..................27
Intellectual Property Licenses.............8 Regulatory Surcharges.....................10
Interim Period.............................1 Reimbursable Action........................74
IRS.......................................45 Reimbursable Amounts......................74
Law........................................8 Reimbursed Party...........................74
Leased Real Property......................35 Related Persons............................49
Legal Proceeding...........................8 Representatives............................62
Liability..................................8 Required Consents..........................31
Licenses...................................8 Restricted Business........................61
Litigation Reimbursement Period...........74 Restricted Period..........................61
Losses.....................................8 Rules......................................79
Marks......................................8 Schedule 10.5 Covenants...................72
Material Adverse Effect....................9 Schedule 10.6 Covenants...................73
Material Contract.........................33 Secured Account............................10
Measurement Date Reference List............9 Security Account Amount...................23
Multiemployer Plan........................47 Seller......................................1
Nonassignable Assets......................20 Sellers.....................................1
Non-DR Entities............................9 Sellers' Perpetual Representations........69
Non-Foreign Status Affidavit..............27 Software...................................11
Open Source Software.......................9 Sole Arbitrator............................79
Order......................................9 ST..........................................1
Organizational Documents..................30 ST Finance..................................1
Partnership Purchase Price................23 State PUC..................................11
Patents....................................8 State PUC Consent..........................11
Pension Plan..............................45 State PUC Licenses.........................11
Permits....................................9 Statement..................................23
Permitted Encumbrances.....................9 STi Assumed Liabilities....................2
2
STi CC 1...................................1 Termination Fee............................69
STi CC 2...................................1 Third Party................................12
STi Mobile.................................1 Total Consideration........................22
STi PCS....................................1 Trade Secrets...............................8
STi Phonecard..............................1 Transaction Documents.....................30
STi Prepaid & Co...........................1 Transfer Taxes.............................12
STi Prepaid Distributors & Co..............1 U.S. Cash..................................12
STi Purchased Assets.......................1 Unaudited Financial Statements............40
Subsidiaries..............................11 Uncapped Losses............................72
T&P........................................1 VoIP Enterprises............................1
Takeover Proposal.........................63 WARN.......................................48
Tax Return................................11 Welfare Plan...............................45
Taxes.....................................11 Wireless Business..........................12
Technology................................11 Wireline Business..........................12
Telco......................................1 Working Capital............................12
Telco Award Agreements....................12 Working Capital Calculation Date..........13
Telecommunication Licenses................12 Working Capital Shortfall Amount..........23
Telecommunications Company................61
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ASSET PURCHASE AND CONTRIBUTION AGREEMENT
This Asset Purchase and Contribution Agreement (this "Agreement") is
made as of the 23rd day of January, 2007, by and among ST Finance, LLC, a
Delaware limited liability company ("ST Finance"), STi Prepaid, LLC (the
"Buyer"), a Delaware limited liability company and indirect subsidiary of
Xxxxxxx Enterprises, Inc. ("Xxxxxxx"), a Colorado corporation and indirect
wholly owned subsidiary of Leucadia National Corporation, a New York
corporation, Xxxxx Xxxxxx, an individual residing at 00 Xxxxxxxxx Xxxxx, Xxxx
Xxxxxxxxxx, XX 00000 ("ST"), Telco Group, Inc., a Delaware corporation
("Telco"), STi Phonecard Inc., a Delaware corporation ("STi Phonecard"),
Dialaround Enterprises Inc., a Delaware corporation ("Dialaround"), STi Mobile
Inc., a Delaware corporation ("STi Mobile"), Phonecard Enterprises Inc., a
Delaware corporation ("Phonecard Enterprises"), VoIP Enterprises Inc., a
Delaware corporation ("VoIP Enterprises"), STi PCS, LLC, a Delaware limited
liability company ("STi PCS"), Tawfik & Partners, SNC, a Luxembourg general
partnership, ("T&P"), STi Prepaid & Co., a Dominican Republic partnership ("STi
Prepaid & Co."), and STi Prepaid Distributors & Co., a Dominican Republic
partnership ("STi Prepaid Distributors & Co." and together with Telco, STi
Phonecard, Dialaround, STi Mobile, Phonecard Enterprises, VoIP Enterprises, STi
PCS, T&P and STi Prepaid & Co., collectively the "Sellers" and each individually
a "Seller").
----------
WHEREAS, the Sellers and the Subsidiaries (such term and others used but
not defined in these recitals shall have the meaning set forth in Section 1)
conduct the Business;
WHEREAS, Xxxxxxx or an affiliate thereof ("BEI") holds 100% of the
membership interest in the Buyer and, through the Buyer's wholly owned
subsidiaries, STi CC 1, LLC, a Delaware limited liability company ("STi CC 1")
and STi CC 2, LLC, a Delaware limited liability company ("STi CC 2"), will hold
100% of the partnership interest in a newly formed Dominican Republic
partnership ("DR Partnership") and subject to the terms and conditions set forth
in this Agreement, will make capital contributions aggregating $120,000,000 to
the Buyer and DR Partnership;
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Non-DR Entities shall sell, transfer and assign to the Buyer and
the Buyer shall (i) acquire for cash from the Non-DR Entities an undivided 75%
interest in all of the Non-DR Entities' right, title and interest in and to the
Purchased Assets (the "BEI Purchased Assets") and (ii) assume 75% of the Assumed
Liabilities of the Non-DR Entities (the "BEI Assumed Liabilities"), all as more
specifically provided herein;
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Non-DR Entities shall contribute to the capital of ST Finance and
ST Finance shall (i) acquire from the Non-DR Entities the remaining undivided
25% interest in all of the Non-DR Entities' right, title and interest in and to
the Purchased Assets (the "STi Purchased Assets"), (ii) assume the remaining 25%
of the Assumed Liabilities of the Non-DR Entities (the "STi Assumed
Liabilities") and (iii) issue 100% of the membership interests in ST Finance to
the Non-DR Entities, all as more specifically provided herein;
1
WHEREAS, subject to the terms and conditions set forth in this
Agreement, ST Finance shall contribute all of the STi Purchased Assets to the
capital of the Buyer and the Buyer (i) shall acquire from ST Finance all of the
STi Purchased Assets, (ii) assume all of the STi Assumed Liabilities and (iii)
issue 25% of the membership interest in the Buyer to ST Finance, all as more
specifically provided herein;
WHEREAS, subject to the terms and conditions set forth in this
Agreement, ST Finance and BEI will enter into the Amended and Restated Limited
Liability Company Agreement of Buyer, a copy of which is attached hereto as
Exhibit A (the "Buyer Operating Agreement");
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the DR Entities shall sell, transfer and assign to DR Partnership and
DR Partnership shall (i) acquire for cash from the DR Entities, all of the DR
Entities' right, title and interest in and to the Purchased Assets (the
"Purchased DR Assets") and (ii) assume all of the Assumed Liabilities of the DR
Entities (the "Assumed DR Liabilities"), all as more specifically provided
herein;
WHEREAS, subject to the terms and conditions set forth in the Agreement,
the Buyer will, through STi CC 1 and STi CC 2, make capital contributions to the
DR Partnership, all as more specifically provided herein;
WHEREAS, the purpose of this Agreement is to set forth the definitive
terms upon which such purchase, sale, assumption and contribution will take
place.
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In consideration of the above recitals and the representations,
warranties and agreements stated in this Agreement, the parties agree as
follows:
1. DEFINITIONS.
1.1 Certain Definitions. In addition to terms defined elsewhere in
this Agreement, the following capitalized terms, when used in this Agreement,
will have the meanings set forth below:
Account Control Agreement. The Securities Account Control Agreement,
dated as of the Initial Closing Date, among ST, BEI and JPMorgan Chase Bank, NA,
relating to the Secured Account, substantially in the form attached as Schedule
K hereto.
Affiliate. With respect to any Person, any other Person controlling,
controlled by or under common control with such Person, with "control" for such
purpose meaning the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities or voting interests, by contract or
otherwise.
Assets. Any and all (a) properties, assets and rights of any kind,
nature and description, whether real, personal or mixed, tangible or intangible,
and (b) right, title and interest in and to any of the foregoing.
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Assumed Liabilities. All Liabilities of the Sellers and the Subsidiaries
set forth on Schedule 2.4 hereof.
Average Gross Margin Percentage. Average gross margin percentage
relating to prepaid phone cards and wireless cards for the three month period
ending on the last calendar day of the month prior to the Initial Closing Date,
which shall be calculated in accordance with GAAP as revenue minus the cost of
sales in such period divided by the revenue, in each case, generated in such
period.
Quarterly Balance Sheet. The combined balance sheet of the Sellers and
Subsidiaries as at the most recently completed fiscal quarter.
Best of the Buyer's Knowledge. The actual knowledge of Xxxxx Xxxxxx as
regards a particular state of facts.
Best of the Sellers' Knowledge. The actual knowledge of any of ST,
Xxxxxxx Xxxxxx, Xxxxxxx Xxxxx, Xxxxx Xxxxx, Xxx X'Xxxxx, Xxxxx Xxxxx, Xxxxxxx
Xxxxxxx, Xxxxx Xxxxxx, Xxxxxx Chick and Xxxxxxxx Xxxxxx as regards a particular
state of facts.
Books and Records. All records, files, data, accounts, drawings,
blueprints, schematics, reports, lists, plans and processes of the Sellers and
the Subsidiaries.
Business. The Wireline Business and the Wireless Business.
Business Day. Any day other than Saturday, Sunday or a day on which
banking institutions in New York, New York are required or authorized to be
closed.
Buyer Disclosure Schedules. The Buyer's disclosure schedules annexed to
this Agreement.
Code. The Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder and currently in effect.
Communications Act. The U.S. Communications Act of 1934, as amended, and
the rules and regulations of the FCC promulgated thereunder and currently in
effect.
Contracts. All contracts, memoranda of understanding, consent decrees,
arrangements and agreements, whether written or oral, to which any of the
Sellers or a Subsidiary is a party or with respect to which any of their Assets
are affected.
Dialaround Assets. All of Dialaround's right, title and interest in and
to the Purchased Assets.
Dialaround Assumed Liabilities. All of the Dialaround Closing BEI
Assumed Liabilities and the Dialaround Closing STi Assumed Liabilities.
Dialaround Closing BEI Assumed Liabilities. All of the BEI Assumed
Liabilities to the extent that such liabilities arise from the Dialaround
Assets.
3
Dialaround Closing BEI Purchased Assets. All of the BEI Purchased Assets
that consist of an interest in the Dialaround Assets.
Dialaround Closing STi Assumed Liabilities. All of the STi Assumed
Liabilities to the extent that such liabilities arise from the Dialaround
Assets.
Dialaround Closing STi Purchased Assets. All of the STi Purchased Assets
that consist of an interest in the Dialaround Assets.
Dialaround Transition Services Agreement. The Transition Services
Agreement, dated as of the Initial Closing Date, by and between Dialaround and
Buyer, substantially in the form of Schedule G.
Disclosure Schedules. The disclosure schedules annexed to this
Agreement.
Documents. All files, documents, instruments, papers, books, reports,
records, tapes, microfilms, photographs, letters, budgets, forecasts, ledgers,
journals, title policies, lists of past, present and/or prospective customers,
supplier lists, regulatory filings, operating data and plans, technical
documentation (design specifications, functional requirements, operating
instructions, logic manuals, flow charts, etc), user documentation (installation
guides, user manuals, training materials, release notes, working papers, etc.),
marketing documentation (sales brochures, flyers, pamphlets, web pages, etc..),
and other similar materials related to the Business and the Purchased Assets, in
each case whether or not in electronic form.
DR Cash. The United States cash and United States cash equivalents held
by any of the DR Entities.
DR Entities. STi Prepaid & Co. and STi Prepaid Distributors & Co.
DR Partnership Agreement. The Partnership Agreement of DR Partnership,
to be entered into by and between STi CC 1 and STi CC 2 prior to the Initial
Closing substantially in the form attached as Schedule J hereto.
Employees. All employees of the Sellers and/or the Subsidiaries.
Encumbrance. Any mortgage, lien, security interest, security agreement,
conditional sale or other title retention agreement, pledge, option, assessment,
claim, easement or any other restriction on transfer.
Environmental Claims. Any complaint, summons, citation, notice,
directive, order, claim, litigation, investigation, judicial or administrative
proceeding, judgment, letter or other communication from any governmental
agency, department, bureau, office or other authority, or any third party
alleging any violation of or liabilities under any Environmental Laws or
Releases of Hazardous Substances.
Environmental Costs and Liabilities. With respect to any Person, all
liabilities, obligations, responsibilities, Remedial Actions, losses, damages,
punitive damages, consequential damages, costs and expenses (including all
reasonable fees, disbursements and expenses of counsel, experts and consultants
4
and costs of investigation and feasibility studies), fines, penalties, sanctions
and interest incurred as a result of any claim or demand by any other Person or
in response to any violation of Environmental Law, whether known or unknown,
accrued or contingent, whether based in contract, tort, implied or express
warranty, strict liability, criminal or civil statute, to the extent based upon,
related to, or arising under or pursuant to any Environmental Law, Environmental
Permit, order or agreement with any Governmental Body or other Person, which
relates to any environmental, health or safety condition, violation of
Environmental Law or a Release or threatened Release of Hazardous Substances.
Environmental Laws. All laws (including common law) pertaining to
protection of the environment, natural resources, or exposure to toxic or
Hazardous Substances or liability for the release of Hazardous Substances
including, but not limited to, the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. 9601 et seq., as amended; the Resource
Conservation and Recovery act, 42 U.S.C. 6901 et seq., as amended; the Clean Air
Act, 42 U.S.C. 7401 et seq., as amended; the Clean Water Act, 33 U.S.C. 1251 et
seq., as amended; the Occupational Safety and Health act, 29 U.S.C. 655 et seq.;
and any other federal, state, local or municipal laws, statutes, regulations,
rules or ordinances imposing liability or establishing standards of conduct for
protection of the environment.
Environmental Permit. Any Permit required by Environmental Laws for the
operation of the Business.
ERISA. The Employee Retirement Income Security Act of 1974, as amended,
and the rules and regulations promulgated thereunder and currently in effect.
Excluded Contracts. All Employee Benefit Plans (except the existing
Aetna health plan) and any other Contract that by the terms of this Agreement
has expressly not been assumed or that is set forth in Schedule 1.1.
FCC. The U.S. Federal Communications Commission and any successor
Governmental Authority.
Former Employees. All individuals (including common law employees,
independent contractors and individual consultants) who were employed or engaged
by the Sellers or the Subsidiaries in connection with the Business but who are
no longer so employed or engaged on the date of this Agreement.
Furniture and Equipment. All furniture, fixtures, furnishings,
equipment, vehicles, leasehold improvements, and other tangible personal
property owned or used by the Sellers and the Subsidiaries in the conduct of the
Business, including all artwork, desks, chairs, tables, Hardware, copiers,
telephone lines and numbers, telecopy machines and other telecommunication
equipment, cubicles and miscellaneous office furnishings and supplies.
GAAP. Generally accepted accounting principles as in effect from time to
time in the United States of America applied in a manner consistent with past
practices.
Governmental Authority. (a) The United States of America or any other
sovereign nation; (b) any state, commonwealth, territory or possession of the
United States of America or any other sovereign nation and any political
5
subdivision thereof (including counties, municipalities and the like); or (c)
any agency, authority or instrumentality of any of the foregoing, including any
court, tribunal, department, bureau, commission or board.
Governmental Regulator. Any and all Governmental Authorities having
regulatory jurisdiction and/or oversight over the Business or the Sellers.
Hardware. Any and all computer and computer-related hardware, including,
but not limited to, computers, file servers, facsimile servers, scanners, color
printers, laser printers and networks.
Hazardous Substances. (a) Any "hazardous waste" as defined by the
Resource Conservation and Recovery Act of 1976 (RCRA) (42 U.S.C. xx.xx. 6901 et
seq.), as amended, and the rules and regulations promulgated thereunder; (b) any
"hazardous substance" as defined by the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (42 U.S.C. xx.xx. 9601 et seq.) (CERCLA),
as amended, and the rules and regulations promulgated thereunder; (c) asbestos
or asbestos-containing material of any kind or character; (d) polychlorinated
biphenyls; (e) any substances regulated under the provisions of Subtitle I of
RCRA relating to underground storage tanks; and (f) any other material,
substance or waste which requires special handling, reporting or notification of
any Governmental Authority in its collection, storage, use, treatment or
disposal, under Environmental Laws including any substance, material or waste
regulated, classified or characterized as "hazardous," "toxic," a "pollutant" or
"contaminant" under Environmental Laws.
Hired Employees. The U.S. individuals who, prior to the Initial Closing,
accept the Buyer's written offer of employment (on an "at will" basis, except as
otherwise provided in a duly executed employment agreement with the Buyer) at
the same salary or hourly wage rate and position in effect immediately prior to
the Initial Closing Date and the Employees of the DR Entities transferred in
accordance with the Laws of the Dominican Republic.
HSR Act. The Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder.
Indebtedness. With respect to any specified Person and without
duplication, any liability (contingent or otherwise, but excluding any
Intercompany Liabilities) relating to: (a) indebtedness, including interest and
any prepayment penalties, expenses, or fees thereon created, issued or incurred
by such Person for borrowed money (whether by loan or the issuance and sale of
debt securities or the sale of property to another Person subject to an
understanding or agreement, contingent or otherwise, to repurchase such property
from such Person); (b) reimbursement obligations and obligations with respect to
letters of credit, bankers' acceptances, bank guarantees, surety bonds and
performance bonds, whether or not matured; (c) obligations of such Person to pay
the deferred purchase or acquisition price of property or services, other than
indemnification obligations, trade accounts payable arising, and accrued
expenses incurred, in the ordinary course of its business and consistent with
such Person's customary trade practices; (d) obligations with respect to
interest rate swap agreements, interest rate cap agreements, interest rate
collar agreements, interest rate insurance agreements, foreign exchange
contracts, currency swap or option agreements, forward contracts, commodity
swap, purchase or option agreements, other commodity price hedging arrangements
6
and all other similar Contracts specifically designed to alter the risks of any
Person arising from fluctuations in interest rates, currency values or commodity
prices; (e) indebtedness secured by a lien on the property of such Person,
whether or not the respective indebtedness so secured is a primary obligation of
or has been assumed by such Person; (f) capital lease obligations of such
Person; and (g) indebtedness of others guaranteed by such person.
Initial Closing Assumed Liabilities. All of the Assumed Liabilities,
except to the extent that such liabilities arise from the Dialaround Assets.
Initial Closing BEI Assumed Liabilities. All of the BEI Assumed
Liabilities, except for the Dialaround Closing BEI Assumed Liabilities.
Initial Closing BEI Purchased Assets. All of the BEI Purchased Assets,
except for the Dialaround Closing BEI Purchased Assets.
Initial Closing Purchased Assets. All of the Purchased Assets, except
for the Purchased Assets that consist of an interest in the Dialaround Assets.
Initial Closing STi Assumed Liabilities. All of the STi Assumed
Liabilities, except for the Dialaround Closing STi Assumed Liabilities.
Initial Closing STi Purchased Assets. All of the STi Purchased Assets,
except for the Dialaround Closing STi Purchased Assets.
Intellectual Property. All right, title and interest in or relating to
intellectual property, whether protected, created or arising under the laws of
the United States or any other jurisdiction, including: (i) all patents and
applications therefor, including all continuations, divisionals, and
continuations-in-part thereof and patents issuing thereon, along with all
reissues, reexaminations and extensions thereof (collectively, "Patents"); (ii)
all trademarks, service marks, trade names, service names, brand names, trade
dress rights, logos, corporate names, trade styles, logos and other source or
business identifiers and general intangibles of a like nature, together with the
goodwill associated with any of the foregoing, along with all applications,
registrations, renewals and extensions thereof (collectively, "Marks"); (iii)
all Internet domain names; (iv) all copyrights and all mask work, database and
design rights, whether or not registered or published, all registrations and
recordations thereof and all applications in connection therewith, along with
all reversions, extensions and renewals thereof (collectively, "Copyrights");
(iv) all proprietary or confidential information of the Sellers or the
Subsidiaries relating to the Business ("Trade Secrets"); (v) all other
intellectual property rights arising from or relating to Technology, and (vi)
all Contracts granting any right relating to or under the foregoing.
Intellectual Property Licenses. Any grant by (i) the Sellers or any
Subsidiary to another Person of any right relating to or under the Purchased
Intellectual Property or Purchased Technology and (ii) another Person to any
Seller or any Subsidiary of any right relating to or under any third Person's
Intellectual Property or Purchased Technology.
7
Law. Any statute, ordinance, code, law, rule, regulation, order or other
written requirement, standard or procedure enacted, adopted or applied by any
Governmental Authority.
Legal Proceeding. Any judicial, administrative or arbitral action,
suits, mediation, investigation, inquiries, proceedings or claims (including
counterclaims) by or before a Governmental Authority.
Liability. Any debt, loss, damage, adverse claim, fines, penalties,
liability or obligation (whether direct or indirect, known or unknown, asserted
or unasserted, absolute or contingent, accrued or unaccrued, matured or
unmatured, determined or determinable, liquidated or unliquidated, or due or to
become due, and whether in contract, tort, strict liability or otherwise), and
including all costs and expenses relating thereto including all fees,
disbursements and expenses of legal counsel, experts, engineers and consultants
and costs of investigation.
Licenses. Any and all licenses, permits, authorizations, certificates,
exemptions and approvals of Governmental Authorities necessary or proper for the
current use, occupancy or operation of an asset or a business.
Losses. Any losses, legal liabilities, damages, penalties, obligations,
judgments, costs (including, without limitation, costs of investigation or
enforcement) and expenses, including interest that may be imposed in connection
therewith, expenses of investigation, reasonable fees and disbursements of
counsel and other experts, and settlement costs, including, without limitation,
to the extent actually assessed, punitive damages, which are paid by the
indemnified party as a result of a third party action, in each case net of
insurance proceeds actually received by the party suffering such Losses.
Material Adverse Effect. Any change, circumstance, effect or event that,
individually or when taken together, is or would reasonably be expected to be
materially adverse to (A) the business, assets, liabilities, condition
(financial or other) or results of operations of the Sellers and their
Subsidiaries, in each case taken as a whole, or (B) the ability of the Sellers
or ST to perform their respective obligations under this Agreement, the Buyer
Operating Agreement, or the DR Partnership Agreement to which they are a party
or to consummate the transactions contemplated hereby or thereby, including as a
consequence of any material impediment, interference or delay.
Measurement Date Reference List. The combined trial balance list of the
Sellers and the Subsidiaries as of the end of the day on the Working Capital
Calculation Date, whose components are fairly stated in accordance with GAAP,
and prepared consistent with past practice, as adjusted on a pro forma basis to
exclude any Excluded Liabilities or Excluded Assets.
Non-DR Entities. The Sellers and Subsidiaries, other than the DR
entities.
Open Source Software. All software that is open source, shareware, or
freeware and that requires as a condition of use, modification and/or
distribution of such software that other software incorporated into, derived
from or distributed with such software (a) be disclosed or distributed in source
code form; (b) be licensed for the purpose of making derivative works; or (c) be
redistributable at no charge.
8
Order. Any order, injunction, judgment, doctrine, decree, ruling, writ,
assessment or arbitration award of a Governmental Authority.
Permits. Any approvals, authorizations, consents, licenses, permits or
certificates of a Governmental Authority.
Permitted Encumbrances. The following Encumbrances: (a) liens for Taxes,
assessments and governmental charges not yet due and payable and/or which are
being contested in good faith by appropriate proceedings and for which adequate
reserves have been established in accordance with GAAP; (b) zoning laws and
ordinances and similar Laws; (c) any right reserved to any Governmental
Authority to regulate the affected property; (d) in the case of any leased
Asset, any Encumbrance granted thereunder; (e) capital leases, to the extent
listed on Section 5.12(b) of the Disclosure Schedules; (f) materialmens',
mechanics', workmen's, repairmen's or other like Encumbrances arising in the
ordinary course of business, consistent with past practices; (g) any Encumbrance
(other than an Encumbrance securing a monetary obligation) that does not
individually or in the aggregate interfere with the continued use of the Assets
subject thereto in the operation of the Business as currently being used; and
(h) pledges or deposits in connection with workers' compensation, unemployment
insurance and other social security Laws.
Permitted Investments. Any (i) cash, (ii) investments in obligations
issued or guaranteed by the United States government or any agency thereof and
(iii) money market funds collateralized by any investment in obligations issued
or guaranteed by the United States government or any agency thereof.
Person. Any natural person, corporation, partnership, trust,
unincorporated organization, association, limited liability company,
Governmental Authority or other entity.
Post-Initial Closing Covenants. Any covenant, agreement or obligation
contained in this Agreement that by its nature is required to be performed after
the Initial Closing.
Pre-Initial Closing Covenants. Any covenant, agreement or obligation
contained in this Agreement that by its nature is required to be performed by,
through, at or prior to the Initial Closing.
Purchased Contracts. All Contracts related to the Business, including
those listed on Section 5.7 of the Disclosure Schedules and Intellectual
Property Licenses but excluding any Excluded Contracts.
Purchased Intellectual Property. All Intellectual Property related to,
held for use or contemplated to be used in connection with the Business.
Purchased Technology. All Technology related to, held for use or
contemplated to be used in connection with the Business.
Real Property. The Assets owned or leased by any of the Sellers or the
Subsidiaries consisting of realty, including appurtenances, improvements and
fixtures located on such realty, and any other interests in real property,
9
including fee interests, leasehold interests and easements, wire crossing
permits, and rights of entry.
Reference Balance Sheet Date. December 31, 2005.
Regulatory Surcharges. All federal, state, local or foreign charges,
fees, imposts, levies or other assessments of any kind or nature imposed by any
Governmental Regulator, including all federal and state telecommunications fees
and levies, including but not limited to universal service contributions,
telecommunications relay service fees, local number portability fees, and FCC
and State PUC regulatory fees, together with any interest thereon and any late
fees, penalties, or interest.
Secured Account. The account of ST which has been pledged to BEI and the
Buyer pursuant to the Pledge Agreement attached as Schedule A hereto (the
"Pledge Agreement") securing all obligations of ST, Sellers and Subsidiaries
under Section 10.
Software. Any and all (i) computer programs, including any and all
software implementations of algorithms, models and methodologies, whether in
source code or object code; (ii) databases and compilations, including any and
all data and collections of data, whether machine readable or otherwise; (iii)
descriptions, flow-charts and other work product used to design, plan, organize
and develop any of the foregoing, screens, user interfaces, report formats,
firmware, development tools, templates, menus, buttons and icons; and (iv) all
documentation, including user manuals and other training documentation related
to any of the foregoing.
State PUC means any state or local public service or public utilities
commission (or the equivalent) having regulatory authority over the Business, as
conducted in any given jurisdiction.
State PUC Consent means the grant by any State PUC of its consent to the
assignment of the State PUC Licenses or any Non-Transferred Assets associated
with such Licenses, in connection with the consummation of the transactions
contemplated hereby.
State PUC Licenses means all Licenses issued or granted by the State PUC
held by the Sellers or any Operating Subsidiary in each applicable jurisdiction,
as set forth on Section 5.6 of the Disclosure Schedules.
Subsidiaries. TGI S.a.r.l., a Luxemburg limited liability company, TGI
S.a.r.l. Schaffhausen, a Swiss branch of TGI S.a.r.l., and the DR Entities.
Tax Return. Any return, report or statement required to be filed with
respect to any Tax, declarations, schedules or attachments thereto, and any
amendment thereof) including any information return, amended return or
declaration of estimated Tax, and including, where permitted or required,
combined, consolidated or unitary returns for any group of entities that
includes the Sellers, any of the Subsidiaries, or any of their Affiliates.
Taxes. (i) All federal, state, local or foreign taxes, charges, fees,
imposts, levies or other assessments of any kind or nature imposed by any
Governmental Authority, other than Regulatory Surcharges, including all income,
capital, sales, use, ad valorem, value added, franchise, severance, net or gross
proceeds, withholding, social security, payroll, employment, excise, property
10
and estimated taxes, customs, duties, fees, assessments, charges and levies of
any kind whatsoever, and (ii) any items described in clause (i) payable by
reason of Contract, assumption, transferee liability, operation of Law, Treasury
Regulation Section 1.1502-6(a) (or any predecessor or successor thereof of any
analogous or similar provision under Law) or otherwise.
Technology. Collectively, all database technologies, Software, systems,
product specifications, data, samples, structures, and architectures (and
related processes, formulas, compositions, improvements, devices, know-how,
inventions, discoveries, concepts, ideas, designs, methods, sketches,
photographs, graphs, drawings and information), inventions (whether patentable
or unpatentable and whether or not reduced to practice), all improvements
thereto, past, current and planned research and development, current and planned
research and distribution methodologies and processes, all analytical
approaches, frameworks and methodologies, and all notes, analyses, compilations,
studies, summaries, confidential business information, client and customer
lists, databases and data collections and all rights therein, current and
anticipated client and customer requirements, price lists, market studies,
business plans, however and whether or not documented, other material prepared
by or for a Person containing or based, in whole or in part, on any information
included in the foregoing, however documented, and any other related information
or technology, that are used in, incorporated in, embodied in, displayed by or
relate to, or are used in the design, development, reproduction, maintenance or
modification of, any of such Person's products.
Telco Award Agreements. Those agreements between Telco and certain
Employees or former Employees, listed on Section 1.1 of the Disclosure
Schedules.
Telecommunication Licenses. All Licenses granted to the applicable
Sellers and/or Subsidiaries by the FCC, the State PUCs, or other Governmental
Regulators for the operation of the Business.
Third Party. Any Person other than the Sellers, the Subsidiaries, the
Buyer, DR Partnership, and their respective Affiliates.
Transfer Taxes. Any federal, state, county, local, foreign and other
sales, use, transfer, conveyance, documentary, recording or other similar tax,
fee or charge imposed upon the sale, transfer or assignment of property or any
interest therein or the recording thereof, and any penalty, addition to tax or
interest with respect thereto, but such term shall not include any tax on, based
upon or measured by, the net income, gains or profits from such sale, transfer
or assignment of the property or any interest therein.
U.S. Cash. The United States cash and United States cash equivalents of
the Non-DR Entities.
Wireless Business. The prepaid wireless business of the applicable
Sellers and Subsidiaries.
Wireline Business. Business engaged in by the Sellers and the
Subsidiaries, except for the Wireless Business, and including prepaid calling
card services, wholesale services offered to other telecommunications service
11
providers, the dial-around ("00-00-XXX") business and any related or
contemplated additional services.
Working Capital. The combined current assets of the Sellers and the
Subsidiaries as of a specified date less the combined current liabilities of the
Sellers and the Subsidiaries as of such specified date, in each case determined
in accordance with GAAP, consistently applied, except for (i) deferred revenue
which shall, for purposes of calculating Working Capital, be an amount equal to
the actual deferred revenue balance as of such specified date multiplied by a
factor equal to 100% minus the Average Gross Margin Percentage and (ii) shall
not include any asset or liability relating to income Tax. It is the intention
of the parties that all financial results (whether income or expense) of the
Sellers and the Subsidiaries from the Working Capital Calculation Date to the
Initial Closing Date shall be for the benefit, or burden, of and belong to, or
be the responsibility of, the Buyer; and ST, the Sellers and the Subsidiaries so
covenant and agree.
Working Capital Calculation Date The last calendar day of the calendar
month that immediately precedes the calendar month in which the Initial Closing
occurs.
1.2 Other Definitions. The following terms are defined in the
Sections indicated:
Term Section
---- -------
Action 10.4
Agreement Recitals
Annual Reimbursement Period 10.10(a)
Appraisal 2.8
Asset Acquisition Statement 2.8
Assignment and Assumption Agreement 4.2(a)
Assumed DR Liabilities Recitals
Audited Financial Statements 5.13
Xxxxxxx Recitals
BEI Recitals
BEI Assumed Liabilities Recitals
BEI Purchased Assets Recitals
Xxxx of Sale 4.2(a)
Buyer Recitals
Buyer Cap 10.6
Buyer Consideration 3.1(b)
Buyer Operating Agreement Recitals
Buyer Organizational Documents 6.1
Buyer Purchase Price 3.1(b)
Buyer Required Consents 6.4(a)
Buyer Uncapped Losses 10.6
Buyer's Perpetual Representations 10.1(a)
Cap 10.5
Cash Shortfall Amount 3.1(b)
CLEC Agreements 5.7(a)
COBRA 5.18(b)
Communications Laws 5.6(b)
12
Term Section
---- -------
Company Regulatory Licenses 5.6(a)
Confidential Information 7.9(c)
Confidentiality Agreement 7.9(b)
Control 10.11
Controlled Group Member 5.18(a)
Deductible 10.5
Dialaround Recitals
Dialaround Closing 4.1(b)
Dialaround Closing Buyer Purchase Price 3.1(b)
Dialaround Closing Date 4.1(b)
DR Partnership Recitals
Employee Benefit Plans 5.18(a)
Enforceability Exception 5.7(b)
Excluded Assets 2.2
Excluded Liabilities 2.5
Extraordinary Events 10.5
Final Reference List 3.2(b)
Final Statement 3.2(b)
Financial Statements 5.13(b)
Indemnified Party 10.4
Indemnifying Party 10.4
Independent Accounting Firm 3.2(b)
Independent Appraiser 2.8
Initial Closing 4.1(a)
Initial Closing Cash Amount 3.1(b)
Initial Closing Date 4.1(a)
IRS 5.18(c)
Leased Real Property 5.8(b)
Litigation Reimbursement Period 10.10(a)
Material Contract 5.7(a)
Multiemployer Plan 5.18(f)
Nonassignable Assets 2.6(c)
Non-Foreign Status Affidavit 4.2(a)
Organizational Documents 5.1
Partnership Purchase Price 3.1
Pension Plan 5.18(a)
Personal Property Leases 5.12(b)
Phonecard Enterprises Recitals
Provider Marks 7.14(b)
Purchase Price 3.1(a)
Purchased Assets 2.1(c)
Purchased DR Assets Recitals
Real Property Leases 5.8(b)
Registration Rights Agreement 4.3(a)
Regulatory Legal Opinion 4.2(a)
13
Term Section
---- -------
Reimbursable Action 10.10(b)
Reimbursable Amounts 10.10(a)
Reimbursed Party 10.10(b)
Related Persons 5.23
Representatives 7.13(a)
Required Consents 5.4(a)
Restricted Business 7.10(a)
Restricted Period 7.10(a)
Rules 12.15
Schedule 10.5 Covenants 10.5
Schedule 10.6 Covenants 10.6
Security Account Amount 3.1(b)
Seller Recitals
Sellers Recitals
Sellers' Perpetual Representations 10.1(a)
Sole Arbitrator 12.15
ST Recitals
ST Finance Recitals
Statement 3.2(a)
STi Assumed Liabilities Recitals
STi CC 1 Recitals
STi CC 2 Recitals
STi Mobile Recitals
STi PCS Recitals
STi Phonecard Recitals
STi Prepaid & Co. Recitals
STi Prepaid Distributors & Co. Recitals
STi Purchased Assets Recitals
T&P Recitals
Takeover Proposal 7.13(c)
Telco Recitals
Termination Fee 9.2(b)
Total Consideration 3.1(a)
Transaction Documents 5.3(a)
Unaudited Financial Statements 5.13(b)
Uncapped Losses 10.5
VoIP Enterprises Recitals
WARN 5.18(m)
Welfare Plan 5.18(a)
Working Capital Calculation Date 3.1(b)
14
2. PURCHASE AND SALE OF ASSETS; CONTRIBUTION OF ASSETS; ASSUMPTION OF
CERTAIN LIABILITIES.
2.1 Purchase and Sale of Assets. Subject to the terms and conditions
set forth in this Agreement:
(a) at the Initial Closing, the Sellers shall (and shall cause the
Subsidiaries to) sell, assign, transfer, convey and deliver to (i) the Buyer,
and the Buyer shall acquire, accept and purchase from the Sellers and the
Subsidiaries, all of the Sellers' and the Subsidiaries' right, title and
interest in, to and under the Initial Closing BEI Purchased Assets, free and
clear of all Encumbrances except for Permitted Encumbrances, subject to the
assumption by the Buyer of the Initial Closing BEI Assumed Liabilities described
in Section 2.4(a)(i) hereof and (ii) DR Partnership, and DR Partnership shall
acquire, accept and purchase from the Sellers, all of the DR Entities' right,
title and interest in, to and under the Purchased DR Assets, free and clear of
all Encumbrances except for Permitted Encumbrances, subject to the assumption by
DR Partnership of the Assumed DR Liabilities described in Section 2.4(a)(ii)
hereof; and
(b) at the Dialaround Closing, the Sellers shall (and shall cause
the Subsidiaries to) sell, assign, transfer, convey and deliver to the Buyer,
and the Buyer shall acquire, accept and purchase from the Sellers and the
Subsidiaries, all of the Sellers' and the Subsidiaries' right, title and
interest in, to and under the Dialaround Closing BEI Purchased Assets, free and
clear of all Encumbrances except for Permitted Encumbrances, subject to the
assumption by the Buyer of the Dialaround Closing BEI Assumed Liabilities
described in Section 2.4(b)(i) hereof.
(c) "Purchased Assets" shall mean all of the business, assets,
properties, contractual rights, goodwill, going concern value, rights and claims
of the Sellers and the Subsidiaries related to, used in or useful to the
Business, wherever situated and of whatever kind and nature, real or personal,
tangible or intangible, whether or not reflected on the Books and Records (other
than the Excluded Assets), including each of the following assets:
(i) all cash, cash equivalents, bank deposits or similar
cash items and accounts receivable of the Sellers and the Subsidiaries (other
than the amount of DR Cash that is retained by the DR Entities pursuant to the
last proviso of Section 3.1(b)(iii));
(ii) all inventory used or intended to be used primarily in
connection with the Business;
(iii) all tangible personal property intended to be used
primarily in connection with the Business, including Furniture and Equipment,
other than such tangible personal property which is an Excluded Asset;
(iv) all deposits (including customer deposits and security
for rent, electricity, telephone or otherwise) and credits, prepaid charges and
expenses, including any prepaid rent, of the Sellers and the Subsidiaries;
(v) all rights of the Sellers and the Subsidiaries under
each Real Property Lease, together with all improvements, fixtures and other
appurtenances thereto and rights in respect thereof;
15
(vi) the Purchased Intellectual Property and the Purchased
Technology;
(vii) all rights of the Sellers and the Subsidiaries under the
Purchased Contracts including all claims or causes of action with respect to the
Purchased Contracts;
(viii) all Documents, including Documents relating to products,
services, marketing, advertising, promotional materials, Purchased Intellectual
Property, personnel files for Hired Employees and all files, customer files and
documents (including credit information), supplier lists, records, literature
and correspondence, whether or not physically located on any of the premises
referred to in clause (e) above, but excluding personnel files for Employees of
the Sellers or the Subsidiaries who are not Hired Employees;
(ix) all Permits, including Environmental Permits, used by
the Sellers and the Subsidiaries in the Business (which includes all Permits
necessary to conduct the Business as currently conducted) and all rights, and
incidents of interest therein;
(x) all supplies owned by the Sellers and the Subsidiaries
and used in connection with, used in or useful to the Business;
(xi) all rights of the Sellers and the Subsidiaries under
non-disclosure or confidentiality, non-compete, or non-solicitation agreements
with Former Employees, Employees and agents of the Sellers or any Subsidiary or
with third parties to the extent relating to the Business or the Purchased
Assets (or any portion thereof);
(xii) all rights of the Sellers and the Subsidiaries under or
pursuant to all warranties, representations and guarantees made by suppliers,
manufacturers and contractors to the extent relating to products sold or
services provided to the Sellers and the Subsidiaries or to the extent affecting
any Purchased Assets;
(xiii) all third-party property and casualty insurance
proceeds, and all rights to third-party property and casualty insurance
proceeds, in each case to the extent received or receivable in respect of the
Business;
(xiv) any claims, causes of actions, counterclaims, setoffs or
defenses and insurance coverage the Sellers or their Subsidiaries may have with
respect to any Assumed Liabilities;
(xv) all goodwill and other intangible assets associated with
the Business, including customer and supplier lists and the goodwill associated
with the Purchased Intellectual Property (and any securities of or interests in
entities other than the Subsidiaries); and
(xvi) all pending or future recoveries received in connection
with any telecommunications carrier dispute.
2.2 Excluded Assets. Nothing herein contained shall be deemed to
sell, transfer, assign or convey the Excluded Assets to Buyer, and the Sellers
or a Subsidiary shall retain all right, title and interest to, in and under the
Excluded Assets. "Excluded Assets" shall mean (a) the Ameritrade Litigation, (b)
16
all intercompany receivables, (c) all minute books, organizational documents,
stock registers and such other Books and Records as pertain to ownership,
organization or existence of each of the Sellers and Subsidiaries and (d) the
INDOTEL Special Registration granted to STi Prepaid & Co. and the Free Zone
permits held by the DR Entities.
2.3 Contributions to Capital of ST Finance, the Buyer and DR
Partnership; and Assumption of Liabilities.
(a) Subject to the terms and conditions set forth in this Agreement,
at the Initial Closing as described below, the following shall occur:
(i) the Sellers shall (and shall cause the Subsidiaries
(other than the DR Entities) to) contribute to the capital of ST Finance all of
their right, title and interest in and to the Initial Closing STi Purchased
Assets, free and clear of all Encumbrances except for Permitted Encumbrances,
subject to the assumption by ST Finance of all of the Initial Closing STi
Assumed Liabilities pursuant to Section 2.4(a)(iii), and ST Finance will issue
to the Sellers and the Subsidiaries (other than the DR Entities) 100% of the
membership interest in ST Finance, in accordance with the ST Finance LLC
Operating Agreement;
(ii) ST Finance shall contribute to the capital of the Buyer
all of its right, title and interest in and to the Initial Closing STi Purchased
Assets, free and clear of all Encumbrances except for Permitted Encumbrances,
subject to the assumption by the Buyer of all of the Initial Closing STi Assumed
Liabilities pursuant to Section 2.4(a)(iv), and the Buyer will issue to ST
Finance a 25% membership interest in the Buyer; and
(iii) the Buyer shall cause STi CC 1 and STi CC 2 to
contribute to the capital of DR Partnership an amount equal to the Partnership
Purchase Price.
(b) Subject to the terms and conditions set forth in this Agreement,
at the Dialaround Closing as described below, the following shall occur:
(i) the Sellers shall (and shall cause the Subsidiaries
(other than the DR Entities) to) contribute to the capital of ST Finance all of
their right, title and interest in and to the Dialaround Closing STi Purchased
Assets, free and clear of all Encumbrances except for Permitted Encumbrances,
subject to the assumption by ST Finance of all of the Dialaround Closing STi
Assumed Liabilities pursuant to Section 2.4(b)(ii); and
(ii) ST Finance shall contribute to the capital of the Buyer
all of its right, title and interest in and to the Dialaround Closing STi
Purchased Assets, free and clear of all Encumbrances except for Permitted
Encumbrances, subject to the assumption by the Buyer of all of the Dialaround
Closing STi Assumed Liabilities pursuant to Section 2.4(b)(iii).
2.4 Assumption of Liabilities.
(a) Subject to the terms and conditions set forth in this Agreement,
at and effective as of the Initial Closing (i) the Buyer shall assume, all of
the Initial Closing BEI Assumed Liabilities, subject to the sale of the Initial
Closing BEI Purchased Assets to the Buyer pursuant to Section 2.1(a)(i) hereof,
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(ii) DR Partnership shall assume, all of the Assumed DR Liabilities, subject to
the sale of the Purchased DR Assets to DR Partnership pursuant to Section
2.1(a)(ii) hereof, (iii) ST Finance shall assume all of the Initial Closing STi
Assumed Liabilities, subject to the contribution to the capital of ST Finance of
the Initial Closing STi Purchased Assets pursuant to Section 2.3(a)(i) and (iv)
the Buyer shall assume the Initial Closing STi Assumed Liabilities previously
assumed by ST Finance pursuant to Section 2.4(a)(iii) hereof, subject to the
contribution of the Initial Closing STi Purchased Assets to the capital of Buyer
pursuant to Section 2.3(a)(ii).
(b) Subject to the terms and conditions set forth in this Agreement,
at and effective as of the Dialaround Closing (i) the Buyer shall assume, all of
the Dialaround Closing BEI Assumed Liabilities, subject to the sale of the
Dialaround Closing BEI Purchased Assets to the Buyer pursuant to Section
2.1(b)(i) hereof, (ii) ST Finance shall assume all of the Dialaround Closing STi
Assumed Liabilities, subject to the contribution to the capital of ST Finance of
the Dialaround Closing STi Purchased Assets pursuant to Section 2.3(b)(i), and
(iii) Buyer shall assume the Dialaround Closing STi Assumed Liabilities
previously assumed by ST Finance pursuant to Section 2.4(b)(ii) hereof, subject
to the contribution of the Dialaround Closing STi Purchased Assets to the
capital of Buyer pursuant to Section 2.3(b)(ii).
2.5 Excluded Liabilities. Notwithstanding anything to the contrary
in this Agreement, neither the Buyer nor DR Partnership will assume or be liable
for any Excluded Liabilities. The Sellers shall, and shall cause the
Subsidiaries to, timely perform, satisfy and discharge in accordance with their
respective terms all Excluded Liabilities unless such an Excluded Liability is
disputed in good faith; provided, however, that even if disputed in good faith,
the Sellers and the Subsidiaries shall timely perform, satisfy and discharge in
accordance with their respective terms such Excluded Liability if the failure to
do so would reasonably be expected to have a Material Adverse Effect on the
Buyer or DR Partnership so long as the Sellers or the Subsidiaries are able to
reserve (contractually or at law) their right to litigate their dispute with
respect to the underlying obligation. If the Sellers or Subsidiaries, as the
case may be, are unable to reserve (contractually or at law) their right to
litigate their dispute with respect to the underlying obligation notwithstanding
their good faith attempt to do so, then the Buyer or DR Partnership may perform,
satisfy or discharge such Excluded Liabilities, and the Sellers shall be
entitled to arbitrate pursuant to Section 12.15 with the Buyer and/or DR
Partnership the underlying merits of such dispute that was performed, satisfied
or discharged by the Buyer and/or DR Partnership. In the event such arbitration
is resolved in the Sellers' favor in whole or in part, none of the Sellers, the
Subsidiaries and ST shall be responsible to indemnify the Buyer or DR
Partnership for any such losses, except to the extent such arbitration is
resolved in the Buyer's and/or DR Partnership's favor, with costs and expenses
to be allocated in accordance with Section 12.15. In the event such arbitration
is resolved in the Buyer's and/or DR Partnership's favor in whole or in part,
the Sellers, the Subsidiaries and ST shall be responsible to indemnify the Buyer
or DR Partnership for any such losses, including the costs and expenses of such
arbitration as provided for in Section 12.15, but only to the extent such
arbitration is resolved against the Sellers, the Subsidiaries or ST, with cost
and expenses to be allocated pursuant to Section 12.15. "Excluded Liabilities"
shall mean all Liabilities of the Sellers and the Subsidiaries other than the
Assumed Liabilities.
2.6 Further Conveyances and Assumptions; Consent of Third Parties.
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(a) From time to time following the Initial Closing at the Buyer's
cost and expense and except as prohibited by Law, ST and the Sellers shall, or
shall cause their Affiliates to, make available to the Buyer and DR Partnership,
as the case may be, such data and personnel records of Hired Employees as is
reasonably necessary for the Buyer and DR Partnership, as the case may be, to
transition such Employees into the Buyer's and DR Partnership's records, as the
case may be.
(b) From time to time following the Initial Closing Date, in the
case of the Initial Closing (or in the case of the Dialaround Closing, the
Dialaround Closing Date) at the Buyer's cost and expense, ST, the Sellers, the
Buyer and DR Partnership shall, and shall cause their respective Affiliates to,
execute, acknowledge and deliver all such further conveyances, notices,
assumptions, releases and aquittances and such other instruments, and shall take
such further actions, as may be necessary or appropriate to assure fully to the
Buyer and DR Partnership and their respective successors or assigns, all of the
properties, rights, titles, interests, estates, remedies, powers and privileges
intended to be conveyed to the Buyer and DR Partnership under this Agreement and
the Transaction Documents and to assure fully to ST, the Sellers and their
Affiliates and their successors and assigns, the assumption of the liabilities
and obligations intended to be assumed by the Buyer and DR Partnership under
this Agreement and the Transaction Documents, and to otherwise make effective
the transactions contemplated hereby and thereby.
(c) Nothing in this Agreement nor the consummation of the
transactions contemplated hereby shall be construed as an attempt or agreement
to assign any Purchased Asset, including any Contract, Permit, certificate,
approval, authorization or other right, which by its terms or by Law is
nonassignable without the consent of a third party or a Governmental Body or is
cancelable by a third party in the event of an assignment ("Nonassignable
Assets") unless and until such consent shall have been obtained. Sections 5..6
and 5.7 of the Disclosure Schedules set forth a true and complete list of all
Nonassignable Assets. To the extent permitted by Law, the Sellers shall, and
shall cause their Affiliates to, use their commercially reasonable efforts to
cooperate with the Buyer and DR Partnership at their request in endeavoring to
obtain such consents promptly. To the extent permitted by applicable Law, in the
event consents to the assignment thereof cannot be obtained, such Nonassignable
Assets shall be held, as of and from the Initial Closing Date, in the case of
the Initial Closing Purchased Assets (or with respect to Dialaround Assets, the
Dialaround Closing Date), by the Sellers or the applicable Affiliate of the
Sellers in trust for the Buyer and DR Partnership, as the case may be, and the
covenants and obligations thereunder shall be performed by the Buyer and DR
Partnership, as the case may be, in the Sellers' or such Affiliate's name and
all benefits and obligations existing thereunder shall be for the Buyer's and DR
Partnership's account, as the case may be. The Sellers shall take or cause to be
taken at the Buyer's expense such actions in their names or otherwise as the
Buyer or DR Partnership may reasonably request so as to provide the Buyer or DR
Partnership, as the case may be, with the benefits of the Nonassignable Assets
and to effect collection of money or other consideration that becomes due and
payable on or after the Initial Closing Date, in the case of the Initial Closing
(or in the case of the Dialaround Closing, the Dialaround Closing Date) under
the Nonassignable Assets, and the Sellers or the applicable Affiliate of the
Sellers shall promptly pay over to the Buyer and DR Partnership, as the case may
be, all money or other consideration received by it on or after the Initial
Closing Date, in the case of the Initial Closing (or in the case of the
Dialaround Closing, the Dialaround Closing Date) in respect of all Nonassignable
Assets, net of applicable Taxes, if any, actually paid by the Sellers as a
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direct result of such collection. As of and from the Initial Closing Date, in
the case of the Initial Closing (or in the case of the Dialaround Closing, the
Dialaround Closing Date), the Sellers on behalf of themselves and their
Affiliates authorizes the Buyer and DR Partnership, as the case may be, to the
extent permitted by applicable Law and the terms of the Nonassignable Assets, at
the Buyer's or DR Partnership's expense, to perform all the obligations and
receive all the benefits of the Sellers or their Affiliates under the
Nonassignable Assets and appoints the Buyer and DR Partnership, as the case may
be, their attorney-in-fact to act in their name on their behalf or in the name
of the applicable Affiliate of the Sellers and on such Affiliate's behalf with
respect thereto.
2.7 Bulk-Sales Laws. The Buyer and DR Partnership hereby waives
compliance by the Sellers and the Subsidiaries with the requirements and
provisions of any "bulk-transfer" tax Laws of any jurisdiction that may
otherwise be applicable with respect to the sale of any or all of the Purchased
Assets to the Buyer and DR Partnership; provided, however, that the Sellers
agrees (i) to pay and discharge when due or to contest or litigate all claims of
creditors which are asserted against the Buyer and DR Partnership or the
Purchased Assets by reason of such noncompliance, (ii) to indemnify, defend and
hold harmless the Buyer and DR Partnership from and against any and all such
claims in the manner provided in Section 10 and (iii) to take promptly all
necessary action to remove any Encumbrance which is placed on the Purchased
Assets by reason of such noncompliance.
2.8 Purchase Price Allocation. Prior to the Initial Closing, the
parties shall obtain the services of Duff & Xxxxxx (the "Independent Appraiser")
to assist the parties in determining the fair value of the Purchased Assets
solely for purposes of allocating the Total Consideration among the Purchased
Assets under this Section 2.8, and the parties agree to accept the Independent
Appraiser's determination of the fair value of the Purchased Assets (the
"Appraisal"). The cost of the Appraisal shall be borne equally by BEI and ST. At
or prior to the Initial Closing, the Buyer shall prepare and deliver to ST (on
behalf of the Sellers and the Subsidiaries) a copy of each Form 8594 and any
required exhibits thereto (the "Asset Acquisition Statement") allocating the
Total Consideration among the Purchased Assets in a manner consistent with the
Appraisal. ST (on behalf of the Sellers and the Subsidiaries) shall have an
opportunity to review each Form 8594. To the extent the Buyer and ST disagree on
any part of any Form 8594, they shall negotiate in good faith to resolve any
differences among the parties for the lesser of (a) a period of fifteen (15)
days and (b) a period commencing on the receipt by the Buyer of ST's objections
and ending fifteen (15) days before the due date (after giving effect to
extensions thereof) for filing the Form 8594. If the parties do not resolve
their differences during the period described above, the Independent Appraiser
shall resolve any such differences and its resolution shall be final, the costs
of which shall be borne equally by BEI and ST. The Buyer, the Sellers and the
Subsidiaries agree (i) to prepare and file all income Tax Returns and reports
(including Forms 8594) filed consistently with the Asset Acquisition Statement,
(ii) that none of the Buyer or the Sellers or any of their respective Affiliates
shall take any position inconsistent with the Asset Acquisition Statement in
connection with any Tax proceeding, except to the extent required by applicable
Law, and (iii) that if any Governmental Authority disputes such Asset
Acquisition Statement, the party receiving notice of the dispute shall promptly
notify the other party hereto of such dispute, and the parties hereto shall
cooperate in good faith in responding to such dispute in order to preserve the
effectiveness of such statement. For purposes of this Section 2.8, the Purchased
Assets shall not include the covenant not to compete as set forth in Section
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7.10, and shall be considered Assets contributed by the Sellers and the
Subsidiaries, in their capacities as members, to the Buyer and DR Partnership,
respectively.
2.9 Right to Control Payment. Subject to Section 2.5, the Buyer
shall have the right, but not the obligation, to make any payment due from the
Sellers or the Subsidiaries with respect to any Reimbursable Amounts under
Section 10.10; provided, however, that the Buyer will not settle or compromise
any Reimbursable Action unless (i) such compromise or settlement is on
exclusively monetary terms and shall be paid entirely by the Buyer and (ii) such
settlement or compromise does not contain any admission of wrongdoing on the
part of any of Sellers or the Subsidiaries.
2.10 Proration of Certain Expenses. Except for Assumed Liabilities,
all real property taxes, personal property taxes, or ad valorem obligations and
similar recurring taxes and fees on the Purchased Assets for taxable periods
beginning before, and ending after, the Working Capital Calculation Date shall
be prorated, as applicable, between Buyer and DR Partnership, on the one hand,
and Sellers, on the other hand, as of 11:59 p.m. eastern time on the Working
Capital Calculation Date. With respect to Taxes described in this Section 2..10,
Sellers shall timely file (or cause to be timely filed) all Tax Returns due
before the Initial Closing Date (or with respect to the Dialaround Assets, the
Dialaround Closing Date) with respect to such Taxes and Buyer or DR Partnership,
as applicable, shall prepare and timely file all Tax Returns due after the
Initial Closing Date (or with respect to the Dialaround Assets, the Dialaround
Closing Date) with respect to such Taxes. If one party remits to the appropriate
taxing authority payment for Taxes, which are subject to proration under this
Section 2.10 and such payment includes the other party's share of such Taxes,
such other party shall promptly reimburse the remitting party for its share of
such Taxes.
2.11 Post-Initial Closing Receipts and Invoices. The Sellers shall
provide reasonable assistance to the Buyer in the collection of accounts
receivable, at the sole cost and expense of the Buyer. If the Sellers or any of
the Subsidiaries shall receive payment in respect of any of the Purchased
Assets, then the Sellers or the Subsidiaries, as the case may be, shall promptly
forward such payment to the Buyer. If the Sellers or any of the Subsidiaries
receive an invoice for an Assumed Liability, then the Sellers or the
Subsidiaries, as the case may be, shall promptly forward such invoice to the
Buyer for payment. If the Buyer or any of its subsidiaries receive an invoice
for any Excluded Liability then the Buyer or any of its subsidiaries, as the
case may be, shall promptly forward such invoice to the Sellers for payment.
3. CONSIDERATION; INITIAL CLOSING.
3.1 Purchase Price.
(a) Subject to the terms and conditions set forth in this Agreement
and subject to adjustment under Section 3.1(b)(iii) and Section 3.2, and in
consideration of the sale, assignment, transfer, delivery and conveyance by the
Sellers and the Subsidiaries to (i) the Buyer of the BEI Purchased Assets and
(ii) DR Partnership of the Purchased DR Assets, the aggregate purchase price to
be paid for the Purchased Assets (the "Purchase Price") is One-Hundred Twenty
Million Dollars ($120,000,000), payable as set forth below, and the assumption
of 75% of the Assumed Liabilities (together with the Purchase Price, the "Total
Consideration").
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(b) The Purchase Price shall be paid as follows:
(i) at the Initial Closing (x) the Buyer will pay
One-Hundred Nine Million Dollars ($109,800,000) ("Buyer Purchase Price"),
payable as follows: Eighty-Nine Million Dollars ($89,800,000) will be payable in
cash (the "Initial Closing Cash Amount") and Twenty Million Dollars
($20,000,000) (the "Security Account Amount") shall be deposited in the Secured
Account and invested in Permitted Investments, and the Buyer will assume the
Initial Closing BEI Assumed Liabilities (together with the Buyer Purchase Price,
the "Buyer Consideration") and (y) DR Partnership will pay Ten Million Dollars
($10,000,000) ("Partnership Purchase Price"), payable in cash, and assume the
Assumed DR Liabilities; and
(ii) at the Dialaround Closing (if it occurs), the Buyer will
pay Two Hundred Thousand Dollars ($200,000)("Dialaround Closing Buyer Purchase
Price"), payable in cash, and assume the Dialaround Closing BEI Assumed
Liabilities.
(iii) prior to the Initial Closing (but no less than one
Business Day before the Initial Closing Date), the Sellers shall deliver to the
Buyer an estimated Measurement Date Reference List and a preliminary Statement
(each of which shall be calculated in a manner consistent with the sample
calculations set out on Schedules 3.2(a) and 3.2(b) hereof), which shall be used
to determine the payment of the Buyer Purchase Price and the Partnership
Purchase Price at the Initial Closing, as follows: If the U.S. Cash as set forth
on the preliminary Statement is less than $42,600,000 (the amount by which the
U.S. Cash reflected on the preliminary Statement is less than $42,600,000 being
the "Cash Shortfall Amount") or the Working Capital is less than negative
$2,400,000 (the amount by which the Working Capital is less than negative
$2,400,000 being the "Working Capital Shortfall Amount"), the Initial Closing
Cash Amount and the Partnership Purchase Price set forth in (i) above shall be
reduced (pro rata based on the percentage of the Purchase Price represented by
such amounts) by an amount equal to the greater of (x) the Cash Shortfall Amount
or (y) the Working Capital Shortfall Amount (the entire amount by which the
Purchase Price is reduced, being the "Initial Closing Purchase Price
Adjustment"); provided, however, that in the event the Purchase Price is reduced
by the Initial Closing Purchase Price Adjustment, the DR Entities shall be
entitled to retain any DR Cash up to the amount of the Initial Closing Purchase
Price Adjustment.
(c) The Buyer shall be entitled to withhold and deduct from the
Purchase Price otherwise payable to the Sellers and the Subsidiaries pursuant to
this Section 3.1 such amounts as the Buyer is required to withhold under the
Code or any other provision of state, local or foreign Tax law determined in
good faith by the Buyer. To the extent so withheld and deducted, such amounts
shall be treated for all purposes of this Agreement as having been paid to the
applicable Seller or Subsidiary. The Buyer shall remit all aforementioned
withholdings and deductions to the appropriate tax authorities in accordance
with applicable Law.
3.2 Determination of Final Working Capital.
(a) As soon as practicable, but in no event later than ninety (90)
calendar days after the Initial Closing Date, the Buyer shall prepare and
deliver to the Sellers the Measurement Date Reference List. The Measurement Date
Reference List shall be accompanied by a statement (the "Statement") setting
forth the actual Working Capital as of the close of business on the Working
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Capital Calculation Date (which may be a negative Working Capital) and the
Average Gross Margin Percentage, setting forth in reasonable detail the
calculations thereof and the supporting details therefor. The Measurement Date
Reference List shall be calculated in a manner consistent with the sample
Measurement Date Reference List set out on Schedule 3.2(a) hereof, and the
Working Capital and the Average Gross Margin Percentage shall be calculated in a
manner consistent with the sample Working Capital and Average Gross Margin
Percentage calculations set out on Schedule 3.2(b) hereof.
(b) The Sellers shall have sixty (60) calendar days following
receipt of the Measurement Date Reference List and the Statement during which to
dispute in writing any item contained in the Measurement Date Reference List or
the Statement. Such notice of dispute shall set forth in reasonable detail the
items disputed and the Sellers' proposed adjustment to such items. If the
Sellers fail to notify the Buyer in writing of any such dispute within such
sixty (60) day period, the Measurement Date Reference List shall be the "Final
Reference List" and the Statement shall be the "Final Statement." If the Sellers
timely notify the Buyer in writing of any such dispute, and the Buyer and the
Sellers cannot resolve any such dispute within thirty (30) calendar days after
receipt by the Buyer of such notice of dispute, such dispute shall be resolved
by a nationally recognized independent accounting firm (the "Independent
Accounting Firm") mutually selected by the Buyer and the Sellers; provided that,
unless agreed to by the parties hereto, such Independent Accounting Firm shall
not have been retained or hired by, or provided services to, any of the parties
to this Agreement or any of their respective Affiliates on or prior to the date
of this Agreement. The determination of the selected Independent Accounting Firm
shall be made as promptly as practicable and shall be final and binding on the
Buyer and the Sellers. If no such selection is made within twenty (20) calendar
days, the Independent Accounting Firm shall be selected according to the
following procedure: (i) the top twenty Independent Accounting Firms shall be
ranked in descending order according to revenue earned for the most recently
reported fiscal year ending prior to the Initial Closing Date and (ii) the
Independent Accounting Firm selected shall be the first such firm (x) to which
none of the parties to this Agreement or any of their respective Affiliates have
paid for services rendered of more than two hundred thousand dollars ($200,000)
in cash or the fair market value of other consideration for the fiscal year
ending immediately prior to the Initial Closing Date and (y) for which none of
the parties to this Agreement or any of their respective Affiliates have current
engagements in the fiscal year in which the Initial Closing occurs that would
result in the payment for services rendered to such Independent Accounting Firm
of two hundred thousand dollars ($200,000) or more in the aggregate of cash or
the fair market value of other consideration. Any fees and expenses relating to
the engagement of the selected Independent Accounting Firm shall be apportioned
between the Buyer and the Sellers based on the total dollar value of the dispute
resolved in favor of the Buyer on the one hand or the Sellers on the other hand,
with each such party bearing such percentage of the fees and disbursements of
the selected Independent Accounting Firm as the aggregate disputes resolved
against that party bears to the total dollar value of all disputed exceptions
considered by the selected Independent Accounting Firm. In the event of a
dispute, the Measurement Date Reference List and Statement, as agreed by the
Buyer and the Sellers, or determined by the selected Independent Accounting
Firm, as the case may be, shall be the "Final Reference List" or the "Final
Statement," as the case may be.
(c) If the (i) Working Capital, as set forth in the Final Statement,
exceeds negative $2,400,000 and (ii) U.S. Cash, as set forth in the Final
Statement, exceeds $42,600,000, the Buyer and DR Partnership shall pay, (pro
23
rata based on the percentage of the Total Consideration paid by each of them) to
Sellers, an amount in cash equal to the lesser of (x) the excess amount by which
Working Capital exceeds negative $2,400,000 and (y) the amount by which the U.S.
Cash exceeds $42,600,000, not later than five (5) Business Days from the date of
such Final Statement.
(d) If (i) the Working Capital, as set forth in the Final Statement,
is less than negative $2,400,000 or (ii) U.S. Cash, as set forth in the Final
Statement, is less than $42,600,000, Sellers shall pay to the Buyer and DR
Partnership, (pro rata based on the percentage of the Total Consideration paid
by each of them) an aggregate amount equal to the greater of (x) the amount by
which Working Capital is less than negative $2,400,000 and (y) the amount by
which the U.S. Cash is less than $42,600,000, not later than five (5) Business
Days from the date of such Final Statement. The thresholds with respect to
Working Capital and Unrestricted Cash must be met independently and any amount
in excess of one of these thresholds cannot be applied to the other.
(e) Any adjustment under this Section 3.2 shall be treated as an
adjustment to the Purchase Price for federal, state and local income Tax
purposes. Any adjustment otherwise required pursuant to Section 3.2(c) or
Section 3.2(d) shall take into account and give credit to any Initial Closing
Purchase Price Adjustments made at the Initial Closing.
4. CLOSING AND DELIVERIES
4.1 Initial Closing.
(a) Upon the terms and subject to the conditions of this Agreement,
the sale and purchase of the Initial Closing Purchased Assets and the assumption
of the Initial Closing Assumed Liabilities contemplated hereby shall take place
at a closing (the "Initial Closing") to be held at the offices of Weil, Gotshal
& Xxxxxx LLP at 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 at 10:00 a.m. New
York time on fifth Business Day following the last to occur of the following:
(x) the receipt of all approvals of the FCC and other Governmental Regulators
required by applicable Law with respect to the transfer of direct or indirect
ownership of or control over the Telecommunications Licenses other than the
Dialaround Licenses; (y) the expiration or termination of all applicable waiting
periods under the HSR Act; and (z) the satisfaction or waiver of all other
conditions to the obligations of the parties set forth in Section 8 (other than
conditions that are not capable of being satisfied until the Closing, but
subject to the satisfaction or waiver of those conditions) or at such other
place or at such other time or at such other date as the Sellers and the Buyer
may mutually agree in writing (the day on which the Initial Closing takes place
being the "Initial Closing Date").
(b) Upon the terms and subject to the conditions of this Agreement,
the sale and purchase of the Dialaround Closing Purchased Assets and the
assumption of the Dialaround Closing Assumed Liabilities contemplated hereby
shall take place at a closing (the "Dialaround Closing") to be held at the
offices of Weil, Gotshal & Xxxxxx LLP at 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000 at 10:00 a.m. New York time on the fifth Business Day following the last
to occur of the following: (x) the receipt of all approvals of the FCC and other
Governmental Regulators required by applicable Law with respect to the transfer
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of direct or indirect ownership of or control over the Dialaround Licenses and
(y) the satisfaction or waiver of all other conditions to the obligations of the
parties set forth in Section 8 (other than conditions that are not capable of
being satisfied until the Closing, but subject to the satisfaction or waiver of
those conditions) or at such other place or at such other time or at such other
date as the Sellers and the Buyer may mutually agree in writing (the day on
which the Dialaround Closing takes place being the "Dialaround Closing Date").
4.2 Closing Deliveries by the Sellers.
(a) At the Initial Closing, the Sellers will deliver (or cause to be
delivered) to the Buyer the following:
(i) A certificate of ST and a duly authorized officer of the
Sellers, respectively, and the Subsidiaries, dated the Initial Closing Date, to
the effect that the conditions specified in Section 8.2(a), Section 8.2(b) and
Section 8.2(c) have been satisfied;
(ii) A xxxx of sale substantially in the form attached as
Schedule E hereto (a "Xxxx of Sale"), duly executed by each of the Sellers, the
Subsidiaries and ST Finance, with respect to the Initial Closing Purchased
Assets and Initial Closing Assumed Liabilities;
(iii) An Assignment and Assumption Agreement substantially in
the form attached as Schedule F hereto (an "Assignment and Assumption
Agreement"), duly executed by each of the Sellers, the Subsidiaries and ST
Finance, with respect to the Initial Closing Purchased Assets and Initial
Closing Assumed Liabilities;
(iv) [Intentionally Omitted];
(v) Confidentiality and Non-Competition Agreements, duly
executed by each of the persons listed in Section 4.2(a)(v) of the Disclosure
Schedules, substantially in the form attached as Schedule B hereto, subject to
Section 8.2(d);
(vi) A certificate duly executed by the Secretary or the
competent corporate body of each of the Sellers and the Subsidiaries certifying
as to the Organizational Documents of each of the Sellers and the Subsidiaries;
(vii) (A) Certificates dated as of recent dates certifying the
existence and good standing of each of the Non-DR Entities issued by the
jurisdiction where it is organized, formed or created and (B) a Certification
issued by the Chamber of Commerce and Production of Santo Xxxxxxx, Inc., stating
that the DR Entities are duly recorded at the Mercantile Registry;
(viii) A certificate duly executed by an executive officer of
the Sellers and the Subsidiaries certifying that, based upon the Books and
Records, and based on such executive's best estimate made in good faith, as of
the Working Capital Calculation Date, the Sellers and the Subsidiaries have at
least $42,600,000 in U.S. Cash and Working Capital is at least negative
$2,400,000;
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(ix) Affidavits of non-foreign status that comply with
Section 1445 of the Code, substantially in the form attached as Schedule I
hereto (a "Non-Foreign Status Affidavit"), duly executed by ST and each Seller
(other than Dialaround) that is not a foreign person under Sections 897 or 1445
of the Code;
(x) A copy of the Dialaround Transition Services Agreement,
duly executed by Dialaround;
(xi) A legal opinion from regulatory counsel to the Sellers,
substantially in the form attached as Schedule D hereto (the "Regulatory Legal
Opinion"); and
(xii) A legal opinion from, Xxxxxxxx Xxxxx Xxxxxxx &
Xxxxxxxxx, Dominican Republic counsel to the Sellers, substantially in the form
attached as Schedule C hereto (the "DR Legal Opinion").
(b) At the Dialaround Closing, the Sellers will deliver (or cause to
be delivered) to the Buyer the following:
(i) A certificate of ST and a duly authorized officer of the
Sellers, respectively, and the Subsidiaries, dated the Dialaround Closing Date,
to the effect that the conditions specified in Section 8.4(a) have been
satisfied;
(ii) A Xxxx of Sale, duly executed by Dialaround and ST
Finance with respect to the Dialaround Assets and the Dialaround Assumed
Liabilities;
(iii) An Assignment and Assumption Agreement, duly executed by
Dialaround and ST Finance with respect to the Dialaround Assets and the
Dialaround Assumed Liabilities;
(iv) Evidence of all consents required in connection with the
assignment of the Dialaround Assets; and
(v) A Non-Foreign Status Affidavit, duly executed by
Dialaround.
4.3 Closing Deliveries by the Buyer.
(a) At the Initial Closing, the Buyer will deliver (or cause to be
delivered) to the Sellers the following:
(i) The Initial Closing Cash Amount and the Partnership
Purchase Price (as such may be reduced pursuant to Section 3.1(b)(iii)) by wire
transfer in immediately available funds to an account designated at least two
(2) Business Days prior to the Initial Closing Date by the Sellers in a written
notice to the Buyer;
(ii) The Security Account Amount by deposit of such amount in
the Secured Account;
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(iii) A certificate of a duly authorized officer of the Buyer,
dated the Initial Closing Date, to the effect that the conditions specified in
Section 8.3(a) and Section 8.3(b) have been satisfied;
(iv) (A) A certificate dated as of a recent date certifying
the existence and good standing of each of the Buyer, STi CC 1, and STi CC 2
issued by the jurisdiction where it is organized, formed or created and (B) a
Certification issued by the Chamber of Commerce and Production of Santo Xxxxxxx,
Inc., stating that DR Partnership is duly recorded at the Mercantile Registry;
(v) An Assignment and Assumption Agreement, duly executed by
the Buyer with respect to the Initial Closing Purchased Assets and the Initial
Closing Assumed Liabilities;
(vi) A copy of the Buyer Operating Agreement, duly executed
by BEI; and
(vii) A copy of the Dialaround Transition Services Agreement,
duly executed by the Buyer;
(viii) A copy of the Account Control Agreement, duly executed
by the Buyer and BEI; (ix) A copy of the Pledge Agreement, duly executed by the
Buyer and BEI;
(x) Duly executed resale certificate(s) for purposes of all
applicable sales Tax Laws; and
(xi) A copy of the Registration Rights Agreement,
substantially in the form attached as Exhibit B hereto (the "Registration Rights
Agreement"), duly executed by the Buyer; and
(xii) A copy of the Employment Agreement in the form attached
as Schedule H hereto (the "Employment Agreement"), effective as of the Initial
Closing Date, duly executed by the Buyer.
(b) At the Dialaround Closing, the Buyer will deliver (or cause to
be delivered) to the Sellers the following:
(i) The Dialaround Closing Buyer Purchase Price; and
(ii) An Assignment and Assumption Agreement, duly executed by
the Buyer with respect to the Dialaround Assets and the Dialaround Assumed
Liabilities.
4.4 Closing Deliveries by ST Finance.
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(a) At the Initial Closing, ST Finance will deliver (or cause to be
delivered) to the Buyer the following:
(i) A copy of the Buyer Operating Agreement, duly executed
by ST Finance;
(ii) A Non-Foreign Status Affidavit, duly executed by ST
Finance; and
(iii) A copy of the Registration Rights Agreement, duly
executed by ST Finance.
(b) At the Dialaround Closing, ST Finance will deliver (or cause to
be delivered) to the Buyer the following:
(i) A Xxxx of Sale, duly executed by ST Finance with respect
to the Dialaround Assets and the Dialaround Assumed Liabilities;
(ii) An Assignment and Assumption Agreement, duly executed by
ST Finance with respect to the Dialaround Assets and the Dialaround Assumed
Liabilities; and
(iii) Evidence of all consents required in connection with the
assignment of the Dialaround Assets.
4.5 Initial Closing Deliveries by DR Entities. At the Initial
Closing, DR Entities will deliver (or cause to be delivered) to DR Partnership
the following:
(a) A Xxxx of Sale, duly executed by DR Entities with respect to the
Purchased DR Assets and the Assumed DR Liabilities; and
(b) An Assignment and Assumption Agreement, duly executed by DR
Entities with respect to the Purchased DR Assets and the Assumed DR Liabilities.
4.6 Initial Closing Deliveries by DR Partnership. At the Initial
Closing, DR Partnership will deliver (or cause to be delivered) to the DR
Entities the following:
(a) An Assignment and Assumption Agreement, duly executed by DR
Partnership with respect to the Purchased DR Assets and the Assumed DR
Liabilities.
4.7 Initial Closing Deliveries by ST. At the Initial Closing, ST
will deliver (or cause to be delivered) to the Buyer the following:
(a) A copy of the Account Control Agreement, duly executed by ST;
(b) A copy of the Pledge Agreement, duly executed by ST;
(c) A copy of the Employment Agreement, effective as of the Initial
Closing Date, duly executed by ST.
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5. REPRESENTATIONS AND WARRANTIES OF ST AND THE SELLERS.
ST and each of the Sellers hereby, jointly and severally, represent and
warrant to the Buyer, DR Partnership and BEI, as of the date of this Agreement
and as of (i) the Initial Closing Date and, (ii) solely with respect to the
Business and Purchased Assets consisting of the Dialaround Assets (and not with
respect to any of the Business and the Purchased Assets sold or transferred at
the Initial Closing), the Dialaround Closing Date (it being acknowledged and
agreed that as of the Dialaround Closing Date, references in Section 5 to the
Initial Closing Date shall be deemed to be references to the Dialaround Closing
Date and references to the Initial Closing shall be deemed to be references to
the Dialaround Closing), as follows:
5.1 Organization, Authority and Qualification of the Sellers and the
Subsidiaries. Each of the Sellers and the Subsidiaries is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization and has all the requisite power and authority to own, lease or
otherwise hold its Assets as they are currently owned, leased or held. True and
correct copies of the certificates or articles of incorporation, organization,
formation or partnership or similar documents filed on behalf of each of the
Sellers and the Subsidiaries with Governmental Authorities in the jurisdictions
of their respective organization, and of the related by-laws, limited liability
agreements, operating agreements or partnership agreements or similar documents
(collectively, the "Organizational Documents") have been delivered by the
Sellers to the Buyer.
5.2 Qualification to Do Business. Each of the Sellers and its
Subsidiaries is duly qualified to do business as a foreign corporation, limited
liability company, or other equivalent, as the case may be, and, if applicable,
is in good standing, in every jurisdiction in which the character of the
properties owned or leased by it or the nature of the business conducted by it
makes such qualification necessary, except where the failure to be so qualified
or, if applicable, in good standing, would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
5.3 Power and Authority of the Sellers.
(a) ST and the Sellers have all requisite power and authority to
execute and deliver, to perform their respective obligations under, and to
consummate the transactions contemplated by, this Agreement and all other
documents and instruments to be executed and delivered in connection with the
transactions contemplated by this Agreement (collectively, the "Transaction
Documents") to which ST or the Sellers is a party. The execution and delivery by
ST and the Sellers of, the performance by ST and the Sellers of their respective
obligations under, and the consummation by ST and the Sellers of the
transactions contemplated by, this Agreement and the Transaction Documents to
which ST or the Sellers is a party have been duly authorized by all requisite
action on the part of ST and the Sellers. This Agreement is, and when executed
and delivered by ST and the Sellers, the other Transaction Documents to which ST
and the Sellers is a party will be, the legal, valid and binding obligations of
ST and the Sellers, enforceable against ST and the Sellers in accordance with
their respective terms, except insofar as enforceability may be affected by the
Enforceability Exception. ST and the Sellers shall have presented, prior to or
on the Initial Closing Date, a resolution from the competent corporate body of
the DR Entities that separately and expressly (i) authorizes the sale of the
Purchased DR Assets in compliance with the terms and conditions of this
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Agreement and (ii) concedes ST or a Seller, as the case may be, is the necessary
proxy for the signature of this Agreement.
(b) Except as disclosed on Section 5.3(b) of the Disclosure
Schedules, ST owns, directly or indirectly, all of the outstanding shares of
capital stock, limited liability company interests or partnership interests, as
the case may be, of the Sellers and the Subsidiaries beneficially and of record,
in each case, free and clear of any Encumbrances other than Permitted
Encumbrances.
5.4 Consents; No Conflict.
(a) The execution and delivery by ST and the Sellers, the
performance of ST and the Sellers under, and the consummation by the Sellers of
the transactions contemplated by, this Agreement and the Transaction Documents
to which ST or the Sellers is a party do not and will not require any consent,
approval, authorization or other order of, action by, filing with or
notification to any Person, except (i) as described in Section 5.4 of the
Disclosure Schedules, (ii) the notification requirements of the HSR Act and
(iii) filings required under, and compliance with other applicable rules,
regulations and requirements of, the Government Regulators set forth on Section
5.4 of the Disclosure Schedules (collectively, the "Required Consents").
(b) Assuming that all Required Consents have been obtained or
performed, the execution and delivery by ST and the Sellers, the performance of
ST and the Sellers under, and the consummation by the Sellers of the
transactions contemplated by, this Agreement and the other Transaction Documents
to which the Sellers is a party do not and will not: (a) violate any provision
of the Organizational Documents; (b) violate any Law or any order, judgment or
decree of any court or other governmental or regulatory authority applicable to
ST or the Sellers or any of the Subsidiaries; or (c) (i) violate, conflict with
or constitute (with due notice or lapse of time or both) a breach of or default
under, (ii) permit or result in the termination, suspension or modification of,
(iii) result in the acceleration of (or give any Person the right to accelerate)
the performance of ST, the Sellers or any Subsidiary under, or (iv) result in
the creation or imposition of any Encumbrance under, any Contract or instrument
to which any of the Sellers or their Subsidiaries is a party or is bound to or,
evidencing any of the Assets, or any Contract or instrument by which any of the
Assets is bound or affected, except for purposes of this clause (c) such
violations, conflicts, breaches, defaults, terminations, suspensions,
modifications, accelerations and Encumbrances as would not, in the aggregate, be
reasonably expected to have a Material Adverse Effect.
5.5 Assets.
(a) Each of the Sellers and the Subsidiaries own or has good and
valid title to each of the Purchased Assets free and clear of all Encumbrances
except Permitted Encumbrances not to exceed $3,000,000 in the aggregate. Other
than with respect to Permitted Encumbrances, there are no instruments and
documents necessary to release any and all Encumbrances on the Purchased Assets,
including UCC financing statement amendments or termination statements.
(b) The Purchased Assets constitute all of the properties used in or
held for use or useful to in the Business and, to the Best of the Sellers'
Knowledge, are in good repair and working order and are sufficient for the Buyer
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to conduct the Business from and after the Initial Closing Date without
interruption and in the ordinary course of business, consistent with past
practices, as it has been conducted by the Sellers and the Subsidiaries. Except
as set forth on Section 5.5(b) of the Disclosure Schedules, neither the Sellers
nor their Subsidiaries have sold or otherwise transferred any assets material to
the ongoing operations, including planned future operations, of the Sellers or
such Subsidiary since December 31, 2005 other than in the ordinary course of
business, consistent with past practices.
5.6 Licenses.
(a) The attached Section 5.6 of the Disclosure Schedules contains a
complete listing of all approvals, authorizations, permits, certificates and
licenses issued by Governmental Regulators to the Sellers and any of their
Subsidiaries and all pending applications therefor (the "Company Regulatory
Licenses"). True and complete copies of all Company Regulatory Licenses which
exist in a tangible form have been provided to or made available to the Buyer by
the Sellers. Each of the Sellers and their Subsidiaries is in compliance with
the terms and conditions of their respective Company Regulatory License(s) and
has not received notice that it is currently in violation of any of the terms or
conditions of such Company Regulatory License(s). Each of the Company Regulatory
Licenses is valid and in full force and effect. The Sellers and/or their
Subsidiaries, as the case may be, validly holds the Company Regulatory Licenses
except as indicated on Section 5.6 of the Disclosure Schedules and has taken all
necessary action to maintain such Company Regulatory Licenses. No loss,
revocation, non-renewal, cancellation, condition or other placement of
restrictions on, modification, or expiration of any of such Company Regulatory
Licenses is pending or, to the Best of the Sellers' Knowledge, foreseeable other
than expiration in accordance with the terms thereof. The Sellers or their
Subsidiaries, as applicable, have sought to renew the Company Regulatory
Licenses in the normal course, to the extent that renewal of the Company
Regulatory Licenses is required. No agreement has been entered into by the
Sellers or any of their Subsidiaries with respect to the Company Regulatory
Licenses, and to the Best of the Sellers' Knowledge, no event has occurred that
permits or after notice or lapse of time would result in any impairment of the
rights of the Sellers or any of their Subsidiaries with respect to such Company
Regulatory Licenses, including but not limited to the revocation, cancellation,
suspension, non-renewal, imposition of any condition or other placement of
restrictions on, or modification of, any of the Company Regulatory Licenses.
Other than the Company Regulatory Licenses, there are no other regulatory
licenses or authorizations necessary for the Sellers and the Subsidiaries to
conduct their business operations or hold any of their respective assets. No
notices have been received by and no claims have been filed against the Sellers
or any of its Subsidiaries alleging their failure to hold any requisite and
material permits, regulatory approvals, licenses and other authorizations.
(b) The operations of the Sellers and their Subsidiaries are in
material compliance with the terms and conditions of the Company Regulatory
Licenses and with the Laws and policies promulgated by the Governmental
Authorities, including, without limitation, the obligations of the Sellers and
their Subsidiaries to pay Regulatory Surcharges applicable to the Business, and
comply with the provisions of the Communications Assistance for Law Enforcement
Act, and the obligations arising pursuant to the FCC's rules and regulations for
the safeguarding of customer proprietary network information (the
"Communications Laws"). The Sellers and their Subsidiaries maintain on file with
31
the Governmental Regulators all required tariffs and the service offerings of
the Sellers and their Subsidiaries are provided in accordance with such tariffs.
(c) Except as set forth on Section 5.6 of the Disclosure Schedules,
to the Best of the Sellers' Knowledge, there are no unresolved customer
complaints (formal or informal) against the Sellers or any of their Subsidiaries
pending before any of the Governmental Regulators that would have a Material
Adverse Effect on the Sellers.
5.7 Contracts.
(a) Set forth on Section 5.7 of the Disclosure Schedules is a true,
correct and complete list of all Contracts that are material to the Sellers
(each, a "Material Contract") including:
(i) Contracts between (A) the Sellers or any Subsidiaries
and (B) the Sellers and/or any Affiliates, current or former employees or
directors (or any Affiliates of any of the foregoing) of the Sellers or
Subsidiaries;
(ii) Any Contracts relating to indebtedness for borrowed
money or other financing transactions;
(iii) Mortgages, pledges, security agreements, deeds of trust,
conditional sale or title retention agreements, indentures, guarantees, loan or
credit agreements, sale and leaseback agreements, purchase money agreements or
other documents granting an Encumbrance (other than Permitted Encumbrances) on
any Asset or the incurrence, assumption or guarantee of any Indebtedness;
(iv) Contracts that provide for a payment (including any
bonus payment) or that the terms and conditions that would otherwise govern the
relationship of the parties thereto will be altered, upon a change of control of
any of the Sellers or any Subsidiaries or the sale of assets of any of the
Sellers or any Subsidiaries;
(v) Contracts with any Governmental Authority;
(vi) Contracts containing covenants which restrict any of the
Sellers or the Subsidiaries from engaging in any business or in any geographical
area or containing any prohibition on the disclosure of confidential information
in the possession of the Sellers or any Subsidiaries or any exclusivity
provision with respect to any business or geographic area;
(vii) Contracts with any labor union or association
representing any employee of any of the Sellers or any of the Subsidiaries;
(viii) Contracts for the sale of any of the assets of any of
the Sellers or any of the Subsidiaries other than in the ordinary course of
business, consistent with past practices, or for the grant to any Person of any
preferential rights to purchase any of its assets;
32
(ix) Contracts for joint ventures, strategic alliances,
partnerships, licensing arrangements, or sharing of profits or proprietary
information;
(x) Contracts relating to the acquisition (by merger,
purchase of stock or assets or otherwise) by any of the Sellers or any of the
Subsidiaries of any operating business or material assets or the capital stock
of any other Person;
(xi) all Contracts obligating any of the Sellers or any of
the Subsidiaries to provide or obtain products of services for a period of one
year or more or requiring the Sellers to purchase or sell a stated portion of
its requirements or outputs;
(xii) Contracts under which any of the Sellers or any of the
Subsidiaries has made, or is obligated to make, advances or loans to any other
Person;
(xiii) Contracts providing for severance, retention, change in
control, deal bonus or other similar payments;
(xiv) Contracts for the employment of any individual on a
full-time, part-time or consulting or other basis;
(xv) management Contracts and Contracts with independent
contractors or consultants (or similar arrangements) that are not cancelable
without penalty or further payment and without more than 30 days' notice;
(xvi) outstanding Contracts of guaranty, surety or
indemnification, direct or indirect, by the Sellers or any of the Subsidiaries;
(xvii) all "Employee Benefit Plans," as defined in Section
5.18(a);
(xviii) Contracts (or group of related Contracts) which involve
the expenditure of more than $200,000 annually or $500,000 in the aggregate, in
each case which are not terminable upon 30 days notice, or require performance
by any party more than one year from the date hereof; and
(xix) Contracts that are otherwise material to the Sellers and
the Subsidiaries, including each of the agreements with the competitive local
exchange carriers (the "CLEC Agreements"); such CLEC Agreements are annexed to
Section 5.7 of the Disclosure Schedules.
(b) The Sellers have delivered to the Buyer true and complete copies
of each Material Contract. Except as would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect, (i) each Material
Contract is in full force and effect and constitutes the valid, legal, binding
and enforceable obligation of the applicable Sellers or Subsidiary, except
insofar as enforceability may be affected by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect affecting
creditors' rights generally or by principles governing the availability of
equitable remedies ("Enforceability Exceptions") and (ii) none of the Sellers or
the Subsidiaries are, and, to the Best of the Sellers' Knowledge, no other party
thereto is, in breach or default of any material terms or conditions thereunder.
Each of the Sellers and the Subsidiaries has performed in all material respects
33
all obligations required to be performed by it to date under, and is not in
material default under, any Contract to which it is a party and, to the Best of
the Sellers' Knowledge, no event has occurred which, with due notice or lapse of
time or both, would constitute such a default. To the Best of the Sellers'
Knowledge, no other party to any Contract is in material default in respect
thereof, and no event has occurred which, with due notice or lapse of time or
both, would constitute such a default, subject to the receipt of the Required
Consents. The Sellers and the Subsidiaries have good and valid title to the
Material Contracts, free and clear of all Encumbrances other than Permitted
Encumbrances.
5.8 Real Property.
(a) None of the Sellers nor any of the Subsidiaries own any Real
Property.
(b) Section 5.8(b) of the Disclosure Schedules is a true, correct
and complete list of all leases, subleases, licenses and other agreements
(collectively, the "Real Property Leases") under which the Sellers or the
Subsidiaries use or occupy, or have the right to use or occupy, any Real
Property (the land, buildings and other improvements covered by the Real
Property Leases are referred to herein as the "Leased Real Property"). The
Sellers have heretofore made available to the Buyer true, correct and complete
copies of each of the Real Property Leases. The Sellers or the Subsidiaries hold
good and valid leasehold interests to the Leased Real Property, in each case
subject to the provisions of the applicable Real Property Lease. To the Best of
the Sellers' Knowledge, each Real Property Lease is valid, binding and
enforceable and in full force and effect, subject to the Enforceability
Exception. To the Best of the Sellers' Knowledge, no default or circumstance
exists which, with the giving of notice or the passage of time, or both, would
constitute a material default by the Sellers or any Subsidiaries under any Real
Property Lease, or by any other party to any Real Property Lease.
5.9 Environmental Matters. Except as would not, in the aggregate, be
reasonably expected to have a Material Adverse Effect, (a) the Sellers or its
Subsidiaries, or to the Best of the Sellers' Knowledge, any Real Property, are
not subject to any outstanding Environmental Claims, including but not limited
to orders, consents or decrees arising under any Environmental Laws and
currently complies with applicable Environmental Laws; (b) property operated by
the Seller or its Subsidiaries has not been used by the Sellers or its
Subsidiaries for the generation, storage, discharge or disposal of any Hazardous
Substances except as permitted under applicable Environmental Laws; (c) there
are no investigations of the Business or of leased Real Property of the Sellers
or its Subsidiaries pending or, to the Best of the Sellers' Knowledge,
threatened, which could lead to an Environmental Claim under Environmental Laws;
(d) no claim is pending or, to the Best of the Sellers' Knowledge, threatened
against the Sellers or its Subsidiaries or any property leased by the Sellers,
alleging, with respect to the Business, that the Sellers or its Subsidiaries may
be in violation of any Environmental Law or may have any liability under any
Environmental Law; (e) the transactions contemplated hereunder do not require
the consent of or filings with any Governmental Body with jurisdiction over the
Sellers or its Subsidiaries regarding environmental matters, including any
Environmental Permits; (f) no facts, circumstances or conditions exist with
respect to the Sellers or its Subsidiaries or any Real Property currently or
formerly owned or leased by the Sellers that would reasonably be expected to
result in the Sellers or its Subsidiaries incurring liabilities under
Environmental Laws and (g) the Sellers or their Subsidiaries have made available
34
for inspection by the Buyer copies of all environmental reports, assessments,
investigations, or correspondence in the possession, custody or control of the
Sellers or their Subsidiaries.
5.10 Compliance with Laws. Except as set forth in Section 5.6 and
Section 5.9, the Sellers and the Subsidiaries have each conducted and continue
to conduct the Business in accordance with all other Laws applicable to the
Sellers or the Subsidiaries or the Assets or the Business, and neither any of
the Sellers nor the Subsidiaries is in violation of any such other Law, except,
in each case, for violations the existence of which would not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect.
5.11 Intellectual Property.
(a) Section 5.11(a) of the Disclosure Schedules sets forth an
accurate and complete list of all Patents, registered Marks, pending
applications for registration of Marks, unregistered Marks, registered
Copyrights, and pending applications for registration of Copyrights included in
the Purchased Intellectual Property. Section 5.11(a) of the Disclosure Schedules
lists (i) the jurisdictions in which each such item of Purchased Intellectual
Property has been issued, registered, otherwise arises or in which any such
application for such issuance and registration has been filed and (ii) the
registration or application date, as applicable. For each item of Purchased
Intellectual Property (registrations and applications) listed or required to be
listed in Section 5.11(a) of the Disclosure Schedule, all necessary
registration, prosecution, maintenance, and renewal fees due and payable between
Initial Closing and within 60 days following the Initial Closing Date have been
made or will be made prior to the Initial Closing, and all necessary documents
and certificates in connection therewith have been filed or will be filed prior
to the Initial Closing with the relevant patent, copyright, trademark, or other
authority in the United States or foreign jurisdictions, as the case may be, for
the purposes of maintaining such Intellectual Property.
(b) Except as disclosed in Section 5.11(b) of the Disclosure
Schedules, a Seller or a Subsidiary is the sole and exclusive owner of all
right, title and interest in and to all of the Purchased Intellectual Property
and each of the Copyrights in any works of authorship prepared by or for a
Seller or a Subsidiary that resulted from or arose out of any work performed by
or on behalf of a Seller or a Subsidiary or by any employee, officer, consultant
or contractor of any of them. To the Best of the Sellers' Knowledge, a Seller or
a Subsidiary, as applicable, is the sole and exclusive owner of, or has valid
and continuing rights to use, sell and license, as the case may be, all other
Purchased Intellectual Property as the same is used, sold and licensed in the
Business as presently conducted and proposed to be conducted, free and clear of
all Encumbrances or obligations to others, except as disclosed in Section
5.11(b) of the Disclosure Schedules.
(c) The Purchased Intellectual Property, the manufacturing,
licensing, marketing, importation, offer for sale, sale or use of any products
and services in connection with the Business as presently and as currently
proposed to be conducted, and the present and currently proposed business
practices, methods and operations of the Sellers and the Subsidiaries, to the
Best of the Sellers' Knowledge, do not infringe, constitute an unauthorized use
of, misappropriation or violate any Copyright, Xxxx, Patent, Trade Secret or
other similar right of any Person and, to the Best of the Sellers' Knowledge, do
35
not infringe, constitute an unauthorized use of, misappropriate, dilute or
violate any other Intellectual Property or other right of any Person (including
pursuant to any non-disclosure agreements or obligations to which any of the
Sellers or any of the Subsidiaries or any of their Employees or Former Employees
is a party). The Intellectual Property included in the Purchased Assets and the
Intellectual Property Licenses constitute all of the Intellectual Property and
Technology necessary and sufficient to enable the Sellers and the Subsidiaries
to conduct the Business in the manner in which such Business is currently being
conducted and proposed to be conducted. None of the Sellers nor any of their
Subsidiaries have received written notice of any allegations, claims, or threats
pertaining to any of the foregoing, any written communications from any other
Person asserting any of the foregoing, any written communications from any other
Person inviting license discussions regarding any of the foregoing, or any
written exposure assessments or opinions performed by or provided to the Sellers
or any of their Subsidiaries regarding any of the foregoing, that have made
against or that have involved the Sellers or any of their Subsidiaries.
(d) Except as set forth in Section 5.11(d) of the Disclosure
Schedule, to the extent that any Purchased Intellectual Property or Purchased
Technology has been developed or created by a third party for a Seller or any of
the Subsidiaries and is currently used in the Business, such Seller or the
relevant Subsidiary has a Contract with the third party with respect thereto,
and the Seller and/or the relevant Subsidiary thereby has obtained ownership of,
or has a valid license or other rights to use pursuant to a Contract
substantially in the form disclosed in Section 5.11(d) of the Disclosure
Schedule, all such Intellectual Property or Technology.
(e) Except with respect to licenses of commercial off-the-shelf
Software available on reasonable terms for an annual license fee, per license,
of no more than $25,000, and except pursuant to the Intellectual Property
Licenses listed in Section 5.11(e) of the Disclosure Schedules, none of the
Sellers or any of the Subsidiaries are required, obligated, or under any
liability whatsoever, to make any payments by way of royalties, fees or
otherwise to any owner, licensor of, or other claimant to, any Purchased
Intellectual Property or Purchased Technology, or any other Person, with respect
to the use thereof or in connection with the conduct of the Business as
currently conducted or proposed to be conducted.
(f) Section 5.11(f) of the Disclosure Schedules sets forth a
complete and accurate list of all Contracts (i) to which any Seller or any
Subsidiary is a party (A) granting any Intellectual Property License, (B)
containing a covenant not to compete or otherwise limiting its ability to (x)
exploit fully any of the Purchased Intellectual Property or (y) conduct the
Business in any market or geographical area or with any Person or (ii) to which
any Seller or any Subsidiary is a party containing an agreement to indemnify any
other Person against any claim of infringement, unauthorized use,
misappropriation, dilution or violation of Intellectual Property. The Sellers
have delivered to the Buyer true, correct and complete copies of each Contract
set forth on Section 5.11(f) of the Disclosure Schedules together with all
amendments, modifications or supplements thereto.
(g) Each of the Intellectual Property Licenses is in full force and
effect and is the legal, valid and binding obligation of the Sellers and/or the
Subsidiaries, enforceable against them in accordance with its terms, subject to
Enforceability Exceptions. None of the Sellers or any Subsidiary is in default
under any Intellectual Property License, nor, to the Best of the Sellers'
36
Knowledge, is any other party to an Intellectual Property License in default
thereunder, and, no event has occurred that with the lapse of time or the giving
of notice or both would constitute a default thereunder. No party to any of the
Intellectual Property Licenses has exercised any termination rights with respect
thereto. The Sellers and the Subsidiaries have, and will transfer to the Buyer
at the Initial Closing, good and valid title to the Intellectual Property
Licenses, free and clear of all Encumbrances other than Permitted Encumbrances.
The Sellers have delivered or otherwise made available to the Buyer true,
correct and complete copies of all of the Intellectual Property Licenses,
together with all amendments, modifications or supplements thereto.
(h) Except as set forth on Section 5.11(h) of the Disclosure
Schedules, no Trade Secret material to the Business as presently conducted and
proposed to be conducted has been authorized to be disclosed or has been
actually disclosed by the Sellers or any Subsidiary to any of their Former
Employees, Employees or any third Person other than pursuant to a non-disclosure
agreement restricting the disclosure and use of the Purchased Intellectual
Property. Except as set forth on Section 5.11(h) of the Disclosure Schedules,
the Sellers and the Subsidiaries have taken reasonable security measures to
protect the secrecy, confidentiality and value of all the Trade Secrets included
in the Purchased Intellectual Property and any other non-public, proprietary
information included in the Purchased Technology, which measures, to the Best of
the Sellers' Knowledge, are reasonable in the industry in which the Business
operates. Except as set forth on Section 5.11(h) of the Disclosure Schedules,
each current and former Employee, contractor and consultant of the Sellers and
the Subsidiaries has entered into a written non-disclosure in a form reasonably
acceptable to them and provided to the Buyer prior to the date hereof. To the
Best of the Sellers' Knowledge, Sellers, their Subsidiaries, or any Employee or
consultant of the Sellers or their Subsidiaries have not caused any of the
Sellers' or any of their Subsidiaries' Trade Secrets to become part of the
public knowledge or literature, nor has the Sellers, their Subsidiaries, or, to
the Best of the Sellers' Knowledge, any of the Employees or consultants of the
Sellers or their Subsidiaries, permitted any such Trade Secrets to be used,
divulged or appropriated for the benefit of Persons to the material detriment of
the Sellers or any of their Subsidiaries.
(i) Except as set forth on Section 5.11(i) of the Disclosure
Schedules, as of the date hereof, none of the Sellers or any of the Subsidiaries
are the subject of any pending or, to the Best of the Sellers' Knowledge,
threatened Legal Proceedings which involve a claim of infringement, unauthorized
use, misappropriation, dilution or violation by any Person against the Sellers
or any of the Subsidiaries or challenging the ownership, use, validity or
enforceability of any Purchased Intellectual Property or Intellectual Property
License. None of the Sellers or any of the Subsidiaries have received written
(including by electronic mail) notice of any such threatened claim and, to the
Best of the Sellers' Knowledge, there are no facts or circumstances that would
form the basis for any such claim or challenge. To the Best of the Sellers'
Knowledge, the Purchased Intellectual Property, and all of the Sellers' and the
Subsidiaries' rights in and to the Purchased Intellectual Property, are valid
and enforceable.
(j) To the Best of the Sellers' Knowledge, no Person is infringing,
violating, misusing or misappropriating any Purchased Intellectual Property or
Intellectual Property License, and no such claims have been made against any
Person by the Sellers or any of the Subsidiaries. None of the Sellers or any of
their Subsidiaries have made any allegations, claims, or threats against any
37
Person alleging infringement, misappropriation, or other violation of any
Purchased Intellectual Property or any of the Sellers' or its Subsidiaries'
exclusive rights to any Intellectual Property License.
(k) There are no Orders to which the Sellers or any of the
Subsidiaries is a party or by which they are bound which restrict, in any
material respect, any rights to any Purchased Intellectual Property.
(l) The consummation of the transactions contemplated hereby will
not result in the loss or impairment of the Buyer's right to own or use any of
the Purchased Intellectual Property.
(m) No Employee or Former Employee of the Sellers or any of the
Subsidiaries has any right, title or interest, directly or indirectly, in whole
or in part, in any material Purchased Intellectual Property. To the Best of the
Sellers' Knowledge, no Employee or Former Employee of the Sellers or any of the
Subsidiaries engaged in the Business is, as a result of or in the course of such
employee's, consultant's or independent contractor's engagement, in default or
breach of any material term of any employment agreement, non-disclosure
agreement, assignment of invention agreement or similar agreement.
(n) Section 5.11(n) of the Disclosure Schedules sets forth a
complete and accurate list of (i) all Software included in the Purchased
Technology owned exclusively by the Sellers and the Subsidiaries that is
material to the operation of the Business and (ii) all other Software used in
the Business that is not exclusively owned by the Sellers and the Subsidiaries,
excluding commercial-off-the-shelf Software available on reasonable terms for an
annual license fee, per license, of no more than $25,000.
(o) Section 5.11(o) of the Disclosure Schedule contains a true and
complete list of all Open Source Software used by the Sellers or any of their
Subsidiaries, along with the applicable version number of such software. To the
Best of the Sellers' Knowledge, except as listed in Section 5.11(o) of the
Disclosure Schedule, no Open Source Software constitutes a component of, has
been included, incorporated or embedded into, or made a part of, any of the
Proprietary Computer Systems or otherwise requires the contribution of any
portion of the Proprietary Computer Systems to any Person, including to the open
source software community.
(p) The Purchased Intellectual Property does not include any
registrations or applications that would require duly executed assignments of
the registrations and applications to be recorded by filing any documentation or
otherwise with or in the U.S. Patent and Trademark Office, U.S. Copyright Office
or equivalent foreign agency, as applicable.
5.12 Tangible Personal Property.
(a) The Sellers and the Subsidiaries have good and marketable title
to all of the items of tangible personal property used in the business of the
Sellers and the Subsidiaries (except as sold or disposed of subsequent to the
date thereof in the ordinary course of business, consistent with past practices,
and not in violation of this Agreement), free and clear of any and all
Encumbrances, other than the Permitted Encumbrances. All such items of tangible
personal property which, individually or in the aggregate, are material to the
operation of the business of the Sellers and the Subsidiaries are in good
38
condition and in a state of good maintenance and repair (ordinary wear and tear
excepted) and are suitable for the purposes used.
(b) Section 5.12(b) of the Disclosure Schedules sets forth all
leases of personal property ("Personal Property Leases") involving annual
payments in excess of $50,000 used in the Business or to which the Sellers or
any of the Subsidiaries is a party or by which the properties or assets of the
Sellers or any of the Subsidiaries is bound. To the Best of the Sellers'
Knowledge, all of the items of personal property under the Personal Property
Leases are in good condition and repair (ordinary wear and tear excepted) and
are suitable for the purposes used, and such property is in all material
respects in the condition required of such property by the terms of the lease
applicable thereto during the term of the lease. The Sellers have delivered to
the Buyer true, correct and complete copies of the Personal Property Leases,
together with all amendments, modifications or supplements thereto.
(c) The Sellers and each of the Subsidiaries have a valid and
enforceable leasehold interest under each of the Personal Property Leases under
which it is a lessee. Each of the Personal Property Leases is in full force and
effect and neither the Sellers nor any Subsidiary has received or given any
notice of any default or event that with notice or lapse of time, or both, would
constitute a default by the Sellers or any Subsidiary under any of the Personal
Property Leases and, to the Sellers' Best Knowledge, no other party is in
default thereof, and no party to the Personal Property Leases has exercised any
termination rights with respect thereto.
5.13 Financial Statements. (a) The Sellers have delivered to the
Buyer true, correct and complete copies of the combined audited financial
statements of the Sellers and the Subsidiaries including the balance sheets and
statements of operations and cash flows as of and for the three year period
ended December 31, 2005 (the "Audited Financial Statements").
(b) The Sellers have delivered to the Buyer true, correct and
complete copies of the combined unaudited financial statements of the Sellers
and the Subsidiaries, including the balance sheet and statements of operations
and cash flows as of and for the nine-month period ended September 30, 2006 (the
"Unaudited Financial Statements" and, collectively with the Audited Financial
Statements, the "Financial Statements").
(c) The Financial Statements are complete and correct in all
material respects and have been prepared from, and are in accordance with, the
Books and Records, have been prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except as may be stated in the
notes thereto and except, in the case of the Unaudited Financial Statements, for
normal and recurring year-end adjustments and the absence of footnote
disclosure), and fairly present the financial position and the results of
operations and cash flows (and changes in financial position, if any) of each of
the Sellers and each of the Subsidiaries as of the times and for the periods
referred to therein.
(d) All Books and Records and accounts of the Sellers and the
Subsidiaries are accurate and complete in all material respects, and are
maintained in all material respects in accordance with all applicable Laws.
39
5.14 Accounts and Notes Receivable and Payable.
(a) All accounts and notes receivable of the Sellers and the
Subsidiaries have arisen from bona fide transactions in the ordinary course of
business consistent with past practices and are payable on ordinary trade terms.
All accounts and notes receivable of the Sellers and the Subsidiaries reflected
on the Quarterly Balance Sheet are good and collectible at the aggregate
recorded amounts thereof, net of any applicable reserve for returns or doubtful
accounts reflected thereon, which reserves are adequate and were calculated in a
manner consistent with past practice and in accordance with GAAP consistently
applied. All accounts and notes receivable of the Sellers and the Subsidiaries
arising after the Reference Balance Sheet Date are good and collectible at the
aggregate recorded amounts thereof, net of any applicable reserve for returns or
doubtful accounts reflected thereon, which reserves are adequate and were
calculated in a manner consistent with past practice and in accordance with GAAP
consistently applied. None of the accounts or the notes receivable of the
Sellers or any of the Subsidiaries (i) are subject to any setoffs or
counterclaims or (ii) represent obligations for goods sold on consignment, on
approval or on a sale-or-return basis or subject to any other repurchase or
return arrangement.
(b) All accounts payable of the Sellers and the Subsidiaries
reflected in the Quarterly Balance Sheet or arising after the date thereof are
the result of bona fide transactions in the ordinary course of business,
consistent with past practices, and have been paid or are not yet due and
payable.
5.15 Conduct in the Ordinary Course; Absence of Material Adverse
Effect. For the period of time beginning on the Reference Balance Sheet Date and
ending on the date hereof, except as disclosed in the Disclosure Schedules, the
Sellers and the Subsidiaries have conducted their respective business
obligations in the ordinary course of business consistent with past practice and
the Business has been conducted in the ordinary course and consistent with past
practice.
(a) Except as set forth on Section 5.15 of the Disclosure Schedules,
since the Reference Balance Sheet Date, there has not been:
(i) any Material Adverse Effect;
(ii) any material loss, damage, destruction or other casualty
to the assets or properties of any of the Sellers or any of the Subsidiaries
(other than any for which insurance awards have been received or guaranteed); or
(iii) any change in any method of accounting or accounting
practice, policy or principle of any of the Sellers or any of their
Subsidiaries, except as required by modifications to GAAP, applicable law or
regulations, or as otherwise required by the Public Sellers Accounting Oversight
Board or any other agency or body with authority over accounting practice.
(b) Since the Reference Balance Sheet Date, except as set forth in
Section 5.15 of the Disclosure Schedules hereto or as otherwise expressly
permitted by the terms of this Agreement, none of the Sellers or any of the
Subsidiaries has:
40
(i) issued or sold any shares of any class of their capital
stock, or any securities convertible into or exchangeable for any such shares,
or issued, sold, granted or entered into any subscriptions, options, warrants,
conversion or other rights, agreements, commitments, arrangements or
understandings of any kind, contingently or otherwise, to purchase or otherwise
acquire any such shares or any securities convertible into or exchangeable for
any such shares;
(ii) modified a material term of any existing Contract,
Personal Property Lease or Real Property Lease, or entered into any Contract,
other than individual telecommunications circuits commitments and agreements
entered into in the ordinary course of their business, and involving (x) an
expenditure of more than $250,000 in each case, or (y) any Contract that,
pursuant to its terms, is not cancelable by the Sellers or the Subsidiaries
without penalty on less than 30 days' notice;
(iii) received any notice, whether written, oral or otherwise,
of the cancellation of the account or Contract of any customer, who generated
for the Sellers and their Subsidiaries aggregate revenue in excess of $3,000,000
during the prior year;
(iv) amended any of their Organizational Documents;
(v) incurred any material Liability except in the ordinary
course of their business, consistent with past practice;
(vi) failed to discharge or satisfy, when due, if applicable,
any material Encumbrance or pay or satisfy when due any material Liability,
other than Liabilities being contested in good faith or Permitted Encumbrances;
(vii) changed their policy or practice with respect to the
timing of the collection or payment of their accounts receivable or accounts
payable or otherwise changed their policy or practice with respect to accounting
matters, accruals and/or reserve estimates or changed their operating plan or
practice with respect to capital expenditures or other cash disbursements which
would be reflected as adjustments to cash flow from operations in a GAAP
financial statement except as required by GAAP;
(viii) mortgaged, pledged or subjected to any Encumbrance any
of their material assets, properties or rights, except for Permitted
Encumbrances;
(ix) changed any accounting or Tax reporting principles,
methods or policies;
(x) made or rescinded any election relating to Taxes or
settled or compromised any claim relating to Taxes;
(xi) sold or transferred any of their material assets or
canceled any material debts or claims or waived any material rights, except in
the ordinary course of their business, consistent with past practice;
41
(xii) made or committed to make any capital expenditures or
capital additions or betterments in excess of $250,000 individually or
$2,000,000 in the aggregate;
(xiii) granted any license or sublicense of any rights under or
with respect to any Intellectual Property owned by any of the Sellers or any of
the Subsidiaries except in the ordinary course of business, consistent with past
practices;
(xiv) modified its business practices in a manner that would
cause the gross profit margins of the prepaid calling card business to be less
than 13.5%;
(xv) entered into any Contract with distributors of prepaid
cards other than standard purchase orders, including any Contract to change
material terms in the future;
(xvi) defaulted on any material obligation; or
(xvii) entered into any agreement or made any commitment to do
any of the foregoing.
5.16 Legal Proceedings. Except as disclosed in Section 5.16(a) of the
Disclosure Schedules, there is no judgment or order outstanding, or any action,
suit, complaint, proceeding or, to the Best of the Sellers' Knowledge,
investigation, by or before any Governmental Authority or any arbitrator
pending, or to the Best of the Sellers' Knowledge, threatened, against all or
any part of the Business, or to which the Sellers or any of the Subsidiaries is
otherwise a party. Except as disclosed in Section 5.16(b) of the Disclosure
Schedules, there are no claims, actions, suits, proceedings or, to the Best of
the Sellers' Knowledge, investigations, pending or, to the Best of the Sellers'
Knowledge, threatened, by or before any Governmental Authority, or any
arbitrator, by or against the Sellers or any of the Subsidiaries, which, if
adversely determined, would restrain or enjoin the consummation of the
transactions contemplated by this Agreement or declare unlawful the transactions
or events contemplated by this Agreement or cause any of such transactions to be
rescinded.
5.17 Taxes; Tax Returns.
(a) (i) All material Tax Returns required to be filed by or on
behalf of the Sellers or the Subsidiaries on or before the Initial Closing Date
have been or will be duly and timely filed with the appropriate Governmental
Authority in all jurisdictions in which such Tax Returns are required to be
filed (after giving effect to any valid extensions of time in which to make such
filings), and all such Tax Returns are, or will be, true, complete and correct
in all material respects, (ii) all material Taxes due and payable by or on
behalf of the Sellers or the Subsidiaries on or before the Initial Closing Date
(after giving effect to any valid extensions of time in which to pay such Taxes)
have been, or will be fully and timely paid on or before the Initial Closing
Date, except as set forth on Section 5.17 of the Disclosure Schedules, and (iii)
no waivers of statutes of limitation have been given or requested with respect
to any Tax Return required to be filed on or before the Initial Closing Date by
or on behalf of the Sellers or the Subsidiaries.
(b) All material Taxes required to be withheld, collected or paid to
a relevant Governmental Authority by a Seller or Subsidiary on or before the
Initial Closing Date have been or will be timely withheld, collected or paid to
42
a relevant Governmental Authority on or before the Initial Closing Date, except
as set forth on Section 5.17 of the Disclosure Schedules.
(c) None of the Sellers and the Subsidiaries has engaged in any
"reportable transactions" as defined in Treasury Regulation Section 1.6011-4(b).
(d) No material adjustment or deficiency relating to any of such Tax
Returns or otherwise, has been proposed in writing by any Governmental Authority
and, to the Best of the Sellers' Knowledge, no claim has been made by any
Governmental Authority in a jurisdiction where Tax Returns are not filed by or
on behalf of the Seller or Subsidiary that such Seller or Subsidiary is or may
be subject to taxation by that jurisdiction.
(e) Except as set forth on Section 5.17 of the Disclosure Schedules,
with respect to all Taxes of each Seller or Subsidiary (i) there is not
currently in effect any extension or waiver by the Seller or Subsidiary of any
statute of limitations of any jurisdiction regarding the assessment or
collection of any Tax, (ii) there are no administrative proceedings or lawsuits
pending or being contemplated against the Purchased Assets or the Seller or
Subsidiary with respect by any Governmental Authority, (iii) there are no liens
for any material Taxes on any Purchased Assets and (iv) no claim has been made
against any Seller or Subsidiary by any Governmental Authority in a
jurisdiction.
(f) Each Seller or Subsidiary has in custody copies of all material
Tax Returns filed for periods with respect to which any statute of limitations
is still open, and related supporting materials and records, and, beginning on
or after the Initial Closing, shall cooperate with the Buyer or DR Partnership,
as appropriate, including by furnishing to the Buyer or DR Partnership such
documents and information as the Buyer or DR Partnership deems reasonably
necessary or appropriate, so as to enable the Buyer or the DR Partnership to
properly and timely prepare and file Tax Returns and related forms with
appropriate Governmental Authorities with respect to the transactions
contemplated herein or the Purchased Assets.
(g) Section 5.17 of the Disclosure Schedules lists, for each Seller
and each Subsidiary, each type of Tax paid and each type of Tax Return filed, by
jurisdiction, by or on behalf of such Seller or the Subsidiary.
(h) Except as set forth on Section 5.17 of the Disclosure Schedules,
no issue has been raised by a Governmental Authority in any prior examination of
the Sellers or the Subsidiaries which, by application of the same or similar
principles, could reasonably be expected to result in a proposed deficiency for
any subsequent taxable period.
(i) None of the Purchased Assets is a "United States real property
interest" within the meaning of Section 897(c)(1) of the Code.
(j) The Purchased Assets were not owned, nor was the Business
formed, prior to January 1, 2000.
(k) The Sellers and the Subsidiaries have complied with all of their
tax obligations towards the tax authorities of the Dominican Republic, directly
or indirectly related to the operation of the DR Entities.
43
5.18 Employment Matters.
(a) As used herein, the term "Employee Benefit Plan" includes any
pension, retirement, savings, disability, medical, dental, health, life, death
benefit, group insurance, profit sharing, deferred compensation, stock option,
bonus, incentive, vacation pay, tuition reimbursement, severance pay, or other
employee benefit plan, trust, agreement, contract, policy or commitment
(including, without limitation, any pension plan, as defined in Section 3(2) of
ERISA ("Pension Plan"), and any welfare plan as defined in Section 3(1) of ERISA
("Welfare Plan")), whether any of the foregoing is funded, insured or
self-funded, written or oral, (i) sponsored or maintained by the Sellers, or any
of their affiliates, to the extent such affiliate is described in Code Section
414(b), (c) or (m) and corresponding Treasury Regulations (each a "Controlled
Group Member") and covering any Controlled Group Member's active or former
employees (or their beneficiaries), (ii) to which any Controlled Group Member is
a party or by which any Controlled Group Member (or any of the rights,
properties or assets thereof) is bound, or (iii) with respect to which any
Controlled Group Member has made any payments, contributions or commitments or
may otherwise have any liability (whether or not such Controlled Group Member
still maintains such Employee Benefit Plan). Each Employee Benefit Plan is
listed on Section 5.18 of the Disclosure Schedules.
(b) No Controlled Group Member sponsors, maintains or has
established any Welfare Plan which provides for continuing benefits or coverage
for any participant or any beneficiary of a participant after such participant's
termination of employment, except as may be required by Code section 4980B or
Section 601 (et seq.) of ERISA ("COBRA"), or under any applicable state law, and
at the expense of the participant or the beneficiary of the participant.
(c) Each Employee Benefit Plan complies in all material respects
with the applicable requirements of ERISA, the Code and any other applicable law
governing such Employee Benefit Plan, and each Employee Benefit Plan has at all
times been properly administered in all material respects in accordance with all
such requirements of law, and in accordance with its terms and the terms of any
applicable collective bargaining agreement to the extent consistent with all
such requirements of law. Each Employee Benefit Plan which is intended to be
qualified is qualified under Code section 401(a), has received a favorable
determination letter from the Internal Revenue Service ("IRS") stating that such
Employee Benefit Plan meets the requirements of Code section 401(a) and that the
trust associated with such Employee Benefit Plan is tax-exempt under Code
section 501(a) and no event has occurred which would jeopardize the qualified
status of any such plan or the tax exempt status of any such trust under
Sections 401(a) and 501(a) of the Code, respectively. Except as set forth on
Section 5.18(c) of the Disclosure Schedules, no lawsuits, claims or complaints
to, or by, any person or governmental entity have been filed or are pending and,
to the Best of the Sellers' Knowledge, there are no facts or contemplated events
which could be expected to give rise to any such lawsuit, claim (other than
routine claims for benefits) or complaint with respect to any Employee Benefit
Plan. There are, and have been, no audits by any governmental agency with
respect to any Employee Benefit Plan. Without limiting the foregoing, the
following are true with respect to each Employee Benefit Plan:
(i) all Controlled Group Members have filed or caused to be
filed every material return, report statement, notice, declaration and other
document required by any law or governmental agency, federal, state and local
44
(including, without limitation, the IRS and the Department of Labor) with
respect to each such Employee Benefit Plan, each of such filings has been
complete and accurate in all material respects and no Controlled Group Member
has incurred any liability in connection with such filings;
(ii) all Controlled Group Members have delivered or caused to
be delivered to every participant, beneficiary and other party entitled to such
material, all material plan descriptions, returns, reports, schedules, notices,
statements and similar materials, including, without limitation, summary plan
descriptions and summary annual reports, as are required under Title I of ERISA,
the Code, or both, and no Controlled Group Member has incurred any material
liability in connection with such requirements;
(iii) no Controlled Group Member is delinquent in making
contributions or payments to or in respect of any Employee Benefit Plan as to
which any is obligated to make contributions or payments (without regard to any
waiver granted by the IRS under Code section 412), nor has any Controlled Group
Member failed to pay any assessments made with respect to any such Employee
Benefit Plan. All contributions and payments (including salary deferral
contributions elected by employees) with respect to Employee Benefit Plans that
are due and owing or required to be made by a Controlled Group Member with
respect to periods ending on or before the Initial Closing Date (including
periods from the first day of the current plan year or policy year to the
Initial Closing Date) have been, or will be, made before the Initial Closing
Date in accordance with the appropriate plan document, actuarial report,
collective bargaining agreements or insurance contracts or arrangements or as
otherwise required by ERISA or the Code;
(iv) with respect to each such Employee Benefit Plan, to the
extent applicable, the Seller has delivered to the Purchaser true and complete
copies of (a) all plan documents, or any and all other documents that establish
the existence of the plan, trust, arrangement, contract, policy or commitment
and all amendments thereto, (b) the most recent determination letter, if any,
received from the IRS, (c) the three (3) most recent Form 5500 Annual Report
(and all schedules and reports relating thereto) and actuarial reports, and (d)
all related trust agreements, insurance contracts or other funding agreements
that implement each such Employee Benefit Plan; and
(v) each Employee Benefit Plan that is a "group health plan"
(as defined in ERISA section 607(1) or Code section 5001(b)(1) has been operated
at all times in compliance with COBRA and the Health Insurance Portability and
Accountability Act of 1996 and any related regulation or applicable similar
state law.
(d) With respect to each Employee Benefit Plan, there has not
occurred, and no person or entity is contractually bound to enter into, any
"prohibited transaction" within the meaning of Section 4975(c) of the Code or
Section 406 of ERISA, which transaction is not exempt under Section 4975(d) of
the Code or Section 408 of ERISA.
(e) No Controlled Group Member has ever established, sponsored,
maintained or contributed to any Employee Benefit Plan that is subject to Title
IV or Section 302 of ERISA or Section 412 of the Code and there has not been any
45
"Reportable Event," as described in Section 4043 of ERISA, with respect to any
Employee Benefit Plan.
(f) No Controlled Group Member has incurred: (i) any multiemployer
Plan (as defined in Section 4001(a)(3) of ERISA ("Multiemployer Plan"))
withdrawal liability (and no event has occurred which, with the giving of the
notice under Section 4219 of ERISA, would result in such liability) under
Section 4201 of ERISA as a result of a complete or partial withdrawal (within
the meaning of Sections 4203 or 4205 of ERISA, respectively) from, or on behalf
of, a Multiemployer Plan, or (ii) any other liability under Title IV of ERISA.
(g) No Controlled Group Member or any organization which is a
successor or parent corporation of such entities, within the meaning of ERISA
Section 4069(b), has engaged in a transaction described in ERISA Section 4069.
(h) The value of the assets of each Employee Benefit Plan subject to
Title IV of ERISA (other than a Multiemployer Plan) equal or exceed the present
value of "Benefit Liabilities" (as defined in Section 4001(a)(16) of ERISA) of
each such Employee Benefit Plan as of the last day of the plan year most
recently ended using PBGC termination actuarial assumptions currently in effect
or other actuarial assumptions certified by the Employee Benefit Plan's actuary
as reasonable for purposes of a standard termination (as described in 4041(b) of
ERISA) with respect to any defined benefit pension plan.
(i) With respect to each Employee Benefit Plan maintained by any
Controlled Group Member, such plan permits the plan sponsor to amend or
terminate the plan at any time and without any liability, subject to the
applicable requirements of ERISA and the Code for plan termination.
(j) No assets of, and no assets managed by, the Sellers or the
Subsidiaries constitute "plan assets" as defined in 29 C.F.R. Section
2510.3-101, and none of the transactions contemplated by this Agreement
(including those transactions occurring after the Initial Closing) will
constitute a "prohibited transaction" within the meaning of Section 4975(c) of
the Code or Section 406 of ERISA, which transaction is not exempt under Section
4975(d) of the Code or Section 408 of ERISA.
(k) The consummation of the transactions contemplated by this
Agreement will not: (i) except as set forth on Section 5.18(k) of the Disclosure
Schedules, entitle any Transferred Employee or Former Employee of the Sellers to
severance pay, unemployment compensation or any similar payment or accelerate
the time of payment or vesting, or increase the amount of any compensation due
to, or in respect of, any Transferred Employee or Former Employee of the
Sellers; or (ii) result in or satisfy a condition to the payment of compensation
that would, in combination with any other payment, result in an "excess
parachute payment" within the meaning of Code section 280(G).
(l) None of the Sellers or any Controlled Group Member has, since
October 3, 2004, (A) granted to any person an interest in a nonqualified
deferred compensation plan (as defined in Code Section 409A(d)(1)) which
interest has been or, upon the lapse of a substantial risk of forfeiture with
respect to such interest, will be subject to the tax imposed by Code Sections
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409A(a)(1)(B) or (b)(4)(A), or (B) modified the terms of any nonqualified
deferred compensation plan in a manner that could cause an interest previously
granted under such plan to become subject to the tax imposed by Code Sections
409A(a)(1)(B) or (b)(4).
(m) There are no complaints, charges or claims against the Sellers
or any of the Subsidiaries pending or, to Best of the Sellers' Knowledge,
threatened that could be brought or filed, with any Governmental Body based on,
arising out of, in connection with or otherwise relating to the employment or
termination of employment of or failure to employ, any individual. Each of the
Sellers and the Subsidiaries is in compliance with all Laws relating to the
employment of labor, including all such Laws relating to wages, hours, the
Worker Adjustment and Retraining Notification Act of 1988, as amended ("WARN"),
and any similar state or local "mass layoff" or "plant closing" Law, collective
bargaining, discrimination, civil rights, safety and health, workers'
compensation and the collection and payment of withholding and/or social
security taxes and any similar tax except for immaterial non-compliance. There
has been no "mass layoff" or "plant closing" (as defined by WARN) with respect
to the Sellers or any of the Subsidiaries within the six (6) months prior to
Initial Closing.
5.19 Labor.
(a) Except as set forth on Section 5.19(a) of the Disclosure
Schedules, neither the Sellers nor any of the Subsidiaries is a party to any
labor or collective bargaining agreement and there are no labor or collective
bargaining agreements which pertain to employees of the Sellers or any of the
Subsidiaries. The Sellers have delivered or otherwise made available to the
Buyer true, correct and complete copies of the labor or collective bargaining
agreements listed on Section 5.19(a) of the Disclosure Schedule, together with
all amendments, modifications or supplements thereto, all employee, supervisor
or human resources handbooks, manuals, any other policies or practices, written
or unwritten, relating to the employment relationship, including without
limitation all third party policies or practices and a summary of the current
workforce, including without limitation, total number of employees, names,
titles, job description, date of employment and salary or hourly wage rate.
(b) Except as set forth on Section 5.19(b) of the Disclosure
Schedules, no Employees are represented by any labor organization. No labor
organization or group of Employees has made a pending demand for recognition,
and there are no representation proceedings or petitions seeking a
representation proceeding presently pending or, to the Best of the Sellers'
Knowledge, threatened to be brought or filed, with the National Labor Relations
Board or other labor relations tribunal. There is no organizing activity
involving the Sellers or any of the Subsidiaries pending or, to the Best of the
Sellers' Knowledge, threatened by any labor organization or group of Employees.
(c) There are no (i) strikes, work stoppages, slowdowns, lockouts or
arbitrations or (ii) material grievances or other labor disputes pending or, to
the Best of the Sellers' Knowledge, threatened against or involving the Sellers
or any of the Subsidiaries. There are no unfair labor practice charges,
grievances or complaints pending or, to the Best of the Sellers' Knowledge,
threatened by or on behalf of any Employee or group of Employees.
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(d) ST, the Sellers and the DR Entities have complied with all of
their labor obligations towards their Dominican based personnel and Dominican
labor authorities, directly or indirectly related to the operation of the DR
Entities.
5.20 Undisclosed Liabilities. There are no material Liabilities of
any of the Sellers or the Subsidiaries of any kind, other than:
(a) Liabilities disclosed, reflected, accrued or reserved against on
any one of the Financial Statements;
(b) Liabilities incurred in the ordinary course of business,
consistent with past practice;
(c) Liabilities incurred after the date hereof which do not violate
Section 7.2.
5.21 Insurance. Section 5.21 of the Disclosure Schedules sets forth a
true, correct and complete list and description of all insurance policies
covering the Assets and the Business. All such policies are in full force and
effect. The Sellers and the Subsidiaries have not received written notice of
cancellation or non-renewal with respect thereto. None of the Sellers and the
Subsidiaries are in default with respect to their material obligations under
such insurance policies. Except as noted on Section 5.21 of the Disclosure
Schedules, all such insurance will remain in full force and effect and all such
insurance is assignable or transferable to the Buyer.
5.22 Inventories. The inventories of the Sellers and the Subsidiaries
are in good and marketable condition, and are usable and of a quantity and
quality saleable in the ordinary course of business, consistent with past
practices. The inventories of the Sellers and the Subsidiaries set forth in the
Quarterly Balance Sheet were valued at the lower of cost (on a FIFO/LIFO basis)
or market and were properly stated therein in accordance with GAAP consistently
applied. Adequate adjustments have been reflected in the Quarterly Balance Sheet
for obsolete, excess, damaged, slow-moving, or otherwise unusable inventory,
which reserves were calculated in a manner consistent with past practice and in
accordance with GAAP consistently applied. The inventories of the Sellers and
the Subsidiaries constitute sufficient quantities for the normal operation of
business in accordance with past practice.
5.23 Related Party Transactions. Except as set forth on Section 5.23
of the Disclosure Schedules, none of the persons that are identified on Schedule
5.23, and to the Best of the Sellers' Knowledge, no employee, officer, director,
stockholder, partner or member of the Sellers or any of the Subsidiaries, any
member of his or her immediate family or any of their respective Affiliates
("Related Persons") (i) owes any amount to the Sellers or any of the
Subsidiaries nor does the Sellers or any of the Subsidiaries owe any amount to,
or has the Sellers or any of the Subsidiaries committed to make any loan or
extend or guarantee credit to or for the benefit of, any Related Person, (ii) is
involved in any business arrangement or other relationship with the Sellers or
any of the Subsidiaries (whether written or oral), (iii) owns any property or
right, tangible or intangible, that is used by the Sellers or any of the
Subsidiaries, (iv) has any claim or cause of action against the Sellers or any
of the Subsidiaries, or (v) owns any direct or indirect interest of any kind in,
or controls or is a director, officer, employee or partner of, or consultant to,
or lender to or borrower from or has the right to participate in the profits of,
any Person which is a competitor, supplier, distributor, customer, landlord,
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tenant, creditor or debtor of, or otherwise receives a payment from, the Sellers
or any Subsidiary. Since the Reference Balance Sheet Date, none of the Sellers
or any Subsidiaries has repaid any indebtedness owed to any Related Persons or
reimbursed any expenses (except with regard to customary travel, meeting and
incidental expenses) of any Related Persons, except as set forth in Section
5.23(c) of the Disclosure Schedules.
5.24 Customers and Suppliers.
(a) Section 5.24 of the Disclosure Schedules sets forth a list of
the twenty (20) largest prepaid phone card customers and the twenty (20) largest
suppliers of the Sellers and the Subsidiaries, as measured by the dollar amount
of purchases therefrom or thereby, during each of the calendar years ended 2003,
2004 and 2005, showing the approximate total sales by the Sellers and the
Subsidiaries to each such customer and the approximate total purchases by the
Sellers and the Subsidiaries from each such supplier, during such period and
reflecting any discount in effect as of December 31, 2005.
(b) Since the Reference Balance Sheet Date, no customer or supplier
listed on Section 5.24 of the Disclosure Schedules has notified the Sellers or
any of the Subsidiaries in writing (or to the Best of the Sellers' Knowledge, in
a manner not in writing) that it has terminated its relationship with the
Sellers or any of the Subsidiaries (and no relationships have terminated as the
result of a prior notification) or materially reduced or changed the pricing or
other terms of its business with the Sellers or any of the Subsidiaries and, to
the Best of the Sellers' Knowledge, no customer or supplier listed on Section
5.24 of the Disclosure Schedules has notified the Sellers or the Subsidiaries
that it intends to terminate or materially reduce or change the pricing or other
terms of its business with the Sellers or any of the Subsidiaries.
5.25 Banks, Powers of Attorney. Section 5.25 of the Disclosure
Schedules contains a complete and correct list of the names and locations of all
banks in which Sellers or any Subsidiary has accounts or safe deposit boxes, the
account numbers of all such accounts and the names of all persons authorized to
draw thereon or to have access thereto. Except as set forth on Section 5.25 of
the Disclosure Schedules, no Person holds a power of attorney to act on behalf
of the Sellers or any Subsidiary.
5.26 Full Disclosure. No representation or warranty of the Sellers
contained in this Agreement or in any of the Transaction Documents and, to the
actual knowledge of each of ST, Xxxxxxx Xxxxxx, Xxxxx Xxxxx and Xxxxxxx Xxxxxxx,
after due inquiry of each of the other individuals listed in the definition of
"Best of the Sellers' Knowledge," no written statement made by or on behalf of
the Sellers or the Sellers to the Buyer or any of its Affiliates pursuant to
this Agreement or any of the Transaction Documents contains an untrue statement
of a material fact or omits to state a material fact necessary to make the
statements contained herein or therein not misleading. There are no facts which
the Sellers have not disclosed or made available in the electronic data room
established and maintained by the Sellers on Intralinks as of January 22, 2007,
with respect to the transactions contemplated in the Transaction Documents, to
the Buyer which could, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.
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5.27 Certain Payments. None of the Sellers, any Subsidiary or ST,
nor, to the Best of the Sellers' Knowledge, any director, officer, employee, or
other Person associated with or acting on behalf of any of them, have directly
or indirectly (a) made any contribution, gift, bribe, rebate (other than those
rebates given in the ordinary course of business), payoff, influence payment,
kickback, or other payment to any Person, private or public, regardless of form,
whether in money, property, or services (i) to obtain favorable treatment in
securing business for the Sellers or any Subsidiary, (ii) to pay for favorable
treatment for business secured by the Sellers or any Subsidiary, (iii) to obtain
special concessions or for special concessions already obtained, for or in
respect of the Sellers or any Subsidiary, or (iv) in violation of any Law, or
(b) established or maintained any fund or asset with respect to the Sellers or
any Subsidiary that have not be recorded in the Books and Records.
5.28 Finders and Brokers. Other than Xxxxxxxx Xxxxx Xxxxxx & Xxxxx
Capital (whose fees will be paid by the Sellers), the Sellers have not employed
any financial advisor, broker or finder or incurred any liability for any
financial advisory, brokerage, finder's or similar fee or commission in
connection with the transactions contemplated by this Agreement.
5.29 Regulatory Filings. With respect to any period for which a
regulatory filing relating to Regulatory Surcharges has not yet been filed or
for which Regulatory Surcharges are not yet due or owing, the Sellers or the
Subsidiaries, as applicable, have made due and sufficient accruals for such
Regulatory Surcharges in the Financial Statements and its Books and Records.
6. REPRESENTATIONS AND WARRANTIES OF THE BUYER AND DR PARTNERSHIP.
Each of the Buyer and DR Partnership jointly and severally represent and
warrant to the Sellers, as of the date of this Agreement and as of the Initial
Closing, as follows (provided, however, that it is agreed that any
representation or warranty made by, or with respect to, DR Partnership is deemed
to be made as of the Initial Closing only):
6.1 Organization, Authority and Qualification of the Buyer and DR
Partnership. Each of the Buyer, STi CC 1, STi CC 2 and DR Partnership is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has all the requisite power and authority
to own, lease or otherwise hold its assets as they are currently owned, leased
or held. True and correct copies of the certificates of formation or partnership
or similar documents filed on behalf of each of the Buyer, STi CC 1, STi CC 2
and DR Partnership with Governmental Authorities in the jurisdictions of their
respective organization, and of the related by-laws, limited liability
agreements, operating agreements or partnership agreements or similar documents
(collectively, the "Buyer Organizational Documents") have been delivered by the
Buyer and DR Partnership to the Sellers.
6.2 Qualification to Do Business. Each of the Buyer and DR
Partnership is, or will be as of the Initial Closing Date, duly qualified to do
business as a foreign limited liability company or partnership, or other
equivalent, as the case may be, and, if applicable, is, or will be as of the
Initial Closing Date, in good standing, in every jurisdiction listed on Section
6.2 of the Buyer's Disclosure Schedules, except where the failure to be so
qualified or, if applicable, in good standing, would not, individually or in the
aggregate, reasonably be expected to have a material adverse effect on the
Buyer's obligations under the Transaction Documents.
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6.3 Power and Authority of the Buyer and DR Partnership.
(a) The Buyer and DR Partnership have all requisite power and
authority to execute and deliver, to perform their respective obligations under,
and to consummate the transactions contemplated by, this Agreement and the
Transaction Documents to which the Buyer or DR Partnership is a party. The
execution and delivery by the Buyer and DR Partnership of, the performance by
the Buyer and DR Partnership of their respective obligations under, and the
consummation by the Buyer and DR Partnership of the transactions contemplated
by, this Agreement and the Transaction Documents to which the Buyer or DR
Partnership is a party have been duly authorized by all requisite action on the
part of the Buyer and DR Partnership. This Agreement is, and when executed and
delivered by the Buyer and DR Partnership, the other Transaction Documents to
which the Buyer and DR Partnership is a party will be, the legal, valid and
binding obligations of the Buyer and DR Partnership, enforceable against the
Buyer and DR Partnership in accordance with their respective terms, except
insofar as enforceability may be affected by the Enforceability Exceptions.
(b) BEI owns, directly or indirectly, all of the outstanding limited
liability company interests of the Buyer, STi CC 1, STi CC 2 and all of the
outstanding partnership interests of DR Partnership beneficially and of record,
in each case, free and clear of any Encumbrances other than Permitted
Encumbrances.
6.4 Consents; No Conflict.
(a) The execution and delivery by the Buyer and DR Partnership, the
performance of the Buyer and DR Partnership under, and the consummation by the
Buyer and DR Partnership of the transactions contemplated by, this Agreement and
the Transaction Documents to which the Buyer and DR Partnership is a party do
not and will not require any consent, approval, authorization or other order of,
action by, filing with or notification to any Person, except (i) as described in
Section 6.4 of the Buyer's Disclosure Schedules, (ii) the notification
requirements of the HSR Act and (iii) filings required under, and compliance
with other applicable rules, regulations and requirements of, Government
Regulators set forth on Section 6.4 of the Buyer's Disclosure Schedules
(collectively, the "Buyer Required Consents").
(b) Assuming that all Buyer Required Consents have been obtained or
performed, the execution and delivery by the Buyer and DR Partnership, the
performance of the Buyer and DR Partnership under, and the consummation by the
Buyer and DR Partnership of the transactions contemplated by, this Agreement and
the other Transaction Documents to which the Buyer and DR Partnership is a party
do not and will not: (a) violate any provision of the Buyer Organizational
Documents; or (b) violate any Law or any order, judgment or decree of any court
or other governmental or regulatory authority applicable to the Buyer, STi CC 1,
STi CC 2 and DR Partnership.
6.5 Finders and Brokers. The Buyer and DR Partnership have not
employed any financial advisor, broker or finder or incurred any liability for
any financial advisory, brokerage, finder's or similar fee or commission in
connection with the transactions contemplated by this Agreement.
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6.6 Legal Proceedings. There are no claims, actions, suits,
proceedings or, to the Best of the Buyer's Knowledge, investigations, pending
or, to the Best of the Buyer's Knowledge, threatened, by or before any
Governmental Authority, or any arbitrator, by, against, affecting or relating to
the Buyer, STi CC 1, STi CC 2 and DR Partnership which, if adversely determined,
would restrain or enjoin the consummation of the transactions contemplated by
this Agreement or declare unlawful the transactions or events contemplated by
this Agreement or cause any of such transactions to be rescinded.
6.7 Financing. At the Initial Closing (i) the Buyer will have
sufficient cash to pay the Buyer Purchase Price pursuant to this Agreement
through capital contributions from its Affiliates and (ii) DR Partnership will
have sufficient cash to pay the Partnership Purchase Price through capital
contributions from its Affiliates.
6.8 No Prior Activities. The Buyer, STi CC 1, STi CC 2 and DR
Partnership are wholly owned subsidiaries of BEI and each were formed in 2006
solely for the purposes of effectuating the transactions contemplated by this
Agreement. None of the Buyer, STi CC 1, STi CC 2 and DR Partnership (i) own
equity, debt or similar interest in any Person or (ii) have engaged in any
activities, owned any Assets or been subject to any Liabilities, except in
connection with the transactions contemplated by this Agreement and the
Transaction Documents.
6.9 Full Disclosure. No representation or warranty of the Buyer or
DR Partnership contained in this Agreement or in any of the Transaction
Documents and, to the Best of the Buyer's Knowledge, no written statement made
by or on behalf of the Buyer or DR Partnership or any of their respective
Affiliates (other than ST, the Sellers, the Subsidiaries and ST Finance)
pursuant to this Agreement or any of the Transaction Documents contains an
untrue statement of a material fact or omits to state a material fact necessary
to make the statements contained herein or therein not misleading. There are no
facts which the Buyer or DR Partnership, or their respective Affiliates (other
than ST, the Sellers, the Subsidiaries and ST Finance), have not disclosed to
the Sellers which could, individually or in the aggregate, reasonably be
expected to have a material adverse effect on the Buyer's obligations under the
Transaction Documents.
6.10 Certain Payments. None of the Buyer, STi CC 1, STi CC 2 and DR
Partnership, nor, to the Best of the Buyer's Knowledge, any director, officer,
employee, or other Person associated with or acting on behalf of any of them,
have directly or indirectly (a) made any contribution, gift, bribe, rebate,
payoff, influence payment, kickback, or other payment to any Person, private or
public, regardless of form, whether in money, property, or services (i) to
obtain favorable treatment in securing business for the Business purchased
pursuant to the terms of this Agreement, (ii) to pay for favorable treatment for
business secured by the Buyer, STi CC 1, STi CC 2 and DR Partnership, (iii) to
obtain special concessions or for special concessions already obtained, for or
in respect of the Business purchased pursuant to the terms of this Agreement, or
(iv) in violation of any Law, or (b) established or maintained any fund or asset
with respect to the Business purchased pursuant to the terms of this Agreement.
7. COVENANTS.
7.1 Access to Premises and Books and Records.
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(a) Between the date of this Agreement and the Initial Closing Date,
ST and the Sellers will give the Buyer and its representatives reasonable access
during normal business hours to (i) all the premises and facilities of the
Sellers and the Subsidiaries, (ii) the Books and Records, properties, and
Contracts of the Business and (iii) all the Assets, and will furnish promptly to
the Buyer and its representatives all information regarding the Business and the
Assets as the Buyer may from time to time reasonably request.
(b) Following the Initial Closing, the Buyer and DR Partnership
shall give ST and the Sellers, and its representatives, reasonable access during
normal business hours, without a material impairment to the operation of the
Business, to the Books and Records that are not Excluded Assets, properties, and
Contracts of the Business, and shall make available to ST and the Sellers, and
to their representatives, such of the officers and employees of the Buyer and DR
Partnership as ST and the Sellers may reasonably request, (i) in connection with
their discharge of their obligations with respect to the Excluded Liabilities
identified in clause (e) of Schedule 2.4 and (ii) for any other reasonable
business purpose of the Sellers or the Subsidiaries, not inconsistent with this
Agreement, relating to matters occurring prior to the Initial Closing Date or
otherwise relating to the Sellers or the Subsidiaries. The Sellers and the
Subsidiaries shall give the Buyer and its subsidiaries and their
representatives, reasonable access during normal business hours, to the Books
and Records that are Excluded Assets as the Buyer and its subsidiaries and
representatives may reasonably request for any reasonable business purpose of
the Buyer and its subsidiaries, not inconsistent with this Agreement, relating
to the Purchased Assets and Assumed Liabilities. The parties shall treat the
Books and Records and any other information or derivatives thereof reviewed or
obtained pursuant to this Section 7.1(b) as "Confidential Information" as such
term is defined in Section 7.9(c) and shall not disclose such Confidential
Information unless required by applicable Law.
7.2 Interim Operation of the Sellers and the Subsidiaries.
(a) Except as expressly permitted by this Agreement, with the prior
written consent of the Buyer or as required by Law, and except where the failure
to comply with this Section 7.2(a) is a result of Buyer's failure to give its
consent to the actions listed in Section 7.2(b) below, during the period from
the date of this Agreement to the Initial Closing Date, ST or the Sellers shall,
and shall cause the Subsidiaries to (i) conduct the Business only in the
ordinary course, consistent with past practice, (ii) use commercially reasonable
efforts to preserve intact their present business organization, and keep
available the services of their present officers and employees, (iii) use
commercially reasonable efforts to preserve their current relationships with,
customers, suppliers, financing sources, employees and any others having
business dealings with them, (iv) use commercially reasonable efforts to
maintain (A) all of the assets and properties of, or used by, the Sellers and
the Subsidiaries in their current condition, ordinary wear and tear excepted,
and (B) insurance upon all of the assets and properties of the Sellers and the
Subsidiaries in such amounts and of such kinds comparable to that in effect on
the date of this Agreement, (v) (A) maintain the books, accounts and records of
the Sellers and the Subsidiaries in the ordinary course of business, consistent
with past practices (B) continue to collect accounts receivable and pay accounts
payable and Taxes (and file Tax returns) utilizing normal procedures consistent
with past practice and without discounting or accelerating payment of such
accounts or Taxes, and (C) comply in all material respects with all contractual
and other obligations of the Sellers and the Subsidiaries (vi) comply in all
material respects with all applicable Laws, and (vii) pay all maintenance and
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similar fees and take all other appropriate actions as necessary to prevent the
abandonment, loss or impairment of all Purchased Intellectual Property.
(b) Without limiting the generality of the foregoing Section 7.2(a),
and except as otherwise expressly permitted by this Agreement or required by
Law, during the period from the date of this Agreement through the Initial
Closing Date, ST or the Sellers shall not, and shall not cause the Subsidiaries
to, without the prior written consent of the Buyer:
(i) make any material change in the conduct of their
businesses or enter into any material transaction other than in the ordinary
course of their business, consistent with past practices;
(ii) amend the Organizational Documents of any of the Sellers
or the Subsidiaries (except that the Organizational Documents of each of the DR
Entities may be amended solely to provide that the DR Entities will not be
dissolved upon the sale of the Purchased DR Assets pursuant to this Agreement);
(iii) enter into an agreement or adopt a plan with respect to
any merger, consolidation, liquidation or business combination involving the
Sellers or their Subsidiaries, or any acquisition or disposition of all or
substantially all of the assets, properties or rights or any securities of the
Sellers or their Subsidiaries;
(iv) (A) sell, lease, transfer or otherwise dispose of any of
their Assets, other than in the ordinary course of business consistent with past
practice or (B) permit, allow or suffer any of their Assets to be subjected to
any Encumbrance other than Permitted Encumbrances;
(v) (A) create, incur, assume or guarantee any Indebtedness;
(B) pay, repay, discharge, purchase, repurchase or satisfy any Indebtedness
issued or guaranteed by the Sellers or any of the Subsidiaries, except in the
ordinary course of business, consistent with past practices; (C) modify the
terms of any Indebtedness or other Liability; or (D) make any loans, advances of
capital contributions to, or investments in, any other Person (other than to the
wholly owned Subsidiaries in the ordinary course of business, consistent with
past practices);
(vi) enter into, amend or supplement any employment,
severance, termination or other agreement or Plan, or employment policies, or
make any change in the compensation, severance or termination benefits payable
or to become payable to any of their officers, directors, employees, agents or
consultants (other than planned annual increases in the rates of compensation or
planned bonuses, in either case, in the ordinary course of business consistent
with past practice);
(vii) enter into, modify or terminate any labor or collective
bargaining agreement or, through negotiation or otherwise, make any commitment
or incur any liability to any labor organization with respect to any Employee;
(viii) make any payments (other than regular compensation
payable to officers and employees of any of the Sellers or the Subsidiaries in
the ordinary course of business consistent with past practice or pursuant to the
54
Telco Award Agreements consistent with the terms of this Agreement), loans,
advances or other distributions to, or enter into any transaction, agreement or
arrangement with, officers, directors, partners, employees, agents, consultants,
stockholders, associates or family members.
(ix) enter into or amend any Contract that, if entered into
or amended prior to the date of this Agreement, would have been required to be
included on Section 5.7 of the Disclosure Schedules;
(x) enter into any transaction or enter into, modify or
renew any Contract which by reason of its size or otherwise is not in the
ordinary course of business, consistent with past practices;
(xi) acquire by merging or consolidating with, or by
purchasing a substantial portion of the assets or securities of or by any other
manner, any Person;
(xii) introduce any material change with respect to the
operation of the Business, including any material change in the types, nature,
composition or quality of products or services, or, other than in the ordinary
course of business, consistent with past practices, make any change in product
specifications or prices or terms of distributions of such products;
(xiii) enter into any Contract, understanding or commitment
that restrains, restricts, limits or impedes the ability of the Business, or the
ability of the Buyer or DR Partnership, to compete with or conduct any business
or line of business in any geographic area or solicit the employment of any
persons;
(xiv) make or authorize any capital expenditures or commitment
for capital expenditures in excess of $250,000 individually or $500,000 in the
aggregate;
(xv) except in the ordinary course of business consistent
with past practice and involving liabilities or obligations not in excess of
$250,000, enter into, or amend, terminate or waive any right under, any Material
Contract, Real Property Lease, Personal Property Lease or Intellectual Property
License;
(xvi) make or authorize (A) any change to any of the Sellers'
or the Subsidiaries' accounting principles, methods or practices or (B) any
change to any of the Sellers' or the Subsidiaries' Tax accounting principles,
methods or practices, other than, in each case, as required by changes in
applicable Law;
(xvii) (A) make, change or revoke any Tax election, settle or
compromise any Tax claim or liability or enter into a settlement or compromise,
or change (or make a request to any taxing authority to change) any material
aspect of its method of accounting for Tax purposes, or (B) prepare or file any
Tax Return (or any amendment thereof) unless such Tax Return shall have been
prepared in a manner consistent with past practice and the Seller shall have
provided Buyer a copy thereof (together with supporting papers) at least three
Business Days prior to the due date thereof for Buyer to review and approve
(such approval not to be unreasonably withheld or delayed), in each case if and
to the extent it could have an adverse effect on the Buyer or DR Partnership in
55
any post-Initial Closing period (or portion thereof) or would result in any
Assumed Liability;
(xviii) modify their policy or practice regarding the timing of
the collection or payment of their accounts receivable or accounts payable or
the dispute thereof or otherwise change their policy or practice with respect to
accounting matters, accruals and/or reserve estimates or change their practice
with respect to capital expenditures or other cash disbursements (except as
required by GAAP) which would be reflected as adjustments to cash flow from
operations in a GAAP financial statement;
(xix) fail to keep current and in full force and effect or
renew any of the Telecommunications Licenses;
(xx) modify current business practices in a manner that would
cause the gross profit margins of the prepaid calling card business to be less
than 13.5%;
(xxi) provide material promotions or discounts in a manner not
in the ordinary course of business, consistent with past practices for the sale
of wireless phones;
(xxii) enter into any Contract with distributors of prepaid
cards other than standard purchase orders, including any Contract to change
material terms in the future;
(xxiii) take any action which would adversely affect the ability
of the parties to consummate the transactions contemplated by this Agreement; or
(xxiv) agree to do anything (A) prohibited by this Section 7.2,
(B) which would make any of the representations and warranties of the Sellers
and ST in this Agreement or any of the Transaction Documents untrue or incorrect
in any material respect or could result in any of the conditions to the Initial
Closing not being satisfied or (C) that would be reasonably expected to have a
Material Adverse Effect.
(c) Notwithstanding anything to the contrary in this Agreement,
including but not limited to Section 7.2(b)(viii), the Sellers may, in good
faith, declare and/or pay any cash dividend or cash distribution to any Person,
consistent with the terms and conditions set forth in Section 3.2 of this
Agreement and in accordance with applicable Laws.
7.3 Employee Matters. The Sellers shall not (and shall cause the
Subsidiaries not to):
(a) terminate any Employee without the prior written consent of the
Buyer other than for cause (as reasonably determined by the Sellers in good
faith consistent with the Sellers' past practices with respect to "for cause"
termination); and
(b) at any time within the 90 calendar day period prior to the
Initial Closing Date, (i) terminate the employment of more than thirty (30)
Employees, or (ii) effectuate a "plant closing" or "mass layoff" as those terms
are defined in WARN or any state law, affecting in whole or in part any of the
Employees.
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7.4 Consents.
(a) Prior to the Initial Closing Date, in the case of the Initial
Closing (or in the case of the Dialaround Closing, the Dialaround Closing Date),
ST and the Sellers will use commercially reasonable efforts to obtain in
writing, as promptly as possible and at the Buyer's expense, all the Required
Consents (other than with respect to the Telecommunications Licenses, which
shall be governed by Section 7.4(b)), in form and substance reasonably
satisfactory to the Buyer and will deliver to the Buyer copies of such Required
Consents after they are obtained by the Sellers. The Buyer will cooperate with
the Sellers to obtain all Required Consents, but the Buyer will not be required
to accept or agree or accede to any modifications or amendments to, or changes
in, or the imposition of any condition to the transfer to the Buyer of any
Contract that are not reasonably acceptable to the Buyer.
(b) To the extent necessary, within ten (10) Business Days after the
date of this Agreement, the parties hereto shall jointly file with the FCC and
other Governmental Regulators applications seeking all Required Consents
relating to the Telecommunications Licenses. The parties hereto shall cooperate
and use their respective commercially reasonable efforts to prosecute such
applications to a favorable conclusion at the earliest practicable time. Each
party hereto shall respond with reasonable diligence and dispatch to any request
for additional information made in response to such filings. The Buyer shall pay
any filing fees and expenses required in connection with such applications.
7.5 HSR Notification. As soon as practicable after the execution of
this Agreement, but in any event no later than ten (10) Business Days after such
execution, the Sellers and the Buyer will each complete and file, or cause to be
completed and filed, any notification and report required to be filed under the
HSR Act; and each such filing will request early termination of the waiting
period imposed by the HSR Act. The parties hereto will use their commercially
reasonable efforts to respond as promptly as reasonably practicable to any
inquiries received from the Federal Trade Commission and the Antitrust Division
of the Department of Justice for additional information or documentation and to
respond as promptly as reasonably practicable to all inquiries and requests
received from any other Governmental Authority in connection with antitrust
matters and shall make any further filings pursuant thereto that may be
necessary, proper or advisable in connection therewith. BEI, on the one hand,
and Sellers, on the other hand, shall equally share the cost of any and all
filing fees required in connection with such HSR Act filings.
7.6 Notification of Certain Matters.
(a) Prior to the Initial Closing Date, in the case of the Initial
Closing (or in the case of the Dialaround Closing, the Dialaround Closing Date),
ST and the Sellers will promptly notify the Buyer of (i) any fact, event,
circumstance or action the existence or occurrence of which would cause any of
ST's and the Sellers' representations or warranties under this Agreement not to
be correct and complete as of the Initial Closing Date (or the Dialaround
Closing Date with respect to the Dialaround Assets) or (ii) all other
developments affecting the Business or the Assets which may reasonably be
expected to have a Material Adverse Effect.
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(b) Prior to the Initial Closing Date, in the case of the Initial
Closing (or in the case of the Dialaround Closing, the Dialaround Closing Date),
the Buyer will promptly notify the Sellers of any fact, event, circumstance or
action the existence or occurrence of which would cause any of the Buyer's
representations or warranties under this Agreement not to be correct and
complete as of the Initial Closing Date (or the Dialaround Closing Date with
respect to the Dialaround Assets).
7.7 Updated Schedules. Not less than five (5) Business Days prior to
the Initial Closing, the Sellers will deliver to the Buyer revised copies of the
Disclosure Schedules which will have been updated and marked to show any changes
occurring between the date of this Agreement and the date of delivery.
Additionally, not less than five (5) Business Days prior to the Dialaround
Closing, the Seller will deliver to the Buyer revised copies of the Disclosure
Schedules solely with respect to the Dialaround Assets which will have been
updated and marked to show any changes occurring between the date of this
Agreement and the date of delivery; provided, however, that for purposes of the
Sellers' representations and warranties and covenants in this Agreement, all
references to the Disclosure Schedules will mean the version of the Disclosure
Schedules attached to this Agreement on the date of signing; provided further,
however, that if a Disclosure Schedule is updated to reflect an agreement, lease
or event of any kind which was permitted to be executed or to occur in
accordance with the terms of this Agreement, the related representation or
warranty shall be deemed accurate as at the Initial Closing Date or the
Dialaround Closing Date, as the case may be. Notwithstanding anything to the
contrary in this Agreement, any changes made to the Disclosure Schedules shall
not limit or otherwise affect the remedies available hereunder to the Buyer, or
the representations or warranties of, or the conditions to the obligations of,
the parties hereto.
7.8 Satisfaction of Conditions. Upon the terms and subject to the
conditions of this Agreement, each party will use their commercially reasonable
efforts to take, or cause to be taken, all action, and to do, or cause to be
done, all things necessary, proper or advisable, consistent with applicable Law
to consummate and make effective in the most expeditious manner practicable the
transactions contemplated hereby.
7.9 Publicity; Confidentiality.
(a) The parties hereto agree that no publicity release or
announcement concerning this Agreement or the transactions contemplated hereby
shall be made without mutual written agreement of the Sellers and the Buyer;
provided that if any announcement is required by Law or the rules of any
securities exchange or market to be made by the Buyer prior to making such
announcement, the Buyer will deliver a draft of such announcement to the Sellers
and shall give the Sellers opportunity to comment thereon. Upon the execution of
this Agreement and the Initial Closing, the Buyer and the Sellers will consult
with the other with respect to a communication plan with respect to customers,
suppliers and other applicable Persons regarding the transactions contemplated
by this Agreement.
(b) All information concerning the Sellers, the Subsidiaries and the
Business obtained by the Buyer or its Affiliates pursuant to or in connection
with negotiation of this Agreement will be used by the Buyer and its Affiliates
solely for purposes related to this Agreement and, in the case of confidential
information, will, except as may be required for the performance of this
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Agreement or by Law, be kept in strict confidence by the Buyer and its
Affiliates in accordance with the terms of the confidentiality agreement dated
March 29, 2006 (the "Confidentiality Agreement"), which Confidentiality
Agreement is hereby incorporated in this Agreement by reference. Any breach of
the Confidentiality Agreement will be deemed a material breach of this
Agreement.
(c) From and after the date hereof, ST and the Sellers shall not,
shall cause their Affiliates, and shall use commercially reasonable efforts to
cause their respective officers, and directors not to, directly or indirectly,
disclose, reveal, divulge or communicate to any Person other than authorized
officers, directors and employees of the Buyer or use or otherwise exploit for
its own benefit or for the benefit of anyone other than the Buyer, any
Confidential Information (as defined below); provided, however, that the
foregoing shall not prohibit the disclosure of any Confidential Information
relating to products, prices, or fees in the ordinary course of business,
consistent with past practices. The Sellers and their officers, directors and
Affiliates shall not have any obligation to keep confidential any Confidential
Information if and to the extent disclosure thereof is specifically required by
law; provided, however, that in the event disclosure is required by applicable
Law, the Sellers shall, to the extent reasonably possible, provide the Buyer
with prompt notice of such requirement prior to making any disclosure so that
the Buyer may seek an appropriate protective order For purposes of this Section
7.9, "Confidential Information" means any information with respect to the
Business that would generally be understood in the industry in which the Sellers
compete to be confidential, secret or proprietary and which the Company treats
as confidential, including methods of operation, customers, customer lists,
products, prices, fees, costs, Technology, inventions, Trade Secrets, know-how,
Software, marketing methods, plans, personnel, suppliers, competitors, markets
or other specialized information or proprietary matters. Confidential
Information does not include, and there shall be no obligation hereunder with
respect to, information that (i) is generally available to the public on the
date of this Agreement or (ii) becomes generally available to the public other
than as a result of a disclosure not otherwise permissible thereunder.
(d) The covenants and undertakings contained in this Section 7.9
relate to matters which are of a special, unique and extraordinary character and
a violation of any of the terms of this Section 7.9 by a party will cause
irreparable injury to the other party, the amount of which will be impossible to
estimate or determine and which cannot be adequately compensated. Accordingly,
the remedy at law for any breach of this Section 7.9 will be inadequate.
Therefore, the Buyer on the one hand, and ST and the Sellers on the other hand
will be entitled to an injunction, restraining order or other equitable relief
from any court of competent jurisdiction in the event of any breach of this
Section 7.9 without the necessity of proving actual damages or posting any bond
whatsoever. The rights and remedies provided by this Section 7.9 are cumulative
and in addition to any other rights and remedies which the Buyer may have
hereunder or at law or in equity.
7.10 Non-Competition; Non-Solicitation.
(a) For a period from the date hereof until the later of the fifth
anniversary of the Initial Closing Date (the "Restricted Period"), ST and the
Sellers shall not, and shall cause their Affiliates not to, directly or
indirectly, (i) own, manage, operate, control or participate in the ownership,
management, operation or control of any business, whether in corporate,
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proprietorship or partnership form or otherwise, or (ii) provide consultative or
advice services to any individual or entity, in either case that is (x) engaged
in production, sale or distribution of telecommunication services (a
"Telecommunications Company"), or (y) that otherwise competes with the Business,
in each case, including any business actually conducted or about to be conducted
during the Restricted Period (a "Restricted Business"), including but not
limited to the prepaid wireless business or prepaid calling card, carrier
wholesale and dial-around business; provided, however, that the restrictions
contained in this Section 7.10(a) shall not restrict the acquisition of a
passive investment by ST and the Sellers, directly or indirectly, in the
aggregate of less than 5% of the outstanding capital stock of any company,
whether publicly traded or privately held, engaged in a Restricted Business or,
the ownership of the securities of Restricted Businesses set forth in Schedule
7.10 (which amount of securities shall not be increased without BEI's consent;
provided further, however, ST may be employed by any entity other than a
Telecommunications Company that owns an interest (which interest represents no
more than 5% of such entity's consolidated income or consolidated assets) in a
Restricted Business so long as ST is not employed by, or in any way involved
with the Restricted Business and does not provide, whether directly or
indirectly, any service (whether as consultant, advisor or otherwise) to or for
the benefit of the Restricted Business or the entity in connection with such
Restricted Business; and further provided the confidentiality provisions of this
Agreement shall be complied with.
(b) For the Restricted Period, the Sellers and ST shall not and
shall cause their Affiliates not to: (i) cause, solicit, induce or encourage any
Employees of the Buyer or DR Partnership to leave such employment or hire,
employ or otherwise engage any such individual; or (ii) cause, induce or
encourage any material actual or prospective client, customer, supplier or
licensor of the Business (including any existing or former customer of the
Sellers or the Subsidiaries and any Person that becomes a client or customer of
the Business after the Initial Closing) or any other Person who has a material
business relationship with the Business, to terminate or modify any such actual
or prospective relationship.
(c) The covenants and undertakings contained in this Section 7.10
relate to matters which are of a special, unique and extraordinary character and
a violation of any of the terms of this Section 7.10 will cause irreparable
injury to the Buyer or DR Partnership, the amount of which will be impossible to
estimate or determine and which cannot be adequately compensated. Accordingly,
the remedy at law for any breach of this Section 7.10 will be inadequate.
Therefore, the Buyer or DR Partnership will be entitled to an injunction,
restraining order or other equitable relief from any court of competent
jurisdiction in the event of any breach of this Section 7.10 without the
necessity of proving actual damages or posting any bond whatsoever. The rights
and remedies provided by this Section 7.10 are cumulative and in addition to any
other rights and remedies which the Buyer or DR Partnership may have hereunder
or at law or in equity. In the event that the Buyer or DR Partnership were to
seek damages for any breach of this Section 7.10, the portion of the Purchase
Price which is allocated by the parties to the foregoing covenant shall not be
considered a measure of or limit on such damages.
(d) The parties hereto agree that, if any court of competent
jurisdiction in a final nonappealable judgment determines that a specified time
period, a specified geographical area, a specified business limitation or any
other relevant feature of this Section 7.10 is unreasonable, arbitrary or
against public policy, then a lesser time period, geographical area, business
limitation or other relevant feature which is determined by such court to be
60
reasonable, not arbitrary and not against public policy may be enforced against
the applicable party.
7.11 Further Action. Each of the parties hereto shall use its
commercially reasonable efforts to promptly take, or cause to be taken, all
appropriate action, do or cause to be done all things necessary, proper or
advisable under applicable Law, and to execute and deliver such documents and
other papers, including but not limited to, anything required to be delivered
pursuant to Section 8.2, Section 8.3 or Section 8.4, as the case may be, as may
be reasonably necessary, proper or advisable to carry out and give full effect
to the provisions of this Agreement, to consummate and make effective the
transactions contemplated by this Agreement and to allow each party fully to
enjoy and exercise the rights accorded and acquired by it under this Agreement,
including from time to time, after the Initial Closing and Dialaround Closing as
may be required to implement the intent of this Agreement.
7.12 Existing Litigation. Notwithstanding anything to the contrary in
this Agreement, (a) the Sellers shall retain control over the litigation Telco
brought against Ameritrade described in Section 5.16 of the Disclosure
Schedules, subsequent to the Initial Closing, (b) any proceeds from such
litigation paid or payable to any of the Sellers shall be assigned to the
Sellers upon any such Sellers' receipt of such proceeds, (c) any such proceeds
shall not be deemed an asset of any of the Sellers and all rights thereto shall
vest in the Sellers and (d) the Buyer shall have no rights in or to such
litigation, including no right to direct or control the litigation, or receive
the proceeds therefrom.
7.13 Non-Solicitation.
(a) The Sellers and ST shall cause the Sellers and their
Subsidiaries and the Sellers' and their Subsidiaries' respective directors,
officers, employees, investment bankers, financial advisors, attorneys,
accountants, agents and other representatives (collectively, "Representatives")
to, immediately cease and cause to be terminated any discussions or negotiations
with any Person conducted heretofore with respect to a Takeover Proposal, and
use best efforts to obtain the return from all such Persons or cause the
destruction of all copies of confidential information previously provided to
such parties by the Sellers, their Subsidiaries or Representatives. The Sellers
shall not, and shall cause their Subsidiaries and Representatives not to,
directly or indirectly (i) solicit, initiate, cause, facilitate or knowingly
encourage (including by way of furnishing information) any inquiries or
proposals that constitute, or may reasonably be expected to lead to, any
Takeover Proposal, (ii) participate in any discussions or negotiations with any
third party regarding any Takeover Proposal or (iii) enter into any agreement
related to any Takeover Proposal.
(b) In addition to the other obligations of ST and the Sellers set
forth in this Section 7.13, the Sellers shall promptly advise the Buyer, orally
and in writing, and in no event later than 24 hours after receipt, if any
proposal, offer, inquiry or other contact is received by, any information is
requested from, or any discussions or negotiations are sought to be initiated or
continued with, the Sellers in respect of any Takeover Proposal, and shall, in
any such notice to the Buyer, indicate the identity of the Person making such
proposal, offer, inquiry or other contact and the terms and conditions of any
proposals or offers or the nature of any inquiries or contacts (and shall
include with such notice copies of any written materials received from or on
61
behalf of such Person relating to such proposal, offer, inquiry or request), and
thereafter shall promptly keep the Buyer fully informed of all material
developments affecting the status and terms of any such proposals, offers,
inquiries or requests (and the Sellers shall provide the Buyer with copies of
any additional written materials received that relate to such proposals, offers,
inquiries or requests) and of the status of any such discussions or
negotiations.
(c) For purposes of this Agreement:
"Takeover Proposal" means any inquiry, proposal or offer from any Person
or "group" (as defined in Section 13(d) of the Exchange Act), other than the
Buyer and its Subsidiaries, relating to any (A) direct or indirect acquisition
(whether in a single transaction or a series of related transactions) of assets
of the Sellers and their Subsidiaries (including securities of Subsidiaries)
equal to 15% or more of the Sellers' consolidated assets or to which 15% or more
of the Sellers' revenues or earnings on a consolidated basis are attributable
(or any long-term lease agreement having similar economic effect), (B) direct or
indirect acquisition (whether in a single transaction or a series of related
transactions) of beneficial ownership (within the meaning of Section 13 under
the Exchange Act) of 15% or more of any class of equity securities of the
Sellers, (C) merger, consolidation, share exchange, business combination,
recapitalization, liquidation, dissolution or similar transaction involving the
Sellers or any of their Subsidiaries; in each case, other than the Transactions.
7.14 Change of Name; Use of Name.
(a) As soon as practicable after the Initial Closing Date, each
Seller will (and will cause the Subsidiaries to) change its corporate, limited
liability company or limited partnership name, as applicable, to such other name
as does not contain the word "STi". After the Initial Closing Date, ST, Sellers
and the Subsidiaries shall not have any right, title or interest in or to, the
name STi or any related Marks or any other Purchased Intellectual Property.
(b) The Sellers and the Subsidiaries hereby grant to the Buyer and
its Affiliates a worldwide, irrevocable, royalty-free, fully paid up and
exclusive license in the fields of the Business to use the Telco, TGI, VoIP Ent.
and Dialaround Marks (the "Provider Marks"), in connection with the Business,
for the 18 month period following the Initial Closing Date (the "Provider Marks
License"); provided, however, that the Dialaround Marks shall not be licensed
to, or used by, the Buyer until the Dialaround Closing Date. Buyer may assign
any or all of its rights, interests and obligations, as they relate to the
Provider Marks, to any of its Affiliates, or to any other Person, in connection
with any transfer or sale of the Business or Assets to which this license
relates; provided, however, that Buyer shall provide notice to Seller of such
assignment. The Sellers and the Subsidiaries represent and warrant to the Buyer
that they have not granted and will not grant any licenses or other rights that
would conflict with the Provider Marks License.
7.15 Agreed Upon Practices and Procedures. The Sellers have begun
procedures to adopt and commence implementation of the practices and procedures
in accordance with Schedule 7.15.
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7.16 Financial Information. The Sellers shall cooperate with BEI and
its Affiliates and provide BEI and its Affiliates, in a timely manner, with such
financial information as is requested to enable BEI and its Affiliates to timely
make all filings with the Securities and Exchange Commission. BEI and the Buyer
shall cooperate with ST and the Sellers in providing financial information of
the Buyer and its subsidiaries, ST, the Sellers and the Subsidiaries, in a
timely manner, that the Sellers may reasonably require for any business purpose
related to ST's and Sellers' rights or obligations under or relating to this
Agreement to the extent such financial information is reasonably available to
BEI and the Buyer from the books and records of the aforesaid entities.
7.17 Covenant of ST.
(a) ST shall cause the Sellers and the Subsidiaries to fulfill their
obligations set forth in this Agreement.
(b) Following the Initial Closing, ST shall, or shall cause his
designee (having documentation evidencing appropriate authority to act on behalf
of ST or the Sellers) to take any and all action reasonably required or
desirable to effectuate the transfer of the Purchased Assets to the Buyer and DR
Partnership, including but not limited to, endorsement and deposit of all checks
and other evidences of indebtedness received by the Buyer on account of the
Assets transferred by the Sellers and the Subsidiaries to the Buyer pursuant to
this Agreement.
7.18 Audited Financial Statements. Upon the request of the Buyer, the
Sellers shall deliver to the Buyer true, correct and complete copies of the
combined audited financial statements of the Sellers and the Subsidiaries,
including the balance sheets for the years ended December 31, 2005 and 2006 and
statements of operations and cash flows as of and for the three years ended
December 31, 2004, 2005 and 2006; provided, however, that the Sellers shall be
under no obligation to so deliver such combined audited financial statements to
the Buyer prior to March 15, 2007.
7.19 WARN Act. The Buyer agrees that between the Initial Closing Date
and a period 90 calendar days thereafter it will not, with respect to any of the
Hired Employees, effect a "plant closing" or "mass layoff" as those terms are
defined in WARN or any state law that would reasonably be expected to create a
liability under the WARN Act for the Sellers or any of the Subsidiaries.
7.20 Employment Offers. The Buyer, prior to the Initial Closing,
shall extend offers of employment to substantially all of the Employees of the
Non-DR Entities which offers shall be subject to customary and reasonable
employment policies. All such offers made to such Employees will be on an "at
will" basis, and at substantially the same salary or wage level, as currently
applicable to each such Employee of the Non-DR Entities. The Non-DR Entities
shall terminate the employment of all Employees of the Non-DR Entities
immediately prior to the Initial Closing Date, and the Non-DR Entities shall pay
all compensation and other obligations due to the Hired Employees of the Non-DR
Entities with respect to any period ending prior to or on the Initial Closing
Date, including but not limited to, all salaries, wages, bonuses, all accrued
(vested or unvested) vacation, personal time, time-off, holiday or sick leave
unemployment taxes, FICA taxes and withholding taxes. The Non-DR Entities shall
pay all bonuses or other compensation (including but not limited to the payments
63
due to certain Employees pursuant to the Telco Award Agreements) payable to the
Employees by reason of the transactions contemplated by this Agreement.
7.21 Covenant of the Buyer and DR Partnership. The Buyer, DR
Partnership and their respective Affiliates shall not, prior to the Initial
Closing Date, do anything or perform any act, or fail to do anything or perform
any act, that would cause the Buyer or DR Partnership to acquire any Assets or
incur any Liabilities except as specifically contemplated by the Transaction
Documents.
7.22 Liability Insurance. The Buyer shall purchase or obtain a three
(3) year director and officer liability insurance policy (or include the Buyer
on an existing policy) providing at least $10 million of director and officer
liability insurance.
7.23 Intellectual Property Covenant. The Buyer agrees that it shall
not do anything inconsistent with the provisions, including all defined terms
used in such provisions, of the agreement referenced on Schedule 7.23, except to
the extent its actions are a result of the actions of, or taken under the
specific directions of, ST.
7.24 Transfer of DR Employees. The Buyer and the Sellers agree that
at the Initial Closing Date, the Employees of the DR Entities will be
transferred and become Hired Employees of the DR Partnership and the Buyer and
the DR Partnership shall have liability for all severance or employment
termination related claims related to such Hired Employees following the Initial
Closing Date regardless of whether incurred prior to or following the Initial
Closing and the Sellers shall cooperate with effecting such transfer.
8. CONDITIONS TO CLOSING.
8.1 Initial Closing Conditions to the Obligations of the Buyer and
the Sellers. The obligations of each party to consummate the transactions
contemplated by this Agreement are subject to the satisfaction, at or before the
Initial Closing, of the following, which may be waived in writing by the parties
to the extent not prohibited by applicable Laws:
(a) HSR Act Filings. All filings required under the HSR Act have
been made and the applicable waiting period has expired or been earlier
terminated without the receipt of any objection or the commencement or threat of
any litigation by a Governmental Authority of competent jurisdiction to restrain
the consummation of the transactions contemplated by this Agreement.
(b) Absence of Legal Proceedings. No action, suit or proceeding is
pending or threatened by or before any Governmental Authority and no Law has
been enacted, promulgated or issued or become or deemed applicable to any of the
transactions contemplated by this Agreement by any Governmental Authority, which
would prevent or make illegal the consummation of any transactions contemplated
by this Agreement.
8.2 Initial Closing Conditions to the Obligations of the Buyer. The
obligations of BEI and/or the Buyer to consummate the transactions contemplated
by this Agreement are subject to the satisfaction, at or before the Initial
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Closing, of the following conditions, which may be waived in writing by the
Buyer to the extent not prohibited by applicable Laws:
(a) Accuracy of Representations and Warranties. The representations
and warranties of the Sellers and ST in this Agreement, if qualified by a
reference to materiality, are true, complete and correct and, if not so
qualified, are true, complete and correct in all material respects, at and as of
the Initial Closing with the same effect as if made at and as of the Initial
Closing, except for changes, if any, permitted or contemplated by this Agreement
and except to the extent a different date is specified therein, in which case
such representation and warranty is true and correct as of such date; provided,
however, that the Sellers' Perpetual Representations shall be true, complete and
correct at and as of the Initial Closing with the same effect as if made at and
as of the Initial Closing.
(b) Performance of Agreements. The Sellers and ST in all material
respects have performed and complied with each obligation, agreement, covenant
and condition required by this Agreement to be performed or complied with by the
Sellers and/or ST at or prior to the Initial Closing.
(c) Absence of Certain Events. There shall not have occurred any
change, event, effect or development or combination of developments that would
constitute a Material Adverse Effect with respect to the Sellers or the
Subsidiaries since the date of this Agreement.
(d) Initial Closing Deliverables. All deliveries contemplated under
Section 4.2, Section 4.4, Section 4.5 and Section 4.7 with respect to the
Initial Closing have been made in accordance with the terms of this Agreement;
provided, however, that with respect to the delivery of the Confidentiality and
Non-Competition Agreements contemplated under Section 4.2(a)(v), only a copy of
the Confidentiality and Non-Competition Agreement duly executed by Xxxxxxx
Xxxxxx shall be a deliverable required under this Section 8.2(d).
(e) Required Consents. All Required Consents (other than with
respect to the transfer of the Dialaround Assets) shall have been obtained and
shall be in full force and effect, and shall not contain any conditions or
limitations with respect thereto that are not reasonably acceptable to the
parties hereto.
(f) Legal Opinions. The Buyer shall have received the Regulatory
Legal Opinion and the DR Legal Opinion.
(g) Escrow of Bonus Payments. ST or the Sellers, as the case may be,
shall not have made any bonus payments under the Telco Award Agreements to any
Employee who has failed to execute the Confidentiality and Non-Competition
Agreement on or prior to the Initial Closing Date. To the extent any bonus that
would have otherwise been paid pursuant to the Telco Award Agreements remains
unpaid, ST or the Sellers, as the case may be, shall remit such unpaid bonus
amounts to Herrick, Feinstein, LLP, who shall hold such unpaid bonus amounts in
escrow until the second anniversary of the Initial Closing Date unless any such
Employee delivers an executed Confidentiality and Non-Competition Agreement to
Herrick, Feinstein, LLP, for delivery to the Buyer upon payment to such Employee
of the bonus due under that Employee's Telco Award Agreement. Xxxxxxx,
65
Xxxxxxxxx, LLP is hereby authorized to make the bonus payment in exchange for
the executed Confidentiality and Non-Competition Agreement.
8.3 Initial Closing Conditions to Obligations of the Sellers. The
obligations of ST and/or the Sellers to consummate the transactions contemplated
by this Agreement are subject to the satisfaction, at or before the Initial
Closing, of the following conditions, which may be waived in writing by the
Sellers to the extent not prohibited by applicable Laws:
(a) Accuracy of Representations and Warranties. The representations
and warranties of the Buyer in this Agreement, if qualified by a reference to
materiality, are true, complete and correct and, if not so qualified, are true,
complete and correct in all material respects, at and as of the Initial Closing,
except for changes, if any, permitted or contemplated by this Agreement and
except to the extent a different date is specified therein, in which case such
representation and warranty is true and correct as of such date; provided,
however, that the Buyer's Perpetual Representations shall be true, complete and
correct at and as of the Initial Closing with the same effect as if made at and
as of the Initial Closing.
(b) Performance of Agreements. The Buyer in all material respects
has performed and complied with each obligation, agreement, covenant and
condition required by this Agreement to be performed or complied with by the
Buyer at or prior to the Initial Closing.
(c) Initial Closing Deliverables. All deliveries contemplated under
Section 4.3 and Section 4.6 have been made to the Sellers' satisfaction.
(d) Joinder of DR Partnership. DR Partnership has become a party to
this Agreement by the execution of a joinder to this Agreement, pursuant to
which it agreed to be bound by the terms hereof.
8.4 Dialaround Closing Conditions. The obligations of each party to
consummate the transactions contemplated by this Agreement are subject to the
satisfaction, at or before the Dialaround Closing, of the following, which may
be waived in writing by the parties to the extent not prohibited by applicable
Laws:
(a) Accuracy of Representations and Warranties. The conditions
stated in Section 8.2(a) have been satisfied as of the Dialaround Closing Date,
solely with respect to the Dialaround Assets (it being acknowledged and agreed
that as of the Dialaround Closing Date, references in Section 8.2(a) to the
Initial Closing shall be deemed to be references to the Dialaround Closing).
(b) Dialaround Assets Approvals. The Sellers have obtained all
consents and approvals required for the transfer of the Dialaround Assets to the
Buyer.
(c) Absence of Legal Proceedings. No action, suit or proceeding is
pending or threatened by or before any Governmental Authority and no Law has
been enacted, promulgated or issued or become or deemed applicable to any of the
transactions contemplated by this Agreement by any Governmental Authority, which
would prevent or make illegal the consummation of any transactions relating to
the Dialaround Assets contemplated by this Agreement.
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(d) Dialaround Closing Deliverables. All deliveries contemplated
under Section 4 with respect to the Dialaround Closing have been made in
accordance with the terms of this Agreement.
(e) Required Consents. All Required Consents relating to the
transfer of the Dialaround Assets shall have been obtained and shall be in full
force and effect, and shall not contain any conditions or limitations with
respect thereto that are not reasonably acceptable to the parties hereto.
(f) Legal Opinions. The Buyer shall have received the Regulatory
Legal Opinion.
(g) Notwithstanding the satisfaction of the Dialaround Closing
Conditions, the Buyer may elect to not acquire the Dialaround Asset by written
notice to ST on behalf of the Sellers. In such event. no party shall have any
Liability with respect to the Dialaround Assets to any other party. If the Buyer
elects to acquire the Dialaround Assets, then ST and the Sellers shall have the
obligations they would have had as if they transferred the Dialaround Assets as
of the Initial Closing Date.
9. TERMINATION.
9.1 Events of Termination. This Agreement may be terminated and the
transactions contemplated by this Agreement may be abandoned at any time prior
to the Initial Closing:
(a) by the mutual written consent of the Buyer and the Sellers;
(b) by any party, upon written notice to the other parties, if the
transactions contemplated by this Agreement to take place at the Initial Closing
have not been consummated by the date which is seven months after the date of
this Agreement, for any reason other than (i) a breach or default by such party
in the performance of any of its obligations under this Agreement or (ii) the
failure of any representation or warranty of such party to be accurate and the
other party has waived the inaccuracy and is willing to close; or
(c) by any party at any time upon written notice to the others, if
any of the others are in material breach or default of any of its
representations, warranties, covenants, agreements or other obligations in this
Agreement or in any Transaction Document (provided, however, with respect to
breaches of representations and warranties, this Section 9.1(c) shall apply to
only those material breaches that (i) in the case of the Buyer, result in a
failure of a condition set forth in Section 8.3(a) to be satisfied and (ii) in
the case of the Sellers, result in a failure of a condition set forth in Section
8.2(a) to be satisfied) and fails to cure such breach or default within the
30-day period following such written notice and the defaulting party promptly
initiates and diligently pursues such cure to completion upon receipt of such
notice; provided, however, if such breach or default is incapable of being cured
within such 30-day period there shall be no cure period.
9.2 Liabilities in Event of Termination.
(a) If this Agreement is terminated pursuant to Section 9.1, all
obligations of the parties under this Agreement will terminate; provided,
however, that the confidentiality provisions contained in Section 7.9(b) shall
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survive termination. Notwithstanding a party's right to pursue remedies for
breach of contract upon termination of this Agreement in accordance with Section
9.1, no remedies for breaches of representations and warranties will be
available if this Agreement is terminated pursuant to Section 9.1(a).
Furthermore, if the Initial Closing does not occur, no party will be liable for
any incidental, consequential, exemplary, special, or punitive damages in
connection with any claim for breach of this Agreement, except as specifically
provided for in this Agreement.
(b) If this Agreement is terminated pursuant to Section 9.1 due to a
willful breach by either party and the other party is not in breach of any
provision of this Agreement that would also permit it to terminate this
Agreement pursuant to Section 9.1, the breaching party shall pay the
non-breaching party the sum of $2,000,000 as liquidated damages (the
"Termination Fee") unless the non-breaching party is the Buyer, in which event
the Buyer shall have the right instead to elect specific performance of this
Agreement. The Termination Fee shall be paid, within five (5) Business Days of
the date this Agreement is so terminated, to the non-breaching party by wire
transfer of immediately available funds to such account(s) designated in writing
by the non-breaching party.
10. INDEMNIFICATION.
10.1 Survival of Representations, Warranties and Covenants.
(a) All agreements and representations and warranties of the parties
contained in this Agreement shall survive the Initial Closing until the second
anniversary of the Initial Closing Date; provided, however, that the
representations and warranties (i) of ST and the Sellers set forth in Section
5.1 (organization, authority and qualification), Section 5.3 (power and
authorization) and Section 5.5(a) (title to purchased assets) (collectively, the
"Sellers' Perpetual Representations") shall survive the Initial Closing
indefinitely, (ii) of ST and the Sellers set forth in Section 5.17 (Tax
Matters), Section 5.9 (environmental matters) and Section 5.18 (employee
matters) shall terminate 60 days following the expiration of the applicable
statute of limitations with respect to the particular matter that is the subject
matter thereof and (iii) of the Buyer set forth in Section 6.1 (organization,
authority and qualification) and Section 6.3 (power and authorization)
(collectively, the "Buyer's Perpetual Representations") shall survive the
Initial Closing indefinitely; provided, further, that all of the Pre-Initial
Closing Covenants of the parties contained in this Agreement shall survive the
Initial Closing and continue in full force and effect for a period of nine (9)
months from the Initial Closing Date and all of the Post-Initial Closing
Covenants of the parties (which shall include obligations under this Section 10)
contained in this Agreement shall survive the Initial Closing and continue in
full force and effect indefinitely; and provided, further, that the
representations and warranties of the parties in this Agreement made at the
Dialaround Closing shall not survive beyond the Dialaround Closing and there
shall be no indemnification obligation for any representations or warranties
made at the Dialaround Closing (but this shall not affect any representations
and warranties made with respect to the Dialaround Assets on the date of this
Agreement or the Initial Closing Date). For avoidance of doubt, any claim for
Losses related to Excluded Liabilities or Excluded Assets shall survive the
Initial Closing and continue in full force and effect indefinitely. In addition,
the Buyer shall have the right, prior to the end of the aforementioned nine (9)
month period, to initiate and complete a review by a forensic accountant to
determine if there were any breaches of Pre-Initial Closing Covenants. The cost
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of such review shall be borne by the Buyer, unless the aggregate Losses arising
from breaches of the Pre-Initial Closing Covenants exceeds $500,000, in which
case the cost of the forensic accountant will be borne by ST and the Sellers.
(b) Notwithstanding anything to the contrary in this Section 10..1,
any notice given in accordance with Section 12.2 of this Agreement (and
delivered within the applicable survival period for such representation or
warranty) claiming an alleged breach of any representation or warranty contained
in this Agreement shall without further action extend the survival period for
the representation or warranty alleged to have been breached solely as applied
to the specific circumstances set forth in such notice until immediately after
the final resolution of the matter; provided any such claims are made in good
faith.
10.2 Indemnification by the Sellers. Subject to the limitations set
forth in this Section 10, following the Initial Closing, ST and the Sellers
jointly and severally will indemnify, defend and hold harmless the Buyer, DR
Partnership and BEI from and against all Losses of or to the Buyer or any such
other indemnified Person resulting from or arising out of (i) any breach of any
representation or warranty made by ST and the Sellers in this Agreement, (ii)
any breach of any covenant, agreement or obligation of ST and the Sellers
contained in this Agreement; provided, however, that with respect to BEI, this
indemnification obligation shall be limited to Pre-Initial Closing Covenants of
the Sellers, (iii) any Excluded Asset or any Excluded Liability, including,
without limitation, any claims for Schedule 10.11 Matters with respect to
periods on or before the Initial Closing Date, (iv) any Liability arising from
use by the Buyer or its subsidiaries, in accordance with the terms of this
Agreement, of the Provider Marks on the back of any prepaid cards ordered on or
before the Initial Closing Date and (v) attributable to any Hired Employee
resulting from or based upon (A) any employment-related liability (statutory or
otherwise) with respect to employment or termination of employment on or prior
to the Initial Closing Date, (B) any liability under COBRA, whether arising
prior to, on or after the Initial Closing Date or (C) any liability under WARN,
provided that the Sellers' or Subsidiaries' conduct violated WARN or caused a
violation thereunder, and further provided that the liability was not caused by
the breach of WARN by the Buyer or DR Partnership after the Initial Closing Date
(assuming the Sellers' and the Subsidiaries' compliance with Section 7.3(b)
hereof).
10.3 Indemnification by BEI, the Buyer and DR Partnership. Subject to
the limitations set forth in this Section 10, following the Initial Closing, (a)
BEI will indemnify, defend and hold harmless the Sellers from and against all
Losses of or to the Sellers resulting from or arising out of (i) any breach of
any representation or warranty made by the Buyer or DR Partnership in this
Agreement, and (ii) any breach of any Pre-Initial Closing Covenants of the Buyer
or DR Partnership in this Agreement; (b) the Buyer will indemnify, defend and
hold harmless the Sellers from and against all Losses of or to the Sellers
resulting from or arising out of any breach of any Post-Initial Closing
Covenants of the Buyer in this Agreement; and (c) DR Partnership will indemnify,
defend and hold harmless the Sellers from and against all Losses of or to the
Sellers resulting from or arising out of any breach of any Post-Initial Closing
Covenants of DR Partnership in this Agreement.
10.4 Third Party Claims. Promptly after the receipt by any party of
notice of any claim, demand, investigation, action, suit or proceeding by any
Person who is not a party to this Agreement (collectively, an "Action"), which
Action is subject to indemnification under this Agreement, such party (the
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"Indemnified Party") will give written notice to the party from whom
indemnification is claimed (the "Indemnifying Party"); provided, however, that
the failure of the Indemnified Party to give prompt notice to the Indemnifying
Party shall not release the Indemnifying Party of its indemnification
obligations hereunder, except to the extent, and then only to the extent, the
Indemnifying Party shall have been materially prejudiced by such failure. The
Indemnified Party will be entitled, at the sole expense and liability of the
Indemnifying Party, to exercise full control of the defense, compromise or
settlement of any such Action unless the Indemnifying Party, within a reasonable
time after the giving of such notice by the Indemnified Party, (a) notifies the
Indemnified Party in writing of the Indemnifying Party's intention to assume
such defense and (b) retains legal counsel reasonably satisfactory to the
Indemnified Party to conduct the defense of such Action. The other party will
cooperate with the party assuming the defense, compromise or settlement of any
such Action in accordance with this Agreement in any manner that such party
reasonably may request. If the Indemnifying Party so assumes the defense of any
such Action, the Indemnified Party will have the right to employ separate
counsel and to participate in (but not control) the defense, compromise or
settlement of the Action, but the fees and expenses of such counsel will be at
the expense of the Indemnified Party; provided that the Indemnifying Party shall
be responsible for the fees and expenses of co-counsel for the Indemnified Party
to the extent the Indemnified Party is advised, by its counsel, that either (x)
the counsel the Indemnifying Party has selected has a conflict of interest with
respect to the matter asserted which has not been waived by the relevant
parties, or (y) there are legal defenses available to the Indemnified Party that
are materially different from or additional to those available to the
Indemnifying Party. No Indemnified Party will settle or compromise any such
Action for which it is entitled to indemnification under this Agreement without
the prior written consent of the Indemnifying Party, unless the Indemnifying
Party has failed, after reasonable notice, to undertake control of such Action
in the manner provided in this Section 10.4. No Indemnifying Party will settle
or compromise any such Action unless (x) (i) such compromise or settlement is on
exclusively monetary terms and shall be paid entirely by the Indemnifying Party,
(ii) the Indemnified Party receives an unconditional release in such compromise
or settlement from all liability in respect of such Claim, and (iii) such
settlement or compromise does not materially and adversely impair the ability of
the Indemnified Party to conduct their respective businesses, and does not
contain any admission of wrongdoing on the part of any of the Indemnified
Parties or (y) in the case of any Action relating to the Indemnified Party's
liability for any Tax, if the effect of such settlement could have an adverse
Tax impact on the Indemnified Party, unless the Indemnified Party consents in
writing to such compromise or settlement.
10.5 Limitations on Indemnification - Sellers and ST. The Sellers and
ST will not be liable for indemnification arising under Section 10.2 for any
Losses of or to BEI, the Buyer, DR Partnership or any other Person entitled to
indemnification from the Sellers and ST unless the amount of such Losses for
which the Sellers and ST would, but for the provisions of this Section 10.5, be
liable exceeds, on an aggregate basis, $500,000 (the "Deductible"), after which
ST and the Sellers will be liable for any and all such Losses in excess of such
amount, which amount will be due and payable within fifteen (15) days after the
later of (a) the date ST or the Sellers receives a statement therefore and
acknowledges their liability and (b) the date an Action with respect to such
Losses is settled or decided in accordance with Section 10.4. The maximum
aggregate amount that ST and the Sellers will be required to pay for
indemnification arising under Section 10.2 in respect of all claims by BEI, the
Buyer, DR Partnership or any other Person entitled to indemnification from the
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Sellers and ST is Twenty Million U.S. Dollars ($20,000,000) (the "Cap");
provided, however, that neither the Deductible or Cap shall apply to Losses
(including Uncapped Losses) related to (u) fraud or intentional
misrepresentation by ST or the Sellers, (v) the breach of the representations
and warranties contained in Section 5.17, (w) the breach of the Sellers'
Perpetual Representations, (x) the breach of any Post-Initial Closing Covenants
of ST or the Sellers or the Subsidiaries listed on Schedule 10.5 (the "Schedule
10.5 Covenants"), (y) Excluded Liabilities, or (z) the Schedule 10.11 Matters
with respect to Liabilities for periods on or before the Initial Closing Date
(Losses related to Claims arising under clauses (u), (v), (w), (x), (y) or (z)
are referred to herein as the "Uncapped Losses"; provided, that for purposes of
clauses (v), (x) (other than with respect to Losses related to a breach of any
Post-Closing Covenant in Section 7.10 hereof), (y) and (z), none of ST, the
Sellers or Subsidiaries shall be liable for any incidental, consequential (lost
profits or other), exemplary, special or punitive damages (except to the extent
actually paid to a third party not affiliated with the Buyer or BEI) related
thereto. ST's and the Sellers' obligations to pay any claims with respect to
Losses (including Uncapped Losses) under Section 10.2 and Section 10.11 hereof
shall be secured by the Permitted Investments in the Secured Account pursuant to
and in accordance with the Account Control Agreement and the Pledge Agreement.
Notwithstanding the foregoing, if BEI, the Buyer and DR Partnership consummate
the transactions contemplated by this Agreement and the Transaction Documents
notwithstanding the failure of a condition set forth in Section 8.2(a) or
Section 8.2(c) solely due to the occurrence of acts of God, fire, floods,
earthquakes, hurricanes, tornados or other natural disasters (collectively,
"Extraordinary Events") resulting in a Material Adverse Effect on the Business,
none of BEI, the Buyer or DR Partnership may seek indemnification for Losses
relating to such Extraordinary Events under this Section 10.5.
10.6 Limitations on Indemnification - BEI, the Buyer and DR
Partnership. None of BEI, the Buyer and DR Partnership will be liable for
indemnification arising under Section 10.3 for any Losses of or to the Sellers
or any other person entitled to indemnification from the BEI, the Buyer or DR
Partnership, as the case may be, unless the amount of such Losses for which BEI,
the Buyer or DR Partnership would, but for the provisions of this Section 10.6,
be liable exceeds, on an aggregate basis, the Deductible, after which the Buyer
and DR Partnership (as the case may be) will be liable for any and all such
Losses in excess of such amount, which amount will be due and payable within
fifteen (15) days after the later of (a) the date the Buyer and DR Partnership
receives a statement therefor and acknowledges its liability and (b) the date an
Action with respect to such Losses is settled or decided in accordance with
Section 10.4. The maximum aggregate amount that the Buyer and DR Partnership
will be required to pay for indemnification arising under Section 10.3 in
respect of all claims by the Sellers or any other person entitled to
indemnification from the BEI, the Buyer or DR Partnership is Twenty Million U.S.
Dollars ($20,000,000) (the "Buyer Cap"); provided, however, that neither the
Deductible nor Cap shall apply to Losses (including Buyer Uncapped Losses)
related to (x) fraud or intentional misrepresentation by the Buyer or DR
Partnership, (y) the breach of any of the Buyer's Perpetual Representations or
(z) the breach of any Post-Initial Closing Covenants of the Buyer or DR
Partnership listed on Schedule 10.6 (the "Schedule 10.6 Covenants"); provided,
further, however, that, for purposes of this clause (z), none of BEI, the Buyer
or DR Partnership will be liable for any incidental, consequential (lost profits
or other), exemplary, special, or punitive damages in connection with any such
Losses in respect of the Schedule 10.6 Covenants (Losses related to Claims
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arising under clauses (x), (y) and (z) are referred to herein as the "Buyer
Uncapped Losses").
10.7 Sole Remedy; Additional Provisions Relating to Indemnification.
(a) Each party acknowledges and agrees that, should the Initial
Closing occur, its sole and exclusive remedy against the other with respect to
any breach of representation, warranty, covenant, agreement or obligation will
be pursuant to the indemnification provisions set forth in this Section 10,
except for claims relating to fraud, intentional misrepresentation or Excluded
Liabilities.
(b) Notwithstanding anything in this Agreement to the contrary, for
purposes of this Section 10, in determining the amount of Losses arising as the
result of a breach of a representation or warranty, no effect shall be given to
any qualification as to materiality or Material Adverse Effect.
(c) The right to indemnification or any other remedy based on
representations, warranties, covenants and agreements in this Agreement shall
not be affected by any investigation conducted at any time, or any knowledge
acquired (or capable of being acquired) at any time, whether before or after the
execution and delivery of this Agreement or the Initial Closing Date (or with
respect to the Dialaround Assets, the Dialaround Closing Date), with respect to
the accuracy or inaccuracy of, or compliance with, any such representation,
warranty covenant or agreement. The waiver of any condition based on the
accuracy of any such representation or warranty, or on the performance of or
compliance with any such covenant or agreements, will not affect the right to
indemnification or any other remedy based on such representations, warranties,
covenants and agreements, except as provided in the last sentence of Section
10.5.
10.8 Right of Offset. In the event the Indemnifying Party is
obligated to make any payments to the Indemnified Party under this Agreement,
the Indemnified Party may offset the sum due and owing to the Indemnified Party
by the Indemnifying Party against (a) any payment the Indemnified Party is
obligated to make to the Indemnifying Party, including amounts payable pursuant
to Section 10.10 and (b) any distributions due to the Indemnifying Party under
the Buyer Operating Agreement. For purposes of the foregoing, (i) each of BEI,
the Buyer and the DR Partnership may offset any amounts payable by it to any of
the Sellers or ST against any payments that any of the Sellers or ST are
obligated to make as an Indemnifying Party to any of BEI, the Buyer or the DR
Partnership, respectively, and (ii) each of Sellers and ST may offset any
amounts payable by it or him to any of BEI, the Buyer or the DR Partnership
against any payments that any of BEI, the Buyer or the DR Partnership,
respectively, are obligated to make as an Indemnifying Party to ST or any of the
Sellers. With respect to claims for Losses for which ST is an Indemnifying
Party, the Buyer agrees, to the extent permitted pursuant to this Section 10.8,
to offset such Losses against any payments it then currently is obligated to
make to ST and ST agrees to such offset.
10.9 Tax Treatment of Indemnity Payments. Sellers and Buyer agree to
treat any indemnity payment made pursuant to this Section 10 as an adjustment to
the Purchase Price for all Tax purposes, unless otherwise required by applicable
Law. If, notwithstanding the treatment required by the preceding sentence, any
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indemnification payment is determined to be taxable to the party receiving such
payment by any Governmental Authority, the paying party shall also indemnify the
party receiving such payment for any Taxes incurred by reason of the receipt of
such payment and any other Losses incurred by the party receiving such payment
in connection with such Taxes (or any asserted deficiency, claim, demand,
action, suit, proceeding, judgment or assessment, including the defense or
settlement thereof, relating to such Taxes).
10.10 Litigation Expense Reimbursement
(a) Subject to limitations in this Section 10.10, Section 2.9 and
Section 10.8, following the Initial Closing, the Buyer will, for a period ending
on the third anniversary of the Initial Closing Date (the "Litigation
Reimbursement Period), in each twelve month period ending on the annual
anniversary of the Initial Closing Date during the Litigation Reimbursement
Period (the "Annual Reimbursement Period) reimburse ST and the Sellers up to an
aggregate amount of $500,000 of the Losses of ST and the Sellers, as the case
may be, resulting from or arising out of the Excluded Liabilities described in
clause (e) of Schedule 2.4, including any matters set forth on Section 5.16 of
the Disclosure Schedule, but excluding any matters which should have been set
forth on Section 5.16 of the Disclosure Schedules (the "Reimbursable Amounts);
provided, however, that the Buyer's obligation for reimbursement under this
Section shall not exceed $500,000 in any Annual Reimbursement Period unless
amounts have been carried over from a prior Annual Reimbursement Period in
accordance with this Section. To the extent that Reimbursable Amounts are less
than $500,000 in either the first or second Annual Reimbursement Period, the
unused amount of the $500,000 for each such period shall be carried over to the
succeeding Annual Reimbursement Periods but in no event shall the Buyer pay more
than $1,500,000 in the aggregate under this Section 10.10. Notwithstanding the
foregoing, this Section shall not in any way constitute a release or waiver of
the Sellers' obligations pursuant to this Agreement, including Section 2.5 and
Section 10.
(b) Promptly after the receipt by any party of notice of any Action,
which Action is subject to reimbursement pursuant to this Section 10.10
(collectively, a "Reimbursable Action"), the Seller (the "Reimbursed Party")
will give written notice to Buyer and keep the Buyer fully apprised of
developments in the Reimbursable Action so that the Buyer may be fully informed
of the progress of any such claim.
(c) Unless otherwise agreed in writing by the Buyer, the Reimbursed
Party shall be responsible for and pay all fees and expenses relating to the
Reimbursable Action; provided, however, that, no later than thirty (30) days
following the end of each Annual Reimbursement Period, the Buyer shall reimburse
the Reimbursed Party for all Reimbursable Amounts up to the Annual Reimbursement
Amount incurred in the most recently ended Annual Reimbursement Period, less any
amounts paid or that became payable by the Buyer pursuant to Section 2.9 or
amounts offset by the Buyer.
10.11 Indemnification For Schedule 10.11 Matters. Without limiting in
any way the obligations of ST and the Sellers pursuant to Section 10.2 or
otherwise with respect to Excluded Liabilities, ST and the Sellers jointly and
severally will indemnify, defend and hold harmless the Buyer, DR Partnership and
BEI from and against all Losses of or to the Buyer or any such other indemnified
Person resulting from or arising out of any Action relating to a Schedule 10.11
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Matter to the extent such Action relates to (i) a period on or before the
Initial Closing Date and/or (ii) the period ending on or before the second
anniversary of the Initial Closing Date. The Buyer may in good faith request ST
to pay a Loss relating to a Schedule 10.11 Matter. If ST asserts that there is a
good faith defense to the Action, the Buyer may either (i) permit the Sellers
and ST to defend the Action; or (ii) have the right, but not the obligation, to
elect to exercise full control of the defense, compromise or settlement
("Control") of any such Action provided that BEI takes such action because (x)
there is no legitimate defense or (y) BEI in good faith believes that it is in
the best interests of the Company to do so. BEI on behalf of the Buyer or any
such other indemnified Person shall not settle or compromise such Action unless
(x) ST and the Sellers receive an unconditional release in such compromise or
settlement from all Liability in respect of such Action, and (y) such settlement
or compromise does not contain any admission of wrongdoing on the part of any of
ST and the Sellers. The Buyer shall provide prompt notice of any such Schedule
10.11 Matter to ST and the Sellers and shall have the right to assert control at
any time during the pendency of such Action. For purposes of this Agreement,
"Schedule 10.11 Matters" are those matters described on Schedule 10.11.
11. TAX MATTERS.
11.1 Transfer Taxes. The Sellers shall be liable for and shall pay,
or shall cause to be paid (and the Sellers shall indemnify and hold the Buyer
harmless from and against) when due, any Transfer Taxes due as a result of the
transactions provided herein. The Sellers agree to file, or cause to be filed,
at their own expense, all necessary documentation (including, but not limited
to, all Tax Returns) with respect to all such Transfer Taxes in a timely manner
and, if required by applicable Law, the Buyer and DR Partnership, as applicable,
shall join in the execution of any such Tax Returns and other documentation. The
parties agree, upon request, to use their reasonable efforts to obtain any
certificate or other document from any Governmental Authority or any other
Person as may be necessary to mitigate, reduce or eliminate any Transfer Taxes.
11.2 Cooperation on Tax Matters. The Buyer and DR Partnership, on the
one hand, and the Sellers, on the other hand, agree to furnish or cause to be
furnished to the other, upon request, as promptly as practicable, such
information and assistance relating to the Purchased Assets, including, without
limitation, access to Books and Records, including making employees available on
a mutually convenient basis to provide additional information and explanations
of any material provided relating to the Purchased Assets as is reasonably
necessary for the filing of all Tax Returns by the Buyer and DR Partnership or
the Sellers and the Subsidiaries, the making of any election relating to Taxes,
the preparation for any audit by any taxing authority, and the prosecution or
defense of any Claim, suit or proceeding relating to any adjustment or proposed
adjustment with respect to Taxes or any appraisal of the Purchased Assets. At
the Initial Closing, the Sellers shall deliver to the Buyer all Books and
Records with respect to Taxes pertaining to the Purchased Assets, which delivery
shall not affect or have any bearing on the responsibilities or liabilities of
the parties hereto for Taxes, which shall be as otherwise set forth in this
Agreement. The Buyer shall retain all such Books and Records for six (6) years
from the Initial Closing and shall abide by all record retention agreements
entered into with any taxing authority, and thereafter may dispose of such Books
and Records with the prior written consent of ST (on behalf of Sellers), and
Sellers' obligation to cooperate (as described in this Section 11.2) shall
apply. The Buyer and DR Partnership, the Sellers and the Subsidiaries shall
cooperate fully with each other in the conduct of any audit, litigation or other
proceeding relating to Taxes involving the Purchased Assets and, except and to
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the extent related to an Assumed Liability or with respect to any period
beginning after the Working Capital Calculation Date, the Sellers shall control
any proposed or actual audit, examination, adjustment, claim, assessment, or
demand concerning the amount of Taxes (including for this purpose, refunds)
related to the Purchased Assets with respect to any period ending on or before
the Working Capital Calculation Date. The Buyer and DR Partnership, the Sellers
and the Subsidiaries further agree, upon request, to use their best efforts to
obtain any certificate or other document from any Governmental Authority or any
other Person as may be necessary to mitigate, reduce or eliminate any Tax that
could be imposed (including, but not limited to, with respect to the
transactions contemplated hereby) or a refund thereof. Notwithstanding anything
to the contrary in this Agreement, this Section 11.2 shall survive the Closing
indefinitely.
11.3 Tax Treatment of Transactions. The parties agree to treat for
federal income tax purposes the transactions contemplated herein as a part-sale
and part-contribution as of the formation of the Buyer and DR Partnership
whereby (i) the Non-DR Entities and DR Entities sell the BEI Purchased Assets
and the Purchased DR Assets, respectively, to the Buyer in exchange for the
Purchase Price and the assumption by Buyer of the Assumed BEI Liabilities and
the Assumed DR Liabilities and (ii) ST Finance contributes the STi Purchased
Assets to the Buyer in exchange for a 25% membership interest in the Buyer and
the assumption by Buyer of the STi Assumed Liabilities. The parties agree that
on the Initial Closing Date the DR Partnership shall be disregarded as an entity
separate from the Buyer for federal income tax purposes. No party shall take any
action inconsistent with the tax treatment described above, unless otherwise
required by applicable law.
12. MISCELLANEOUS.
12.1 Parties Obligated and Benefited.
(a) Subject to the limitations set forth below, this Agreement will
be binding upon the parties and their respective permitted assigns and
successors in interest and will inure solely to the benefit of the parties and
their respective permitted assigns and successors in interest, and, except for
the provisions of Section 10 relating to Indemnified Parties, no other Person
will be entitled to any of the benefits conferred by this Agreement. Without the
prior written consent of the other party, no party to this Agreement will
assign, directly or indirectly, including by transferring the equity interest in
a contracting party, any of its rights under this Agreement or delegate any of
its duties under this Agreement; provided, however, that either party may assign
its rights to an Affiliate so long as the assigning party continues to be bound
by the terms of this Agreement and is able to meet each obligation hereunder as
it becomes due, whether financial or otherwise.
(b) DR Partnership shall have no obligations with respect to any
covenants herein until such time as DR Partnership becomes a party to this
Agreement by the execution of a joinder to this Agreement, pursuant to which it
agrees to be bound by the terms hereof retroactive as of the date of the
execution by both partners of the DR Partnership Agreement.
12.2 Notices. Any notice, request, demand, waiver or other
communication required or permitted to be given under this Agreement will be in
writing and will be deemed to have been duly given only if delivered in person
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or by first class, prepaid, certified mail, or sent by courier or, if receipt is
confirmed, by telecopier:
To the Buyer at: STi Prepaid, LLC
c/o Leucadia National Corporation
000 Xxxx Xxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxxx
Fax: (000) 000-0000
With a copy to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxxx, Esq.
Fax: (000) 000-0000
To Sellers at:c/o Xxxxx Xxxxxx
00 Xxxxxxxxx Xxxxx
Xxxx Xxxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxx
Fax: _______________________
With a copy to:
Xxxxxxx, Xxxxxxxxx LLP
0 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
Xxxx X. Xxxxxxx, Esq.
Fax: (000) 000-0000
Any party may change the address to which notices are required to be sent by
giving notice of such change in the manner provided in this Section 12.2. All
notices will be deemed to have been received on the date of actual receipt.
12.3 Waiver. This Agreement or any of its provisions may not be
waived except in writing. The failure of any party to enforce any right arising
under this Agreement on one or more occasions will not operate as a waiver of
that or any other right on that or any other occasion.
12.4 Captions. The captions of this Agreement are for convenience
only and do not constitute a part of this Agreement.
12.5 Governing Law. This Agreement and the rights of the parties
under it will be governed by and construed in all respects in accordance with
the substantive laws of the State of New York, without regard to the conflicts
of laws rules of New York.
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12.6 Terms. Terms used with initial capital letters will have the
meanings specified, applicable to both singular and plural forms, for all
purposes of this Agreement. The word "include" and derivatives of that word are
used in this Agreement in an illustrative sense rather than limiting sense. For
purposes of this Agreement, the words "hereof," "herein," "hereby" and other
words of similar import refer to this Agreement as a whole unless otherwise
indicated. "$" shall mean the lawful currency of the United States of America.
Whenever the singular is used herein, the same shall include the plural, and
whenever the plural is used herein, the same shall include the singular, where
appropriate. All terms defined herein in the singular shall have the same
meaning when used in the plural; all terms defined herein in the plural shall
have the same meaning when used in the singular.
12.7 Rights Cumulative; Remedies. All rights and remedies of each of
the parties under this Agreement will be cumulative, and the exercise of one or
more rights or remedies will not preclude the exercise of any other right or
remedy available under this Agreement or applicable law. In case any one or more
of the covenants and/or agreements set forth in this Agreement, shall have been
breached by any party hereto, the party or parties entitled to the benefit of
such covenants or agreements may, except as may otherwise be expressly provided
in this Agreement, proceed to protect and enforce their rights either by suit in
equity and/or by action at law, including, but not limited to, an action for
damages as a result of any such breach in accordance with the provisions of this
Agreement and/or an action for specific performance of any such covenant or
agreement contained in this Agreement.
12.8 Counterparts. This Agreement may be executed in counterparts,
each of which will be deemed an original. This Agreement will become binding
when one or more counterparts, individually or taken together, bear the
signatures of all parties to this Agreement. Delivery of an executed signature
page of this Agreement by facsimile or e-mail transmission will constitute
effective and binding execution and delivery of this Agreement.
12.9 Entire Agreement. This Agreement (including the Disclosure
Schedules referred to in this Agreement, which are incorporated in and
constitute a part of this Agreement), the Transaction Documents and the
Confidentiality Agreement contain the entire agreement of the parties and
supersede all prior oral or written agreements and understandings with respect
to the subject matter. In executing this Agreement, no party has relied on any
statement, representations or warranty not expressly set forth in this
Agreement.
12.10 Severability. Any term or provision of this Agreement which is
invalid or unenforceable will be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining rights
of the Person intended to be benefited by such provision or any other provisions
of this Agreement.
12.11 Construction. This Agreement has been negotiated by the Buyer
and the Sellers and their respective legal counsel, and legal or equitable
principles that might require the construction of this Agreement or any
provision of this Agreement against the party drafting this Agreement will not
apply in any construction or interpretation of this Agreement.
12.12 Expenses. Except as otherwise expressly provided in this
Agreement, each party will pay all of its expenses, including attorneys' and
accountants' fees, in connection with the negotiation of this Agreement, the
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performance of its obligations and the consummation of the transactions
contemplated by this Agreement.
12.13 Commercially Reasonable Efforts. For purposes of this Agreement,
unless a different standard is expressly provided with respect to any particular
matter, any requirement herein that a party use "commercially reasonable
efforts" will not be deemed to require that party to undertake extraordinary
measures, including the initiation or prosecution of legal proceedings or the
payment of amounts in excess of normal and usual filing fees and processing
fees, if any.
12.14 Waiver of Jury Trial. EACH OF THE PARTIES HERETO WAIVES ITS
RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT.
12.15 Alternate Dispute Resolution. Any dispute, claim or controversy
arising out of or relating to (i) this Agreement or to the breach of this
Agreement, (ii) the indemnification obligations of any party, or (iii) the
termination, enforcement, interpretation or validity of this Agreement,
including the determination of the scope or applicability of this agreement to
arbitrate, shall be finally determined by arbitration in New York City before a
single arbitrator (the "Sole Arbitrator"). The arbitration shall be administered
by JAMS pursuant to its Comprehensive Arbitration Rules (the "Rules"). The
selection of the Sole Arbitrator shall be made pursuant to Rule 15 of the Rules.
Each party shall be entitled, in its discretion, to the deposition of at least
three fact witnesses and any expert witness designated to testify at the
hearing, and the parties may seek additional depositions or other discovery.. No
deposition shall exceed two days unless the Sole Arbitrator permits otherwise
for good cause. Judgment on any award may be entered in any court having
jurisdiction. This clause shall not preclude parties from seeking provisional
remedies in aid of arbitration from a New York state or federal court sitting in
the City of New York, Borough of Manhattan. The Sole Arbitrator shall, in the
award, direct the party that does not prevail to pay the costs of the
arbitration, including the fees of the arbitrator and the reasonable attorneys'
fees of the prevailing party. In the event that there are multiple issues
presented, the Sole Arbitrator shall allocate the aforesaid costs between or
among the parties.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
XXXXX XXXXXX
By:
----------------------------
Name: Xxxxx Xxxxxx
TELCO GROUP, INC.
By:
----------------------------
Name: Xxxxx Xxxxxx
Title:
STI PHONECARD INC.
By:
----------------------------
Name: Xxxxx Xxxxxx
Title:
DIALAROUND ENTERPRISES INC.
By:
----------------------------
Name: Xxxxx Xxxxxx
Title:
STI MOBILE INC.
By:
----------------------------
Name: Xxxxx Xxxxxx
Title:
PHONECARD ENTERPRISES INC.
By:
----------------------------
Name: Xxxxx Xxxxxx
Title:
VOIP ENTERPRISES INC.
By:
----------------------------
Name: Xxxxx Xxxxxx
Title:
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STI PCS, LLC
By:
----------------------------
Name: Xxxxx Xxxxxx
Title:
TAWFIK & PARTNERS, SNC
By:
----------------------------
Name: Xxxxx Xxxxxx
Title:
ST FINANCE, LLC
By:
----------------------------
Name: Xxxxx Xxxxxx
Title:
STI PREPAID & CO.
By:
----------------------------
Name: Xxxxx Xxxxxx
Title:
STI PREPAID DISTRIBUTORS & CO.
By:
----------------------------
Name: Xxxxx Xxxxxx
Title:
STI PREPAID, LLC
By:
----------------------------
Name: Xxxxxx X. Orlando
Title: President
XXXXXXX ENTERPRISES, INC.
By:
----------------------------
Name: Xxxxxx X. Orlando
Title: Vice President
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