Exhibit 10.1
ASSET ACQUISITION AGREEMENT
THIS AGREEMENT, dated December 5, 2001, by and between DEVISE
ASSOCIATES, INC. ("Seller") and EMTEC, INC. ("Buyer").
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase
from Seller, substantially all of the assets (other than accounts receivable)
comprising the business of information technology consulting and managed
services (the "Business").
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual agreements herein contained, the parties hereto do hereby agree as
follows:
1. Transfer of Assets.
(a) On the terms and subject to the conditions herein set forth, the
Seller shall sell, transfer, convey, assign and deliver to the Buyer, and the
Buyer shall acquire and accept all right, title and interest in and to all of
the assets of Seller used and useful in the Business ("Business Assets") other
than those assets set forth in paragraph 1(b) hereof (the "Excluded Assets";
Business Assets other than Excluded Assets are referred to herein as "Purchased
Assets"). The Purchased Assets include, but are not limited to:
(i) the Business customer list, Business customer records and all
other manifestations of general Business goodwill ("Goodwill");
(ii) all not yet completed customer contracts (the "Customer
Contracts");
(iii) Lease, dated April 27, 1998, by Seller, as tenant, and
Vandergrand Properties Co., L.P., as landlord, with respect to the 12th floor of
000 Xxxxx Xxxxxx, XX, XX (the "Third Avenue Lease");
(iv) furniture, fixtures, leasehold improvements and equipment
owned by Seller and located at Seller's offices on the 12th floor at 000 Xxxxx
Xxxxxx, XX, XX (collectively, the "Equipment"); and
(v) the contracts listed on Schedule 1(a)(v) annexed hereto (the
"Assumed Other Contracts");
(vi) prepaid expenses with respect to Novell Platinum Renewal and
the Citrix Partnership fee (the "Prepaid Expenses").
(b) the Excluded Assets are:
(i) any accounts or loans receivable outstanding on the Closing
Date (as defined in Section 11 hereof); accounts receivable are referred to
herein as "Receivables";
(ii) rights with respect to services rendered other than under a
prior invoice ("WIP") extant on the Closing Date;
(iii) cash on hand and cash equivalents (including letters of
credit) existing on the Closing Date:
(iv) all prepaid expenses other than the Prepaid Expenses,
including without limitation any deposits or other collateral securing the Third
Avenue Lease and prepaid insurance premiums;
(v) all contracts other than Customer Contracts, the Assumed Other
Contracts and the Third Avenue Lease (as defined in paragraph 1(a)(iii) hereof),
including all labor and employment contracts and equipment leases; contracts
included in this paragraph 1(b)(v) are referred to herein as "Other Business
Contracts";
(vi) equipment leases;
(vii) parts, supplies and inventory;
(viii) real estate leases other than the Third Avenue Lease;
(ix) the furniture, fixtures, leasehold improvements and equipment
located at Seller's offices on the 8th floor at 000 Xxxxx Xxxxxx, XX, XX;
(x) the trademark and tradenames that in any way include the name
"McLeodUSA" and the "star" logo, and the goodwill associated with them; and
(xi) accounting and tax books, record and minute books and stock
transfer books; provided, however, that Seller is making same reasonably
available to Buyer for proper business purposes.
(c) The transfer of the Purchased Assets shall be effected by documents
in such form as Buyer and Seller shall reasonably agree.
2. Consideration for the Purchased Assets; Assumption of Certain Liabilities.
(a) Cash Consideration. On the Closing Date Buyer shall pay to Escrow
Agent (as defined in paragraph 6(c) hereof) $365,589 by certified check.
(b) Allocation of Consideration. The consideration for the Purchased
Assets shall be allocated as follows:
Goodwill $200,000
Equipment $162,758
Prepaid Expenses $ 2,831
(c) Assumption of Certain of Seller's Liabilities. On the Closing Date
Buyer shall assume Seller's obligations under the Customer Contracts listed on
Schedule 3(i) annexed hereto, the Assumed Other Contracts and the Third Avenue
Lease; the obligations assumed under this paragraph 2(c) are referred to herein
as the "Assumed Obligations". Except as expressly set forth in this paragraph
2(c), Buyer is not assuming any of Seller's liabilities.
(d) Tax Obligation on Asset Acquisition. Buyer shall be responsible for
any sales, use or similar tax obligations associated with the purchase and/or
sale of the Purchased Assets, other than any of Seller's income tax obligations.
3. Representations and Warranties of Seller. Seller hereby represents, warrants
and agrees as follows:
(a) Organization and Qualification; Corporate Action. The Seller is a
corporation duly organized and validly existing under the laws of New York and
has all requisite power to own or lease its properties and to carry on its
business as now being conducted. All corporate action necessary for the
authorization and performance on the part of Seller of this Agreement and the
transactions contemplated hereby has been taken, and this Agreement represents a
valid and binding obligation of Seller in accordance with its terms.
(b) No Conflict. The execution, delivery and performance by the Seller
of this Agreement and the consummation of the transactions contemplated hereby
will not, in any material respect, violate, be in conflict with, result in the
breach of or constitute (with due notice or lapse of time or both), a default
under (i) the certificate of incorporation or by-laws of the Seller (ii) any
law, rule, court order, consent decree or regulation applicable to the Seller or
(iii) any agreement or other instrument of whatever nature to which the Seller
is a party or by which it is bound, except as specifically noted on the
Schedules annexed to this Agreement with respect to (A) certain third party
notices or (B) consents on assignments.
(c) Compliance with Law. The business of the Seller has been in the
past and is
presently conducted in all material respects in accordance with all
applicable laws, regulations and ordinances pertaining thereto (including,
without limitation, all federal, state and local environmental laws). No
submissions must be made with, or permission obtained from, any state or local
authority in order to proceed with this transaction.
(d) Financial Statements. Seller has heretofore delivered to Buyer, and
initialed for identification purposes, its balance sheets and statements of
operations for the years ended December 31, 1999 and 2000 (collectively, the
"Financial Statements").The Financial Statements accurately reflect, in all
material respects, the financial position and results of operations of the
Seller, as of their respective dates, and have been prepared, in all material
respects, on a consistent basis, in accordance with generally accepted
accounting principles.
(e) Taxes. Seller has filed all tax returns required to be filed by it
on or prior to the date hereof by all taxing authorities to which it or its
properties are subject and has paid all taxes which have become due pursuant to
such returns and pursuant to any assessment which has been received by it. Such
returns are true and correct. Seller owes no sales or compensating use taxes.
(f) Change in Financial Status. Other than in the ordinary course of
business, since October 31, 2001 Seller has not (i) disposed of any Equipment
used in the Business; (ii) transferred or otherwise terminated any Customer
Contracts; (iii) disposed of customer records or other manifestations of general
goodwill used in the Business; (iv) mortgaged, pledged or subjected to lien,
charge or any other Encumbrance (as defined in paragraph 3(g) hereof) any of the
Purchased Assets, tangible or intangible (other than pursuant to that certain
Credit Agreement dated as of May 31, 2000, as amended (the "Credit Agreement"),
between McLeodUSA Incorporated ("McLeodUSA"), the Lenders thereunder and The
Chase Manhattan Bank, as Agent); (v) waived any rights of substantial value;
(vi) amended any Customer Contract; (vii) entered into any transactions or
(viii) suffered any occurrence which has or may have a materially adverse affect
upon the Business' financial status.
(g) Good Title. Seller has good title to each of the assets comprising
the Purchased Assets, free and clear of all liens, claims, equities or
encumbrances of any type whatsoever (any liens, claims, equities or encumbrances
of any type whatsoever are sometimes referred to as "Encumbrances") other than
Encumbrances under the Credit Agreement. The version of the Credit Agreement
provided by Seller's counsel to Buyer's counsel by email on November 20, 2001 is
a true, accurate and complete copy of the Credit Agreement. On the Closing Date
Buyer will receive good title to each of the assets comprising the Purchased
Assets, free and clear of all Encumbrances.
(h) Goodwill. Simultaneously with the execution hereof, Seller is
making available to Buyer a complete copy of the Seller's customer records
(including customer list). None of the manifestations of the Goodwill infringes
or otherwise conflicts in any material respect with the proprietary rights of
others. Schedule 3(h) annexed hereto is a true accurate and complete list of
Seller's customers.
(i) Customer Contracts. Schedule 3(i) annexed hereto is in all material
respects a true, accurate and complete list of all of the Customer Contracts.
Also set forth on Schedule 3(i) are: (i) a list of Receivables as of the date
hereof, aged as of the date hereof and broken down to show earned revenue and
unearned revenue with respect to each such Receivable as of the date hereof,
(ii) a list of WIP extant as of the date hereof and (iii) a list of retainers
paid to Seller under the Customer Contracts for services to be performed broken
down to show earned revenue and unearned revenue with respect to each such
retainer as of the date hereof. Seller has heretofore provided to Buyer complete
and accurate copies of each of the Customer Contracts which is written and a
written description detailing all of the salient terms of each of
the Customer Contracts which is not written. Each of the Customer Contracts is
in full force and effect and constitutes a legal, valid and binding obligation
of the respective parties thereto, and is enforceable in accordance with its
terms. There has been no default, in any material respect, under any of the
Customer Contracts by Seller and, to the best of Seller's knowledge, there have
been no such defaults thereunder by the customer. Except as specifically noted
on Schedule 3(i), the assignment of Seller's rights in the Customer Contracts
does not require the consent or approval of any of the parties to such
agreements.
(j) Assumed Other Contracts; Other Business Contracts. Each of the
Assumed Other Contracts is in full force and effect and constitutes a legal,
valid and binding obligation of the respective parties thereto, and is
enforceable in accordance with its terms. There has been no default, in any
material respect, under any of the Assumed Other Contracts by Seller and, to the
best of Seller's knowledge, there have been no such defaults thereunder by the
other party thereto. Except as specifically noted on Schedule 1(a)(v), the
assignment of Seller's rights in the Assumed Other Contracts does not require
the consent or approval of any of the parties to such agreements. Seller has
heretofore provided to Buyer complete and accurate copies of each of the Assumed
Other Contracts which is written and a written description detailing all of the
salient terms of each of the Assumed Other Contracts which is not written.
Schedule 3(j) annexed hereto is a true, accurate and complete list of the Other
Business Contracts. Seller has heretofore provided to Buyer complete and
accurate copies of each of the Other Business Contracts which is written and a
written description detailing all of the salient terms of each of the Other
Business Contracts which is not written.
(k) Third Avenue Lease. Seller has heretofore provided to Buyer a
complete and accurate copy of the Third Avenue Lease. The Third Avenue Lease is
in full force and effect and constitutes a legal, valid and binding obligation
of the respective parties thereto, and is enforceable in accordance with its
terms. There has been no default by Seller under the Third Avenue Lease and, to
the best of Seller's knowledge, there has been no default thereunder by the
landlord.
(l) Equipment. Schedule 3(l) annexed hereto is in all material respects
a true and accurate list of all the Equipment. Upon consummation of the
transactions contemplated hereby, Buyer will possess all right, title and
interest in and to the Equipment free of all Encumbrances (including, without
limitation, any rights of the landlord under the Third Avenue Lease).
(m) Prepaid Expenses. Upon consummation of the transactions
contemplated hereby, Buyer will possess all right, title and interest in and to
the Prepaid Expenses free of all Encumbrances
(n) Litigation. Schedule 3(n) annexed hereto is a true, accurate and
complete list of all actions, suits, proceedings and counterclaims (whether or
not purportedly on behalf of the Seller) pending or, to the knowledge of Seller,
threatened against the Seller which involve the Purchased Assets or the
Business.
(o) No Broker's Fee. Seller is not a party to, or in any way obligated
under, any contract or outstanding claim for the payment of any broker's or
finder's fee in connection with the origin, negotiation, execution or
performance of this Agreement.
(p) Pension Plans, Etc. Except as set on Schedule 3(p), Seller is not a
party to any collective bargaining agreement or any pension, profit sharing or
employee welfare plans. Buyer will not incur any liability with respect to any
of the plans listed on Schedule 3(p) by reason of the consummation of the
transactions contemplated by this Agreement.
(q) Employees. Annexed hereto as Schedule 3(q) is a true and accurate
list of all employees ("Employees") whose primary duties are performed on behalf
of the Business; also
set forth on Schedule 3(q) are the Employees' respective positions, functions,
present rate of base compensation, incentive and bonus compensation paid in
respect of calendar year 2000 and anticipated incentive and bonus compensation
due to them for calendar 2001 through October 31, 2001. Seller has heretofore
provided to Buyer complete and accurate copies of each written employment
contract and a written description detailing all of the salient terms of
employment with respect to each Employee for whom it does not have a written
employment agreement. Seller has met or complied with all of its obligations in
all material respects under its agreements with its Employees.
4. Representations and Warranties of Buyer.
The Buyer hereby represents, warrants and agrees as follows:
(a) Organization and Qualification. The Buyer is a corporation duly
organized and validly existing under the laws of New Jersey and has all
requisite power to own or lease its properties and to carry on its business as
now being conducted.
(b) Corporate Action. All corporate action necessary for the
authorization and performance on the part of Buyer of this Agreement and the
transactions contemplated hereby has been taken, and this Agreement represents a
valid and binding obligation of Buyer in accordance with its terms.
(c) No Conflict. The execution, delivery and performance by the Buyer
of this Agreement and the consummation of the transactions contemplated hereby
will not, in any material respect, violate, be in conflict with, result in the
breach of or constitute (with due notice or lapse of time or both), a default
under (i) the certificate of incorporation or by-laws of the Buyer (ii) any law,
rule, court order, consent decree or regulation applicable to the Buyer or (iii)
any agreement or other instrument of whatever nature to which the Buyer is a
party or by which it is bound.
(d) No Broker's Fee. Buyer is not a party to, or in any way obligated
under, any contract or outstanding claim for the payment of any broker's or
finder's fee in connection with the origin, negotiation, execution or
performance of this Agreement.
(e) Funds Available. Buyer has and will have on the Closing Date
sufficient funds on hand to complete the transactions contemplated by this
Agreement.
5. Conditions.
(a) The obligations of Buyer hereunder are, at the option of Buyer,
subject to the conditions that, at the Closing Date:
(i) The representations and warranties made by Seller herein shall
be correct in all material respects at and as of the Closing Date and Seller
shall have delivered an officer's certificate to said effect.
(ii) The Purchased Assets shall not have been physically adversely
affected in any material way, whether or not insured against.
(iii) Seller shall confirm the release of the Credit Agreement
lien on the Purchased Assets.
(iv) Seller shall have given the material required notices and
obtained the material required consents or approvals of assignments noted on the
Schedules annexed to this Agreement; unless otherwise specifically noted on the
Schedules, each listed required notice, consent or approval shall be deemed
material.
(v) The Employees listed on Schedule 5(a)(v) annexed hereto shall
have entered into employment arrangements and signed confidentiality agreements
with Buyer; provided, that Buyer has offered each of said employees employment
terms at least as favorable to that
employee as those set forth on Schedule 3(q) for that employee.
(vi) Seller and Buyer shall have obtained the consent of the
landlord under the Third Avenue Lease to the assignment of the Third Avenue
Lease to Buyer.
(vii) Seller shall have complied in all material respects with all
of its obligations under this Agreement.
(b) The obligations of Seller hereunder are, at the option of Seller,
subject to the conditions that, at the Closing Date:
(i) the representations and warranties made by Buyer herein shall
be correct in all material respects at and as of the Closing Date and an officer
of Seller shall have delivered his certificate to said effect.
(ii) Seller and Buyer shall have obtained the consent of the
landlord under the Third Avenue Lease to the assignment of the Third Avenue
Lease to Buyer.
(iii) Buyer shall have complied in all material respects with all
of its obligations under this Agreement.
(iv) Buyer shall have delivered the cash consideration
contemplated by Section 2(a) hereof.
(v) Seller shall be under no obligation to close this transaction
unless and until proper authorization has been received from the Board of
Directors, or an authorized Committee of the Board of Directors, of McLeodUSA
Incorporated.
6. Pre-Closing Covenants.
(a) From the date hereof until the Closing Date, Seller shall conduct
the Business in substantially the same manner as heretofore conducted and shall
use its commercially reasonable efforts to preserve its business organization
and to preserve its relationships with suppliers, customers, employees and
others having business relations with it. Without limiting the foregoing Seller
shall not (i) dispose of any of the Purchased Assets other than for fair
consideration and in the ordinary course of business; (ii) mortgage, pledge or
subject to lien, charge or any other encumbrance any Purchased Assets, tangible
or intangible, other than liens resulting from purchase obligations incurred in
the ordinary course of business and other than liens pursuant to the Credit
Agreement; (iii) amend or terminate any material contract, except in the
ordinary course of business; (iv) increase the salaries or other compensation of
any of its employees, except for raises in the ordinary course of business; or
(v) enter into any transactions other than in the ordinary course of business.
(b) Seller hereby authorizes Buyer to:
(i) contact Customers along with Seller to seek to reasonably
ascertain the status of work being done by Seller for them; and
(ii) negotiate with and conditionally hire (subject to closing of
the transactions contemplated hereby) the Employees listed on Schedule 5(a)(v)
annexed hereto.
(c) Bulk Sales. Immediately upon execution of this Agreement, Buyer
shall file with the New York State Tax Department, a Notification of Sale,
Transfer or Assignment in Bulk. Buyer shall immediately notify Seller and
Xxxxxxx & Xxxxx (the "Escrow Agent") of any determination of a deficiency in
sales or compensating use taxes.
(i) Notwithstanding anything heretofore contained herein to the
contrary, all sums payable to Seller pursuant to Section 2 hereof shall be paid
to Escrow Agent to be held in escrow, in an interest bearing account, pursuant
to the terms of this paragraph 6(c).
(ii) If the New York State Tax Department determines that there is
a deficiency in the payment of Seller's sales or compensating use taxes, the
Escrow Agent, upon being
notified of same, shall pay the lesser of the deficiency and all amounts held in
escrow to the New York State Tax Department.
(iii) On the earlier of (A) 95 days from the Closing Date and (B)
the date upon which the Escrow Agent receives from the New York State Tax
Department a release of Seller, the Escrow Agent shall pay all amounts held in
escrow hereunder.
(iv) The Escrow Agent shall in no case be liable for failure of
any of the terms hereof or for any damage caused either to the Buyer or Seller
by the Escrow Agent in connection with the escrow established hereby except by
reason of the Escrow Agent's gross negligence, co-mingling or willful
misconduct.
(d) Seller shall use its commercially reasonable efforts to cause the
satisfaction of the conditions to the obligations of Buyer set forth in
paragraph 5(a) hereof.
(e) Buyer shall use its commercially reasonable efforts to cause the
satisfaction of the conditions to the obligations of Seller set forth in
paragraph 5(b) hereof.
(f) In seeking the consent of the landlord under the Third Avenue Lease
to the assignment thereof to Buyer, Buyer shall provide substitute collateral or
other security as may be reasonably necessary (but in no event in excess of
$250,000) to release Seller and its current and former affiliates from any
obligations after the Closing Date to the landlord under the Third Avenue Lease.
(g) Seller shall act reasonably to obtain prior to the Closing Date the
consents of third parties on the Customer Contracts that are necessary and
appropriate for the assignment of such contracts to Buyer; provided, however,
that Seller shall not be required to incur or pay any consideration or accept
any compromise to obtain such consents.
7. Adjustments with Respect to Receivables, WIP and Retainers.
(a) Receivables.
(i) Receivables with Unearned Revenue Portions. On the Closing
Date Seller shall (A) deliver to Buyer a list of Receivables as of the Closing
Date, aged as of the Closing Date, broken down to show earned revenue and
unearned revenue with respect to each such Receivable and providing a status
report for work done on the matter through the Closing Date and (B) render a
credit memo to each Customer in an amount equal to the unearned revenue with
respect to that Customer's Receivable as of the Closing Date. Within 30 days
following the Closing Date, the parties shall ascertain from each Customer who
had a Receivable with an unearned portion whether the Customer agrees with the
status report for work done on the matter as provided by Seller to Buyer on the
Closing Date. The parties will attempt to reconcile with the Customer any
discrepancy between the status report and what the Customer asserts is the
status. In the event that Seller and the Customer cannot reconcile the
discrepancy within 35 days of the Closing Date, or Seller and Buyer continue to
disagree over the valuation of the work done through the Closing Date, the
parties shall submit the matter to binding arbitration; such arbitration shall
be held in New York City in accordance with the Rules of the American
Arbitration Association; if the dispute is between Seller and Customer as to
status of the project, all expenses of such arbitration shall be borne by
Seller; if the dispute is between Seller and Buyer as to valuation of the work,
paragraph 12.(m) shall apply; in either event, Buyer shall be entitled to submit
evidence in the arbitration hearing; Seller and Buyer shall be bound by the
award rendered by the arbitrator, and judgment upon the award may be entered in
any court having jurisdiction thereof.
(ii) Receivables Without Unearned Revenue Portions. With respect
to each matter which has not been invoiced in advance, on the Closing Date
Seller shall, to the extent consistent with the Customer Contract relating to
that matter, (i) render an invoice to the
Customer for WIP through the Closing Date and (ii) deliver to Buyer a status
report of work done on each such matter through the Closing Date with a break
down detailing the work done and billed and the work done (and its value) which
cannot, consistent with the Customer Contract, be billed through the Closing
Date. Within 30 days following the Closing Date, the parties shall ascertain
from each Customer whether the Customer agrees with the status of the project as
set forth in the statement provided by Seller to Buyer on the Closing Date. The
parties will attempt to reconcile with the Customer any discrepancy between the
status report accounting and what the Customer asserts is the status. In the
event that Seller and the Customer cannot reconcile the discrepancy within 35
days of the Closing Date, or Seller and Buyer continue to disagree over the
valuation of the work done through the Closing Date, the parties shall submit
the matter to binding arbitration; such arbitration shall be held in New York
City in accordance with the Rules of the American Arbitration Association; if
the dispute is between Seller and Customer as to status of the project, all
expenses of such arbitration shall be borne by Seller; if the dispute is between
Seller and Buyer as to valuation of the work, paragraph 12.(m) shall apply; in
either event, Buyer shall be entitled to submit evidence in the arbitration
hearing; Seller and Buyer shall be bound by the award rendered by the
arbitrator, and judgment upon the award may be entered in any court having
jurisdiction thereof.
(b) Retainers. On the Closing Date Seller shall (i) deliver to Buyer a
list of retainers as of the Closing Date, broken down to show earned revenue and
unearned revenue with respect to each such retainer and providing a status
report for work done on the matter through the Closing Date and (ii) pay to
Buyer an amount equal to all unearned revenue with respect to the retainers.
Within 30 days following the Closing Date, the parties shall ascertain from each
Customer who has (or had) a retainer whether the Customer agrees with the
accounting of that Customer's retainer as provided by Seller to Buyer on the
Closing Date. The parties will attempt to reconcile with the Customer any
discrepancy between the accounting and what the Customer asserts is appropriate.
In the event that Seller and the Customer cannot reconcile the discrepancy
within 35 days of the Closing Date, Seller shall within 60 days of the Closing
Date either pay to Buyer the disputed amount or submit the matter to binding
arbitration; such arbitration shall be held in New York City in accordance with
the Rules of the American Arbitration Association; all expenses of such
arbitration shall be borne by Seller; Buyer shall be entitled to submit evidence
in the arbitration hearing; Seller and Buyer shall be bound by the award
rendered by the arbitrator, and judgment upon the award may be entered in any
court having jurisdiction thereof.
(c) Offset Right. Buyer shall be entitled to offset against collections
by Buyer on Seller's behalf pursuant to Section 8 hereof amounts which are
determined to be due to Buyer under this Section 7 in excess of the amounts paid
on the Closing Date pursuant to this Section 7.
8. Collection/Billing Agency.
(a) Effective as of the Closing Date and continuing for a period of one
year, Seller appoints Buyer as Seller's exclusive agent for the purpose of
collecting Receivables extant on the Closing Date and billing and collecting WIP
extant on the Closing Date.
(b) Buyer agrees to make a reasonable effort, at its own expense, in
accordance with its ordinary business practices under the circumstances to
collect the Receivables and to xxxx and collect the WIP; provided, however, that
Buyer shall not be obligated to xxx or bring any legal action to collect the
Receivables or any accounts receivable resulting from the WIP. Seller shall
reasonably cooperate with Buyer in collecting the Receivables and billing and
collecting the WIP. Buyer shall have the right and power to endorse and
negotiate checks and other
instruments of payment received in respect of the Receivables and WIP in the
name of Seller; Buyer shall make a monthly remittance to Seller of amounts
collected under this Section 8. Within 60 business days of the termination of
Buyer's appointment hereunder, Buyer will send a list of all uncollected
Receivables, unbilled WIP and uncollected accounts receivable resulting from the
WIP to Seller for Seller's disposition (subject to the following sentence). In
the event Buyer determines that any Receivable is not collectible on account of
the poor financial condition of any obligor, it will, promptly following such
determination, deliver to Seller notice of such determination, whereupon Seller
shall be entitled to take such action as Seller and Buyer shall mutually agree
is appropriate under the circumstances to collect such Receivable.
(c) Payments received within 120 days of the Closing Date with respect
to Receivables and/or accounts receivable resulting from the WIP which have been
expressly directed by the obligor to be allocated to specific invoices shall be
so allocated; payments received within 120 days of the Closing Date with respect
to Receivables and/or accounts receivable resulting from the WIP which have not
been expressly directed by the obligor to be allocated to specific invoices
shall be allocated to that obligor's obligations in the chronological order of
any unpaid invoices of that obligor. Payments received after 120 days following
the Closing Date with respect to Receivables and/or accounts receivable
resulting from the WIP shall, regardless of obligor direction, be allocated
first to outstanding invoices for services rendered post Closing Date, then as
specified by the obligor and then in the chronological order of any unpaid
invoices of that obligor. Provided, however, that payments received within 150
days of the Closing Date with respect to Xxxxxxxx, Xxxxx & Xxxxxxx ("Xxxxxxxx")
Receivables and/or Xxxxxxxx accounts receivable resulting from the WIP which
have been expressly directed by Xxxxxxxx to be allocated to specific invoices
shall be so allocated; payments received within 150 days of the Closing Date
with respect to Xxxxxxxx Receivables and/or Xxxxxxxx accounts receivable
resulting from the WIP which have not been expressly directed by Xxxxxxxx to be
allocated to specific invoices shall be allocated to Xxxxxxxx'x obligations in
the chronological order of any unpaid invoices of Xxxxxxxx; payments received
after 150 days following the Closing Date with respect to Xxxxxxxx Receivables
and/or Xxxxxxxx accounts receivable resulting from the WIP shall, regardless of
Xxxxxxxx direction, be allocated first to outstanding invoices for services
rendered post Closing Date, then as specified by Xxxxxxxx and then in the
chronological order of any unpaid invoices of Xxxxxxxx.
9. Post Closing Covenants.
(a) Non-Compete; Non-Solicit. (i) For a period of two years following
the Closing Date neither Seller nor McLeodUSA shall, directly or indirectly, in
the states of New York or New Jersey, engage in, own, manage, operate, join,
control, be financially interested in, represent or otherwise render assistance
to, any business enterprise in connection with the provision of (Y) computer
network consultative services focused directly on the design, implementation and
support of enterprise network infrastructure substantially similar to that
engaged in by the Business on the Closing Date or (Z) proactive monitoring and
resolution management of network elements substantially similar to that engaged
in by the Business on the Closing Date; provided, however, that the foregoing
shall not apply to passive investment comprising no more than 5% of the value or
voting power of the securities of a publicly traded company and provided further
that the foregoing shall not apply in the case of an acquisition, merger or
other combination involving McLeodUSA or its affiliates and an unrelated third
party where such third party's revenues that arise from activities that would
otherwise be prohibited by the foregoing do not exceed 25% of its total revenues
and the subsequent operation of such activities by the combined group that would
otherwise be prohibited by the foregoing shall not constitute a
breach of such non-compete restriction.
(ii) For a period of two years following the Closing Date neither
Seller nor McLeodUSA shall, directly or indirectly, (A) solicit, or be
instrumental in anyway in soliciting, any person listed on Schedule 3(q) hereto
to leave the employ of the Buyer or any of its affiliates or (B) hire, or be
instrumental in any way in hiring, any person listed on Schedule 3(q) hereto.
Provided, however, that after six months following the Closing Date, the
foregoing sentence shall not prohibit any mass media advertisement or general
solicitation (or any hiring pursuant thereto) that is not specifically targeted
at such persons.
(iii) Each of Seller and McLeodUSA acknowledges that any action at
law for any breach or threatened breach by them of the provisions of this
paragraph 9(a) may be inadequate and accordingly agrees that Buyer may, without
limiting any other remedy available to it, enforce such provisions by permanent
or temporary injunctive or mandatory relief without the need of proving actual
damage.
(iv) In addition, the parties and McLeodUSA acknowledge that
actual damages incurred due to a breach of the non-solicitation provisions of
Section 9(a)(ii) would be difficult to ascertain and accordingly agree that the
sole remedy for breach of the non-solicitation provisions shall be liquidated
damages in the amount of the annual base salary, during the preceding twelve
months, of the employee who was hired in breach of the provision
(b) Audit. Within 60 days after the Closing Date, the Seller and Buyer
shall cause to be prepared and delivered to Buyer the balance sheet of Seller at
December 31, 2000 and the related statements of income and retained earnings,
cash flow and changes in shareholder's equity for the fiscal period then ended,
certified by the Seller's independent auditors, prepared (i) on a consistent
basis, in accordance with generally accepted accounting principles and (ii) in
accordance with Regulation S-X, promulgated by the Securities Exchange
Commission and, in particular, Rules 1-02 and 3-05 thereunder. Buyer shall pay
the costs of preparing such financial statements, provided that Seller shall
reimburse Buyer an amount equal to the lesser of (i) 50% of the costs of the
external audit and (ii) $10,000.
(c) Seller shall pay or cause to be paid all debts or claims against
Seller as they mature.
(d) Buyer shall pay or cause to be paid all debts or claims against
Buyer as they mature.
10. Indemnification.
(a) Subject to the terms of this Agreement, Seller and McLeodUSA shall
jointly and severally indemnify and hold Buyer harmless from and against any and
all losses, liabilities, damages, deficiencies, costs, expenses or other
liabilities of Buyer of every kind, nature and description arising out of or
resulting from (i) the breach by Seller or McLeodUSA of any covenant,
representation, warranty or agreement hereunder, (ii) all claims for warranty
for services performed shipped by the Seller prior to or as of the Closing Date,
(iii) all claims for warranty or product liability for products shipped by the
Seller prior to or as of the Closing Date not otherwise reimbursed by the
manufacturer, (iv) all claims for employee benefits associated with Seller's
employment arrangements (including, but not limited to, liabilities for accrued
vacation and severance pay, contributions to pension, profit sharing, employee
welfare, benefit and like plans for Seller's employees), all debts, claims or
liabilities of whatever nature of the Seller other than the Assumed Obligations,
(v) any sales or compensating use tax deficiency or (vi) any and all actions,
suits, proceedings, claims, demands, assessments, judgments, costs and expenses
(including reasonable attorney's fees) incident to any of the matters set forth
in this paragraph 10(a) including those incurred in connection with actions
brought to recover from Seller pursuant this paragraph 10(a).
(b) Subject to the terms of this Agreement, Buyer shall indemnify and
hold Seller
harmless from and against any and all losses, liabilities, damages,
deficiencies, costs, expenses or other liabilities of Seller of every kind
nature and description arising out of or resulting from (i) the breach by Buyer
of any covenant, representation, warranty or agreement hereunder, including the
Assumed Obligations and the operation or conduct of the Business by Buyer on and
after the Closing Date, (ii) any and all actions, suits, proceedings, claims,
demands, assessments, judgments, costs and expenses (including reasonable
attorney's fees) incident to any of the matters set forth in this paragraph
10(b) including those incurred in connection with actions brought to recover
from Buyer pursuant this paragraph 10(b).
(c) Indemnification Procedures. If subsequent to the Closing any claim
(a "AClaim") is asserted against a party to this Agreement as to which such
party believes it is entitled to indemnification under this Agreement, such
party (the "Indemnified Party") shall promptly after learning of such Claim
notify in writing the party obligated to indemnify it (the "Indemnifying Party")
in writing. The Indemnifying Party shall have the right, upon written notice to
the Indemnified Party within fifteen (15) days after receipt from the
Indemnified Party of written notice of such Claim, to conduct at its expense the
defense against such Claim in its own name, or if necessary in the name of the
Indemnified Party. If the Indemnifying Party shall fail to give such notice, it
shall be deemed to have elected not to conduct the defense of the subject Claim,
and in such event the Indemnified Party shall have the right to conduct such
defense and to compromise and settle the Claim with the prior written consent of
the Indemnifying Party, which shall not be unreasonably withheld. If the
Indemnifying Party does elect to conduct the defense of the subject Claim, the
Indemnified Party will cooperate with and make available to the Indemnifying
Party such assistance and materials as may be reasonably requested by it, all at
the expense of the Indemnifying Party, and the Indemnified Party shall have the
right at its expense to participate in the defense, provided that the
Indemnified Party shall have the right to compromise and settle the Claim only
with the prior written consent of the Indemnifying Party. Any judgment entered
or settlement agreed upon in the manner provided herein shall be binding upon
the Indemnifying Party, and shall conclusively be deemed to be an obligation
with respect to which the Indemnified Party is entitled to indemnification
hereunder.
(d) Limitations on Indemnification. The representations, warranties,
covenants and agreements shall survive for the period contemplated in paragraph
12(a) of this Agreement. Any claim for indemnification that is not made in
accordance with the terms and conditions set forth herein and asserted by
written notice given within the specified period of survival may not be pursued
and is hereby irrevocably waived after such time. The indemnification provided
for in this paragraph 10 shall not apply unless, and shall apply only to the
extent and in the amount that, the aggregate damages for which one or more
indemnified parties seeks indemnification hereunder exceeds Twenty Five Thousand
Dollars ($25,000) (the "Deductible"). Furthermore, the indemnification provided
for in this paragraph 10 shall not apply to the excess of the aggregate damages
for which an Indemnified Party seeks indemnification hereunder over Three
Hundred Forty Thousand Dollars ($340,000), and such amount shall for all
purposes hereunder be the maximum indemnification obligation of Seller and
McLeodUSA, as a combined group on the one hand, or Buyer on the other hand.
11. Closing Date. The closing of the transactions contemplated hereby shall take
place on December 31, 2001 (the "Closing Date") at Seller's offices in New York
City, or at such time and place as the parties otherwise mutually agree. In the
event that, through no fault of either of the parties, the closing of the
transactions contemplated hereby has not occurred on or before March 31, 2002
(or such later date as the parties may agree to in writing) this Agreement shall
be terminated and of no further force and effect.
12. Miscellaneous.
(a) Survival of Representations and Warranties. All representations,
warranties, covenants and agreements contained herein or made in writing in
connection herewith shall survive the execution and delivery of this Agreement
for a period of twelve (12) months from the Closing Date.
(b) Further Assurances. Each of the parties agrees to execute such
other documents and perform (or cause to be performed) such other acts as the
other may reasonably request in order to effectuate the provisions and intent of
this Agreement.
(c) Notices. Any notice or other communication in connection with this
Agreement shall be in writing and shall be deemed to have been given (i) if
personally delivered, when so delivered, (ii) if by Federal Express or other
recognized next day carrier, two business days after mailing, addressed, if to
Seller, at McLeodUSA Incorporated, 0000 X Xxxxxx XX, Xxxxx Xxxxxx, Xxxx 00000,
Attention: General Counsel, and if to Buyer, at 000 Xxxx Xxxx Xx., Xx. Xxxxxx XX
00000, Attention: Xx. Xxxx Xxxxxxx, or (iii) if by facsimile, once transmitted
(provided that the appropriate answer back or telephonic confirmation is
received), if to Seller, at 000-000-0000, Attention: General Counsel, and if to
Buyer, at 000-000-0000, Attention: Xx. Xxxx Xxxxxxx, provided, further, that
such notice or other communication is also promptly thereafter sent in
accordance with the provisions of clause (ii) above. In addition to the
foregoing, a copy of said notice shall be sent by recognized "next day" carrier
on the same day as the giving of the notice (for next day delivery), in the case
of a notice to Buyer, to Xxxxxxx X. Xxxx, Esq., Xxxxxxxx, Mufson & Spar, P.A.,
000 Xxxxxxxxx Xxxxx, Xxxx Xxxxxx, XX 00000. Any party may change the address or
facsimile number to which notices or other communications hereunder are to be
delivered by giving the other party notice in the manner set forth.
(d) Conflict of Law and Consent to Jurisdiction. This Agreement shall
be deemed to be a contract under the laws of the State of New York and for all
purposes shall be governed by and construed in accordance with the laws of said
State, without regard to principles of conflicts of laws. Each of the parties
hereby submits himself/herself/itself and his/her/its properties and assets to
the exclusive jurisdiction of the courts of the State of New York for all
disputes relating to the construction, interpretation, enforcement and
performance of this Agreement, hereby waiving all defenses based on venue or
convenience of forum, and irrevocably agrees that service of process shall be
valid if served in the manner and to the address provided in paragraph 12.(c)
hereof.
(e) Severability. If any provision of this Agreement shall for any
reason be held invalid or unenforceable by any court or governmental agency of
competent jurisdiction, such invalidity or unenforceability shall not affect any
other provision hereof or thereof, but this Agreement shall be construed as if
such invalid or unenforceable provision had never been contained herein or
therein, so long as the economic or legal substance of the transactions
contemplated by this Agreement are not affected in any materially adverse way to
any party to this Agreement. The section and other headings contained in this
Agreement are for reference purposes only and shall not limit or otherwise
affect the meaning of interpretation of this Agreement.
(f) Entire Agreement. This Agreement, the Schedules hereto and hereby
made a part hereof and other documents delivered pursuant hereto and signed by
the parties hereto, (i) contain the entire agreement among the parties hereto
with respect to the transactions contemplated hereby, (ii) supersede all prior
agreements or understandings among the parties hereto relating to the subject
matter hereof and (iii) cannot be amended, modified, changed or terminated
except by a writing signed by the party against which enforcement thereof is
sought.
(g) Preparation of Agreement. The parties acknowledge that this
Agreement was, in effect, prepared jointly; therefore, it is the parties' intent
that the Agreement be construed
without any presumption against one party or the other as the draftsman.
(h) Date of Agreement. The date of this Agreement shall be the date on
which it is executed by all parties or, if not executed simultaneously, the date
on which both parties have a fully executed copy of the Agreement; said date
shall be inserted at the top of the first page hereof.
(i) Authority to Execute. Each of the individuals executing this
Agreement, by his/her act of executing this Agreement, represents and warrants
that he/she has full authority and/or has been duly authorized by his/her
respective entity to do so on behalf of such entity.
(j) Parties in Interest; Assignments. This Agreement shall be binding
upon and inure to the benefit of each of the parties hereto and their permitted
successors and assigns. Neither party may assign or otherwise transfer its
rights or obligations without the prior written consent of the other party.
(k) Waiver. The failure of either party to insist upon a strict
performance of any of the agreements, terms, covenants and conditions hereof
shall not be deemed a waiver of any subsequent breach or default in any such
agreements, terms, covenants and conditions.
(l) Singular/Plural, Gender. Whenever herein the singular number is
used the same shall include the plural and vice versa, as the context shall
require. Whenever herein the masculine gender is used the same shall include the
feminine and neuter genders and vice versa, as the context shall require.
(m) Prevailing Party. The prevailing party in any dispute under this
Agreement shall be entitled to receive from the losing party the prevailing
party=s costs of enforcement of this Agreement (including, without limitation,
its court fees and reasonable attorneys= fees).
(n) Counterparts. This Agreement may be executed in one or more
counterparts, which shall constitute one and the same instrument; facsimile
copies of signatures shall be binding.
(o) Publicity. Buyer and Seller will consult each other before issuing
any press release or other public statement in connection with the matters
contemplated by this Agreement and provide each other the opportunity to review,
comment upon and concur therewith; provided, however, that this paragraph 12.(o)
shall not be construed to in any way constrain Buyer from complying with its
security law disclosure obligations.
(p) Force Majeure. In the event that the Company shall be delayed or
prevented from performing any of its obligations pursuant to the provisions of
this Agreement due to any cause beyond the reasonable control of such party,
including but not limited to governmental action or lack thereof, shortages or
unavailability of materials or supplies, labor disputes, strikes, slow-downs,
job actions, picketing, secondary boycotts, fire or other casualty, delays in
transportation, acts of God, failure to comply or inability to comply with any
orders or requests of any governmental agencies or authorities, acts of declared
or undeclared war, public disorder, riot or civil commotion, then such party
shall in any or all events be excused from its obligation to perform and comply
with such provisions of this Agreement, commensurate with any delays so caused,
without any liability whatsoever.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
DEVISE ASSOCIATES, INC., Seller
By:
---------------------------------
Xxxxxxx X. Xxxx, Authorized Officer
EMTEC, INC., Buyer
By:
-----------------------------------
Xxxx Xxxxxxx, Authorized Officer
McLeodUSA is executing McLeodUSA Incorporated
this Agreement for the lim-
ited purpose of being bound By:
by Sections 9 and 10 and -----------------------------------
paragraph 12.(c) hereof. Xxxxxxx X. Xxxx , Authorized Officer
Schedule 1(a)(v)
Assumed Other Contracts
1. Citrix - Solutions Network Gold Membership Agreement
2. Cisco - Regional VAR agreement
3. Novell - PartnerNet Agreement
4. Compaq - System Service Provider Agreement
5. Computer Associates - Reseller Agreement
6. Microsoft - Solution Provider Agreement
7. Dell - Support Services Agreement
(b) Telecommunications Contracts:
1. Verizon B Centrex Contract (attached) was entered into on 9/9/98. The length
of the contract is 60 months. If the Centrex contract is cancelled by Devise,
Devise will incur a trade up cost (at this time around $2,000)
2. MCI World Com B Contract has expired and continued on a month-by-month basis.
Can be cancelled at any time with no fees incurred.
3. PSInet B Contract attached, has expired and continued on a month-by-month
basis. Can be cancelled at any time with no fees incurred.
4. Globix - Contract has expired and continued on a month-by-month basis. Can be
cancelled at any time with no fees incurred.
5. Skytel B No contract was entered into. Month to month service.
6. Time Warner Cable B Contract attached, Month to month service.
Schedule 3(h)
Customer List
Schedule 3(i)
Customer Contracts
Lists of Receivables, WIP and Retainers
Schedule 3(j)
Other Business Contracts
Schedule 3(l)
Equipment
Schedule 3(m)
Prepaid Expenses
Schedule 3(n)
Litigation
Schedule 3(p)
ERISA Plans
Schedule 3(q)
Employees
Schedule 5(a)(v)
Employees Upon Whom Agreement is Conditioned
