<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
April 17, 2000
Date of Report (Date of earliest event reported):
VOYAGER.NET, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 000-26661 38-3431501
(State or other jurisdiction (Commission File (I.R.S. Employer
of incorporation) Number) Identification No.)
4660 S. HAGADORN ROAD, SUITE 320
EAST LANSING, MI 48823
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code:
(517) 324-8940
<PAGE>
Item 5. Other Events.
Voyager.net, Inc., a Delaware corporation (the "Registrant"), files this
Form 8-K report that contains financial information consistent with Regulation
S-X, Rule 3-05(b)(2)(i) for businesses acquired since the date of the
Registrant's most recent audited balance sheet.
On September 8, 1999, Voyager Information Networks, Inc., a Michigan
corporation ("Voyager") and wholly-owned subsidiary of the Registrant, entered
into an Asset Purchase Agreement (the "Agreement") to purchase substantially all
of the assets of Net Direct, Inc., an Indiana corporation ("Net Direct").
Pursuant to the Agreement, the consideration for the sale by Net Direct to
Voyager of substantially all of its internet service-related assets was
$4,550,000, subject to certain adjustments (the "Purchase Price"). The Purchase
Price was determined through negotiation.
In order to fund this acquisition, the Registrant used proceeds from its
July 21, 1999 initial public offering of Common Stock, and drew-down from its
$60,000,000 revolving senior credit facility with Fleet National Bank, as agent,
and certain additional lenders.
Net Direct is an Internet connectivity and web-hosting business (the
"Business"). The assets of Net Direct, include equipment used in the Business.
Voyager intends to continue to use the acquired equipment for the purpose of its
Internet connectivity and web-hosting business.
- --------------------------------------------------------------------------------
On September 14, 1999, Voyager entered into an Asset Purchase Agreement
(the "Agreement") to purchase substantially all of the assets of Raex Internet,
Inc., a Ohio corporation, Raex Communications, Inc., an Ohio corporation and
Raex Corporation, an Ohio corporation (collectively "Raex").
Pursuant to the Agreement, the consideration for the sale by Raex to
Voyager of substantially all of its internet service-related assets was
$4,600,000, subject to certain adjustments (the "Purchase Price"). The Purchase
Price was determined through negotiation.
In order to fund this acquisition, the Registrant used proceeds from its
July 21, 1999 initial public offering of Common Stock, and drew-down from its
$60,000,000 revolving senior credit facility with Fleet National Bank, as agent,
and certain additional lenders.
Raex is an Internet connectivity and web-hosting business (the "Business").
The assets of Raex, include equipment used in the Business. Voyager intends to
continue to use the acquired equipment for the purpose of its Internet
connectivity and web-hosting business.
- --------------------------------------------------------------------------------
On September 30, 1999, Voyager entered into an Asset Purchase Agreement,
effective on October 7, 1999, (the "Agreement") to purchase substantially all of
the assets of ChoiceDotNet, L.L.C. ("Choicedotnet").
2
<PAGE>
Pursuant to the Agreement, the consideration for the sale by Choicedotnet
to Voyager of substantially all of its internet service-related assets was
$1,800,000, subject to certain adjustments (the "Purchase Price"). The Purchase
Price was determined through negotiation.
In order to fund this acquisition, the Registrant used proceeds from its
July 21, 1999 initial public offering of Common Stock, and drew-down from its
$60,000,000 revolving senior credit facility with Fleet National Bank, as agent,
and certain additional lenders.
Choicedotnet is an Internet connectivity and web-hosting business (the
"Business"). The assets of Choicedotnet, include equipment used in the
Business. Voyager intends to continue to use the acquired equipment for the
purpose of its Internet connectivity and web-hosting business.
- -----------------------------------------------------------------------------
On December 10, 1999, Voyager entered into an Asset Purchase Agreement (the
"Agreement") to purchase substantially all of the assets of Wholesale ISP, Inc.,
an Ohio corporation("Wholesale").
Pursuant to the Agreement, the consideration for the sale by Wholesale to
Voyager of substantially all of its internet service-related assets was
$5,000,000, subject to certain adjustments (the "Purchase Price"). The Purchase
Price was determined through negotiation.
In order to fund this acquisition, the Registrant used proceeds from its
July 21, 1999 initial public offering of Common Stock, and drew-down from its
$60,000,000 revolving senior credit facility with Fleet National Bank, as agent,
and certain additional lenders.
Wholesale is an Internet connectivity and web-hosting business (the
"Business"). The assets of Wholesale, include equipment used in the Business.
Voyager intends to continue to use the acquired equipment for the purpose of its
Internet connectivity and web-hosting business.
3
<PAGE>
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Businesses Acquired.
The Financial Statements of the acquired businesses required by this
Item are attached hereto.
(b) Pro Forma Financial Information.
The Pro Forma Financial Information required by this Item is attached
hereto.
(c) Exhibits
*2.1 Asset Purchase Agreement, entered into on September 8, 1999, by
and between Voyager Information Networks, Inc., a Michigan corporation, Net
Direct, Inc., an Indiana corporation, and certain principals.
*2.2 Asset Purchase Agreement, entered into on September 14, 1999, by
and between Voyager Information Networks, Inc., a Michigan corporation, Raex
Internet, Inc., an Ohio corporation, Raex Communications, Inc., an Ohio
corporation and Raex Corporation, an Ohio corporation, and certain principals.
*2.3 Asset Purchase Agreement, entered into on September 30, 1999, and
effective on October 7, 1999 by and between Voyager Information Networks, Inc.,
a Michigan corporation, ChoiceDotNet, L.L.C., an Ohio limited liability company,
Choice.Net, Inc., an Ohio corporation, Dotnet, Ltd., an Ohio limited liability
company, and certain principals.
*2.4 Asset Purchase Agreement, entered into on December 10, 1999, by
and between Voyager Information Networks, Inc., a Michigan corporation,
Wholesale ISP, Inc., an Ohio corporation and certain principals.
- ----------
* Filed herewith.
4
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be filed on its behalf by the
undersigned thereunto duly authorized
VOYAGER.NET, INC.
Dated: April 17, 2000 By: /s/ Christopher Torto
----------------------------
Christopher Torto
Chief Executive Officer
5
<PAGE>
Voyager.net, Inc.
Index to Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGES
<S> <C>
Net Direct, Inc. - Statement of Operations and Cash Flows:
Report of Independent Accountants............................................... F-2
Statement of Operations for the Period From January 1, 1999 to
September 7, 1999............................................................... F-3
Statement of Cash Flows for the Period From January 1, 1999 to
September 7, 1999............................................................... F-4
Notes to Statement of Operations and Cash Flows................................. F-5
Raex Corporation - Statement of Operations and Cash Flows:
Report of Independent Accountants............................................... F-7
Statement of Operations for the Year Ended December 31, 1998.................... F-8
Statement of Cash Flows for the Year Ended December 31, 1998.................... F-9
Notes to Statement of Operations and Cash Flows................................. F-10
Choice Dot Net, LLC - Statement of Operations and Cash Flows:
Report of Independent Accountants............................................... F-12
Statement of Operations for the Period From January 1, 1999 to
October 6, 1999................................................................. F-13
Statement of Cash Flows for the Period From January 1, 1999 to
October 6, 1999................................................................. F-14
Notes to Statement of Operations and Cash Flows................................. F-15
Wholesale ISP, Inc. - Statement of Operations and Cash Flows:
Report of Independent Accountants............................................... F-16
Statement of Operations for the Eleven Months Ended November 30, 1999........... F-17
Statement of Cash Flows for the Eleven Months Ended November 30, 1999........... F-18
Notes to Statement of Operations and Cash Flows................................. F-19
Pro Forma Condensed Consolidated Financial Statements (Unaudited):
Pro Forma Condensed Consolidated Statement of Operations for the Year Ended
December 31, 1999 (Unaudited)................................................ F-22
Notes to Pro Forma Condensed Consolidated Financial Statements (Unaudited)...... F-23
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and the Stockholders of
Voyager.net, Inc.:
In our opinion, the accompanying statement of operations and cash flows present
fairly, in all material respects, the results of operations and cash flows of
Net Direct, Inc. (the "Company") for the period from January 1, 1999 to
September 7, 1999, in conformity with accounting principles generally accepted
in the United States. These statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these statements
based on our audit. We conducted our audit of these statements in accordance
with auditing standards generally accepted in the United States, which require
that we plan and perform the audit to obtain reasonable assurance about whether
the statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of these
statements. We believe that our audit provides a reasonable basis for our
opinion.
PricewaterhouseCoopers LLP
Grand Rapids, Michigan
April 7, 2000
F-2
<PAGE>
Net Direct, Inc.
Statement of Operations
For the Period From January 1, 1999 to September 7, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Revenue, Internet access service $ 1,642,916
------------
Operating expenses:
Internet access service costs 647,774
Sales and marketing 220,163
General and administrative 685,977
Depreciation 129,034
------------
Total operating expenses 1,682,948
------------
Loss from operations before other expense (40,032)
------------
Other expense (20,237)
------------
Net loss $ (60,269)
============
Per share data:
Basic and diluted net loss per share applicable to common
stockholders $ (60.27)
============
Weighted average common shares outstanding:
Basic and diluted 1,000
============
</TABLE>
The accompanying notes are an integral part of the statement of operations and
cash flows.
F-3
<PAGE>
Net Direct, Inc.
Statement of Cash Flows
For the Period From January 1, 1999 to September 7, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Cash flows from operating activities:
Net loss $ (60,269)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 129,034
Changes in assets and liabilities:
Accounts receivable (17,653)
Accounts payable 60,697
Other liabilities 23,764
Deferred revenue 39,450
----------
Net cash provided by operating activities 175,023
Cash flows used in investing activities, purchase of property
and equipment (159,504)
----------
Cash flows from financing activities:
Borrowings on line of credit 84,000
Payments on line of credit (15,000)
Payments on capital leases (10,023)
Payments on notes payable, related party (39,424)
----------
Net cash provided by financing activities 19,553
----------
Net increase in cash and cash equivalents 35,072
Cash and cash equivalents at beginning of period 83,297
----------
Cash and cash equivalents at end of period $ 118,369
==========
</TABLE>
The accompanying notes are an integral part of the statement of operations and
cash flows.
F-4
<PAGE>
Net Direct, Inc.
Notes to Statement Operations and of Cash Flows
For the Period From January 1, 1999 to September 7, 1999
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Organization and basis of presentation
Net Direct, Inc. (the "Company") provides full service access to the Internet
for corporate and individual users in Indiana.
Revenue recognition
The Company recognizes revenue when Internet access services are provided.
Advance collections relating to future access services are recorded as
deferred revenue and recognized as revenue when earned.
Cash equivalents
The Company considers all highly liquid investments purchased with an initial
maturity of three months or less to be cash equivalents.
Property and equipment
Property and equipment are depreciated over five years using the straight
line method. Equipment acquired under capital leases are depreciated over
their related lease terms. Costs of repair and maintenance are charged to
expense as incurred. Depreciation expense of approximately $129,000 was
charged to operations in 1999.
Advertising costs
Advertising costs are expensed as incurred. Advertising costs of
approximately $25,000 were charged to operations in 1999.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Income taxes
The Company is taxed as an S-Corporation. Accordingly, the stockholders of
the Company are subject to federal income taxes rather than the Company.
2. OPERATING LEASES
Rent expense under all operating leases of approximately $70,000 was charged
to operations in 1999.
F-5
<PAGE>
Net Direct, Inc.
Notes to Statement of Operations and Cash Flows
For the Period From January 1, 1999 to September 7, 1999
- --------------------------------------------------------------------------------
3. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
The following is the supplemental cash flow information for the period
presented:
Period From
January 1, 1999
to September 7,
1999
Cash paid during the year for interest $ 20,950
==========
Acquisition of equipment through capital lease $ 74,669
==========
4. RELATED PARTY TRANSACTION
The notes payable, related party, represent principal and interest payable
on October 1, 2001 and on demand to the previous owner of the Company. Interest
on the notes is at rates of 9 percent and zero percent in 1999.
5. SUBSEQUENT EVENT
On September 8, 1999, the assets of the Company were purchased by
Voyager.net, Inc. for approximately $4,519,000, of which approximately
$4,493,000 was paid to the Company and the remainder was used for payment of
certain acquisition costs.
F-6
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Voyager.net, Inc.:
In our opinion, the accompanying statement of operations and cash flows present
fairly, in all material respects, the results of operations and cash flows of
Raex Corporation (the "Company") for the year ended December 31, 1998, in
conformity with accounting practices generally accepted in the United States.
These statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these statements based on our audit.
We conducted our audit of these statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statements, assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of these statements. We believe that our
audit provides a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Grand Rapids, Michigan
April 7, 2000
F-7
<PAGE>
Raex Corporation
Consolidated Statement of Operations
For the Year Ended December 31, 1998
- --------------------------------------------------------------------------------
Revenue:
Internet access service $1,564,099
Other 20,244
-----------
1,584,343
Operating expenses:
Internet access service costs 757,312
Sales and marketing 72,610
General and administrative 798,331
Depreciation 153,304
-----------
Total operating expenses 1,781,557
-----------
Loss from operations before other income and expense (197,214)
-----------
Other income (expense):
Interest expense (78,228)
Gain on sale of assets 31,956
Other income 6,271
-----------
Total other expense (40,001)
-----------
Net loss $ (237,215)
===========
The accompanying notes are an integral part of the consolidated statement of
operations and cash flows.
F-8
<PAGE>
Raex Corporation
Consolidated Statement of Cash Flows
For the Year Ended December 31, 1998
- --------------------------------------------------------------------------------
Cash flows from operating activities:
Net loss $(237,215)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 153,304
Gain on sale of equipment (31,956)
Changes in assets and liabilities:
Accounts receivable 24,999
Other assets (1,745)
Accounts payable 120,188
Other liabilities (784)
Deferred revenue 111,464
----------
Net cash provided by operating activities 138,255
Cash flows from investing activities:
Purchase of property and equipment (61,784)
Proceeds from sale of equipment 33,333
----------
Net cash used in investing activities (28,451)
Cash flows from financing activities:
Payments on capital leases (74,629)
Proceeds from shareholder loans, net 91,681
Decrease in cash overdraft (52,938)
Payments on lines of credit (9,002)
----------
Net cash used in financing activities (44,888)
----------
Net increase in cash and cash equivalents 64,916
Cash and cash equivalents at beginning of period 285
----------
Cash and cash equivalents at end of period $ 65,201
==========
The accompanying notes are an integral part of the consolidated statement of
operations and cash flows.
F-9
<PAGE>
Raex Corporation
Notes to Consolidated Statement of Operations and Cash Flows
December 31, 1998
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and basis of presentation
Raex Corporation (the "Company") provides full service access to the internet
for corporate and individual users in the state of Ohio, through its wholly-
owned subsidiary Raex Internet, Inc. Also, Raex Communication, a wholly-
owned subsidiary of the Company, is a competitive local exchange carrier
licensed in Ohio. The consolidated statement of operations and cash flows
include the accounts of the Company and its wholly-owned subsidiaries. All
significant intercompany transactions have been eliminated.
Revenue recognition
The Company recognizes revenue when Internet access services are provided.
Advance collections relating to future access services are recorded as
deferred revenue and recognized as revenue when earned.
Cash equivalents
The Company considers all highly liquid investments purchased with an initial
maturity of three months or less to be cash equivalents.
Property and equipment
Property and equipment are depreciated over their estimated useful lives
using the straight line method as follows:
Depreciable
Life-years
-----------
Computer equipment 3-5
Furniture and fixtures 10
Leasehold improvements 10
Equipment acquired under capital leases are depreciated over their related
lease terms. Costs of repair and maintenance are charged to expense as
incurred. Depreciation expense of approximately $157,000 was charged to
operations in 1998.
Advertising costs
Advertising costs are expensed as incurred. Advertising costs of
approximately $69,000 were charged to operations in 1998.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Income taxes
The Company is taxed as an S-Corporation. Accordingly, the stockholders of
the Company are subject to federal income taxes rather than the Company.
2. OPERATING LEASES
Rent expense under all operating leases of approximately $100,000 was charged
to operations in 1998.
F-10
<PAGE>
Raex Corporation
Notes to Consolidated Statement of Operations and Cash Flows
December 31, 1998
- --------------------------------------------------------------------------------
3. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
The following is the supplemental cash flow information for the period
presented:
<TABLE>
<S> <C>
Cash paid during the year for interest $ 78,228
=========
Acquisition of equipment through capital lease $ 58,648
=========
</TABLE>
4. RELATED PARTY TRANSACTION
The shareholder loans represent principal and interest payable on demand to
the two shareholders of the Company. Interest on the loans is at rates of 6
percent and 15 percent in 1998.
5. SUBSEQUENT EVENT
On September 14, 1999, the assets of the Company were purchased by
Voyager.net, Inc. for approximately $4,370,000 of which approximately $3,178,000
was paid to the Company and the remainder was used for payment of certain
liabilities and acquisition costs.
F-11
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Voyager.net, Inc.:
In our opinion, the accompanying statement of operations and cash flows present
fairly, in all material respects, the results of operations and cash flows of
Choice Dot Net, LLC (the "Company") for the period from January 1, 1999 to
October 6, 1999, in conformity with accounting practices generally accepted in
the United States. These statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these statements
based on our audit. We conducted our audit of these statements in accordance
with auditing standards generally accepted in the United States, which require
that we plan and perform the audit to obtain reasonable assurance about whether
the statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of these
statements. We believe that our audit provides a reasonable basis for our
opinion.
PricewaterhouseCoopers LLP
Grand Rapids, Michigan
April 7, 2000
F-12
<PAGE>
Choice Dot Net, LLC
Statement of Operations
For the Period From January 1, 1999 to October 6, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Revenue, Internet access service $ 814,801
Operating expenses:
Internet access service costs 427,697
Sales and marketing 26,848
General and administrative 240,263
Depreciation and amortization 20,427
----------
Total operating expenses 715,235
----------
Income from operations before other income 99,566
Other income 4,376
----------
Net income $ 103,942
==========
</TABLE>
The accompanying notes are an integral part of the statement operations and
cash flows.
F-13
<PAGE>
Choice Dot Net, LLC
Statement of Operations
For the Period From January 1, 1999 to October 6, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income $ 103,942
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 20,427
Changes in assets and liabilities:
Accounts receivable (10,699)
Prepaid assets 5,819
Accounts payable (7,144)
Other liabilities 168,562
Deferred revenue 12,284
----------
Net cash provided by operating activities 293,191
Cash flows from investing activities:
Purchase of property and equipment (161,112)
Purchase of intangible asset (38,000)
----------
Net cash used in investing activities (199,112)
Cash flows from financing activities:
Distribution to owners (50,000)
Proceeds from note payable, related party 20,850
----------
Net cash used in financing activities (29,150)
----------
Net increase in cash and cash equivalents 64,929
Cash and cash equivalents at beginning of period 51,542
----------
Cash and cash equivalents at end of period $ 116,471
==========
</TABLE>
The accompanying notes are an integral part of the statement of operations and
cash flows.
F-14
<PAGE>
Choice Dot Net, LLC
Notes to Statement of Operations and Cash Flows
For the Period From January 1, 1999 to October 6, 1999
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Basis of Presentation
Choice Dot Net, LLC (the "Company") provides full service access to the
internet for corporate and individual users in the states of Ohio and
Kentucky.
Revenue Recognition
The Company recognizes revenue when Internet access services are provided.
Advance collections relating to future access services are recorded as
deferred revenue and recognized as revenue when earned.
Cash Equivalents
The Company considers all highly liquid investments purchased with an initial
maturity of three months or less to be cash equivalents.
Property and Equipment
Property and equipment are depreciated over their estimated useful lives
using the straight line method as follows:
Depreciable
Life-Years
-----------
Computer equipment 5
Office furniture and fixtures 7
Leasehold improvements 39
Costs of repair and maintenance are charged to expense as incurred.
Depreciation expense of approximately $20,000 was charged to operations in
1999.
Intangible Asset
Intangible asset is amortized over the term of the related licensing
agreement.
Advertising Costs
Advertising costs are expensed as incurred. Advertising costs of
approximately $9,000 were charged to operations.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Income Taxes
The Company is a limited liability corporation and the members of the Company
are subject to federal income tax.
2. OPERATING LEASES
Rent expense under all operating leases of approximately $9,000 was charged
to operations in 1999.
3. RELATED PARTY TRANSACTIONS
The note payable, related party, represents principal payable on demand to a
general partner. There is no interest payable on this note.
4. SUBSEQUENT EVENT
On October 7, 1999, the assets of the Company were purchased by Voyager.net,
Inc. for approximately $1,765,000, of which approximately $1,729,000 was paid
to the Company and the remainder was used for payment of certain acquisition
costs.
F-15
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Voyager.net, Inc.:
In our opinion, the accompanying statement of operations and cash flows present
fairly, in all material respects, the results of operations and cash flows of
Wholesale ISP, Inc. (the "Company") for the eleven months ended November 30,
1999, in conformity with accounting practices generally accepted in the United
States. These statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these statements based on our
audit. We conducted our audit of these statements in accordance with auditing
standards generally accepted in the United States, which require that we plan
and perform the audit to obtain reasonable assurance about whether the
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the statements,
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of these statements.
We believe that our audit provides a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Grand Rapids, Michigan
April 7, 2000
F-16
<PAGE>
Wholesale ISP, Inc.
Statement of Operations
For the Eleven Months Ended November 30,1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Revenue, Internet access service $ 2,327,641
------------
Operating expenses:
Internet access service costs 1,123,280
Sales and marketing 104,645
General and administrative 853,520
Depreciation 233,583
------------
Total operating expenses 2,315,028
------------
Income from operations before other income and expense 12,613
------------
Other income (expense):
Interest income 845
Loss on sale of assets (10,699)
Other income 12,255
------------
Total other income 2,401
------------
Net income $ 15,014
============
Per share data:
Basic and diluted net income per share applicable to common
stockholders $ 107.24
============
Weighted average common shares outstanding:
Basic and diluted 140
============
</TABLE>
The accompanying notes are an integral part of the statement of operations and
cash flows.
F-17
<PAGE>
Wholesale ISP, Inc.
Statement of Cash Flows
For the Eleven Months Ended November 30,1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income $ 15,014
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 233,583
Loss on sale of equipment 10,699
Changes in assets and liabilities:
Accounts receivable (238,249)
Other assets 4,290
Accounts payable (50,943)
Other liabilities (11,695)
Deferred revenue 177,513
----------
Net cash provided by operating activities 140,212
Cash flows used in investing activities, purchase of
property and equipment (79,531)
----------
Cash flows from financing activities:
Payments on capital leases (76,309)
Proceeds from notes receivable, related party 13,580
----------
Net cash used in financing activities (62,729)
----------
Net decrease in cash and cash equivalents (2,048)
Cash and cash equivalents at beginning of period 21,666
----------
Cash and cash equivalents at end of period $ 19,618
==========
</TABLE>
The accompanying notes are an integral part of the statement of operations and
cash flows.
F-18
<PAGE>
Wholesale ISP, Inc.
Notes to Statement of Operations and Cash Flows
November 30,1999
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Basis of Presentation
Wholesale ISP, Inc.'s (the "Company") name was changed from GlassCity
Internet, Inc. on December 10, 1999. The Company provides full service
access to the internet for corporate and individual users in the state of
Ohio.
Revenue Recognition
The Company recognizes revenue when Internet access services are provided.
Advance collections relating to future access services are recorded as
deferred revenue and recognized as revenue when earned.
Cash Equivalents
The Company considers all highly liquid investments purchased with an initial
maturity of three months or less to be cash equivalents.
Property and Equipment
Property and equipment are depreciated over their estimated useful lives
using the straight line method as follows:
Depreciable
Life-Years
-----------
Computer equipment 3-5
Leasehold improvements 39
Equipment acquired under capital leases are depreciated over their related
lease terms. Costs of repair and maintenance are charged to expense as
incurred. Depreciation expense of approximately $234,000 was charged to
operations in 1999.
Advertising Costs
Advertising costs are expensed as incurred. Advertising costs of
approximately $99,000 were charged to operations in 1999.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Income Taxes
The Company is taxed as an S-Corporation. Accordingly, the stockholders of
the Company are subject to federal income taxes rather than the Company.
2. OPERATING LEASES
Rent expense under all operating leases of approximately $65,000 was charged
to operations in 1999.
F-19
<PAGE>
Wholesale ISP, Inc.
Notes to Statement of Operations and Cash Flows
November 30, 1999
- --------------------------------------------------------------------------------
3. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
The following is the supplemental cash flow information for the period
presented.
<TABLE>
<CAPTION>
Eleven Months
Ended
November 30,
1999
<S> <C>
Cash paid during the year for interest $ 25,553
==========
Acquisition of equipment through capital lease $ 53,234
==========
</TABLE>
4. RELATED PARTY TRANSACTION
The notes receivable, related party, represents principal and interest
receivable on October 31, 2003 from shareholders of the Company. Interest on
the notes is at 4.42 percent.
5. SUBSEQUENT EVENT
On December 10, 1999, the assets of the Company were purchased by Voyager.
net, Inc. for approximately $4,693,000, of which approximately $4,462,000 was
paid to the Company and the remainder was used for payment of certain
liabilities and acquisition costs.
F-20
<PAGE>
VOYAGER.NET, INC.
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following unaudited pro forma condensed consolidated financial statements
give effect to the acquisitions by Voyager.net, Inc. (the "Company") of the
following four businesses in 1999:
Acquired entity Date
--------------- ----
NetDirect, Inc. ............................... 9/8/99
Raex Corporation .............................. 9/14/99
Choice Dot Net, LLC ........................... 10/7/99
Wholesale ISP, Inc. ........................... 12/10/99
These acquisitions were accounted for using the purchase method of accounting.
Accordingly, the purchase prices were allocated to assets acquired and
liabilities assumed based upon their estimated fair values at the dates of
acquisitions.
The unaudited pro forma statement of operations is based on the statement of
operations of the Company and the historical results of the acquired entities
listed above from January 1, 1999 through the dates of acquisition and combine
the results of operations of the Company and of the acquired entities for the
year ended December 31, 1999 as if the acquisitions occurred on January 1, 1999.
The unaudited pro forma condensed consolidated statement of operation is not
necessarily indicative of operating results that would have been achieved had
the combination been consummated as of the beginning of the period presented and
should not be construed as representative of future operations.
These unaudited pro forma condensed consolidated financial statements should
be read in conjunction with the historical consolidated financial statements and
the related notes thereto of Voyager, which are included in Voyager.net's Annual
Report on Form 10-K, and the historical statement of operations and cash flows
and the related notes thereto of the acquired entities listed above included
herein.
F-21
<PAGE>
VOYAGER.NET, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the year ended December 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Pre-aquisition Results
---------------------------------------------------------------
GDR
Voyager.net Enterprises, Net Raex Choice Dot
Inc. Inc. Direct, Inc. Corporation Net, LLC
------------- ------------ ----------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Revenue:
Internet access service $ 47,423,462 $ 1,528,411 $1,642,916 $1,512,851 $ 814,801
Other 1,074,173 - - 19,458 -
------------- ------------ ----------- ------------- ------------
Total revenue 48,497,635 1,528,411 1,642,916 1,532,309 814,801
------------- ------------ ----------- ------------- ------------
Internet access service costs 15,933,377 426,057 647,774 609,257 427,697
Sales and marketing 6,401,810 101,678 220,163 68,320 26,848
General and administrative 14,150,924 565,492 685,977 812,784 240,263
Depreciation and amortization 23,836,385 231,590 129,034 123,480 20,427
Compensation charge for issuance of
common stock and options 2,563,311 - - - -
------------- ------------ ----------- ------------- ------------
Total operating expenses 62,885,807 1,324,817 1,682,948 1,613,841 715,235
------------- ------------ ----------- ------------- ------------
Total operating income (loss) (14,388,172) 203,594 (40,032) (81,532) 99,566
Other income (expense) (1,740,777) (73,718) (20,237) (1,206) 4,376
------------- ------------ ----------- ------------- ------------
Net income (loss) (16,128,949) 129,876 (60,269) (82,738) 103,942
Preferred stock dividends (367,265) - - - -
------------- ------------ ----------- ------------- ------------
Net income (loss) applicable to
common stockholders $(16,496,214) $ 129,876 $ (60,269) $ (82,738) $ 103,942
============= ============ =========== ============= ============
Basic and diluted earnings
per share $ (.61)
=============
Basic and diluted weighted
average shares 27,238,084
=============
</TABLE>
<TABLE>
<CAPTION>
Pre-aquisition Results
---------------------------------
Other
Wholesale Acquired
ISP, Inc. Entities Adjustments Total
------------ ------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Revenue:
Internet access service $ 2,327,641 $ 6,798,421 $ 62,048,503
Other - - 1,093,631
----------- ----------- ------------- -------------
Total revenue 2,327,641 6,798,421 63,142,134
----------- ----------- ------------- -------------
Internet access service costs 1,123,280 2,558,202 21,725,644
Sales and marketing 104,645 169,084 7,092,548
General and administrative 853,520 2,581,786 19,890,746
Depreciation and amortization 233,583 440,533 $ 10,259,109 35,274,141
Compensation charge for issuance of
common stock and options - - 2,563,311
----------- ----------- ------------- -------------
Total operating expenses 2,315,028 5,749,605 10,259,109 86,546,390
----------- ----------- ------------- -------------
Total operating income (loss) 12,613 1,046,816 (10,259,109) (23,404,256)
Other income (expense) 2,401 (1,493) (2,345,222) (4,175,876)
----------- ----------- ------------- -------------
Net income (loss) 15,014 1,047,323 (12,604,331) (27,580,132)
Preferred stock dividends - - (367,265)
----------- ----------- ------------- -------------
Net income (loss) applicable to
common stockholders $ 15,014 $ 1,047,323 $ (12,604,331) $ (27,947,397)
=========== =========== ============= =============
Basic and diluted earnings
per share $ (1.03)
=============
Basic and diluted weighted
average shares 27,238,084
=============
</TABLE>
See accompanying notes to condensed consolidated pro forma financial statements.
F-22
<PAGE>
VOYAGER.NET, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Pro forma adjustments are as follows:
A. Acquired customer bases in the amount of $54.4 million are being amortized
over a three-year period beginning January 1, 1999 as if the acquisitions had
occurred on that date.
B. Voyager.net utilized $46.8 million of its revolving credit facility to
complete the acquisitions in 1999. Additional interest expense on the related
debt would have been approximately $2.6 million. The assumed interest rates
were 8.5% and 8.25% for the period presented.
F-23
<PAGE>
EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
Agreement made as of September 8, 1999 by and between Voyager Information
Networks, Inc., a Michigan corporation ("Buyer"), Net Direct, Inc., an Indiana
corporation ("Seller"), and Mark Wilson (the "Principal").
WHEREAS, subject to the terms and conditions hereof, Seller desires to
sell, transfer and assign to Buyer, and Buyer desires to purchase from Seller,
all of the properties, rights and assets used or useful in connection with the
Internet service business of Seller (the "Business").
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
SECTION 1. PURCHASE AND SALE OF ASSETS.
1.1 Sale of Assets. Upon the terms and subject to the conditions set
forth in this Agreement, and the performance by the parties hereto of their
respective obligations hereunder, Seller agrees to sell, assign, transfer and
deliver to Buyer, and Buyer agrees to purchase from Seller, all of Seller's
right, title and interest in and to all of the properties, assets and business
of the Business of every kind and description, tangible and intangible, real,
personal or mixed, and wherever located, but excluding the Excluded Assets (as
defined in Section 1.2 below), including, without limitation, the following:
(a) Equipment. All free standing kiosks, servers, routers, modems,
computers, electronic devices, test equipment and all other fixed assets,
equipment, furniture, fixtures, leasehold improvements, parts, accessories,
inventory, office materials, software, supplies and other tangible personal
property of every kind and description owned by Seller and used or held for use
in connection with the Business, in each case together with any additions
thereto between the date of this Agreement and the Closing Date (as defined
below), all as set forth on Schedule 1.1(a) attached hereto (collectively,
"Equipment");
(b) Contracts. All of the rights of Seller under and interest of
Seller in and to all contracts relating to the Business (other than the Excluded
Contracts (as defined below)), including, without limitation, original contracts
for the provision of Internet connectivity, dedicated service, web-hosting, web-
domain, dial-up services, web-development and Internet commerce, all leases with
respect to real property and all co-location agreements, a true, correct and
complete list of which contracts is attached hereto as Schedule 1.1(b)
(collectively, the "Contracts");
(c) Intellectual Property. All of Seller's Intellectual Property (as
defined in Section 2.20), as set forth on Schedule 1.1(c) attached hereto;
<PAGE>
(d) Licenses and Authorizations. All rights associated with the
licenses, permits, easements, registrations and authorizations issued or granted
to Seller by any governmental authority with respect to the operation of the
Business, including, without limitation, those licenses and authorizations
listed on Schedule 1.1(d) attached hereto, and all applications therefor,
together with any renewals, extensions, or modifications thereof and additions
thereto;
(e) Current Assets; Accounts Receivable. All Current Assets of Seller
(as such term is hereinafter defined) and all accounts receivable of Seller
incurred in the ordinary course of business and such accounts receivable are
included on Seller's balance sheet, as determined in accordance with generally
accepted accounting principles ("GAAP"), consistently applied, a complete list
of such accounts receivable is attached hereto as Schedule 1.1(e) ("Accounts
Receivable");
(f) Goodwill. All of the goodwill of Seller in, and the going concern
value of, the Business, and all of the business and customer lists, proprietary
information, and trade secrets related to the Business; and
(g) Records. All of Seller's customer logs, location files and
records, employee records, and other business files and records, in each case
relating to the Business.
The assets, properties and business of Seller being sold to and purchased
by Buyer under this Section 1.1 are referred to herein collectively as the
"Assets."
1.2 Excluded Assets. There shall be excluded from the Assets and retained
by Seller, to the extent in existence on the Closing Date, the following assets
(the "Excluded Assets"):
(a) Other Assets. All other assets of Seller which are not used or
held for use in connection with the Business or otherwise necessary to the
operation of the Business now or after the Closing Date and which are set forth
on Schedule 1.2(a) attached hereto;
(b) Excluded Contracts. All of Seller's right, title and interest in,
to and under the contracts and agreements listed on Schedule 1.2(b) attached
hereto (the "Excluded Contracts");
(c) Cash and Cash Equivalents. All of Seller's cash on hand and
Seller's cash equivalents;
(d) Insurance. All contracts of insurance (including any cash
surrender value thereof) and all insurance proceeds of settlement and insurance
claims made by Seller on or before the Closing Date as set forth on Schedule
1.2(d) attached hereto;
2
<PAGE>
(e) Tax Items. All claims, rights and interest in and to any refunds
for federal, state or local Taxes (as defined below) and the returns related
thereto for periods prior to the Closing Date as set forth on Schedule 1.2(e)
attached hereto; and
(f) Corporate Records. All of Seller's corporate and other
organizational records.
1.3 Assumed Liabilities; Excluded Liabilities; Employees.
(a) Assumed Liabilities. Buyer shall, on and as of the Closing Date,
accept and assume, and shall become and be fully liable and responsible for, and
other than as expressly set forth herein Seller shall have no further liability
or responsibility for or with respect to, (i) liabilities and obligations
arising out of events occurring on and after the Closing Date related to Buyer's
ownership of the Assets and Buyer's operation of the Business after the Closing
Date; (ii) all obligations and liabilities of Seller which are to be performed
after the Closing Date arising under the Contracts, including, without
limitation, Seller's obligations to Subscribers under such Contracts for (A)
Subscriber deposits held by Seller as of the Closing Date in the amount for
which Buyer receives a credit pursuant to Section 1.6(a) below, (B) Subscriber
advance payments held by Seller as of the Closing Date for services to be
rendered in connection with the Business in the amount for which Buyer receives
a credit pursuant to Section 1.6(a) below, and (C) the delivery of Internet
connectivity service to Subscribers (whether pursuant to a Contract or
otherwise) after the Closing Date; and (iii) the Current Liabilities (as
hereinafter defined) of Seller ((i), (ii) and (iii) together, the "Assumed
Liabilities"). The assumption of the Assumed Liabilities by Buyer hereunder
shall not enlarge any rights of third parties under contracts or arrangements
with Buyer or Seller or any of their respective affiliates or subsidiaries. No
parties other than Buyer and Seller shall have any rights under this Agreement.
(b) Excluded Liabilities. It is expressly understood that, except for
the Assumed Liabilities, Buyer shall not assume, pay or be liable for any
liability or obligation of Seller of any kind or nature at any time existing or
asserted, whether, known, unknown, fixed, contingent or otherwise, not
specifically assumed herein by Buyer, including, without limitation, any
liability or obligation relating to, resulting from or arising out of (i) the
Excluded Assets, including, without limitation, the Excluded Contracts, (ii) the
employees of the Business, including, without limitation, any obligation to
provide any amounts due to the employees under any pension, profit sharing or
similar plan, any bonus or other compensation plan, or related to vacation or
other similar employee benefits, or arising as a result of the transactions
contemplated hereby or (iii) any fact existing or event occurring prior to the
Closing Date or relating to the operation of the Business prior to the Closing
Date. The liabilities which are not assumed by Buyer under this Agreement are
hereinafter sometimes referred to as the "Excluded Liabilities."
3
<PAGE>
(c) Employees, Wages and Benefits.
(i) Seller shall terminate all of its employees effective as of
the Closing Date and Buyer shall not assume or have any obligations or
liabilities with respect to such employees or such terminations, including,
without limitation, any severance obligation. Seller acknowledges and
agrees that Buyer has the right to interview and discuss employment terms
and issues with such employees prior to and after the Closing.
(ii) Buyer specifically reserves the right, on or after the
Closing Date, to employ or reject any of Seller's employees or other
applicants in its sole and absolute discretion; provided that Buyer shall
provide to Seller a list of employees to whom Buyer intends to offer
employment at least three (3) business days prior to the Closing. Nothing
in this Agreement shall be construed as a commitment or obligation of Buyer
to accept for employment, or otherwise continue the employment of, any of
Seller's employees, and no employee shall be a third-party beneficiary of
this Agreement.
(iii) Seller shall pay all wages, salaries, commissions, and the
cost of all fringe benefits provided to its employees which shall have
become due for work performed as of and through the day preceding the
Closing Date, and Seller shall collect and pay all Taxes in respect of such
wages, salaries, commissions and benefits.
(iv) Seller acknowledges and agrees that Buyer shall not acquire
any rights or interests of Seller in, or assume or have any obligations or
liabilities of Seller under, any benefit plans maintained by, or for the
benefit of any employees of Seller prior to the Closing Date, including,
without limitation, obligations for severance or vacation accrued but not
taken as of the Closing Date.
1.4 The Closing. The transactions contemplated by this Agreement shall
take place at a closing (the "Closing") to be held at 10:00 a.m., local time, at
the offices of Henderson, Daily, Withrow & DeVoe, on September 8, 1999, or at
such other time and place as shall be mutually agreed upon in writing by Buyer
and Seller (the "Closing Date").
1.5 Purchase Price. In consideration of the sale by Seller to Buyer of
the Assets, and subject to the assumption by Buyer of the Assumed Liabilities
and satisfaction of the conditions contained herein, Buyer shall pay to Seller
at the Closing an amount equal to $4,550,000 (as adjusted in accordance with
Section 1.6 below, the "Purchase Price") as follows:
(a) At the Closing, Buyer shall deliver the sum of $4,095,000 (as
adjusted in accordance with Section 1.6) to Seller by bank cashier's check or
bank wire transfer pursuant to payment instructions delivered by Seller to Buyer
at least two (2) business days prior to the Closing; and
(b) At the Closing, Buyer shall deposit the sum of $455,000 (the
"Escrow Deposit") with Boston Safe Deposit and Trust Company as Escrow Agent
under the Escrow
4
<PAGE>
Agreement in the form attached hereto as Exhibit A (the "Escrow Agreement"). The
Escrow Deposit shall be held, administered and distributed in accordance with
the terms of the Escrow Agreement.
1.6 Adjustments to Purchase Price. The Purchase Price shall be adjusted
at the Closing in the manner set forth below:
(a) The Purchase Price will be increased or decreased, as the case may
be, on a dollar-for-dollar basis, by the Working Capital Excess or Deficiency,
as applicable, as of the opening of business on the Closing Date.
For the purposes of this Agreement, the following terms shall
have the following meanings:
(i) "Working Capital" shall mean the difference between Seller's
Current Assets and Current Liabilities;
(ii) "Current Assets" shall mean and include all Accounts
Receivable of Seller outstanding on the Closing Date with balances of thirty
(30) days or less, all prepaid expenses (including postal deposits), and all
other current assets which have value to the business at the Closing and which
are used in the operation of Seller's Business, in each case as determined in
accordance with GAAP, consistently applied; provided, however, Current Assets
shall not include Seller's cash on hand, Seller's cash equivalents or
receivables from Seller's shareholders;
(iii) "Current Liabilities" shall mean and include accounts
payable, accrued expenses, all deferred revenues and all other current
liabilities incurred in the operation of Seller's Business and reflected on
Seller's balance sheet in each case as determined in accordance with GAAP,
consistently applied; provided, however, Current Liabilities shall not include
taxes and the current portion of Seller's long-term liabilities;
(iv) "Deficiency" shall mean the amount by which the Current
Liabilities exceeds the Current Assets; and
(v) "Excess" shall mean the amount by which the Current Assets
exceeds the Current Liabilities.
(b) (i) No later than five (5) days prior to the Closing, Buyer and
Seller shall prepare a statement to be attached hereto as Schedule 1.6(b)
(the "Estimated Adjustment Statement") which sets forth the Company's
estimated Working Capital and the amount of any estimated Deficiency or
Excess, as the case may be, as of the Closing Date (the "Estimated
Adjustment"). The Purchase Price payable at the Closing shall be increased
on a dollar-for-dollar basis to the extent of any positive Estimated
Adjustment
5
<PAGE>
or decreased on a dollar-for-dollar basis to the extent of any negative
Estimated Adjustment, as the case may be, set forth on such Estimated
Adjustment Statement.
(ii) No later than forty-five (45) days following the Closing,
Buyer shall prepare and deliver to Seller a statement (the "Final
Adjustment Statement") setting forth the actual Working Capital, and the
amount of any actual Deficiency or Excess, as the case may be, as well as
any other changes to the Estimated Adjustment, as of the Closing Date.
Subject to Section 1.6(b)(iii) below, within ten (10) days following the
delivery of such Final Adjustment Statement to Seller, Buyer or Seller, as
the case may be, shall pay to the other party, by wire transfer of
immediately available funds, the difference between the Estimated
Adjustment, as shown on the Estimated Adjustment Statement, and the actual
adjustment, as shown on the Final Adjustment Statement.
(iii) In the event Seller objects to the Final Adjustment
Statement, Seller shall notify Buyer in writing of such objection within
the ten (10) day period following the delivery thereof, stating in such
written objection the reasons therefor and setting forth the Seller's
calculation of Seller's actual Working Capital at the Closing. Upon
receipt by Buyer of such written objection, the parties shall attempt to
resolve the disagreement concerning the Final Adjustment Statement through
negotiation. Notwithstanding any other dispute resolution procedure
provided for in this Agreement, if Buyer and Seller cannot resolve such
disagreement concerning the Final Adjustment Statement within thirty (30)
days following the end of the foregoing 10-day period, the parties shall
submit the matter for resolution to a nationally recognized firm of
independent certified public accountants not affiliated with either party,
with the costs thereof to be shared equally by the parties. Such
accounting firm shall deliver a statement setting forth its own calculation
of the final adjustment to the parties within thirty (30) days of the
submission of the matter to such firm. Any payment shown to be due by a
party on the statement of such accounting firm shall be paid to the other
party promptly but in no event later than five (5) days following the
delivery of such statement by such accounting firm to the parties.
1.7 Purchase Price Allocation. At least two (2) business days prior to
the Closing, Buyer and Seller shall agree on the allocation of the Purchase
Price as set forth on Schedule 1.7 attached hereto. Such allocation shall be
binding upon Buyer and Seller for all purposes (including financial accounting
purposes, financial and regulatory reporting purposes and tax purposes). Buyer
and Seller each further agrees to file its Federal income tax returns and its
other tax returns reflecting such allocation, Form 8594 and any other reports
required by Section 1060 of the Internal Revenue Code of 1986, as amended.
1.8 Records and Contracts. To the extent not previously provided to
Buyer, at the Closing, Seller shall deliver to Buyer all of the Contracts, with
such assignments thereof and consents to assignments as are necessary to assure
Buyer of the full benefit of the same. Seller shall also deliver to Buyer at
the Closing all of Seller's files and records constituting Assets.
6
<PAGE>
1.9 Further Assurances. Seller, from time to time after the Closing at
the request of Buyer and without further consideration, shall execute and
deliver further instruments of transfer and assignment and take such other
action as Buyer may reasonably require to more effectively transfer and assign
to, and vest in, Buyer the Assets free and clear of all Liens (as defined in
Section 2.8).
1.10 Sales and Transfer Taxes. All sales, transfer, use, recordation,
documentary, stamp, excise taxes, personal property taxes, fees and duties
(including any real estate transfer taxes) under applicable law incurred in
connection with this Agreement or the transactions contemplated thereby will be
borne and paid by Seller, and Seller shall promptly reimburse Buyer for the
payment of any such tax, fee or duty which Buyer is required to make under
applicable law.
1.11 Transfer of Subject Assets. At the Closing, Seller shall deliver or
cause to be delivered to Buyer good and sufficient instruments of transfer
transferring to Buyer title to all of the Assets, together with all required
consents. Such instruments of transfer (a) shall contain appropriate warranties
and covenants which are usual and customary for transferring the type of
property involved under the laws of the jurisdictions applicable to such
transfers, (b) shall be in form and substance reasonably satisfactory to Buyer
and its counsel, (c) shall effectively vest in Buyer good and marketable title
to all of the Assets free and clear of all Liens, and (d) where applicable,
shall be accompanied by evidence of the discharge of all Liens against the
Assets.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLER AND THE PRINCIPAL. In order
to induce Buyer to enter into this Agreement, Seller and the Principal, jointly
and severally, hereby represent and warrant to Buyer as follows:
2.1 Organization; Subsidiaries.
(a) Seller is a corporation duly organized, validly existing and in
good standing under the laws of Indiana, with full corporate power and authority
to own or lease its properties and to conduct its business in the manner and in
the places where such properties are owned or leased or such business is
currently conducted or proposed to be conducted. The copies of Seller's
Articles of Incorporation and by-laws, each as amended to date, heretofore
delivered to Buyer's counsel are complete and correct. Seller is not in
violation of any term of its Articles of Incorporation or by-laws. Seller is
duly qualified to do business in the state of its organization, and is not
required to be licensed or qualified to conduct its business or own its property
in any other jurisdiction.
(b) Seller has no subsidiaries and does not own any securities issued
by any other business organization or governmental authority, except U.S.
Government securities, bank certificates of deposit and money market accounts
acquired as short-term investments in the ordinary course of its business.
Seller does not own or have any direct or indirect interest in or control over
any corporation, partnership, joint venture or entity of any kind.
7
<PAGE>
2.2 Required Action. All actions and proceedings necessary to be taken by
or on the part of Seller in connection with the transactions contemplated by
this Agreement have been duly and validly taken, and this Agreement and each
other agreement, document and instrument to be executed and delivered by or on
behalf of Seller pursuant to, or as contemplated by, this Agreement
(collectively, the "Seller Documents") has been duly and validly authorized,
executed and delivered by Seller and no other action on the part of Seller or
its stockholders is required in connection therewith. Each of Seller and the
Principal have full right, authority, power and capacity to execute and deliver
this Agreement and each other Seller Document and to carry out the transactions
contemplated hereby and thereby. This Agreement and each other Seller Document
constitutes, or when executed and delivered will constitute, the legal, valid
and binding obligation of each of Seller and the Principal enforceable in
accordance with its respective terms.
2.3 No Conflicts.
(a) The execution, delivery and performance by Seller of this
Agreement and each other Seller Document does not and will not (i) violate any
provision of the Articles of Incorporation and by-laws of Seller, in each case
as amended to date, (ii) constitute a violation of, or conflict with or result
in any breach of, acceleration of any obligation under, right of termination
under, or default under, any agreement or instrument to which Seller is a party
or by which Seller or the Assets is bound, (iii) violate any judgment, decree,
order, statute, rule or regulation applicable to Seller or the Assets, (iv)
require Seller to obtain any approval, consent or waiver of, or to make any
filing with, any person or entity (governmental or otherwise) that has not been
obtained or made or (v) result in the creation or imposition of any Lien on any
of the Assets.
(b) The execution, delivery and performance by the Principal of this
Agreement and each other Seller Document does not and will not (i) constitute a
violation of, or conflict with or result in any breach of, acceleration of any
obligation under, right of termination under, or default under, any agreement or
instrument to which the Principal is a party or by which the Principal is bound,
(ii) violate any judgment, decree, order, statute, rule or regulation applicable
to the Principal, (iii) require the Principal to obtain any approval, consent or
waiver of, or to make any filing with, any person or entity (governmental or
otherwise) that has not been obtained or made, or (iv) result in the creation or
imposition of any Lien on any of the Assets.
2.4 Taxes.
(a) Seller has paid or caused to be paid all federal, state, local,
foreign and other taxes, including, without limitation, income taxes, estimated
taxes, alternative minimum taxes, excise taxes, sales taxes, use taxes, value-
added taxes, gross receipts taxes, franchise taxes, capital stock taxes,
employment and payroll-related taxes, withholding taxes, stamp taxes, transfer
taxes, windfall profit taxes, environmental taxes and property taxes, whether or
not
8
<PAGE>
measured in whole or in part by net income, and all deficiencies, or other
additions to tax, interest, fines and penalties owed by it (collectively,
"Taxes"), required to be paid by it through the date hereof whether disputed or
not.
(b) Seller has in accordance with applicable law filed all federal,
state, local and foreign tax returns required to be filed by it through the date
hereof, and all such returns correctly and accurately set forth the amount of
any Taxes relating to the applicable period. A list of all federal, state,
local and foreign income tax returns filed with respect to Seller for taxable
periods ended on or after December 31, 1993, is set forth in Schedule 2.4
attached hereto, and said schedule indicates those returns that have been
audited or currently are the subject of an audit. Seller has delivered to Buyer
correct and complete copies of all federal, state, local and foreign income tax
returns listed on said schedule, and of all examination reports and statements
of deficiencies assessed against or agreed to by Seller with respect to said
returns.
(c) Neither the Internal Revenue Service ("IRS") nor any other
governmental authority is now asserting or, to the knowledge of Seller or the
Principal, threatening to assert against Seller any deficiency or claim for
additional Taxes. To the knowledge of Seller and the Principal, no claim has
ever been made by an authority in a jurisdiction where Seller does not file
reports and returns that Seller is or may be subject to taxation by that
jurisdiction. There are no security interests on any of the Assets of Seller
that arose in connection with any failure (or alleged failure) to pay any Taxes.
Seller has never entered into a closing agreement pursuant to Section 7121 of
the Internal Revenue Code of 1986, as amended (the "Code").
(d) There has not been any audit of any tax return filed by Seller, no
audit of any tax return of Seller is in progress, and Seller has not been
notified by any tax authority that any such audit is contemplated or pending.
No extension of time with respect to any date on which a tax return was or is to
be filed by Seller is in force, and no waiver or agreement by Seller is in force
for the extension of time for the assessment or payment of any Taxes.
(e) Seller has never been (and has never had any liability for unpaid
Taxes because it once was) a member of an "affiliated group" (as defined in
Section 1504(a) of the Code). Seller has never filed, and has never been
required to file, a consolidated, combined or unitary tax return with any other
entity. Seller does not own and has never owned a direct or indirect interest
in any trust, partnership, corporation or other entity and therefore Buyer is
not acquiring from Seller an interest in any entity. Seller is not a party to
any tax sharing agreement.
(f) Seller is not a "foreign person" within the meaning of Section
1445 of the Code and Treasury Regulations Section 1.1445-2.
(g) For purposes of this Agreement, all references to Sections of the
Code shall include any predecessor provisions to such Sections and any similar
provisions of federal, state, local or foreign law.
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2.5 Compliance with Laws. Seller's operation of the Business and the
Assets is in compliance in all material respects with all applicable statutes,
ordinances, orders, rules and regulations promulgated by any federal, state,
municipal or other governmental authority (including the Federal Communications
Commission), and Seller has not received notice of a violation or alleged
violation of any such statute, ordinance, order, rule or regulation.
2.6 Insurance. The physical properties and tangible Assets are insured to
the extent disclosed in Schedule 2.6 attached hereto, and all insurance policies
and arrangements of Seller in effect as of the date hereof are disclosed in said
Schedule. Said insurance policies and arrangements are in full force and
effect, all premiums with respect thereto are currently paid, and Seller is in
compliance in all material respects with the terms thereof. Said insurance is
adequate and customary for the business engaged in by Seller and is sufficient
for compliance by Seller with all requirements of law and all agreements and
leases to which Seller is a party.
2.7 Contracts. The Contracts constitute all leases, contracts and
arrangements, whether oral or written, under which Seller is bound or to which
Seller is a party which relate to the Business or Assets. Schedule 1.1(b)
attached hereto contains a true, correct and complete list of all Contracts.
With respect to each oral agreement or understanding involving the Business,
Seller has provided a written summary of the material terms of each such
agreement or understanding on Schedule 1.1(b). Each Contract is valid, in full
force and effect and binding upon Seller and the other parties thereto in
accordance with its terms. Neither Seller nor, to the knowledge of Seller and
the Principal, any other party is in default under or in arrears in the
performance, payment or satisfaction of any agreement or condition on its part
to be performed or satisfied under any Contract, nor does any condition exist
that with notice or lapse of time or both would constitute such a default, and
no waiver or indulgence has been granted by any party under any Contract.
Seller has not received notice of, and each of Seller and the Principal have no
knowledge of, any fact which would result in a termination, repudiation or
breach of any Contract. Seller has provided Buyer with true and complete copies
of all of such Contracts, other than with respect to the oral agreements or
understandings described on Schedule 1.1(b).
2.8 Title. Except as set forth in Schedule 2.8 attached hereto, Seller
has good and marketable title to all of the Assets free and clear of all
mortgages, pledges, security interests, charges, liens, restrictions and
encumbrances of any kind (collectively, "Liens") whatsoever. Upon the sale,
assignment, transfer and delivery of the Assets to Buyer hereunder and under the
Seller Documents, there will be vested in Buyer good, marketable and
indefeasible title to the Assets, free and clear of all Liens. The Assets
include all of the assets and properties (i) held for use by Seller to conduct
the Business as presently conducted and (ii) necessary for Buyer to operate the
Business in the same manner as such business is currently operated by Seller.
To the best knowledge of Seller, all of the tangible Assets are in good repair,
have been well maintained and are in good operating condition, do not require
any material modifications or repairs, and comply in all material respects with
applicable laws, ordinances and regulations, ordinary wear and tear excepted.
Seller has delivered complete and true copies of all real property leases (the
"Leases") set forth on Schedule 1.1(b). Seller holds good, clear, marketable,
valid and enforceable leasehold interest in the real property subject to the
Leases (the "Leased Real
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Property"), subject only to the right of reversion of the landlord or lessor
under the Leases, free and clear of all other prior or subordinate interests,
including, without limitation, mortgages, deeds of trust, ground leases, leases,
subleases, assessments, tenancies, claims, covenants, conditions, restrictions,
easements, judgments or other encumbrances or matters affecting title, and free
of encroachments onto or off of the leased real property. To the best knowledge
of Seller, there are no material defects in the physical condition of any
improvements constituting a part of the Leased Real Property, including, without
limitation, structural elements, mechanical systems, roofs or parking and
loading areas, and all of such improvements are in good operating condition and
repair, have been well maintained. All water, sewer, gas, electric, telephone,
drainage and other utilities required by law or necessary for the current or
planned operation of the Leased Real Property have been installed and connected
pursuant to valid permits, and are sufficient to service the Leased Real
Property. Seller does not hold or own a fee interest in any real property.
2.9 No Litigation. Seller is not now involved in nor, to the knowledge of
Seller and the Principal, is Seller threatened to be involved in any litigation
or legal or other proceedings related to or affecting the Business or any Asset
or which would prevent or hinder the consummation of the transactions
contemplated by this Agreement. Seller has not been operating the Business
under, and the Business is not subject to, any order, injunction or decree of
any court of federal, state, municipal or other governmental department,
commission, board, agency or instrumentality.
2.10 Employees; Labor Matters. Seller employs approximately 13 full-time
employees and 4 part-time employees and generally enjoys good employer-employee
relationships. Seller shall provide to Buyer a list of the employees of Seller
in connection with the Business at least ten (10) days prior to Closing,
including the name, date of hire and wages of such employees. Seller is not
delinquent in payments to any of its employees for any wages, salaries,
commissions, bonuses or other direct compensation for any services performed for
it to the date hereof or amounts required to be reimbursed to such employees.
Upon termination of the employment of any of said employees, neither Seller nor
Buyer will by reason of the transactions contemplated hereby or anything done
prior to the Closing be liable to any of said employees for so-called "severance
pay" or any other payments, except as set forth in Schedule 2.10 attached
hereto. Seller does not have any policy, practice, plan or program of paying
severance pay or any form of severance compensation in connection with the
termination of employment, except as set forth in said Schedule. Seller is in
compliance in all material respects with all applicable laws and regulations
respecting labor, employment, fair employment practices, workplace safety and
health, terms and conditions of employment, and wages and hours. There are no
charges of employment discrimination or unfair labor practices, nor are there
any strikes, slowdowns, stoppages of work, or any other concerted interference
with normal operations existing, pending or, to the knowledge of Seller and the
Principal, threatened against or involving Seller. No question concerning
representation exists respecting any group of employees of Seller. There are no
grievances, complaints or charges that have been filed against Seller under any
dispute resolution procedure (including, but not limited to, any proceedings
under any dispute resolution procedure under any collective bargaining
agreement)
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that might have an adverse effect on Seller or the conduct of its business and
no arbitration or similar proceeding is pending and no claim therefor has been
asserted. No collective bargaining agreement is in effect or is currently being
or is about to be negotiated by Seller. Seller has received no information to
indicate that any of its employment policies or practices is currently being
audited or investigated by any federal, state or local government agency. Seller
is, and at all times since November 6, 1986 has been, in compliance with the
requirements of the Immigration Reform Control Act of 1986.
2.11 Financial Statements. Attached hereto as Schedule 2.11 are copies
of the balance sheet of Seller as at July 31, 1999 (the "Base Balance Sheet")
and the statements of income and expense of Seller for the twelve months ended
July 31, 1999 (collectively the "Financial Statements"). The Financial
Statements have been prepared in accordance with generally accepted accounting
principles applied consistently during the periods covered thereby (except for
the absence of footnotes with respect to unaudited financials), are complete and
correct and present fairly and accurately the financial condition of the
Business at the dates of said statements and the results of operations of the
Business for the periods covered thereby. As of the date of the Base Balance
Sheet (the "Base Balance Sheet Date"), Seller had no liabilities or obligations
of any kind with respect to the Business, whether accrued, contingent or
otherwise, that are not disclosed and adequately reserved against on the Base
Balance Sheet. As of the date hereof and at the Closing, Seller had and will
have no liabilities or obligations of any kind with respect to the Business,
whether accrued, contingent or otherwise, that are not disclosed and adequately
reserved against on the Base Balance Sheet.
2.12 Business Since the Base Balance Sheet Date. Except for the
transactions contemplated by this Agreement, since the Base Balance Sheet Date:
(a) there has been no material adverse change in the Business or in
the Assets, operations or financial condition of the Business;
(b) the Business has, in all material respects, been conducted in the
ordinary course of business and in substantially the same manner as it was
conducted before the date of the Base Balance Sheet Date;
(c) there has not been any material obligation or liability
(contingent or other) incurred by Seller with respect to the Business, whether
or not incurred in the ordinary course of business including, without
limitation, any capital or operating leases with respect to Equipment;
(d) there has not been any purchase, sale or other disposition, or any
agreement or other arrangement, oral or written, for the purchase, sale or other
disposition, of any material properties or assets of the Business, whether or
not in the ordinary course of business;
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(e) there has not been any mortgage, encumbrance or lien placed on any
of the Assets, nor any payment or discharge of a material lien or liability of
Seller which was not reflected on the Base Balance Sheet;
(f) there has not been any damage, destruction or loss, whether or not
covered by insurance, adversely affecting the Business or Assets;
(g) there has not been any material change in Seller's pricing,
marketing, customer service, billing, accounting, operational or promotional
activities and policies of Seller;
(h) there has not been any change in the collection, payment and
accounting policies used by Seller in the Business; and
(i) there has not been any agreement or understanding, whether in
writing or otherwise, for Seller to take any of the actions specified above.
2.13 Licenses. As of the date of this Agreement, Seller is the holder of
all licenses, permits and authorizations with respect to the Business (the
"Authorizations"). The Authorizations constitute all of the licenses, permits
and authorizations required for operation of the Business as now operated. All
of the Authorizations are in full force and effect and no licenses, permits or
authorizations of any governmental department or agency are required for the
operation of the Business which have not been duly obtained. As of the date
hereof, there is not pending or, to the knowledge of Seller and the Principal,
threatened any action by or before any governmental agency to revoke, cancel,
rescind or modify any of the Authorizations, and there is not now issued or
outstanding or, to the knowledge of Seller and the Principal, pending or
threatened any order to show cause, notice of violation, notice of apparent
liability, or notice of forfeiture or complaint against Seller with respect to
the Business.
2.14 Approvals; Consents. Except as set forth on Schedule 2.14 attached
hereto, no approval, consent, authorization or exemption from or filing with any
person or entity not a party to this Agreement is required to be obtained or
made by Seller in connection with the execution and delivery of this Agreement
and the Seller Documents and the consummation of the transactions contemplated
hereby and thereby. All of the approvals, consents and authorizations listed on
Schedule 2.14 shall be obtained by Seller at or prior to the Closing in
accordance with Section 4.4 hereof.
2.15 Customers and Suppliers. Seller's relations with its customers and
suppliers, including its Subscribers (as defined below), are good and there are
not pending or, to Seller's knowledge, threatened claims or controversies with
any customer or suppliers that are material to the Assets or the Business.
2.16 Subscribers. Schedule 2.16(a) attached hereto sets forth, as of the
date hereof, the Subscribers of the Business as listed by class, type and
billing plan. For purposes of this Agreement, the terms "Subscriber" shall mean
any active subscriber to Internet services offered
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by Seller in the Business who has subscribed to a service for at least one month
and has paid at least one bill, including, without limitation, any person who
receives dial-up Internet access and e-mail services through the Business (a
"Dial-up Subscriber"), any person who receives dedicated Internet access from
Seller offering higher data transmission rates than available from dial-up
access (a "Dedicated Subscriber"), and any person with a web page or domain name
on Seller's server and to whom Seller provides Internet access (a
"Web-hosting/Domain-hosting Subscriber"); provided, however, that "Subscriber"
shall not include any person who is (i) more than thirty (30) days delinquent in
payment of such person's bill for such services provided by the Business and
(ii) receiving complimentary Internet services or Internet services at a
promotional discounted rate. Set forth on Schedule 2.16(b) attached hereto is a
listing of all such accounts which receive complimentary Internet services or
Internet services at a promotional discounted rate (including, but not limited
to, those accounts that receive "student plan" rates). Set forth on Schedule
2.16(c) attached hereto is Seller's policy and practice with respect to the
disconnection of Subscribers, with which Seller has, except as set forth on
Schedule 2.16(c), at all times since its inception, complied in all material
respects.
2.17 Brokers. Seller has not retained any broker or finder or other
person who would have any valid claim against any of the parties to this
Agreement for a commission or brokerage fee in connection with this Agreement or
the transactions contemplated hereby.
2.18 Collectibility of Accounts Receivable. All of the Accounts
Receivable of Seller are or will be as of the Closing Date bona fide, valid and
enforceable claims, subject to no setoff or counterclaim and to Seller's
knowledge are collectible in accordance with their terms. Seller has no accounts
or loans receivable from any person, firm or corporation which is affiliated
with Seller or from any director, officer or employee of Seller, or from any of
their respective spouses or family members.
2.19 Banking Relations. All of the arrangements which Seller has with any
banking institution are completely and accurately described in Schedule 2.19
attached hereto, indicating with respect to each of such arrangements the type
of arrangement maintained (such as checking account, borrowing arrangements,
safe deposit box, etc.) and the person or persons authorized in respect thereof.
2.20 Intellectual Property.
(a) Set forth on Schedule 2.20 attached hereto are all computer
programs and related documentation sold, marketed, licensed and distributed by
Seller which are originally created by the Seller (the "Products") and all
computer programs and documentation created by third parties which are licensed
and/or distributed by Seller (the "Licensed Products"). All of the Intellectual
Property of Seller is set forth on Schedule 2.20 attached hereto. For purposes
hereof, the term "Intellectual Property" includes: (i) all patents, patent
applications, patent rights, and inventions and discoveries and invention
disclosures (whether or not patented) (collectively, "Patents"); (ii) Seller's
rights to the names "Net Direct" and "netdirect.net", all trade names, trade
dress, logos, packaging design, slogans, any and all Internet domain names
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used or useful in the Business, registered and unregistered trademarks and
service marks and applications (collectively, "Marks"); (iii) all copyrights in
both published and unpublished works, including, without limitation, all
compilations, databases and computer programs, and all copyright registrations
and applications, and all derivatives, translations, adaptations and
combinations of the above (collectively, "Copyrights"); (iv) all know-how, trade
secrets, confidential or proprietary information, customer lists, IP addresses,
research in progress, algorithms, data, designs, processes, formulae, drawings,
schematics, blueprints, flow charts, models, prototypes, techniques, Beta
testing procedures and Beta testing results (collectively, "Trade Secrets"); (v)
Seller's web-sites (including the domain names "www.netdirect.net",
"www.inetdirect.net" and "www.net-direct.net" and any other similar domain
names; (vi) all goodwill, franchises, licenses, permits, consents, approvals,
technical information, telephone numbers, and claims of infringement against
third parties (the "Rights"); and (vii) all contracts relating to the Products
and the Licensed Products and the Intellectual Property to which Seller is a
party or is bound, including, without limitation, all nondisclosure and/or
confidentiality agreements entered into by persons in connection with
disclosures by Seller (collectively,"Assigned Contracts").
(b) Except as described in Schedule 2.20, Seller has exclusive
ownership of, and has good, valid and marketable title to, all of the
Intellectual Property, free and clear of any Liens, and has the right to use all
of the Intellectual Property without payment to any third party. Seller's rights
in all of such Intellectual Property are freely transferable. There are no
claims or demands pending or, to the knowledge of Seller and the Principal,
threatened of any other person pertaining to any of such Intellectual Property
and no proceedings have been instituted, or are pending or, to the knowledge of
Seller and the Principal, threatened against Seller and/or its officers,
employees and consultants which challenge the validity and enforceability of
Seller's rights in respect of the Intellectual Property. The Intellectual
Property constitutes all of the assets of Seller used in designing, creating and
developing the Products, and represent all of such Intellectual Property
necessary for the operation of Seller's Business as currently conducted.
Except as set forth in Schedule 2.20 attached hereto, all former and
current employees, consultants and contractors of Seller have executed written
instruments with Seller that assign to Seller all rights to any inventions,
improvements, discoveries, or information relating to the business of Seller.
No employee, consultant or contractor of Seller has entered into any agreement
that restricts or limits in any way the scope or type of work in which the
employee, consultant or contractor may be engaged or requires the employee,
consultant or contractor to transfer, assign, or disclose information concerning
his work to anyone other than Seller.
(c) Schedule 2.20 sets forth a complete and accurate list and summary
description of all of Seller's Patents. All of the issued Patents are currently
in compliance with formal legal requirements (including without limitation
payment of filing, examination and maintenance fees and proofs of working or
use), are valid and enforceable, and are not subject to any maintenance fees or
taxes or actions falling due within ninety (90) days after the Closing Date. In
each case where a Patent is held by Seller by assignment, the assignment has
been duly recorded with the U.S. Patent and Trademark Office and all other
jurisdictions of registration.
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No Patent has been or is now involved in any interference, reissue,
re-examination or opposition proceeding. To the knowledge of Seller and the
Principal, there is no potentially interfering Patent of any third party. All
Products made, used or sold under the Patents have been marked with the proper
patent notice.
(d) Schedule 2.20 sets forth a complete and accurate list and summary
description of all of Seller's Marks. All Marks that have been registered with
the United States Patent and Trademark Office and/or any other jurisdiction are
currently in compliance with formal legal requirements (including, without
limitation, the timely post-registration filing of affidavits of use and
incontestability and renewal applications), are valid and enforceable, and are
not subject to any maintenance fees or taxes or actions falling due within
ninety (90) days after the Closing Date. In each case where a Trademark is held
by Seller by assignment, the assignment has been duly recorded with the U.S.
Patent and Trademark Office and all other jurisdictions of registration. No
Mark has been or is now involved in any opposition, invalidation or cancellation
proceeding and, to the knowledge of Seller and the Principal, no such action is
threatened with respect to any of the Marks. All Products and materials
containing a Mark bear the proper notice where permitted by law.
(e) Schedule 2.20 sets forth a complete and accurate list and summary
description of all of Seller's Copyrights. All the Copyrights have been
registered with the United States Copyright Office and are currently in
compliance with formal legal requirements, are valid and enforceable, and are
not subject to any fees or taxes or actions falling due within ninety (90) days
after the Closing Date. In each case where a Copyright is held by Seller by
assignment, the assignment has been duly recorded with the U.S. Copyright Office
and all other jurisdictions of registration. None of the source or object code,
algorithms, or structure included in the Products or to the Seller's knowledge,
the Licensed Products is copied from, based upon, or derived from any other
source or object code, algorithm or structure in violation of the rights of any
third party. Any substantial similarity of the Products or to the Seller's
knowledge, the Licensed Products to any computer program owned by any third
party did not result from the Products or the Licensed Products, as applicable,
being copied from, based upon, or derived from any such computer software
program in violation of the rights of any third party. All copies of works
encompassed by the Copyrights have been marked with the proper copyright notice.
(f) Seller has taken all reasonable security measures to protect the
secrecy, confidentiality and value of all Trade Secrets. To the knowledge of
Seller and the Principals, there has not been any breach by any party to any
such confidentiality or non-disclosure agreement. The Trade Secrets have not
been disclosed by Seller to any person or entity other than employees or
contractors of Seller who had a need to know and use the Trade Secrets in the
course of their employment or contract performance. Except as set forth on
Schedule 2.20, (i) Seller has not directly or indirectly granted any rights or
interests in the source code of the Products or, to the Seller's knowledge, the
Licensed Products, and (ii) Seller has not provided, licensed or disclosed the
source code of the Products or, to the Seller's knowledge, the Licensed Products
to any person or entity. Seller has the right to use, free and clear of claims
of third
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parties, all Trade Secrets. To the knowledge of Seller and the Principal, there
is not any assertion that the use by Seller of any Trade Secret violates the
rights of any third party.
(g) Seller has the exclusive right to use, license, distribute,
transfer and bring infringement actions with respect to the Intellectual
Property. Except as set forth on Schedule 2.20, Seller (i) has not licensed or
granted to anyone rights of any nature to use any of its Intellectual Property
and (ii) is not obligated to and does not pay royalties or other fees to anyone
for its ownership, use, license or transfer of any of its Intellectual Property.
(h) All licenses or other agreements under which Seller is granted
rights by others in Intellectual Property are listed in Schedule 2.20. All such
licenses or other agreements are in full force and effect, to the knowledge of
Seller and the Principal there is no material default by any party thereto, and
all of the rights of Seller thereunder are freely assignable. True and complete
copies of all such licenses or other agreements, and any amendments thereto,
have been provided to Buyer, and Seller has no reason to believe that the
licensors under the licenses and other agreements under which Seller is granted
rights and has granted rights to others do not have and did not have all
requisite power and authority to grant the rights purported to be conferred
thereby.
(i) All licenses or other agreements under which Seller has granted
rights to others in Intellectual Property are listed in Schedule 2.20. All such
licenses or other agreements are in full force and effect, and to the knowledge
of Seller and the Principal there is no material default by any party thereto.
True and complete copies of all such licenses or other agreements, and any
amendments thereto, have been provided to Buyer.
(j) Seller has no obligation to any other person to maintain, modify,
improve or upgrade the Products or, to the Seller's knowledge, the Licensed
Products.
(k) None of the Products or, to the Seller's knowledge, the Licensed
Products manufactured and sold, nor any process or know-how used, by Seller
infringes or is alleged to infringe any patent, trademark, service mark, trade
name, copyright or other proprietary right or is a derivative work based on the
work of any other person.
(l) There are no (i) actions, suits, claims, investigations or other
proceedings involving the Products or, to the Seller's knowledge, the Licensed
Products, the Intellectual Property, or the Rights by or before any governmental
authority or arbitrator pending or, to the knowledge of Seller and the
Principal, threatened against Seller, or (ii) judgments, decrees, injunctions,
or orders involving the Products or, to the Seller's knowledge, the Licensed
Products, the Intellectual Property or the Rights of any governmental authority
or arbitrator against Seller. Seller is not in default under any such judgment,
decree, injunction or order.
(m) The Products and, to the Seller's knowledge, the Licensed
Products, perform in accordance with their published specifications and
documentation and as Seller has warranted to its customers. Seller has reviewed
the areas within its businesses and operations
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which could be adversely affected by, and has developed a program to address on
a timely basis, the "Year 2000 Problem" (i.e., the risk that applications used
by Seller or its suppliers and/or providers may be unable to recognize and
properly perform date-sensitive functions involving certain dates prior to and
any date after December 31, 1999). Seller reasonably believes that the "Year
2000 Problem" will not have any material adverse effect on the business or
operations of Seller.
2.21 Absence of Restrictions. Seller has not entered into any other
agreement or arrangement with any other party with respect to the sale, transfer
or any other disposition or encumbrance of the Business or the Assets, in whole
or in part.
2.22 Permits; Burdensome Agreements. Schedule 2.22 lists all permits,
registrations, licenses, franchises, certifications and other approvals
(collectively, the "Approvals") required from federal, state or local
authorities in order for Seller to conduct its Business. Seller has obtained
all such Approvals, which are valid and in full force and effect, and is
operating in compliance therewith. Such Approvals include, but are not limited
to, those required under federal, state or local statutes, ordinances, orders,
requirements, rules, regulations, or laws pertaining to environmental
protection, public health and safety, worker health and safety, buildings,
highways or zoning. Except as disclosed in Schedule 2.22, all such Approvals
will be available and assigned to Buyer and remain in full force and effect upon
Buyer's purchase of the Assets, and no further Approvals will be required in
order for Buyer to conduct the business currently conducted by Seller subsequent
to the Closing. Except as disclosed in Schedule 2.22 or in any other schedule
hereto, Seller is not subject to or bound by any agreement, arrangement,
judgment, decree or order which may materially and adversely affect its business
or prospects, its condition, financial or otherwise, or any of its assets or
properties.
2.23 Transactions with Interested Persons. Except as set forth in
Schedule 2.23 attached hereto, neither Seller, nor any stockholder, officer,
supervisory employee or director of Seller or, to the knowledge of Seller or the
Principal, any of their respective spouses or family members owns directly or
indirectly on an individual or joint basis any material interest in, or serves
as an officer or director or in another similar capacity of, any competitor or
supplier of Seller, or any organization which has a material contract or
arrangement with Seller.
2.24 Employee Benefit Programs.
(a) Schedule 2.24 attached hereto sets forth a list of every Employee
Program (as defined below) that has been maintained by the Seller or an
Affiliate at any time during the six-year period ending on the Closing Date.
Each Employee Program which has ever been maintained by the Seller or an
Affiliate and which has been intended to qualify under Section 401(a) or
501(c)(9) of the Code has received a favorable determination or approval letter
from the IRS regarding its qualification under such section and has, in fact,
been qualified under the applicable section of the Code from the effective date
of such Employee Program through and including the Closing Date (or, if earlier,
the date that all of such Employee Program's assets were distributed). No event
or omission has occurred which would cause any such Employee
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Program to lose its qualification or otherwise fail to satisfy the relevant
requirements to provide tax-favored benefits under the applicable Code Section
(including without limitation Code Sections 105, 125, 401(a) and 501(c)(9)).
With respect to any Employee Program ever maintained by the Seller or any
Affiliate, there has been no (i) "prohibited transaction," as defined in Section
406 of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")
or Code Section 4975, (ii) non-deductible contribution, or (iii) failure to
comply with any provision of ERISA, other applicable law, or any agreement
which, in the case of any of (i), (ii) or (iii), could subject the Seller or any
Affiliate to liability either directly or indirectly (including, without
limitation, through any obligation of indemnification or contribution) for any
damages, penalties, or taxes, or any other loss or expense. No litigation or
governmental administrative proceeding (or investigation) or other proceeding
(other than those relating to routine claims for benefits) is pending or
threatened with respect to any such Employee Program. All payments and/or
contributions required to have been made (under the provisions of any agreements
or other governing documents or applicable law) with respect to all Employee
Programs ever maintained by the Seller or any Affiliate, for all periods prior
to the Closing Date, either have been made or have been accrued (and all such
unpaid but accrued amounts are described on Schedule 2.24). Each Employee
Program ever maintained by the Seller or an Affiliate has complied with the
applicable notification and other applicable requirements of the Consolidated
Omnibus Budget Reconciliation Act of 1985.
(b) Neither the Seller nor any Affiliate (A) has ever maintained any
Employee Program which has been subject to title IV of ERISA or Code Section
412, including, but not limited to, any Multiemployer Plan (as defined in
Section 3(37) of ERISA) or (B) has ever provided health care or any other non-
pension benefits to any employees after their employment is terminated (other
than as required by part 6 of subtitle B of title I of ERISA) or has ever
promised to provide such post-termination benefits.
(c) For purposes of this section:
(i) "Employee Program" means all employee benefit plans within
the meaning of ERISA Section 3(3) as well as all other employee benefit
plans, agreements and arrangements of any kind.
(ii) An entity "maintains" an Employee Program if such entity
sponsors, contributes to, or provides benefits under or through such
Employee Program, or has any obligation (by agreement or under applicable
law) to contribute to or provide benefits under or through such Employee
Program, or if such Employee Program provides benefits to or otherwise
covers employees of such entity (or their spouses, dependents, or
beneficiaries).
(iii) An entity is an "Affiliate" of the Seller if it would have
ever been considered a single employer with the Seller under ERISA Section
4001(b) or part of the same "controlled group" as the Seller for purposes
of ERISA Section 302(d)(8)(C).
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2.25 Environmental Matters.
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(a) (i) Seller has never generated, transported, used, stored,
treated, disposed of, or managed any Hazardous Waste (as defined below); (ii) to
Seller's knowledge, no Hazardous Material (as defined below) has ever been or is
threatened to be spilled, released, or disposed of at any site presently or
formerly owned, operated, leased, or used by Seller, or has ever been located in
the soil or groundwater at any such site; (iii) to Seller's knowledge, no
Hazardous Material has ever been transported from any site presently or formerly
owned, operated, leased, or used by Seller for treatment, storage, or disposal
at any other place; (iv) Seller does not presently own, operate, lease, or use,
nor has it previously owned, operated, leased, or used any site on which
underground storage tanks are or were located; and (v) no lien has ever been
imposed by any governmental agency on any property, facility, machinery, or
equipment owned, operated, leased, or used by Seller in connection with the
presence of any Hazardous Material.
(b) (i) To Seller's knowledge, Seller has no liability under, nor has
it ever violated, any Environmental Law (as defined below); (ii) to Seller's
knowledge, Seller, any property owned, operated, leased, or used by Seller, and
any facilities and operations thereon are presently in compliance with all
applicable Environmental Laws; (iii) Seller has never entered into or been
subject to any judgment, consent decree, compliance order, or administrative
order with respect to any environmental or health and safety matter or received
any request for information, notice, demand letter, administrative inquiry, or
formal or informal complaint or claim with respect to any environmental or
health and safety matter or the enforcement of any Environmental Law; and (iv)
Seller has no knowledge or reason to know that any of the items enumerated in
clause (iii) of this subsection will be forthcoming.
(c) To the knowledge of Seller and the Principal, no site owned,
operated, leased, or used by Seller contains any asbestos or asbestos-containing
material, any polychlorinated biphenyls (PCBs) or equipment containing PCBs, or
any urea formaldehyde foam insulation.
(d) Seller has, to the knowledge of Seller and the Principal, provided
to Buyer copies of all documents, records, and information available to Seller
concerning any environmental or health and safety matter relevant to Seller,
whether generated by Seller or others, including, without limitation,
environmental audits, environmental risk assessments, site assessments,
documentation regarding off-site disposal of Hazardous Materials, spill control
plans, and reports, correspondence, permits, licenses, approvals, consents, and
other authorizations related to environmental or health and safety matters
issued by any governmental agency.
(e) For purposes of this Section 2.25, (i) "Hazardous Material" shall
mean and include any hazardous waste, hazardous material, hazardous substance,
petroleum product, oil, toxic substance, pollutant, contaminant, or other
substance which may pose a threat to the environment or to human health or
safety, as defined or regulated under any Environmental Law; (ii) "Hazardous
Waste" shall mean and include any hazardous waste as defined or regulated under
any Environmental
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Law; (iii) "Environmental Law" shall mean any environmental or health and
safety-related law, regulation, rule, ordinance, or by-law at the foreign,
federal, state, or local level, whether existing as of the date hereof,
previously enforced, or subsequently enacted; and (iv) "Seller" shall mean and
include Seller and all other entities for whose conduct Seller is or may be held
responsible under any Environmental Law.
2.26 Undisclosed Liabilities. Seller has no liabilities or obligations of
any nature (whether known or unknown and whether absolute, accrued, contingent
or otherwise) except for liabilities or obligations reflected on the Base
Balance Sheet and current liabilities incurred in the ordinary course of
business since the date thereof.
2.27 Indebtedness. Except as set forth in Schedule 2.27, Seller has no
bank debt or indebtedness (other than pursuant to operating or capitalized lease
obligations for leased equipment and other current liabilities).
2.28 Agreements. The Principal is not a party to any non-competition,
trade secret or confidentiality agreement with any party other than Seller.
There are no agreements or arrangements not contained herein or disclosed in a
Schedule hereto, to which such Principal is a party relating to the business of
Seller or to such Principal's rights and obligations as a stockholder, director
or officer of Seller. Such Principal does not own, directly or indirectly, on
an individual or joint basis, any material interest in, or serve as an officer
or director of, any customer, competitor or supplier of Seller, or any
organization which has a contract or arrangement with the Seller. Such
Principal has not at any time transferred any of the stock of Seller held by or
for such holder to any employee of the Seller, which transfer constituted or
could be viewed as compensation for services rendered to Seller by said
employee. The execution, delivery and performance of this Agreement will not
violate or result in a default or acceleration of any obligation under any
contract, agreement, indenture or other instrument involving Seller to which
such Principal is a party.
2.29 Disclosure. The representations, warranties and statements contained
in this Agreement and in the certificates, exhibits and schedules delivered by
Seller and the Principal to Buyer pursuant to this Agreement do not contain any
untrue statement of a material fact, and, when taken together, do not omit to
state a material fact required to be stated therein or necessary in order to
make such representations, warranties or statements not misleading in light of
the circumstances under which they were made. There are no facts known to
Seller or the Principal which presently or may in the future have a material
adverse affect on Seller's business, properties, assets, prospects, operations
or (financial or other) condition of Seller which has not been specifically
disclosed herein or in a Schedule furnished herewith, other than general
economic conditions affecting the Internet services industry generally.
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SECTION 3. REPRESENTATIONS AND WARRANTIES OF BUYER. As a material inducement
to Seller entering into this Agreement, Buyer hereby represents and warrants to
Seller as follows:
3.1 Organization. Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. Buyer has all
requisite power and authority to conduct its business as it is now conducted and
to own, lease and operate its properties and assets.
3.2 Required Action. All actions and proceedings necessary to be taken by
or on the part of Buyer in connection with the transactions contemplated by this
Agreement have been duly and validly taken, and this Agreement and each other
agreement, document and instrument to be executed and delivered by or on behalf
of Buyer pursuant to, or as contemplated by, this Agreement (collectively, the
"Buyer Documents") has been duly and validly authorized, executed and delivered
by Buyer. Buyer has full right, authority, power and capacity to execute and
deliver this Agreement and each other Buyer Document and to carry out the
transactions contemplated hereby and thereby. This Agreement and each other
Buyer Document constitutes, or when executed and delivered will constitute, the
legal, valid and binding obligations of Buyer enforceable in accordance with its
respective terms.
3.3 No Conflicts. The execution, delivery and performance by Buyer of
this Agreement and each other Buyer Document does not and will not (a) violate
any provision of the Articles of Incorporation or by-laws of Buyer, as amended
to date, (b) constitute a violation of, or conflict with or result in any breach
of, acceleration of any obligation under, right of termination under, or default
under, any agreement or instrument to which Buyer is a party or by which it is
bound, (c) violate any judgment, decree, order, statute, rule or regulation
applicable to Buyer, (d) require Buyer to obtain any approval, consent or waiver
of, or to make any filing with, any person or entity (governmental or otherwise)
that has not been obtained or made. The officers who execute this Agreement and
the other Buyer Documents contemplated hereby on behalf of Buyer have and shall
have all requisite power to do so in the name of and on behalf of Buyer.
3.4 Brokers. Other than Rampart Associates, Buyer has not retained any
broker or finder or other person who would have any valid claim against any of
the parties to this Agreement for a commission or brokerage fee in connection
with this Agreement or the transactions contemplated hereby. Buyer shall
indemnify Seller from any claim for a commission or brokerage fee in connection
with this Agreement or the transactions contemplated hereby.
SECTION 4. COVENANTS OF SELLER. Seller covenants and agrees that, from the
date hereof until consummation of the transactions contemplated hereby at the
Closing, Seller shall:
4.1 Access to Premises and Records. From the date hereof until the
consummation of the transactions contemplated hereby at the Closing, Seller
shall give Buyer and its
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representatives, at reasonable times and with reasonable prior notice, free
access to the properties, books and records of the Business and to the Assets
and will furnish to Buyer and its representatives such information regarding the
Business and the Assets as Buyer or its representatives may from time to time
reasonably request in order that Buyer may have full opportunity to make a
diligent investigation consistent with this Agreement. The foregoing shall
include, without limitation, Buyer and its representatives conducting, at
Buyer's expense, an audit of the accounting books and records of the Seller. In
addition to, and not in limitation of the foregoing, Seller shall provide Buyer
with access to and copies of the records of all: (a) Accounts Receivable, (b)
Subscriber billings, (c) pre-paid accounts, (d) accounts for which no
remuneration is received by Seller and (e) general reports with respect to each
category of service provided by the Business.
4.2 Continuity and Maintenance of Operations of the Business. Except as
to actions of which Buyer has been advised and to which Buyer has consented to
in writing, and except as specifically permitted or required by this Agreement,
Seller shall:
(a) Operate the Business in the ordinary course consistent with past
practices, use its commercially reasonable efforts to keep available the
services of the employees who are involved in the operation of the Business, and
use commercially reasonable efforts to preserve any beneficial business
relationships with Subscribers, customers, suppliers and others having business
dealings with Seller relating to the Business;
(b) Use and operate the Assets in a manner consistent with past
practice and maintain the Assets in good operating condition, ordinary wear and
tear excepted;
(c) Maintain adequate inventories of spare Equipment consistent with
past practices;
(d) Maintain insurance upon the Assets in such amounts and types as in
effect on the date of this Agreement as set forth in Schedule 2.6 attached
hereto;
(e) Keep all of its business books, records and files in the ordinary
course of business in accordance with past practices, and provide Buyer with
access thereto upon its reasonable request;
(f) Continue to implement and enforce its procedures for disconnection
and discontinuance of service to Subscribers whose accounts are delinquent in
accordance with those in effect on the date of this Agreement;
(g) Perform and comply in all material respects with the terms of the
Contracts and keep such Contracts in full force and effect; and
(h) Use its reasonable best efforts to preserve the goodwill of the
Business.
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4.3 Negative Covenants. Seller shall not, without the prior written
consent of Buyer:
(a) Sell, transfer, lease, assign or otherwise dispose of, or agree to
sell, transfer, lease, assign or otherwise dispose of, any Assets;
(b) Make any change in the number of shares of its capital stock,
authorized, issued or outstanding or grant any option, warrant or other right to
purchase, or to convert any obligation into, shares of its capital stock;
(c) Amend its articles of incorporation or by-laws;
(d) Enter into any contract or commitment for the acquisition of goods
or services relating to the Business (other than in the ordinary course of
business) or which otherwise obligates Seller to perform in full or in part
beyond the Closing Date;
(e) Hire any new employees or enter into any employment arrangements
or otherwise increase the salary or compensation of any existing employees;
(f) Renegotiate, modify, amend or terminate any Contract;
(g) Create, assume, or permit to exist, or agree to incur, assume or
acquire, any Lien, claim or liability on the Assets;
(h) Make any modifications or changes to the existing rate schedules
or product offerings in effect with respect to the Business;
(i) Offer or employ any sales discounts, free services or other
extraordinary marketing practices or extraordinary promotions outside the
ordinary course of business and not consistent with Seller's past practices;
(j) Take any actions or permit its employees and agents to take any
actions which would materially interfere with or preclude the transactions
contemplated by this Agreement; and
(k) Cause or permit the provision for any new and material pension,
retirement or other employment benefits for employees who perform services in
connection with the conduct of the Business or any material increase in any
existing benefits (other than as required by law).
4.4 Consents. Seller will use its reasonable best efforts to obtain, as
soon as practicable and at its expense, the consent of all third parties under
the Contracts for which the prior approval of such third party is required
pursuant to the terms of the Contract, in the forms attached hereto as Exhibit B
and Exhibit C; provided, however, that "reasonable best efforts" for this
purpose shall not require Seller to undertake extraordinary or unreasonable
measures to
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obtain such approvals and consents, including, without limitation, the
initiation or prosecution of legal proceedings or the payment of fees in excess
of customary filing, processing and documentation fees.
4.5 Notification of Certain Matters. Seller shall promptly notify Buyer
of (i) any fact, event, circumstances or action the existence or occurrence of
which would cause any of Seller's representations or warranties under this
Agreement, or the disclosures in any schedules or exhibits attached hereto, not
to be true in any material respect and (ii) any failure on its part to comply
with or satisfy in any material respect any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement. Seller shall promptly
notify Buyer in writing of the assertion, commencement or threat of any claim,
litigation, proceeding or investigation in which Seller is a party or in which
the Assets or Business may be affected and which could reasonably be expected to
be material or which relates to the transactions contemplated hereby.
4.6 Adverse Change. Seller shall promptly notify Buyer in writing of any
materially adverse developments affecting the Assets or the Business which
become known to Seller, including, without limitation, (i) any damage,
destruction or loss (whether or not covered by insurance) materially and
adversely affecting any of the Assets or the Business, (ii) any material notice
of violation, forfeiture or complaint under any material Contract, or (iii)
anything which, if not corrected prior to the Closing Date, would prevent Seller
from fulfilling any condition to Closing described in Section 6 hereof.
4.7 No Solicitation. From the date of this Agreement until the earlier of
(i) October 12, 1999 or (ii) termination of this Agreement pursuant to Section
8.1, Seller shall not, and Seller shall cause its officers, employees,
stockholders, agents and representatives (including, without limitation, any
investment banker, attorney or accountant retained by Seller) and all other
employees who perform services with respect to the operation of the Business not
to, initiate, solicit or encourage, directly or indirectly, any inquiries or the
making of any proposal with respect to the Assets or the Business, or engage in
any negotiations concerning, or provide to any other person any information or
data relating to, the Business, the Assets or Seller for the purpose of, or have
any discussions with, any person relating to, or otherwise cooperate in any way
with or assist or participate in, facilitate or encourage, any inquiries or the
making of any proposal which constitutes, or may reasonably be expected to lead
to, any effort or attempt by any other person to seek or effect a transaction,
or enter into a transaction with any person or persons, other than Buyer,
concerning the possible sale of the Assets or Business, or the capital stock of
Seller. Seller shall promptly inform Buyer of any such inquiries or proposals
and provide all pertinent documentation related thereto.
4.8 Cooperation. Seller shall use its best efforts to take all steps
within its power and will cooperate with Buyer to cause to be fulfilled those of
the conditions to Buyer's obligations to consummate the transactions
contemplated by this Agreement that are dependent upon its actions, and to
execute and deliver such instruments and take such other reasonable actions as
may be necessary or appropriate in order to carry out the intent of this
Agreement and
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consummate the transactions contemplated hereby. Without limiting the foregoing,
Seller shall cooperate with all reasonable requests of Buyer and its counsel in
connection with Buyer's due diligence investigation of the Business and Assets.
4.9 Expenses. Seller shall bear its own expenses incurred in connection
with the negotiation and preparation of this Agreement and in connection with
all obligations required to be performed by it under this Agreement; provided,
however, if (i) Buyer terminates this Agreement other than pursuant to Section
8.1 and (ii) Seller has satisfied all conditions in Section 6 and Seller has
complied with all of the covenants of Seller in Section 4, then Buyer shall
reimburse Seller for Seller's documented expenses incident to the negotiation,
preparation and performance of this Agreement in an amount up to one percent
(1%) of the Purchase Price.
4.10 Financial Information. Seller shall, as promptly as practical after
such information becomes available, deliver to Buyer copies of Seller's monthly
unaudited financial statements, prepared in accordance with GAAP, consistently
applied, and in form and presentation as is reasonably acceptable to Buyer.
4.11 Consummation of Agreement. Subject to the provisions of Section 8 of
this Agreement: (a) Seller shall use its reasonable best efforts to fulfill and
perform all conditions and obligations on its part to be fulfilled and performed
under this Agreement, and to cause the transactions contemplated by this
Agreement to be fully carried out on or before October 12, 1999; and (b) Seller
shall not take any action or omit to take any action that would or could
reasonably be expected to (i) result in any of the representations and
warranties of Seller being or becoming untrue in any respect that would cause
Section 6.1 of this Agreement not to be satisfied, (ii) result in any conditions
to Closing set forth in Section 6 of this Agreement not to be satisfied, or
(iii) result in a material violation of any provision of this Agreement.
4.12 Confidentiality. Seller agrees that it and its representatives will
hold in strict confidence, and will not use, any confidential or proprietary
data or information obtained from Buyer with respect to its business or
financial condition except for the purpose of evaluating, negotiating and
completing the transactions contemplated hereby. Information generally known in
Buyer's industry or which has been disclosed to Seller by third parties which
have a right to do so shall not be deemed confidential or proprietary
information for purposes of this Agreement. If the transactions contemplated by
this Agreement are not consummated, Seller will return, and cause its respective
officers, directors, agents and representatives to return, to Buyer (or certify
that they have destroyed) all copies of such data and information made available
to Seller (and its officers, directors, agents and representatives) in
connection with the transaction.
4.13 Public Announcements. All press releases, filings and other public
announcements concerning the transactions contemplated hereby will be subject to
review and approval by Seller, on the one hand, and Buyer, on the other hand,
such approval not to be unreasonably withheld. Such approval shall not be
required if the party issuing such release, filing or public announcement
reasonably believes, based on advice of counsel, that it is required
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by law to do so, but in any such case, all reasonable efforts shall be made to
consult with the other party in advance of such release, filing or announcement
and to provide the other party with the content thereof, the reasons the
release, filing or announcement is required by law and the time and place that
such release, filing or announcement will be made.
SECTION 5. COVENANTS OF BUYER. Buyer covenants and agrees that, from the
date hereof until consummation of the transactions contemplated hereby at the
Closing, Buyer shall:
5.1 Cooperation. Buyer shall use its reasonable best efforts to take all
steps within its power and will cooperate with Seller, to cause to be fulfilled
those of the conditions to Seller's obligations to consummate the transactions
contemplated by this Agreement that are dependent upon its actions and to
execute and deliver such instruments and take such other reasonable actions as
may be necessary or appropriate in order to carry out the intent of this
Agreement and consummate the transactions contemplated hereby.
5.2 Notification of Certain Matters. Buyer shall promptly notify Seller
of any fact, event, circumstances or action the existence or occurrence of which
would cause Buyer's representations or warranties under this Agreement not to be
true in any material respect.
5.3 Expenses. Buyer shall bear its own expenses incurred in connection
with the negotiation and preparation of this Agreement and in connection with
all obligations required to be performed by it under this Agreement.
5.4 Consummation of Agreement. Subject to the provisions of Section 8 of
this Agreement: (a) Buyer shall use its reasonable best efforts to fulfill and
perform all conditions and obligations on its part to be fulfilled and performed
under this Agreement, and to cause the transactions contemplated by this
Agreement to be fully carried out on or before October 12, 1999; and (b) Buyer
shall not take any action or omit to take any action that would or could
reasonably be expected to (i) result in any of the representations and
warranties of Buyer set forth in this Agreement being or becoming untrue in any
respect that would cause Section 7.1 of this Agreement not to be satisfied, (ii)
result in any condition to the Closing set forth in Section 7 of this Agreement
not being satisfied, or (iii) result in a material violation of any provision of
this Agreement.
5.5 Confidentiality. Buyer agrees that it and its representatives will
hold in strict confidence, and will not use, any confidential or proprietary
data or information obtained from Seller with respect to its business or
financial condition except for the purpose of evaluating, negotiating and
completing the transactions contemplated hereby. Information generally known in
Seller's industry or which has been disclosed to Buyer by third parties which
have a right to do so shall not be deemed confidential or proprietary
information for purposes of this Agreement. If the transactions contemplated by
this Agreement are not consummated, Buyer will return, and cause its respective
officers, directors, agents and representatives to return, to Seller (or certify
that they have destroyed) all copies of such data and information made available
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to Buyer (and its officers, directors, agents and representatives) in connection
with the transaction.
5.6 Public Announcements. All press releases, filings and other public
announcements concerning the transactions contemplated hereby will be subject to
review and approval by Seller, on the one hand, and Buyer, on the other hand,
such approval not to be unreasonably withheld. Such approval shall not be
required if the party issuing such release, filing or public announcement
reasonably believes, based on advice of counsel, that it is required by law to
do so, but in any such case, all reasonable efforts shall be made to consult
with the other party in advance of such release, filing or announcement and to
provide the other party with the content thereof, the reasons the release,
filing or announcement is required by law and the time and place that such
release, filing or announcement will be made.
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATION OF BUYER. Buyer's obligation to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions, unless otherwise waived by Buyer in writing:
6.1 Accuracy of Representations and Warranties. The representations and
warranties of Seller contained in this Agreement shall be true and correct in
all material respects at the Closing Date with the same effect as though made at
such time and the representations and warranties of Seller contained in this
Agreement which are qualified by materiality shall be true and correct in all
respects as of the Closing Date with the same effect as though made at such
time.
6.2 Performance of Agreements and Deliveries. Seller shall have performed
in all material respects all of its covenants, agreements and obligations under
this Agreement which are to be performed or complied with by Seller prior to or
upon the Closing Date and shall have delivered all documents and items required
to be delivered at or prior to the Closing, including, without limitation:
(a) A certificate, dated the Closing Date, from the President of
Seller to the effect that the conditions set forth in Sections 6.1 and 6.2 have
been satisfied;
(b) A certificate, dated the Closing Date, from Seller's Secretary as
to the charter, by-laws, authority and the incumbency of all officers executing
the Seller Documents on behalf of Seller;
(c) A certified copy of Seller's Articles of Incorporation from the
Secretary of State of the State of Indiana;
(d) An Amendment to the Articles of Incorporation and any other
required documentation, which effect a change of Seller's name;
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(e) A certificate of the status of the corporation of the Seller from
the Secretary of State of the State of Indiana; and
(f) Such other certificates and instruments reasonably requested by
Buyer.
6.3 No Material Adverse Effect. None of the schedules, documents or other
information to be furnished by Seller to Buyer pursuant to this Agreement, shall
disclose any fact, circumstance or matter, or any change in or development in
connection with any matter disclosed in the original schedules or documents
previously delivered by Seller to Buyer, which has, or could reasonably be
expected to have, a material adverse effect on the Assets or on the Business;
and there shall have been no other changes or developments affecting either the
Assets or the Business since the Base Balance Sheet Date which have, or could
reasonably be expected to have, a material adverse effect on the Assets or
Business.
6.4 Asset Transfer. Seller shall have delivered to Buyer the following
instruments of transfer and assignment in accordance with the provisions hereof,
transferring to Buyer all of Seller's right, title and interest in and to the
Assets, free and clear of all Liens:
(a) A Bill of Sale in the form attached hereto as Exhibit D;
(b) An Assignment and Assumption Agreement in the form attached hereto
as Exhibit E;
(c) An Assignment of Patents and Trademarks in the form attached
hereto as Exhibit F;
(d) An Assignment of Internet Domain Name in the form attached hereto
as Exhibit G; and
(e) Such other instruments of transfer reasonably requested by Buyer.
6.5 Assignment of Contracts and Authorizations; Approvals. All Contracts
shall have been duly and validly assigned to Buyer by Seller, and all consents
and approvals required in connection with the consummation of the transactions
contemplated hereby under any Contract or Authorization or otherwise shall have
been obtained in form and substance satisfactory to Buyer and without conditions
materially and adversely affecting Buyer and which do not require Buyer to pay
money to any party to any such Contract or Authorization in excess of amounts
required to be so paid pursuant to the terms and conditions thereof. All such
Contracts and Authorizations shall remain in full force and effect and shall not
have been amended, modified or repudiated in any material respect by either
party thereto. Neither Seller nor, to the knowledge of Seller and the
Principal, the other party thereto, shall have breached or defaulted under any
Contract or Authorization. Seller shall not have received notice of or have
knowledge of any fact which could result in the termination, repudiation or
breach of any Contract or Authorization.
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6.6 Escrow Agreement. Seller shall have executed and delivered to Buyer
the Escrow Agreement.
6.7 Non-Competition Agreement. Seller and each of the Principal and Larry
Zore shall have executed and delivered to Buyer a Non-Competition Agreement in
substantially the form attached hereto as Exhibit H.
6.8 Release of Liens. Seller shall have obtained and delivered to Buyer
at or prior to the Closing instruments (including payoff letters, bills of sale
and UCC-3 termination statements) releasing any and all Liens on the Assets.
6.9 Revenues. Seller shall have delivered to Buyer Recurring Revenues for
the business which are equal to or greater than $210,000.00 as of the Closing
Date, and Seller shall have furnished Buyer with a certificate, dated as of the
Closing Date, to that effect. For purposes hereof, "Recurring Revenues" shall
mean revenues of Seller from recurring sources, calculated by multiplying the
number of Subscribers as of the Closing Date by the average monthly rate in
effect for such Subscribers, by type, excluding any one-time set-up fees and
other ancillary charges.
6.10 Employment Agreements. Each of the Principal and Larry Zore shall
have executed and delivered to Buyer an Employment Agreement substantially in
the form attached as Exhibit J hereto.
6.11 Due Diligence. The results of Buyer's due diligence review of Seller
and its assets, liabilities and operations shall be reasonably satisfactory to
Buyer.
6.12 Opinion of Seller's Counsel. Buyer shall have received the opinion
or opinions of Henderson, Daily, Withrow & DeVoe, counsel for Seller, dated the
Closing Date, substantially in the form of Exhibit I attached hereto.
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATION OF SELLER. The obligation of
Seller to consummate the transactions contemplated by this Agreement is subject
to the satisfaction, on or prior to the Closing Date, of the following
conditions, unless waived by Seller in writing:
7.1 Accuracy of Representations and Warranties. The representations and
warranties of Buyer contained in this Agreement shall be true and correct in all
material respects at the Closing Date with the same effect as though made at
such time, and the representations and warranties of Buyer contained in this
Agreement which are qualified by materiality shall be true and correct in all
respects as of the Closing Date with the same effect as though made at such
time.
7.2 Performance of Agreement and Deliveries. Buyer shall have performed
in all material respects all of its covenants, agreements and obligations under
this Agreement which
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are to be performed or complied with by Buyer prior to or upon the Closing Date
and shall have delivered all documents and items required to be delivered at or
prior to the Closing, including, without limitation:
(a) A certificate, dated the Closing Date, from the President of Buyer
to the effect that the conditions set forth in Sections 7.1 and 7.2 have been
satisfied;
(b) A certificate, dated the Closing Date, from Buyer's Assistant
Secretary as to the Certificate of Incorporation, by-laws, authority and the
incumbency of all officers executing the Buyer Documents on behalf of Buyer;
(c) A certified copy of Buyer's Articles of Incorporation from the
Secretary of State of the State of Michigan; and
(d) A certificate of good standing from the Secretary of State of the
State of Michigan.
7.3 Escrow Agreement. Buyer shall have executed and delivered to Seller
the Escrow Agreement.
SECTION 8. TERMINATION.
8.1 Events of Termination. This Agreement and the transactions
contemplated by this Agreement may be terminated at any time prior to the
Closing:
(a) By the mutual written consent of Buyer and Seller.
(b) By Seller, if it is not in breach or default hereunder:
(i) if any representation or warranty of Buyer made herein is
untrue in any material respect and such breach is not cured within
thirty (30) days of Buyer's receipt of a notice from Seller that such
breach exists or has occurred;
(ii) if Buyer shall have defaulted in any material respect in
the performance of any material obligation under this Agreement and
such breach is not cured within thirty (30) days of Buyer's receipt of
a notice from Seller that such default exists or has occurred; or
(iii) if the conditions to Seller's obligations to consummate
the Closing as set forth in Section 7 cannot reasonably be satisfied
or performed on or before October 12, 1999 (unless such failure of
satisfaction, non-compliance or non-performance is the result,
directly or indirectly, of any action or failure to act on the part of
Seller).
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(c) by Buyer, if it is not in breach or default hereunder:
(i) if any representation or warranty of Seller made herein is
untrue in any material respect and such breach is not cured within
thirty (30) days of Seller's receipt of a notice from Buyer that such
breach exists or has occurred;
(ii) if Seller shall have defaulted in any material respect in
the performance of any material obligation under this Agreement and
such breach is not cured within thirty (30) days of Seller's receipt
of a notice from Buyer that such default exists or has occurred; or
(iii) if the conditions to Buyer's obligations to consummate the
Closing as set forth in Section 6 cannot reasonably be satisfied or
performed on or before October 12, 1999 (unless such failure of
satisfaction, non-compliance or non-performance is the result directly
or indirectly of any action or failure to act on the part of Buyer).
8.2 Manner of Exercise. In the event of the termination of this Agreement
by either Buyer or Seller pursuant to Section 8.1 notice thereof shall forthwith
be given to the other party in accordance with the provisions set forth in
Section 11 hereto and this Agreement shall terminate and the transactions
contemplated hereunder shall be abandoned without further action by Buyer or
Seller.
8.3 Effect of Termination; Liabilities. In the event of the termination
of this Agreement pursuant to Section 8.1 and prior to the Closing, all
obligations of the parties hereunder (other than pursuant to Sections 4.7, 4.8,
4.12 and 5.5 hereof) shall terminate, and neither Seller nor Buyer shall have
any further liability hereunder, including for losses, liabilities, obligations,
damages, deficiencies, actions, suits, proceedings, demands, assessments,
orders, judgments, costs and expenses (including attorneys' fees) of any kind
whatsoever; except upon termination of this Agreement pursuant to Sections
8.1(c)(i) and 8.1(c)(ii), Buyer shall be entitled to any remedy which it may
have, whether at law or in equity.
SECTION 9. POST-CLOSING COVENANTS; SURVIVAL.
9.1 Use of Trade Names. After the Closing Date, neither Seller, nor any
person controlling, controlled by or under common control with Seller will for
any reason, directly or indirectly, for itself or any other person, (a) use the
names "Net Direct" or "netdirect.net" or (b) use or disclose any trade secrets,
confidential information, know-how, proprietary information or other
intellectual property of Seller transferred pursuant to this Agreement.
9.2 Post-Closing Transitional Matters. For a period of ninety (90) days
following the Closing, Seller shall provide, without additional cost to Buyer,
such assistance as is reasonably requested by Buyer in order to effect an
orderly transition in the ownership and operation of the Assets.
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9.3 Access to Records. For a period of one year following the date
hereof, Seller shall give Buyer and its representatives, at reasonable times and
with reasonable prior notice, free access to the books and records of the
Business and will furnish to Buyer and its representatives such information
regarding the Business and the Assets as Buyer or its representatives may from
time to time reasonably request.
9.4 Survival. All representations, warranties, covenants, agreements and
indemnities contained in this Agreement, or in any schedule, exhibit,
certificate, agreement, document or statement delivered pursuant hereto, are
material, shall be deemed to have been relied upon by the parties and, shall
survive the Closing for a period of two (2) years (the "Expiration Date")
regardless of any investigation conducted by or knowledge of any party hereto.
SECTION 10. INDEMNIFICATION.
10.1 Indemnification by Seller and the Principal. Seller and the
Principal hereby agrees, jointly and severally, to indemnify and hold harmless
Buyer, its affiliates and its and their respective directors, officers,
stockholders, partners, members, employees, and agents (individually, a "Buyer
Indemnified Party" and collectively, "Buyer Indemnified Parties"), against and
in respect of all losses, liabilities, obligations, damages, deficiencies,
actions, suits, proceedings, demands, assessments, orders, judgments, costs and
expenses (including the reasonable fees, disbursements and expenses of attorneys
and consultants) of any kind or nature whatsoever, but net of the proceeds from
any insurance policies or other third party reimbursement for such loss, to the
extent sustained, suffered or incurred by or made against any Buyer Indemnified
Party, to the extent based upon, arising out of or in connection with: (a) any
breach of any representation or warranty made by Seller and the Principal in
this Agreement or in any schedule, exhibit, certificate, agreement or other
instrument delivered pursuant to this Agreement; (b) any breach of any covenant
or agreement made by Seller in this Agreement or in any schedule, exhibit,
certificate, financial statement, agreement or other instrument delivered
pursuant to this Agreement; (c) any claim made by any person or entity which
relates to the operation of the Assets or the Business which arises in
connection with or on the basis of events, acts, omissions, conditions or any
other state of facts occurring on or existing before the Closing Date; and (d)
any claim which arises in connection with any liability or obligation of Seller
other than the Assumed Liabilities.
10.2 Indemnification by Buyer. Buyer agrees to indemnify and hold
harmless Seller and its officers, directors, stockholders, employees and agents
(individually, a "Seller Indemnified Party" and collectively, "Seller
Indemnified Parties") at all times against and in respect of all losses,
liabilities, obligations, damages, deficiencies, actions, suits, proceedings,
demands, assessments, orders, judgments, costs and expenses (including the
reasonable fees, disbursements and expenses of attorneys and consultants), of
any kind or nature whatsoever, to the extent sustained, suffered or incurred by
or made against any Seller Indemnified Party, to the extent based upon, arising
out of or in connection with: (a) any breach of any representation or warranty
made by Buyer in this Agreement or in any schedule, exhibit, certificate,
agreement or other instrument delivered pursuant to this Agreement; (b) any
breach of any covenant or
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agreement made by Buyer in this Agreement or in any schedule, exhibit,
certificate, agreement or other instrument delivered pursuant to this Agreement;
(c) any claim made against Seller which relates to, results from or arises out
of Buyer's operation of the Assets or the Business from and after the Closing
Date; and (d) the Assumed Liabilities.
10.3 Notice; Defense of Claims.
(a) Notice of Claims. Promptly after receipt by an indemnified party
of notice of any claim, liability or expense to which the indemnification
obligations hereunder would apply, the indemnified party shall give notice
thereof in writing to the indemnifying party, but the omission to so notify the
indemnifying party promptly will not relieve the indemnifying party from any
liability except to the extent that the indemnifying party shall have been
prejudiced as a result of the failure or delay in giving such notice. Such
notice shall state the information then available regarding the amount and
nature of such claim, liability or expense and shall specify the provision or
provisions of this Agreement under which the liability or obligation is
asserted.
(b) Third Party Claims. With respect to third party claims, if within
twenty (20) days after receiving the notice described in clause (a) above the
indemnifying party gives (i) written notice to the indemnified party stating
that (A) it would be liable under the provisions hereof for indemnity in the
amount of such claim if such claim were successful and (B) that it disputes and
intends to defend against such claim, liability or expense at its own cost and
expense and (ii) provides reasonable assurance to the indemnified party that
such claim will be promptly paid in full if required, then counsel for the
defense shall be selected by the indemnifying party (subject to the consent of
the indemnified party which consent shall not be unreasonably withheld) and the
indemnified party shall not be required to make any payment with respect to such
claim, liability or expense as long as the indemnifying party is conducting a
good faith and diligent defense at its own expense; provided, however, that the
assumption of defense of any such matters by the indemnifying party shall relate
solely to the claim, liability or expense that is subject or potentially subject
to indemnification. The indemnifying party shall have the right, with the
consent of the indemnified party, which consent shall not be unreasonably
withheld, to settle all indemnifiable matters related to claims by third parties
which are susceptible to being settled provided the indemnifying parties'
obligation to indemnify the indemnified party therefor will be fully satisfied.
The indemnifying party shall keep the indemnified party apprised of the status
of the claim, liability or expense and any resulting suit, proceeding or
enforcement action, shall furnish the indemnified party with all documents and
information that the indemnified party shall reasonably request and shall
consult with the indemnified party prior to acting on major matters, including
settlement discussions. Notwithstanding anything herein stated, the indemnified
party shall at all times have the right to fully participate in such defense at
its own expense directly or through counsel; provided, however, if the named
parties to the action or proceeding include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate under applicable standards of professional conduct, the expense
of separate counsel for the indemnified party shall be paid by the indemnifying
party. If no such notice of intent to dispute and defend is given by the
indemnifying party, or if such diligent good faith defense is
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not being or ceases to be conducted, the indemnified party shall, at the expense
of the indemnifying party, undertake the defense of (with counsel selected by
the indemnified party), and shall have the right to compromise or settle
(exercising reasonable business judgment), such claim, liability or expense. If
such claim, liability or expense is one that by its nature cannot be defended
solely by the indemnifying party, then the indemnified party shall make
available all information and assistance that the indemnifying party may
reasonably request and shall cooperate with the indemnifying party in such
defense.
(c) Non-Third Party Claims. With respect to non-third party claims,
if within twenty (20) days after receiving the notice described in clause (a)
above the indemnifying party does not give written notice to the indemnified
party that it contests such indemnity, the amount of indemnity payable for such
claim shall be as set forth in the indemnified party's notice. If the
indemnifying party provides written notice to the indemnified party within such
20-day period that it contests such indemnity, the parties shall attempt in good
faith to reach an agreement with regard thereto within thirty (30) days of
delivery of the indemnifying party's notice. If the parties cannot reach
agreement within such 30-day period, the matter may be submitted by either party
for binding arbitration in accordance with the provisions of Section 12.11
hereof.
SECTION 11. NOTICES. All notices and other communications required to be
given hereunder, or which may be given pursuant or relative to the provisions
hereof, shall be in writing and shall be deemed to have been given when
delivered in hand or mailed, postage prepaid, by first class United States mail,
certified return receipt requested as follows:
If to Seller: Net Direct, Inc.
6251 N. Winthrop Ave., #5
Indianapolis, IN 46220
Attn: Mark Wilson
With a copy to: Henderson, Daily, Withrow & DeVoe
One Indiana Square, Suite 2600
Indianapolis, IN 46204-2071
Attn: Timothy E. Hollingsworth, Esq.
If to the Principal: Mark Wilson
6251 N. Winthrop Ave., #5
Indianapolis, IN 46220
copy to: Henderson, Daily, Withrow & DeVoe
One Indiana Square, Suite 2600
Indianapolis, IN 46204-2071
Attn: Timothy E. Hollingsworth, Esq.
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If to Buyer: Voyager Information Networks, Inc.
4660 S. Hagadorn Road
Suite 320
East Lansing, MI 48823
Attn: Christopher Torto
With a copy to: Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Attn: David F. Dietz, P.C.
or to such other address of which any party may notify the other
parties as provided above. Notices shall be effective as of the date of such
delivery or mailing.
SECTION 12. MISCELLANEOUS.
12.1 Assignability; Binding Effect. This Agreement shall not be
assignable by Buyer or Seller except with the written consent of the other,
except that Buyer may assign its rights hereunder either (a) to any affiliate of
Buyer or its owners, (b) as a result of any merger, reorganization or other
consolidation or sale, or (c) in connection with the granting of a security
interest to its senior lenders. This Agreement shall be binding upon and shall
inure to the benefit of, the parties hereto and their respective successors, and
assigns.
12.2 Headings. The subject headings used in this Agreement are included
for purposes of convenience only and shall not affect the construction or
interpretation of any of its provisions.
12.3 Amendments; Waivers. This Agreement may not be amended or modified,
nor may compliance with any condition or covenant set forth herein be waived,
except by a writing duly and validly executed by Buyer and Seller or, in the
case of a waiver, the party waiving compliance. No delay on the part of any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any waiver on the part of any party of any such right,
power or privilege, or any single or partial exercise of any such right, power
or privilege, preclude any further exercise thereof or the exercise of any other
such right, power or privilege.
12.4 Bulk Sales Law. Buyer hereby waives compliance by Seller of any
applicable bulk sales law and Seller agrees to make full and timely payment when
due of all amounts owed by Seller to its creditors. Seller agrees to indemnify
and hold Buyer harmless from, and reimburse Buyer for, any loss, cost, expense,
liability or damage (including reasonable counsel fees and disbursements and
expenses) which Buyer may suffer or incur by virtue of the non-compliance by
Seller with such laws.
12.5 Entire Agreement. This Agreement, together with the schedules and
exhibits hereto, constitutes the entire agreement between the parties with
respect to the subject matter
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hereof and supersedes and cancels any and all prior or contemporaneous
arrangements, understandings and agreements between them relating to the subject
matter hereof.
12.6 Severability. In the event that any provision or any portion of any
provision of this Agreement shall be held to be void or unenforceable, then the
remaining provisions of this Agreement (and the remaining portion of any
provision held to be void or unenforceable in part only) shall continue in full
force and effect.
12.7 Governing Law. This Agreement and the transactions contemplated
hereby shall be governed and construed by and enforced in accordance with the
laws of the State of Indiana, without regard to conflict of laws principles.
12.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which shall
constitute the same instrument.
12.9 Expenses. Each party shall pay its own expenses incident to the
negotiation, preparation and performance of this Agreement and the transactions
contemplated hereby, including all fees and expenses of its counsel and
accountants for all activities of such counsel and accountants undertaken
pursuant to this Agreement, whether or not the transactions contemplated hereby
are consummated; provided, however, if (i) Buyer terminates this Agreement other
than pursuant to Section 8.1 and (ii) Seller has satisfied all conditions in
Section 6 and Seller has complied with all of the covenants of Seller in Section
4, then Buyer shall reimburse Seller for Seller's documented expenses incident
to the negotiation, preparation and performance of this Agreement in an amount
up to one percent (1%) of the Purchase Price.
12.10 Remedies. It is specifically understood and agreed that certain
breaches of this Agreement will result in irreparable injury to the parties
hereto, that the remedies available to the parties at law alone will be an
inadequate remedy for such breach, and that, in addition to any other legal or
equitable remedies which the parties may have, a party may enforce its rights by
an action for specific performance and the parties expressly waive the defense
that a remedy in damages will be adequate. The Escrow Deposit shall represent
Purchaser's sole remedy for any breach of warranty and representation claims,
other than claims made with respect to authority, title, employee matters,
undisclosed liabilities, fraud, and claims for indemnification made by Buyer
with respect to breach of covenant, third party claims, and excluded
liabilities.
12.11 Dispute Resolution. Any dispute arising out of or relating to this
Agreement or the breach, termination or validity hereof shall be finally settled
solely and exclusively by arbitration conducted expeditiously in accordance with
the CPR Institute for Dispute Resolution Rules for Nonadministered Arbitration
of Business Disputes (the "CPR Rules"). The CPR Institute for Dispute
Resolution shall appoint a neutral advisor from its National CPR Panel. The
arbitration shall be governed by the United States Arbitration Act, 9 U.S.C.
(S)(S)1-16, and judgment upon the award rendered by the arbitrators may be
entered by any court having jurisdiction thereof. The place of arbitration
shall be Detroit, Michigan.
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Such proceedings shall be administered by the neutral advisor in accordance
with the CPR Rules as he/she deems appropriate; however, such proceedings shall
be guided by the following agreed upon procedures:
(a) Mandatory exchange of all relevant documents, to be accomplished
within forty-five (45) days of the initiation of the procedure;
(b) No other discovery;
(c) Hearings before the neutral advisor which shall consist of a
summary presentation by each side of not more than three hours; such hearings to
take place in one or two days at a maximum; and
(d) Decision to be rendered not later than ten (10) days following
such hearings.
Each of the parties hereto (a) hereby unconditionally and irrevocably
submits to the jurisdiction of any United States District Court of competent
jurisdiction located in the State of Indiana for the purpose of enforcing the
award or decision in any such proceeding and (b) hereby waives, and agrees not
to assert in any civil action to enforce the award, any claim that it is not
subject personally to the jurisdiction of the above-named court, that its
property is exempt or immune from attachment or execution, that the civil action
is brought in an inconvenient forum, that the venue of the civil action is
improper or that this Agreement or the subject matter hereof may not be enforced
in or by such court, and (c) hereby waives and agrees not to seek any review by
any court of any other jurisdiction which may be called upon to grant an
enforcement of the judgment of any such court. Each of the parties hereto
hereby consents to service of process by registered mail at the address to which
notices are to be given. Each of the parties hereto agrees that its submission
to jurisdiction and its consent to service of process by mail is made for the
express benefit of the other parties hereto. Final judgment against any party
hereto in any such action, suit or proceeding may be enforced in other
jurisdictions by suit, action or proceeding on the judgment, or in any other
manner provided by or pursuant to the laws of such other jurisdiction; provided,
however, that any party may at its option bring suit, or institute other
judicial proceedings, in any state or federal court of the United States or of
any country or place where the other parties or their assets, may be found.
Notwithstanding the foregoing, the parties may enforce their rights under
this Agreement in accordance with Section 12.10.
12.12 Third Party Rights. This Agreement is for the benefit of the
parties hereto and is not entered into for the benefit of, and shall not be
construed to confer any benefit upon, any other party or entity.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, Seller, Principal and Buyer have caused this Asset
Purchase Agreement to be executed as of the date first above written.
SELLER:
NET DIRECT, INC.
By: /s/ Net Direct, Inc.
------------------------------------------
Name:
Title:
PRINCIPAL:
/s/ Mark Wilson
----------------------------------------------
Mark Wilson
BUYER:
VOYAGER INFORMATION NETWORKS, INC.
By: /s/ Voyager Information Networks, Inc.
------------------------------------------
Name:
Title:
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LIST OF EXHIBITS AND SCHEDULES
SCHEDULES
- ---------
Exhibit A - Form of Escrow Agreement
Exhibit B - Form of Consent (for contracts)
Exhibit C - Form of Consent (for leases)
Exhibit D - Form of Bill of Sale
Exhibit E - Form of Assignment and Assumption Agreement
Exhibit G - Form of Assignment of Internet Domain Names
Exhibit H-1 - Form of Non-Competition Agreement
Exhibit H-2 - Form of Non-Competition Agreement
Exhibit I - Form of Opinion of Seller's Counsel
Exhibit J - Form of Employment Agreement
Schedule 1.1(a) Equipment
Schedule 1.1(b) Contracts
Schedule 1.1(c) Intellectual Property
Schedule 1.1(d) Licenses and Authorizations
Schedule 1.1(e) Accounts Receivable
Schedule 1.2(a) Excluded Assets
Schedule 1.2(b) Excluded Contracts
Schedule 1.2(d) Insurance Exclusions
Schedule 1.2(e) Excluded Tax Items
Schedule 1.6(b) Estimated Adjustment Statement
Schedule 1.7 Allocation of Purchase Price
Schedule 2.4 Taxes
Schedule 2.6 Insurance
Schedule 2.8 Title
Schedule 2.10 Employees; Labor Matters
Schedule 2.11 Financial Statements
Schedule 2.14 Approvals; Consents
Schedule 2.16(a) Subscribers
Schedule 2.16(b) Complimentary Accounts
Schedule 2.16(c) Disconnection Policy
Schedule 2.19 Banking Relations
Schedule 2.20 Intellectual Property
Schedule 2.22 Permits, Approvals
Schedule 2.23 Affiliated Transactions
Schedule 2.24 Employee Benefits
Schedule 2.27 Indebtedness
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Exhibit 2.2
ASSET PURCHASE AGREEMENT
------------------------
Agreement made as of September 14, 1999 by and between Voyager Information
Networks, Inc., a Michigan corporation ("Buyer"), Raex Internet, Inc., a Ohio
corporation ("Raex"), Raex Communications, Inc., an Ohio corporation ("RCI") and
Raex Corporation, an Ohio corporation ("Raex Corp") (Raex, RCI and Raex Corp
each a "Seller" and collectively, the "Sellers"), Philip Patete as Trustee of
the Philip Patete Electing Small Business Trust dated September 8, 1999 (the
"Patete Trust"), Christopher Gallo as Trustee of the Christopher Gallo Electing
Small Business Trust dated September 8, 1999 (the "Gallo Trust") (the Patete
Trust and the Gallo Trust collectively, the "Trusts"), and Christopher Gallo
("Gallo"), individually and Philip Patete ("Patete"), individually (Patete and
Gallo collectively, the "Principals").
WHEREAS, subject to the terms and conditions hereof, each Seller desires to
sell, transfer and assign to Buyer, and Buyer desires to purchase from each
Seller, all of the properties, rights and assets used or useful in connection
with the internet service and the competitive local exchange carrier businesses
of the Sellers (collectively, the "Business").
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
SEC PURCHASE AND SALE OF ASSETS.
1.1 Sale of Assets. Upon the terms and subject to the conditions set
forth in this Agreement, and the performance by the parties hereto of their
respective obligations hereunder, each Seller agrees to sell, assign, transfer
and deliver to Buyer, and Buyer agrees to purchase from each Seller, all of
Seller's right, title and interest in and to all of the properties, assets and
business of the Business of every kind and description, tangible and intangible,
real, personal or mixed, and wherever located, in existence as of the Closing
Date, but excluding the Excluded Assets (as defined in Section 1.2 below),
including, without limitation, the following:
(a) Equipment. All free standing kiosks, servers, routers, modems,
computers, electronic devices, test equipment and all other fixed assets,
equipment, furniture, fixtures, leasehold improvements, parts, accessories,
inventory, office materials, software, supplies and other tangible personal
property of every kind and description owned by each Seller and used or held for
use in connection with the Business, in each case together with any additions
thereto between the date of this Agreement and the Closing Date (as defined
below), all as set forth on Schedule 1.1(a) attached hereto (collectively,
"Equipment");
<PAGE>
(b) Contracts. All of the rights of each Seller under and interest of
each Seller in and to all contracts relating to the Business (other than the
Excluded Contracts (as defined below)), including, without limitation, original
contracts for the provision of internet connectivity, dedicated service, web-
hosting, web-domain, dial-up services, web-development and internet commerce,
all leases with respect to real property and all collocation agreements, a true,
correct and complete list of which contracts is attached hereto as Schedule
1.1(b) (collectively, the "Contracts");
(c) Intellectual Property. All of each Seller's Intellectual Property
(as defined in Section 2.20), as set forth on Schedule 1.1(c) attached hereto;
(d) Licenses and Authorizations. All rights associated with the
licenses, permits, easements, registrations and authorizations issued or granted
to each Seller by any governmental authority with respect to the operation of
the Business, including, without limitation, those licenses and authorizations
listed on Schedule 1.1(d) attached hereto, and all applications therefor,
together with any renewals, extensions, or modifications thereof and additions
thereto;
(e) Current Assets; Accounts Receivable. All Current Assets of each
Seller (as such term is hereinafter defined) and all accounts receivable of each
Seller incurred in the ordinary course of business and such accounts receivable
are included on each Seller's balance sheet as of the Closing Date, as
determined in accordance with generally accepted accounting principles ("GAAP"),
consistently applied, a complete list of such accounts receivable is attached
hereto as Schedule 1.1(e) ("Accounts Receivable");
(f) Goodwill. All of the goodwill of each Seller in, and the going
concern value of, the Business, and all of the business and customer lists,
proprietary information, and trade secrets related to the Business; and
(g) Records. All of each Seller's customer logs, location files and
records, employee records, and other business files and records, in each case
relating to the Business.
The assets, properties and business of each Seller being sold to and
purchased by Buyer under this Section 1.1 are referred to herein collectively as
the "Assets."
1.2 Excluded Assets. There shall be excluded from the Assets and retained
by each Seller, to the extent in existence on the Closing Date, the following
assets (the "Excluded Assets"):
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(a) Other Assets. All other assets of each Seller which are not used
or held for use in connection with the Business or otherwise necessary to the
operation of the Business now or after the Closing Date and which are set forth
on Schedule 1.2(a) attached hereto;
(b) Excluded Contracts. All of each Seller's right, title and
interest in, to and under the contracts and agreements listed on Schedule 1.2(b)
attached hereto (the "Excluded Contracts");
(c) Cash and Cash Equivalents. All of each Seller's cash on hand and
each Seller's cash equivalents;
(d) Insurance. All contracts of insurance (including any cash
surrender value thereof) and all insurance proceeds of settlement and insurance
claims made by each Seller on or before the Closing Date as set forth on
Schedule 1.2(d) attached hereto;
(e) Tax Items. All claims, rights and interest in and to any refunds
for federal, state or local Taxes (as defined below) for periods prior to the
Closing Date as set forth on Schedule 1.2(e) attached hereto; and
(f) Corporate Records. All of each Seller's corporate and other
-----------------
organizational records.
1.3 Assumed Liabilities; Excluded Liabilities; Employees.
----------------------------------------------------
(a) Assumed Liabilities. Buyer shall, on and as of the Closing Date,
accept and assume, and shall become and be fully liable and responsible for, and
other than as expressly set forth herein no Seller shall have any further
liability or responsibility for or with respect to, (i) liabilities and
obligations arising out of events occurring on and after the Closing Date
related to Buyer's ownership of the Assets and Buyer's operation of the Business
on or after the Closing Date; (ii) all obligations and liabilities of each
Seller which are to be performed on or after the Closing Date arising under the
Contracts, including, without limitation, such Seller's obligations to
Subscribers under such Contracts for (A) Subscriber deposits, if any, held by
such Seller as of the Closing Date in the amount for which Buyer receives a
credit pursuant to Section 1.6(a) below, (B) Subscriber advance payments held by
such Seller as of the Closing Date for services to be rendered in connection
with the Business in the amount for which Buyer receives a credit pursuant to
Section 1.6(a) below, and (C) the delivery of the services of the Business,
including, but not limited to, internet connectivity service to Subscribers
(whether pursuant to a Contract or otherwise) on or after the Closing Date; and
(iii) the Current Liabilities (as hereinafter defined) of such Seller ((i), (ii)
and (iii) together, the "Assumed Liabilities"). The assumption of the Assumed
Liabilities by Buyer hereunder shall not enlarge any rights of third parties
under contracts or arrangements with Buyer or any Seller or any of their
respective affiliates or
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subsidiaries. No parties other than Buyer and Sellers shall have any rights
under this Agreement.
(b) Excluded Liabilities. It is expressly understood that, except for
the Assumed Liabilities, Buyer shall not assume, pay or be liable for any
liability or obligation of any Seller of any kind or nature at any time existing
or asserted, whether, known, unknown, fixed, contingent or otherwise, not
specifically assumed herein by Buyer, including, without limitation, any
liability or obligation relating to, resulting from or arising out of (i) the
Excluded Assets, including, without limitation, the Excluded Contracts, (ii) the
employees of the Business, including, without limitation, any obligation to
provide any amounts due to the employees under any pension, profit sharing or
similar plan, any bonus or other compensation plan, or related to vacation or
other similar employee benefits, or arising as a result of the transactions
contemplated hereby or (iii) any fact existing or event occurring prior to the
Closing Date or relating to the operation of the Business prior to the Closing
Date. The liabilities which are not assumed by Buyer under this Agreement are
hereinafter sometimes referred to as the "Excluded Liabilities."
(c) Employees, Wages and Benefits.
-----------------------------
(i) Each Seller shall terminate all of its employees effective
as of the Closing Date and Buyer shall not assume or have any obligations
or liabilities with respect to such employees or such terminations,
including, without limitation, any severance obligation. Each Seller
acknowledges and agrees that Buyer has the right to interview and discuss
employment terms and issues with such employees prior to and after the
Closing.
(ii) Buyer specifically reserves the right, on or after the
Closing Date, to employ or reject any or all Seller's employees or other
applicants in its sole and absolute discretion; provided that Buyer shall
provide to Sellers a list of employees to whom Buyer intends to offer
employment at least three (3) business days prior to the Closing. Nothing
in this Agreement shall be construed as a commitment or obligation of Buyer
to accept for employment, or otherwise continue the employment of, any of
each Seller's employees, and no employee shall be a third-party beneficiary
of this Agreement.
(iii) Each Seller shall pay all wages, salaries, commissions,
and the cost of all fringe benefits provided to its employees which shall
have become due for work performed as of and through the day preceding the
Closing Date, and each Seller shall collect and pay all Taxes in respect of
such wages, salaries, commissions and benefits.
(iv) Each Seller acknowledges and agrees that Buyer shall not
acquire any rights or interests of any Seller in, or assume or have any
obligations or liabilities of
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any Seller under, any benefit plans maintained by or for the benefit of any
employees of any Seller prior to the Closing Date, including, without
limitation, obligations for severance or vacation accrued but not taken as
of the Closing Date.
1.4 The Closing. The transactions contemplated by this Agreement shall
take place at a closing (the "Closing") to be held at 10:00 a.m., local time, at
the offices of Stark & Knoll, on September __, 1999, or at such other time and
place as shall be mutually agreed upon in writing by Buyer and each Seller (the
"Closing Date").
1.5 Purchase Price. In consideration of the sale by Sellers to Buyer of
the Assets, and subject to the assumption by Buyer of the Assumed Liabilities
and satisfaction of the conditions contained herein, Buyer shall deliver,
collectively, to Sellers at the Closing an aggregate amount equal to $4,600,000
(as adjusted in accordance with Section 1.6 below, the "Purchase Price") as
follows:
(a) At the Closing, Buyer shall deliver the sum of $4,100,000 (as
adjusted in accordance with Section 1.6) to Sellers, collectively, by bank
cashier's check or bank wire transfer to one account designated by the Sellers
in writing to Buyer at least two (2) business days prior to the Closing; and
(b) At the Closing, Buyer shall deposit the sum of $500,000 (the
"Escrow Deposit") with Boston Safe Deposit and Trust Company as Escrow Agent
under the Escrow Agreement in the form attached hereto as Exhibit A (the "Escrow
Agreement"). The Escrow Deposit shall be held, administered and distributed in
accordance with the terms of the Escrow Agreement.
1.6 Adjustments to Purchase Price. The Purchase Price shall be increased,
with respect to the competitive local exchange carrier ("CLEC") assets, at the
Closing by the amount set forth on Schedule 1.6(b) hereto. The Purchase Price
shall be further adjusted at the Closing in the manner set forth below:
(a) The Purchase Price will be increased or decreased, as the case may
be, on a dollar-for-dollar basis, by the Working Capital Excess or Deficiency,
as applicable, as of the opening of business on the Closing Date.
For the purposes of this Agreement, the following terms shall
have the following meanings:
(i) "Working Capital" shall mean the difference between Sellers'
Current Assets and Current Liabilities, in the aggregate;
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(ii) "Current Assets" shall mean and include all Accounts
Receivable of Sellers, in the aggregate, outstanding on the Closing Date with
balances of sixty (60) days or less, all prepaid expenses (including postal
deposits and security deposits for leased real property) on the Closing Date,
and all other current assets which have value to the business at the Closing and
which are used in the operation of the Business, in each case as determined in
accordance with GAAP, consistently applied; provided, however, Current Assets
shall not include any Seller's cash on hand, any Seller's cash equivalents or
receivables from any Seller's shareholders;
(iii) "Current Liabilities" shall mean and include accounts
payable, accrued expenses, all deferred revenues and all other current
liabilities incurred in the operation of the Business and reflected on each
Seller's balance sheet on the Closing Date in each case as determined in
accordance with GAAP, consistently applied; provided, however, Current
Liabilities shall not include taxes and the current portion of any Seller's
long-term liabilities;
(iv) "Deficiency" shall mean the amount by which the Current
Liabilities exceeds the Current Assets; and
(v) "Excess" shall mean the amount by which the Current Assets
exceeds the Current Liabilities.
(b) (i) No later than five (5) days prior to the Closing, Buyer and
Sellers shall prepare a statement to be attached hereto as Schedule 1.6(b)
(the "Estimated Adjustment Statement") which sets forth the estimated
Working Capital and the amount of any estimated Deficiency or Excess, as
the case may be, as of the Closing Date (the "Estimated Adjustment"). The
Purchase Price payable at the Closing shall be increased on a dollar-for-
dollar basis to the extent of any positive Estimated Adjustment or
decreased on a dollar-for-dollar basis to the extent of any negative
Estimated Adjustment, as the case may be, set forth on such Estimated
Adjustment Statement.
(ii) No later than forty-five (45) days following the Closing,
Buyer shall prepare and deliver to Sellers a statement (the "Final
Adjustment Statement") setting forth the actual Working Capital, and the
amount of any actual Deficiency or Excess, as the case may be, as well as
any other changes to the Estimated Adjustment, as of the Closing Date.
Subject to Section 1.6(b)(iii) below, within twenty (20) days following the
delivery of such Final Adjustment Statement to Sellers, Buyer or Sellers,
as the case may be, shall pay to the other party, by wire transfer of
immediately available funds, the difference between the Estimated
Adjustment, as shown on the Estimated Adjustment Statement, and the actual
adjustment, as shown on the Final Adjustment Statement.
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(iii) In the event Sellers object to the Final Adjustment
Statement, Sellers shall notify Buyer in writing of such objection within
the twenty (20) day period following the delivery thereof, stating in such
written objection the reasons therefor and setting forth the Sellers'
calculation of Sellers' actual Working Capital at the Closing. Upon receipt
by Buyer of such written objection, the parties shall attempt to resolve
the disagreement concerning the Final Adjustment Statement through
negotiation. Notwithstanding any other dispute resolution procedure
provided for in this Agreement, if Buyer and Sellers cannot resolve such
disagreement concerning the Final Adjustment Statement within thirty (30)
days following the end of the foregoing 20-day period, the parties shall
submit the matter for resolution to Ernst & Young LLP or in the event that
Ernst & Young LLP is not independent of the parties, to another nationally
recognized firm of certified public accountants which is independent of the
parties hereto, with the costs thereof in either case to be shared equally
by the parties. Such accounting firm shall deliver a statement setting
forth its own calculation of the final adjustment to the parties within
thirty (30) days of the submission of the matter to such firm. Any payment
shown to be due by a party on the statement of such accounting firm shall
be paid to the other party promptly but in no event later than five (5)
days following the delivery of such statement by such accounting firm to
the parties.
1.7 Purchase Price Allocation. At least two (2) business days prior to
the Closing, Buyer and Sellers shall agree on the allocation of the Purchase
Price as set forth on Schedule 1.7 attached hereto. Such allocation shall be
binding upon Buyer and Sellers for all purposes (including financial accounting
purposes, financial and regulatory reporting purposes and tax purposes). Buyer
and each Seller further agree to file their Federal income tax returns and their
other tax returns reflecting such allocation, Form 8594 and any other reports
required by Section 1060 of the Internal Revenue Code of 1986, as amended.
1.8 Records and Contracts. To the extent not previously provided to
Buyer, at the Closing Sellers shall deliver to Buyer, subject to Section 1.9
below, all of the Contracts, with such assignments thereof and consents to
assignments as are necessary to assure Buyer of the full benefit of the same.
Each Seller shall also deliver to Buyer at the Closing all of such Seller's
files and records constituting Assets.
1.9 Further Assurances. Each Seller, from time to time after the Closing
at the request of Buyer and without further consideration, shall execute and
deliver further instruments of transfer and assignment and take such other
action as Buyer may reasonably require to more effectively transfer and assign
to, and vest in, Buyer the Assets free and clear of all Liens (as defined in
Section 2.8). Additionally, to the extent Seller has not obtained any required
consents to the assignment of the Contracts by the Closing Date, Seller shall
use its reasonable best efforts to obtain such consents in the forms attached
hereto as Exhibit B and Exhibit C, within 60 days of the date hereof. For
purposes of this Section 1.9, "reasonable best efforts" shall not require
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Seller to undertake extraordinary or unreasonable measures to obtain such
approvals and consents, including, without limitation, the initiation or
prosecution of legal proceedings or the payment of fees in excess of customary
filing, processing and documentation fees. Schedule 2.3(a) sets forth a list of
required consents not obtained as of the Closing Date.
1.10 Sales and Transfer Taxes. All sales, transfer, use, recordation,
documentary, stamp, excise taxes, personal property taxes, fees and duties
(including any real estate transfer taxes) under applicable law incurred in
connection with this Agreement or the transactions contemplated thereby will be
borne and paid by Sellers, and Sellers shall promptly reimburse Buyer for the
payment of any such tax, fee or duty which Buyer is required to make under
applicable law.
1.11 Transfer of Subject Assets. At the Closing, Sellers shall deliver or
cause to be delivered to Buyer good and sufficient instruments of transfer
transferring to Buyer title to all of the Assets, together with all required
consents (subject to Section 1.9). Such instruments of transfer (a) shall
contain appropriate warranties and covenants which are usual and customary for
transferring the type of property involved under the laws of the jurisdictions
applicable to such transfers, (b) shall be in form and substance reasonably
satisfactory to Buyer and its counsel, (c) shall effectively vest in Buyer good
and marketable title to all of the Assets free and clear of all Liens, and (d)
where applicable, shall be accompanied by evidence of the discharge of all Liens
against the Assets.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLERS AND PRINCIPALS. In order
to induce Buyer to enter into this Agreement, Sellers, the Trusts and each of
the Principals, jointly and severally, hereby represent and warrant to Buyer as
follows:
2.1 Organization; Subsidiaries.
--------------------------
(a) Each Seller is a corporation duly organized, validly existing and
in good standing under the laws of Ohio, with full corporate power and authority
to own or lease its properties and to conduct its business in the manner and in
the places where such properties are owned or leased or such business is
currently conducted or proposed to be conducted. The copies of each Seller's
Articles of Incorporation and code of regulations, each as amended to date,
heretofore delivered to Buyer's counsel are complete and correct. No Seller is
in violation of any term of its Articles of Incorporation or code of
regulations. Each Seller is duly qualified to do business in the state of its
organization, and is not required to be licensed or qualified to conduct its
business or own its property in any other jurisdiction where the failure to be
so licensed or qualified would have a material adverse effect.
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(b) Each of the Trusts is an electing small business trust duly
organized, validly existing and in good standing under the laws of Ohio, with
full power and authority to own or lease its properties and to conduct its
business in the manner and in the places in which such properties are owned or
leased or such business is currently conducted or proposed to be conducted. The
copies of each Trust's declaration of trust, each as amended to date, heretofore
delivered to Buyer's counsel are complete and correct. No Trust is in violation
of any term of its declaration of trust. Each Trust is duly qualified to do
business in the state of its organization, and is not required to be licensed or
qualified to conduct its business or own its property in any other jurisdiction
where the failure to be so licensed or qualified would have a material adverse
effect.
(c) Except as set forth on Schedule 2.1(b) hereto, no Seller has any
subsidiaries and no Seller owns any securities issued by any other business
organization or governmental authority, except U.S. Government securities, bank
certificates of deposit and money market accounts acquired as short-term
investments in the ordinary course of its business. Seller does not own or have
any direct or indirect interest in or control over any corporation, partnership,
joint venture or entity of any kind.
2.2 Required Action. All actions and proceedings necessary to be taken
by or on the part of each Seller and each Trust, as applicable, in connection
with the transactions contemplated by this Agreement have been duly and validly
taken, and this Agreement and each other agreement, document and instrument to
be executed and delivered by or on behalf of each Seller pursuant to, or as
contemplated by, this Agreement (collectively, the "Seller Documents") has been
duly and validly authorized, executed and delivered by each Seller and no other
action on the part of any Seller or any Trust, as applicable, or its
stockholders or trustees, respectively, is required in connection therewith.
This Agreement has been duly and validly authorized, executed and delivered by
each Trust and no other action on the part of any Trust or their trustees or
beneficiaries is required in connection therewith. Each Trust has full right,
authority, power and capacity to execute and deliver this Agreement and to
execute and carry out the transactions contemplated hereby. Each Seller and the
Principals have full right, authority, power and capacity to execute and deliver
this Agreement and each other Seller Document and to carry out the transactions
contemplated hereby and thereby. This Agreement and each other Seller Document
constitutes, or when executed and delivered will constitute, the legal, valid
and binding obligation of each Seller, each Trust and the Principals enforceable
in accordance with its respective terms.
2.3 No Conflicts.
------------
(a) Except as set forth in Schedule 2.3(a) attached hereto, the
execution, delivery and performance by each Seller of this Agreement and each
other Seller Document does not and will not (i) violate any provision of the
Articles of Incorporation and code of regulations
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of any Seller, in each case as amended to date, (ii) constitute a violation of,
or conflict with or result in any breach of, acceleration of any obligation
under, right of termination under, or default under, any agreement or instrument
to which any Seller is a party or by which such Seller or the Assets is bound,
(iii) violate any judgment, decree, order, statute, rule or regulation
applicable to any Seller or the Assets, (iv) require any Seller to obtain any
approval, consent or waiver of, or to make any filing with, any person or entity
(governmental or otherwise) that has not been obtained or made or (v) result in
the creation or imposition of any Lien on any of the Assets.
(b) Except as set forth in Schedule 2.3(b) attached hereto, the
execution, delivery and performance by each of the Principals of this Agreement
and each other Seller Document does not and will not (i) constitute a violation
of, or conflict with or result in any breach of, acceleration of any obligation
under, right of termination under, or default under, any agreement or instrument
to which any or all of the Principals are a party or by which any or all of the
Principals are bound, (ii) violate any judgment, decree, order, statute, rule or
regulation applicable to the Principals, (iii) require the Principals to obtain
any approval, consent or waiver of, or to make any filing with, any person or
entity (governmental or otherwise) that has not been obtained or made, or (iv)
result in the creation or imposition of any Lien on any of the Assets.
(c) The execution, delivery and performance by each Trust of the
Agreement does not and will not (i) violate any provision of the declaration of
trust of any Trust, in each case as amended to date, (ii) constitute a violation
of, or conflict with or result in any breach of, acceleration of any obligation
under, right of termination under, or default under, any agreement or instrument
to which any Trust is a party or by which such Trust is bound, (iii) violate any
judgement, decree, order, statute or rule or regulation applicable to any Trust,
(iv) require any Trust to obtain any approval, consent or waiver of, or to make
any filing with, any person or entity (governmental or otherwise) that has not
been obtained or made.
2.4 Taxes.
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(a) Each Seller has paid or caused to be paid all federal, state,
local, foreign and other taxes, including, without limitation, income taxes,
estimated taxes, alternative minimum taxes, excise taxes, sales taxes, use
taxes, value-added taxes, gross receipts taxes, franchise taxes, capital stock
taxes, employment and payroll-related taxes, withholding taxes, stamp taxes,
transfer taxes, windfall profit taxes, environmental taxes and property taxes,
whether or not measured in whole or in part by net income, and all deficiencies,
or other additions to tax, interest, fines and penalties owed by it
(collectively, "Taxes"), required to be paid by it through the date hereof
whether disputed or not.
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(b) Each Seller has in accordance with applicable law filed all
federal, state, local and foreign tax returns required to be filed by it through
the date hereof, and all such returns correctly and accurately set forth the
amount of any Taxes relating to the applicable period. A list of all federal,
state, local and foreign income tax returns filed with respect to each Seller
for taxable periods ended on or after December 31, 1993, is set forth in
Schedule 2.4 attached hereto, and said schedule indicates those returns that
have been audited or currently are the subject of an audit. Sellers have
delivered to Buyer correct and complete copies of all federal, state, local and
foreign income tax returns listed on said schedule, and of all examination
reports and statements of deficiencies assessed against or agreed to by any
Seller with respect to said returns.
(c) Neither the Internal Revenue Service ("IRS") nor any other
governmental authority is now asserting or, to the knowledge of each Seller or
the Principals, threatening to assert against any Seller any deficiency or claim
for additional Taxes. To the knowledge of each Seller and the Principals, no
claim has ever been made by an authority in a jurisdiction where Sellers do not
file reports and returns that any Seller is or may be subject to taxation by
that jurisdiction. There are no security interests on any of the Assets of any
Seller that arose in connection with any failure (or alleged failure) to pay any
Taxes. No Seller has ever entered into a closing agreement pursuant to Section
7121 of the Internal Revenue Code of 1986, as amended (the "Code")
(d) There has not been any audit of any tax return filed by any
Seller, no audit of any tax return of any Seller is in progress, and no Seller
has been notified by any tax authority that any such audit is contemplated or
pending. No extension of time with respect to any date on which a tax return
was or is to be filed by any Seller is in force, and no waiver or agreement by
any Seller is in force for the extension of time for the assessment or payment
of any Taxes.
(e) No Seller has ever been (and has never had any liability for
unpaid Taxes because it once was) a member of an "affiliated group" (as defined
in Section 1504(a) of the Code). No Seller has ever filed, or has ever been
required to file, a consolidated, combined or unitary tax return with any other
entity. Except as set forth on Schedule 2.4(e), no Seller owns and no Seller
has ever owned a direct or indirect interest in any trust, partnership,
corporation or other entity and therefore Buyer is not acquiring from any Seller
an interest in any entity. No Seller is a party to any tax sharing agreement.
(f) No Seller is a "foreign person" within the meaning of Section 1445
of the Code and Treasury Regulations Section 1.1445-2.
(g) For purposes of this Agreement, all references to Sections of the
Code shall include any predecessor provisions to such Sections and any similar
provisions of federal, state, local or foreign law.
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2.5 Compliance with Laws. Each Seller's operation of the Business and the
Assets is in compliance in all material respects with all applicable statutes,
ordinances, orders, rules and regulations promulgated by any federal, state,
municipal or other governmental authority (including the Federal Communications
Commission), and no Seller has ever received notice of a violation or alleged
violation of any such statute, ordinance, order, rule or regulation.
2.6 Insurance. The physical properties and tangible Assets are insured to
the extent disclosed in Schedule 2.6 attached hereto, and all insurance policies
and arrangements of each Seller in effect as of the date hereof are disclosed in
said Schedule. Said insurance policies and arrangements are in full force and
effect up to the Closing Date, all premiums with respect thereto are currently
paid, and each Seller is in compliance in all material respects with the terms
thereof. Said insurance is adequate and customary for the business engaged in
by each Seller and is sufficient for compliance by each Seller with all
requirements of law and all agreements and leases to which such Seller is a
party.
2.7 Contracts. The Contracts constitute all leases, contracts and
arrangements, whether oral or written, under which any Seller is bound or to
which any Seller is a party which relate to the Business or Assets. Schedule
1.1(b) attached hereto contains a true, correct and complete list of all
Contracts. With respect to each oral agreement or understanding involving the
Business, Sellers have provided a written summary of the material terms of each
such agreement or understanding on Schedule 1.1(b). Each Contract is valid, in
full force and effect and binding upon each Seller and the other parties thereto
in accordance with its terms. Neither any Seller nor, to the knowledge of each
Seller and the Principals, any other party is in default under or in arrears in
the performance, payment or satisfaction of any agreement or condition on its
part to be performed or satisfied under any Contract, nor, to the knowledge of
any Seller, except as set forth on Schedule 2.3(a), does any condition exist
that with notice or lapse of time or both would constitute such a default, and
no waiver or indulgence has been granted by any party under any Contract. No
Seller has received notice of, and each Seller and the Principals have no
knowledge of, any fact which would result in a termination, repudiation or
breach of any Contract, except as set forth on Schedule 2.3(a). Sellers have
provided Buyer with true and complete copies of all of such Contracts, other
than with respect to the oral agreements or understandings described on Schedule
1.1(b).
2.8 Title. Each Seller has good and marketable title to all of the Assets
free and clear of all Liens (as hereinafter defined). For purposes of this
Agreement, a Lien shall include all mortgages, pledges, security interests,
charges, liens, restrictions and encumbrances of any kind; provided, that Liens
shall not include the mortgages, pledges, security interests, charges, liens,
restrictions and encumbrances if any, represented by the Uniform Commercial Code
filings associated with the Contracts, as more particularly set forth on and
attached to Schedule 2.8 hereto). Upon the sale, assignment, transfer and
delivery of the Assets to Buyer hereunder and under the Seller Documents, there
will be vested in Buyer good, marketable and indefeasible title
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to the Assets, free and clear of all Liens. The Assets include all of the assets
and properties (i) held for use by Sellers to conduct the Business as presently
conducted and (ii) necessary for Buyer to operate the Business in the same
manner as such Business is currently operated by Sellers. Except to the extent
of ordinary wear and tear, all of the tangible Assets are in good repair, have
been well maintained and are in good operating condition, do not require any
material modifications or repairs, and comply in all material respects with
applicable laws, ordinances and regulations. Sellers have delivered complete and
true copies of all real property leases (the "Leases") set forth on Schedule
1.1(b). To Sellers' knowledge, each Seller holds good, clear, marketable, valid
and enforceable leasehold interest in the real property subject to the Leases
(the "Leased Real Property") and leased by it, subject only to the right of
reversion of the landlord or lessor under the Leases, free and clear, to
Sellers' knowledge, of all other prior or subordinate interests, including,
without limitation, mortgages, deeds of trust, ground leases, leases, subleases,
assessments, tenancies, claims, covenants, conditions, restrictions, easements,
judgments or other encumbrances or matters affecting title, and, to Sellers'
knowledge, free of encroachments onto or off of the leased real property. There
are no material defects in the physical condition of any improvements
constituting a part of the Leased Real Property, including, without limitation,
structural elements, mechanical systems, roofs or parking and loading areas, and
all of such improvements are in good operating condition and repair, ordinary
wear and tear excepted, and have been well maintained. All water, sewer, gas,
electric, telephone, drainage and other utilities required by law or necessary
for the current or planned operation of the Leased Real Property have been
installed and connected pursuant to valid permits, and are sufficient to service
the Leased Real Property. No Seller holds or owns a fee interest in any real
property.
2.9 No Litigation. Except as set forth in Schedule 2.9 attached hereto,
no Seller is now involved in nor, to the knowledge of each Seller and the
Principals, is any Seller threatened to be involved in any litigation or legal
or other proceedings related to or affecting the Business or any Asset or which
would prevent or hinder the consummation of the transactions contemplated by
this Agreement. Sellers have not been operating the Business under, and the
Business is not subject to, any order, injunction or decree of any court of
federal, state, municipal or other governmental department, commission, board,
agency or instrumentality.
2.10 Employees; Labor Matters. Raex employs approximately 0 full-time
employees and 0 part-time employees and generally enjoys commercially reasonable
employer-employee relationships. RCI employs approximately 0 full-time
employees and 0 part-time employees and generally enjoys commercially reasonable
employer-employee relationships. Raex Corp employs approximately 20 full-time
employees and 7 part-time employees and generally enjoys commercially reasonable
employer-employee relationships. Each Seller shall provide to Buyer a list of
the employees of such Seller in connection with the Business at least ten (10)
days prior to Closing, including the name, date of hire and wages of such
employees. No Seller is delinquent in payments to any of its employees for any
wages, salaries, commissions, bonuses or other
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direct compensation for any services performed for it to the date hereof or
amounts required to be reimbursed to such employees. Upon termination of the
employment of any of said employees, neither any Seller nor Buyer will by reason
of the transactions contemplated hereby or anything done prior to the Closing be
liable to any of said employees for so-called "severance pay" or any other
payments, except as set forth in Schedule 2.10 attached hereto. No Seller has
any policy, practice, plan or program of paying severance pay or any form of
severance compensation in connection with the termination of employment, except
as set forth in said Schedule. Each Seller is in compliance in all material
respects with all applicable laws and regulations respecting labor, employment,
fair employment practices, workplace safety and health, terms and conditions of
employment, and wages and hours. There are no charges of employment
discrimination or unfair labor practices, nor are there any strikes, slowdowns,
stoppages of work, or any other concerted interference with normal operations
existing, pending or, to the knowledge of each Seller and the Principals,
threatened against or involving any Seller. No question concerning
representation exists respecting any group of employees of any Seller. There are
no grievances, complaints or charges that have been filed against any Seller
under any dispute resolution procedure (including, but not limited to, any
proceedings under any dispute resolution procedure under any collective
bargaining agreement) that might have an adverse effect on any Seller or the
conduct of its business and no arbitration or similar proceeding is pending and,
to the knowledge of each Seller, no claim therefor has been asserted. No
collective bargaining agreement is in effect or is currently being or is about
to be negotiated by any Seller. No Seller has received any information to
indicate that any of its employment policies or practices is currently being
audited or investigated by any federal, state or local government agency. Each
Seller is, and at all times since November 6, 1986 has been, in compliance with
the requirements of the Immigration Reform Control Act of 1986.
2.11 Financial Statements. Attached hereto as Schedule 2.11 are copies
of the balance sheet of Sellers as at August 31, 1999 (the "Base Balance Sheet")
and the statements of income and expense of Sellers for the 12 months ending
August 31, 1999 (collectively the "Financial Statements"). The Financial
Statements are complete and correct and present fairly and accurately the
financial condition of the Business at the dates of said statements and the
results of operations of the Business for the periods covered thereby. Schedule
2.11 sets forth the manner in and extent to which the Financial Statements and
the principles by which such Financial Statements were prepared deviate from
generally accepted accounting principles. As of the date of the Base Balance
Sheet (the "Base Balance Sheet Date"), no Seller had any liabilities or
obligations of any kind with respect to the Business, whether accrued,
contingent or otherwise, that are not disclosed and adequately reserved against
on the Base Balance Sheet. As of the date hereof and at the Closing, no Seller
had and no Seller will have any liabilities or obligations of any kind with
respect to the Business, whether accrued, contingent or otherwise, that are not
disclosed and adequately reserved against on the Base Balance Sheet.
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2.12 Business Since the Base Balance Sheet Date. Except as set forth in
Schedule 2.12 attached hereto, since the Base Balance Sheet Date:
(a) there has been no material adverse change in the Business or in
the Assets, operations or financial condition of the Business;
(b) the Business has, in all material respects, been conducted in the
ordinary course of business and in substantially the same manner as it was
conducted before the date of the Base Balance Sheet Date;
(c) there has not been any material obligation or liability
(contingent or other) incurred by any Seller with respect to the Business,
whether or not incurred in the ordinary course of business including, without
limitation, any capital or operating leases with respect to Equipment;
(d) there has not been any purchase, sale or other disposition, or
any agreement or other arrangement, oral or written, for the purchase, sale or
other disposition, of any material properties or assets of the Business, whether
or not in the ordinary course of business;
(e) there has not been any mortgage, encumbrance or lien placed on
any of the Assets, nor any payment or discharge of a material lien or liability
of any Seller which was not reflected on the Base Balance Sheet;
(f) there has not been any damage, destruction or loss, whether or
not covered by insurance, adversely affecting the Business or Assets;
(g) there has not been any material change in any Seller's pricing,
marketing, customer service, billing, accounting, operational or promotional
activities and policies of such Seller;
(h) there has not been any change in the collection, payment and
accounting policies used by any Seller in the Business; and
(i) there has not been any agreement or understanding, whether in
writing or otherwise, for any Seller to take any of the actions specified above.
2.13 Licenses. As of the date of this Agreement, Sellers are the holders
of all licenses, permits and authorizations with respect to the Business (the
"Authorizations"). The Authorizations constitute all of the licenses, permits
and authorizations required for operation of the Business as now operated.
Except as set forth on Schedule 2.13, all of the Authorizations
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are in full force and effect and no licenses, permits or authorizations of any
governmental department or agency are required for the operation of the Business
which have not been duly obtained. As of the date hereof, there is not pending
or, to the knowledge of each Seller and the Principals, threatened any action by
or before any governmental agency to revoke, cancel, rescind or modify any of
the Authorizations, and there is not now issued or outstanding or, to the
knowledge of each Seller and the Principals, pending or threatened any order to
show cause, notice of violation, notice of apparent liability, or notice of
forfeiture or complaint against any Seller with respect to the Business.
2.14 Approvals; Consents. Except as set forth on Schedule 2.14 attached
hereto, no approval, consent, authorization or exemption from or filing with any
person or entity not a party to this Agreement is required to be obtained or
made by any Seller in connection with the execution and delivery of this
Agreement and the Seller Documents and the consummation of the transactions
contemplated hereby and thereby. Each Seller shall use its best efforts to
obtain all of the approvals, consents and authorizations listed on Schedule 2.14
at or prior to the Closing in accordance with Section 4.4 hereof or, to the
extent necessary, in accordance with Section 1.9 hereof.
2.15 Customers and Suppliers. Each Seller's relations with its customers
and suppliers, including its Subscribers (as defined below), are commercially
reasonable and there are not pending or, to each Seller's knowledge, threatened
claims or controversies with any customer or suppliers that are material to the
Assets or the Business.
2.16 Subscribers. Schedule 2.16(a) attached hereto sets forth, as of the
date hereof, the Subscribers of the Business as listed by class, type and
billing plan. For purposes of this Agreement, the terms "Subscriber" shall mean
any active subscriber to internet services offered by Sellers in the Business
who has subscribed to a service for at least one month and has paid at least one
bill, including, without limitation, any person who receives dial-up internet
access and e-mail services through the Business (a "Dial-up Subscriber"), any
person who receives dedicated internet access from any Seller offering higher
data transmission rates than available from dial-up access (a "Dedicated
Subscriber"), and any person with a web page or domain name on any Seller's
server and to whom such Seller provides internet access (a "Web-hosting/Domain-
hosting Subscriber"); provided, however, that "Subscriber" shall not include any
person who is (i) more than sixty (60) days delinquent in payment of such
person's bill for such services provided by the Business and (ii) receiving
complimentary internet services or internet services at a promotional discounted
rate. Set forth on Schedule 2.16(b) attached hereto is a listing of all such
accounts which receive complimentary internet services or internet services at a
promotional discounted rate (including, but not limited to, those accounts that
receive "student plan" rates). Set forth on Schedule 2.16(c) attached hereto is
each Seller's policy and practice with respect to the disconnection of
Subscribers, with which each Seller has,
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except as set forth on Schedule 2.16(c), at all times since its inception,
complied in all material respects.
2.17 Brokers. Except as set forth in Schedule 2.17 attached hereto, no
Seller has retained any broker or finder or other person who would have any
valid claim against any of the parties to this Agreement for a commission or
brokerage fee in connection with this Agreement or the transactions contemplated
hereby.
2.18 Collectibility of Accounts Receivable. All of the Accounts
Receivable of each Seller are or will be as of the Closing Date bona fide, valid
and enforceable claims, subject to no setoff or counterclaim and to Seller's
knowledge are collectible in accordance with their terms. No Seller has any
accounts or loans receivable from any person, firm or corporation which is
affiliated with any Seller or from any director, officer or employee of any
Seller, or from any of their respective spouses or family members.
2.19 Banking Relations. All of the arrangements which each Seller has
with any banking institution are completely and accurately described in Schedule
2.19 attached hereto, indicating with respect to each of such arrangements the
type of arrangement maintained (such as checking account, borrowing
arrangements, safe deposit box, etc.) and the person or persons authorized in
respect thereof.
2.20 Intellectual Property.
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(a) Set forth on Schedule 2.20 attached hereto are all computer
programs and related documentation sold, marketed, licensed and distributed by
each Seller (the "Products"). All of the Intellectual Property of each Seller is
set forth on Schedule 2.20 attached hereto. For purposes hereof, the term
"Intellectual Property" includes: (i) all patents, patent applications, patent
rights, and inventions and discoveries and invention disclosures (whether or not
patented) (collectively, "Patents"); (ii) each Seller's rights to the names
"raex.net" and "raex.com", all trade names, trade dress, logos, packaging
design, slogans, any and all internet domain names used or useful in the
Business, registered and unregistered trademarks and service marks and
applications (collectively, "Marks"); (iii) all copyrights in both published and
unpublished works, including, without limitation, all compilations, databases
and computer programs, and all copyright registrations and applications, and all
derivatives, translations, adaptations and combinations of the above
(collectively, "Copyrights"); (iv) all know-how, trade secrets, confidential or
proprietary information, customer lists, IP addresses, research in progress,
algorithms, data, designs, processes, formulae, drawings, schematics,
blueprints, flow charts, models, prototypes, techniques, Beta testing procedures
and Beta testing results (collectively, "Trade Secrets"); (v) each Seller's web-
sites (including the domain names "www.raex.com" and "www.raex.net" and any
other similar domain names; (vi) all goodwill, franchises, licenses, permits,
consents, approvals, technical information, telephone numbers, and claims of
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infringement against third parties (the "Rights"); and (vii) all contracts
relating to the Products and the Intellectual Property to which each Seller is a
party or is bound, including, without limitation, all nondisclosure and/or
confidentiality agreements entered into by persons in connection with
disclosures by each Seller (collectively, "Assigned Contracts").
(b) Except as described in Schedule 2.20, each Seller has exclusive
ownership of, and has good, valid and marketable title to, all of the
Intellectual Property, free and clear of any Liens, and has the right to use all
of the Intellectual Property without payment to any third party. Each Seller's
rights in all of such Intellectual Property are freely transferable. There are
no claims or demands pending or, to the knowledge of each Seller and the
Principals, threatened of any other person pertaining to any of such
Intellectual Property and no proceedings have been instituted, or are pending
or, to the knowledge of each Seller and the Principals, threatened against each
Seller and/or its officers, employees and consultants which challenge the
validity and enforceability of each Seller's rights in respect of the
Intellectual Property. The Intellectual Property with the Assets constitutes
all of the assets of each Seller used in designing, creating and developing the
Products, and represent all of such Intellectual Property necessary for the
operation of each Seller's Business as currently conducted.
Except as set forth in Schedule 2.20 attached hereto, all former and
current employees, consultants and contractors of each Seller have executed
written instruments with such Seller that assign to such Seller all rights to
any inventions, improvements, discoveries, or information relating to the
business of such Seller. To the knowledge of each Seller, no employee,
consultant or contractor of any Seller has entered into any agreement that
restricts or limits in any way the scope or type of work in which the employee,
consultant or contractor may be engaged or requires the employee, consultant or
contractor to transfer, assign, or disclose information concerning his work to
anyone other than such Seller.
(c) Schedule 2.20 sets forth a complete and accurate list and summary
description of all of each Seller's Patents. All of the issued Patents are
currently in compliance with formal legal requirements (including without
limitation payment of filing, examination and maintenance fees and proofs of
working or use), are valid and enforceable, and are not subject to any
maintenance fees or taxes or actions falling due within ninety (90) days after
the Closing Date. In each case where a Patent is held by any Seller by
assignment, the assignment has been duly recorded with the U.S. Patent and
Trademark Office and all other jurisdictions of registration. To the knowledge
of each Seller, no Patent has been or is now involved in any interference,
reissue, re-examination or opposition proceeding. To the knowledge of each
Seller and the Principals, there is no potentially interfering Patent of any
third party. All products made, used or sold under the Patents have been marked
with the proper patent notice.
(d) Schedule 2.20 sets forth a complete and accurate list and summary
description of all of each Seller's Marks. All Marks that have been registered
with the United
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States Patent and Trademark Office and/or any other jurisdiction are currently
in compliance with formal legal requirements (including, without limitation, the
timely post-registration filing of affidavits of use and incontestability and
renewal applications), are valid and enforceable, and are not subject to any
maintenance fees or taxes or actions falling due within ninety (90) days after
the Closing Date. In each case where a Trademark is held by any Seller by
assignment, the assignment has been duly recorded with the U.S. Patent and
Trademark Office and all other jurisdictions of registration. To the knowledge
of each Seller, no Mark has been or is now involved in any opposition,
invalidation or cancellation proceeding and, to the knowledge of each Seller and
the Principals, no such action is threatened with respect to any of the Marks.
All products and materials containing a Mark bear the proper notice where
permitted by law.
(e) Schedule 2.20 sets forth a complete and accurate list and summary
description of all of each Seller's Copyrights. All the Copyrights have been
registered with the United States Copyright Office and are currently in
compliance with formal legal requirements, are valid and enforceable, and are
not subject to any fees or taxes or actions falling due within ninety (90) days
after the Closing Date. In each case where a Copyright is held by any Seller by
assignment, the assignment has been duly recorded with the U.S. Copyright Office
and all other jurisdictions of registration. None of the source or object code,
algorithms, or structure included in the Products is copied from, based upon, or
derived from any other source or object code, algorithm or structure in
violation of the rights of any third party. Any substantial similarity of the
Products to any computer program owned by any third party did not result from
the Products being copied from, based upon, or derived from any such computer
software program in violation of the rights of any third party. All copies of
works encompassed by the Copyrights have been marked with the proper copyright
notice.
(f) Each Seller has taken reasonable security measures to protect the
secrecy, confidentiality and value of all Trade Secrets. To the knowledge of
each Seller and the Principals, there has not been any breach by any party to
any such confidentiality or non-disclosure agreement. The Trade Secrets have
not been disclosed by any Seller to any person or entity other than employees or
contractors of such Seller who had a need to know and use the Trade Secrets in
the course of their employment or contract performance. Except as set forth on
Schedule 2.20, (i) no Seller has directly or indirectly granted any rights or
interests in the source code of the Products, and (ii) no Seller has provided,
licensed or disclosed the source code of the Products to any person or entity.
Each Seller has the right to use, free and clear of claims of third parties, all
Trade Secrets. To the knowledge of each Seller and the Principals, there is not
any assertion that the use by any Seller of any Trade Secret violates the rights
of any third party.
(g) Each Seller has the exclusive right to use, license, distribute,
transfer and bring infringement actions with respect to the Intellectual
Property used, licensed, distributed or transferred by it. Except as set forth
on Schedule 2.20, no Seller (i) has licensed or granted to anyone rights of any
nature to use any of its Intellectual Property and (ii) is obligated to and no
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Seller pays royalties or other fees to anyone for its ownership, use, license or
transfer of any of its Intellectual Property.
(h) All licenses or other agreements under which any Seller is granted
rights by others in Intellectual Property are listed in Schedule 2.20. All such
licenses or other agreements are in full force and effect, to the knowledge of
each Seller and the Principals there is no material default by any party
thereto, and all of the rights of each Seller thereunder are freely assignable.
True and complete copies of all such licenses or other agreements, and any
amendments thereto, have been provided to Buyer, and no Seller has any reason to
believe that the licensors under the licenses and other agreements under which
such Seller is granted rights and has granted rights to others do not have and
did not have all requisite power and authority to grant the rights purported to
be conferred thereby.
(i) All licenses or other agreements under which any Seller has
granted rights to others in Intellectual Property are listed in Schedule 2.20.
All such licenses or other agreements are in full force and effect, and to the
knowledge of each Seller and the Principals there is no material default by any
party thereto. True and complete copies of all such licenses or other
agreements, and any amendments thereto, have been provided to Buyer.
(j) No Seller has any obligation to any other person to maintain,
modify, improve or upgrade the Products.
(k) None of the Products manufactured and sold, nor any process or
know-how used, by any Seller infringes or is alleged to infringe any patent,
trademark, service mark, trade name, copyright or other proprietary right or is
a derivative work based on the work of any other person.
(l) There are no (i) actions, suits, claims, investigations or other
proceedings involving the Products, the Intellectual Property, or the Rights by
or before any governmental authority or arbitrator pending or, to the knowledge
of each Seller and the Principals, threatened against any Seller, or (ii)
judgments, decrees, injunctions, or orders involving the Products, the
Intellectual Property or the Rights of any governmental authority or arbitrator
against any Seller. No Seller is in default under any such judgment, decree,
injunction or order.
(m) The Products perform in accordance with their published
specifications and documentation and as each Seller has warranted to its
customers. Each Seller has reviewed the areas within its businesses and
operations which could be adversely affected by, and has developed a program to
address on a timely basis, the "Year 2000 Problem" (i.e., the risk that
applications used by such Seller or its suppliers and/or providers may be unable
to recognize and properly perform date-sensitive functions involving certain
dates prior to and any date after
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December 31, 1999). Each Seller reasonably believes that the "Year 2000 Problem"
will not have any material adverse effect on the business or operations of such
Seller.
2.21 Absence of Restrictions. Except as set forth in Schedule 2.21
attached hereto, no Seller has entered into any other agreement or arrangement
with any other party with respect to the sale, transfer or any other disposition
or encumbrance of the Business or the Assets, in whole or in part.
2.22 Permits; Burdensome Agreements. Schedule 2.22 lists all permits,
registrations, licenses, franchises, certifications and other approvals
(collectively, the "Approvals") required from federal, state or local
authorities in order for each Seller to conduct its Business. Each Seller has
obtained all such Approvals, which are valid and in full force and effect, and
is operating in compliance therewith. Such Approvals include, but are not
limited to, those required under federal, state or local statutes, ordinances,
orders, requirements, rules, regulations, or laws pertaining to environmental
protection, public health and safety, worker health and safety, buildings,
highways or zoning. Except as disclosed in Schedule 2.22, all such Approvals
will be available and assigned to Buyer and remain in full force and effect upon
Buyer's purchase of the Assets, and no further Approvals will be required in
order for Buyer to conduct the business currently conducted by each Seller
subsequent to the Closing. Except as disclosed in Schedule 2.22 or in any other
schedule hereto, no Seller is subject to or bound by any agreement, arrangement,
judgment, decree or order which may materially and adversely affect its business
or prospects, its condition, financial or otherwise, or any of its assets or
properties.
2.23 Transactions with Interested Persons. Except as set forth in
Schedule 2.23 hereto, neither Seller, nor any stockholder, officer, supervisory
employee or director of any Seller or, to the knowledge of each Seller or the
Principals, any of their respective spouses or family members owns directly or
indirectly on an individual or joint basis any material interest in, or serves
as an officer or director or in another similar capacity of, any competitor or
supplier of any Seller, or any organization which has a material contract or
arrangement with any Seller.
2.24 Employee Benefit Programs.
-------------------------
(a) Schedule 2.24 attached hereto sets forth a list of every Employee
Program (as defined below) that has been maintained by each Seller or an
Affiliate at any time during the six-year period ending on the Closing Date.
Each Employee Program which has ever been maintained by any Seller or an
Affiliate and which has been intended to qualify under Section 401(a) or
501(c)(9) of the Code has received a favorable determination or approval letter
from the IRS regarding its qualification under such section and has, in fact,
been qualified under the applicable section of the Code from the effective date
of such Employee Program through and including the Closing Date (or, if earlier,
the date that all of such Employee Program's assets
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were distributed). No event or omission has occurred which would cause any such
Employee Program to lose its qualification or otherwise fail to satisfy the
relevant requirements to provide tax-favored benefits under the applicable Code
Section (including without limitation Code Sections 105, 125, 401(a) and
501(c)(9)). With respect to any Employee Program ever maintained by any Seller
or any Affiliate, there has been no (i) "prohibited transaction," as defined in
Section 406 of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") or Code Section 4975, (ii) non-deductible contribution, or (iii)
failure to comply with any provision of ERISA, other applicable law, or any
agreement which, in the case of any of (i), (ii) or (iii), could subject any
Seller or any Affiliate to liability either directly or indirectly (including,
without limitation, through any obligation of indemnification or contribution)
for any damages, penalties, or taxes, or any other loss or expense. No
litigation or governmental administrative proceeding (or investigation) or other
proceeding (other than those relating to routine claims for benefits) is pending
or, to the knowledge of each Seller, threatened with respect to any such
Employee Program. All payments and/or contributions required to have been made
(under the provisions of any agreements or other governing documents or
applicable law) with respect to all Employee Programs ever maintained by any
Seller or any Affiliate, for all periods prior to the Closing Date, either have
been made or have been accrued (and all such unpaid but accrued amounts are
described on Schedule 2.24). Each Employee Program ever maintained by any Seller
or an Affiliate has complied with the applicable notification and other
applicable requirements of the Consolidated Omnibus Budget Reconciliation Act of
1985.
(b) Neither any Seller nor any Affiliate (A) has ever maintained any
Employee Program which has been subject to title IV of ERISA or Code Section
412, including, but not limited to, any Multiemployer Plan (as defined in
Section 3(37) of ERISA) or (B) prior to the Closing Date has ever provided
health care or any other non-pension benefits to any employees after their
employment is terminated (other than as required by part 6 of subtitle B of
title I of ERISA) or has ever promised to provide such post-termination
benefits.
(c) For purposes of this section:
(i) "Employee Program" means all employee benefit plans within
the meaning of ERISA Section 3(3) as well as all other employee benefit
plans, agreements and arrangements of any kind.
(ii) An entity "maintains" an Employee Program if such entity
sponsors, contributes to, or provides benefits under or through such
Employee Program, or has any obligation (by agreement or under applicable
law) to contribute to or provide benefits under or through such Employee
Program, or if such Employee Program provides benefits to or otherwise
covers employees of such entity (or their spouses, dependents, or
beneficiaries).
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(iii) An entity is an "Affiliate" of a Seller if it would have
ever been considered a single employer with such Seller under ERISA Section
4001(b) or part of the same "controlled group" as such Seller for purposes
of ERISA Section 302(d)(8)(C).
2.25 Environmental Matters.
---------------------
(a) Except as set forth in Schedule 2.25 attached hereto, (i) no
Seller has ever generated, transported, used, stored, treated, disposed of, or
managed any Hazardous Waste (as defined below); (ii) to each Seller's knowledge,
no Hazardous Material (as defined below) has ever been or is threatened to be
spilled, released, or disposed of at any site presently or formerly owned,
operated, leased, or used by each Seller, or has ever been located in the soil
or groundwater at any such site; (iii) to each Seller's knowledge, no Hazardous
Material has ever been transported from any site presently or formerly owned,
operated, leased, or used by each Seller for treatment, storage, or disposal at
any other place; (iv) to each Seller's knowledge, no Seller presently owns,
operates, leases, or uses, nor has any Seller previously owned, operated,
leased, or used any site on which underground storage tanks are or were located;
and (v) to each Seller's knowledge no lien has ever been imposed by any
governmental agency on any property, facility, machinery, or equipment owned,
operated, leased, or used by each Seller in connection with the presence of any
Hazardous Material.
(b) Except as set forth in Schedule 2.25, (i) to each Seller's
knowledge, no Seller has any liability under, nor has it ever violated, any
Environmental Law (as defined below); (ii) to each Seller's knowledge, Sellers,
any property owned, operated, leased, or used by any Seller, and any facilities
and operations thereon are presently in compliance with all applicable
Environmental Laws; (iii) no Seller has ever entered into or been subject to any
judgment, consent decree, compliance order, or administrative order with respect
to any environmental or health and safety matter or received any request for
information, notice, demand letter, administrative inquiry, or formal or
informal complaint or claim with respect to any environmental or health and
safety matter or the enforcement of any Environmental Law; and (iv) no Seller
has any knowledge or reason to know that any of the items enumerated in clause
(iii) of this subsection will be forthcoming.
(c) Except as set forth in Schedule 2.25, to the knowledge of each
Seller and the Principals, no site owned, operated, leased, or used by any
Seller contains any asbestos or asbestos-containing material, any
polychlorinated biphenyls (PCBs) or equipment containing PCBs, or any urea
formaldehyde foam insulation.
(d) Each Seller has, to the knowledge of each Seller and the
Principals, provided to Buyer copies of all documents, records, and information
available to such Seller concerning any environmental or health and safety
matter relevant to such Seller, whether generated by such Seller or others,
including, without limitation, environmental audits,
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environmental risk assessments, site assessments, documentation regarding off-
site disposal of Hazardous Materials, spill control plans, and reports,
correspondence, permits, licenses, approvals, consents, and other authorizations
related to environmental or health and safety matters issued by any governmental
agency.
(e) For purposes of this Section 2.25, (i) "Hazardous Material" shall
mean and include any hazardous waste, hazardous material, hazardous substance,
petroleum product, oil, toxic substance, pollutant, contaminant, or other
substance which may pose a threat to the environment or to human health or
safety, as defined or regulated under any Environmental Law; (ii) "Hazardous
Waste" shall mean and include any hazardous waste as defined or regulated under
any Environmental Law; (iii) "Environmental Law" shall mean any environmental or
health and safety-related law, regulation, rule, ordinance, or by-law at the
foreign, federal, state, or local level, whether existing as of the date hereof,
previously enforced, or subsequently enacted; and (iv) "Seller" shall mean and
include each Seller and all other entities for whose conduct such Seller is or
may be held responsible under any Environmental Law.
2.26 Undisclosed Liabilities. No Seller has any liabilities or obligations
of any nature (whether known or unknown and whether absolute, accrued,
contingent or otherwise) except for liabilities or obligations reflected on the
Base Balance Sheet, current liabilities incurred in the ordinary course of
business since the date thereof and any liabilities disclosed in Schedule 2.26
attached hereto.
2.27 Indebtedness. Except as set forth in Schedule 2.27, no Seller has any
bank debt or indebtedness (other than pursuant to operating or capitalized lease
obligations for leased equipment and other current liabilities).
2.28 Agreements. Except as set forth in Schedule 2.28, each Principal who
is employed by any Seller is not a party to any non-competition, trade secret or
confidentiality agreement with any party other than such Seller. There are no
agreements or arrangements not contained herein or disclosed in a Schedule
hereto, to which such Principal is a party relating to the business of any
Seller or to such Principal's rights and obligations as a stockholder, director
or officer of any Seller. Except as set forth in Schedule 2.28 attached hereto,
such Principal does not own, directly or indirectly, on an individual or joint
basis, any material interest in, or serve as an officer or director of, any
customer, competitor or supplier of any Seller, or any organization which has a
contract or arrangement with any Seller. Such Principal has not at any time
transferred any of the stock of any Seller held by or for such holder to any
employee of any Seller, which transfer constituted or could be viewed as
compensation for services rendered to such Seller by said employee. Except as
set forth in Schedule 2.28 attached hereto, the execution, delivery and
performance of this Agreement will not violate or result in a default or
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acceleration of any obligation under any contract, agreement, indenture or other
instrument involving any Seller to which such Principal is a party.
2.29 Disclosure. The representations, warranties and statements contained
in this Agreement and in the certificates, exhibits and schedules delivered by
each Seller and the Principals to Buyer pursuant to this Agreement do not
contain any untrue statement of a material fact, and, when taken together, do
not omit to state a material fact required to be stated therein or necessary in
order to make such representations, warranties or statements not misleading in
light of the circumstances under which they were made. There are no facts known
to any Seller or the Principals which presently or may, in Sellers' and the
Principals' reasonable business judgment, in the future have a material adverse
affect on any Seller's business, properties, assets, prospects, operations or
(financial or other) condition of any Seller which has not been specifically
disclosed herein or in a Schedule furnished herewith, other than general
economic conditions affecting the internet services industry and/or the
competitive local exchange carrier industry generally. There are no facts known
to any Seller or the Principals which may result in the Revenues delivered by
Sellers to Buyer pursuant to Section 6.9 being materially less than $180,000 as
of the Closing Date.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF BUYER. As a material inducement to
Sellers and the Principals and the Trusts entering into this Agreement, Buyer
hereby represents and warrants to Sellers and the Principals and the Trusts as
follows:
3.1 Organization. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Michigan. Buyer has
all requisite power and authority to conduct its business as it is now conducted
and to own, lease and operate its properties and assets.
3.2 Required Action. All actions and proceedings necessary to be taken
by or on the part of Buyer in connection with the transactions contemplated by
this Agreement have been duly and validly taken, and this Agreement and each
other agreement, document and instrument to be executed and delivered by or on
behalf of Buyer pursuant to, or as contemplated by, this Agreement
(collectively, the "Buyer Documents") has been duly and validly authorized,
executed and delivered by Buyer. Buyer has full right, authority, power and
capacity to execute and deliver this Agreement and each other Buyer Document and
to carry out the transactions contemplated hereby and thereby. This Agreement
and each other Buyer Document constitutes, or when executed and delivered will
constitute, the legal, valid and binding obligations of Buyer enforceable in
accordance with its respective terms.
3.3 No Conflicts. The execution, delivery and performance by Buyer of
this Agreement and each other Buyer Document does not and will not (a) violate
any provision of the
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Articles of Incorporation or by-laws of Buyer, in each case as amended to date,
(b) constitute a violation of, or conflict with or result in any breach of,
acceleration of any obligation under, right of termination under, or default
under, any agreement or instrument to which Buyer is a party or by which it is
bound, (c) violate any judgment, decree, order, statute, rule or regulation
applicable to Buyer, (d) require Buyer to obtain any approval, consent or waiver
of, or to make any filing with, any person or entity (governmental or otherwise)
that has not been obtained or made. The officers who execute this Agreement and
the other Buyer Documents contemplated hereby on behalf of Buyer have and shall
have all requisite power to do so in the name of and on behalf of Buyer.
3.4 Brokers. Buyer has not retained any broker or finder or other person
who would have any valid claim against any of the parties to this Agreement for
a commission or brokerage fee in connection with this Agreement or the
transactions contemplated hereby.
SECTION 4. COVENANTS OF SELLERS. Each Seller covenants and agrees that, from
the date hereof until consummation of the transactions contemplated hereby at
the Closing, such Seller shall:
4.1 Access to Premises and Records. From the date hereof until the
consummation of the transactions contemplated hereby at the Closing, Seller
shall give Buyer and its representatives, at reasonable times and with
reasonable prior notice, free access to the properties, books and records of the
Business and to the Assets and will furnish to Buyer and its representatives
such information regarding the Business and the Assets as Buyer or its
representatives may from time to time reasonably request in order that Buyer may
have full opportunity to make a diligent investigation consistent with this
Agreement. The foregoing shall include, without limitation, Buyer and its
representatives conducting, at Buyer's expense, an audit of the accounting books
and records of the Seller. In addition to, and not in limitation of the
foregoing, Seller shall provide Buyer with access to and copies of the records
of all: (a) Accounts Receivable, (b) Subscriber billings, (c) pre-paid accounts,
(d) accounts for which no remuneration is received by Seller and (e) general
reports with respect to each category of service provided by the Business.
4.2 Continuity and Maintenance of Operations of the Business. Except as
to actions of which Buyer has been advised and to which Buyer has consented to
in writing, and except as specifically permitted or required by this Agreement,
Seller shall:
(a) Operate the Business in the ordinary course consistent with past
practices, use its commercially reasonable efforts to keep available the
services of the employees who are involved in the operation of the Business, and
use commercially reasonable efforts to preserve any beneficial business
relationships with Subscribers, customers, suppliers and others having business
dealings with Seller relating to the Business;
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(b) Use and operate the Assets in a manner consistent with past
practice and maintain the Assets in good operating condition, ordinary wear and
tear excepted;
(c) Maintain adequate inventories of spare Equipment consistent with
past practices;
(d) Maintain insurance upon the Assets in such amounts and types as in
effect on the date of this Agreement as set forth in Schedule 2.6 attached
hereto;
(e) Keep all of its business books, records and files in the ordinary
course of business in accordance with past practices, and provide Buyer with
access thereto upon its reasonable request;
(f) Continue to implement and enforce its procedures for disconnection
and discontinuance of service to Subscribers whose accounts are delinquent in
accordance with those in effect on the date of this Agreement;
(g) Perform and comply in all material respects with the terms of the
Contracts and keep such Contracts in full force and effect; and
(h) Use its reasonable best efforts to preserve the goodwill of the
Business.
4.3 Negative Covenants. Seller shall not, without the prior written
consent of Buyer:
(a) Sell, transfer, lease, assign or otherwise dispose of, or agree to
sell, transfer, lease, assign or otherwise dispose of, any Assets;
(b) Make any change in the number of shares of its capital stock,
authorized, issued or outstanding or grant any option, warrant or other right to
purchase, or to convert any obligation into, shares of its capital stock;
(c) Amend its certificate of incorporation or by-laws;
(d) Enter into any contract or commitment for the acquisition of goods
or services relating to the Business (other than in the ordinary course of
business) or which otherwise obligates Seller to perform in full or in part
beyond the Closing Date;
(e) Hire any new employees or enter into any employment arrangements
or otherwise increase the salary or compensation of any existing employees;
(f) Renegotiate, modify, amend or terminate any Contract;
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(g) Create, assume, or permit to exist, or agree to incur, assume or
acquire, any Lien, claim or liability on the Assets;
(h) Make any modifications or changes to the existing rate schedules
or product offerings in effect with respect to the Business;
(i) Offer or employ any sales discounts, free services or other
extraordinary marketing practices or extraordinary promotions outside the
ordinary course of business and not consistent with Seller's past practices;
(j) Take any actions or permit its employees and agents to take any
actions which would materially interfere with or preclude the transactions
contemplated by this Agreement; and
(k) Cause or permit the provision for any new and material pension,
retirement or other employment benefits for employees who perform services in
connection with the conduct of the Business or any material increase in any
existing benefits (other than as required by law).
4.4 Consents. Seller will use its reasonable best efforts to obtain, as
soon as practicable and at its expense, the consent of all third parties under
the Contracts for which the prior approval of such third party is required
pursuant to the terms of the Contract, in the forms attached hereto as Exhibit B
and Exhibit C; provided, however, that "reasonable best efforts" for this
purpose shall not require Seller to undertake extraordinary or unreasonable
measures to obtain such approvals and consents, including, without limitation,
the initiation or prosecution of legal proceedings or the payment of fees in
excess of customary filing, processing and documentation fees.
4.5 Notification of Certain Matters. Seller shall promptly notify Buyer
of (i) any fact, event, circumstances or action the existence or occurrence of
which would cause any of Seller's representations or warranties under this
Agreement, or the disclosures in any schedules or exhibits attached hereto, not
to be true in any material respect and (ii) any failure on its part to comply
with or satisfy in any material respect any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement. Seller shall promptly
notify Buyer in writing of the assertion, commencement or threat of any claim,
litigation, proceeding or investigation in which Seller is a party or in which
the Assets or Business may be affected and which could reasonably be expected to
be material or which relates to the transactions contemplated hereby.
4.6 Adverse Change. Seller shall promptly notify Buyer in writing of any
materially adverse developments affecting the Assets or the Business which
become known to Seller,
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including, without limitation, (i) any damage, destruction or loss (whether or
not covered by insurance) materially and adversely affecting any of the Assets
or the Business, (ii) any material notice of violation, forfeiture or complaint
under any material Contract, or (iii) anything which, if not corrected prior to
the Closing Date, would prevent Seller from fulfilling any condition to Closing
described in Section 6 hereof.
4.7 No Solicitation. From the date of this Agreement until the earlier of
(i) October 1, 1999 or (ii) termination of this Agreement pursuant to Section
8.1, Seller shall not, and Seller shall cause its officers, employees,
stockholders, agents and representatives (including, without limitation, any
investment banker, attorney or accountant retained by Seller) and all other
employees who perform services with respect to the operation of the Business not
to, initiate, solicit or encourage, directly or indirectly, any inquiries or the
making of any proposal with respect to the Assets or the Business, or engage in
any negotiations concerning, or provide to any other person any information or
data relating to, the Business, the Assets or Seller for the purpose of, or have
any discussions with, any person relating to, or otherwise cooperate in any way
with or assist or participate in, facilitate or encourage, any inquiries or the
making of any proposal which constitutes, or may reasonably be expected to lead
to, any effort or attempt by any other person to seek or effect a transaction,
or enter into a transaction with any person or persons, other than Buyer,
concerning the possible sale of the Assets or Business, or the capital stock of
Seller. Seller shall promptly inform Buyer of any such inquiries or proposals
and provide all pertinent documentation related thereto.
4.8 Cooperation. Seller shall use its best efforts to take all steps
within its power and will cooperate with Buyer to cause to be fulfilled those of
the conditions to Buyer's obligations to consummate the transactions
contemplated by this Agreement that are dependent upon its actions, and to
execute and deliver such instruments and take such other reasonable actions as
may be necessary or appropriate in order to carry out the intent of this
Agreement and consummate the transactions contemplated hereby. Without limiting
the foregoing, Seller shall cooperate with all reasonable requests of Buyer and
its counsel in connection with Buyer's due diligence investigation of the
Business and Assets.
4.9 Expenses. Seller shall bear its own expenses incurred in connection
with the negotiation and preparation of this Agreement and in connection with
all obligations required to be performed by it under this Agreement; provided,
however, if (i) Buyer terminates this Agreement other than pursuant to Section
8.1 and (ii) Seller has satisfied all conditions in Section 6 and Seller has
complied with all of the covenants of Seller in Section 4, then Buyer shall
reimburse Seller for Seller's documented expenses incident to the negotiation,
preparation and performance of this Agreement in an amount up to one percent
(1%) of the Purchase Price.
4.10 Financial Information. Seller shall, as promptly as practical after
such information becomes available, deliver to Buyer copies of Seller's monthly
unaudited financial
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statements, prepared in accordance with GAAP, consistently applied, and in form
and presentation as is reasonably acceptable to Buyer.
4.11 Consummation of Agreement. Subject to the provisions of Section 8 of
this Agreement: (a) Seller shall use its reasonable best efforts to fulfill and
perform all conditions and obligations on its part to be fulfilled and performed
under this Agreement, and to cause the transactions contemplated by this
Agreement to be fully carried out on or before October 31, 1999; and (b) Seller
shall not take any action or omit to take any action that would or could
reasonably be expected to (i) result in any of the representations and
warranties of Seller being or becoming untrue in any respect that would cause
Section 6.1 of this Agreement not to be satisfied, (ii) result in any conditions
to Closing set forth in Section 6 of this Agreement not to be satisfied, or
(iii) result in a material violation of any provision of this Agreement.
4.12 Confidentiality. Seller agrees that it and its representatives will
hold in strict confidence, and will not use, any confidential or proprietary
data or information obtained from Buyer with respect to its business or
financial condition except for the purpose of evaluating, negotiating and
completing the transactions contemplated hereby. Information generally known in
Buyer's industry or which has been disclosed to Seller by third parties which
have a right to do so shall not be deemed confidential or proprietary
information for purposes of this Agreement. If the transactions contemplated by
this Agreement are not consummated, Seller will return, and cause its respective
officers, directors, agents and representatives to return, to Buyer (or certify
that they have destroyed) all copies of such data and information made available
to Seller (and its officers, directors, agents and representatives) in
connection with the transaction.
4.13 Public Announcements. All press releases, filings and other public
announcements concerning the transactions contemplated hereby will be subject to
review and approval by Seller, on the one hand, and Buyer, on the other hand,
such approval not to be unreasonably withheld. Such approval shall not be
required if the party issuing such release, filing or public announcement
reasonably believes, based on advice of counsel, that it is required by law to
do so, but in any such case, all reasonable efforts shall be made to consult
with the other party in advance of such release, filing or announcement and to
provide the other party with the content thereof, the reasons the release,
filing or announcement is required by law and the time and place that such
release, filing or announcement will be made.
SECTION 5. COVENANTS OF BUYER. Buyer covenants and agrees that, from the date
hereof until consummation of the transactions contemplated hereby at the
Closing, Buyer shall:
5.1 Cooperation. Buyer shall use its reasonable best efforts to take all
steps within its power and will cooperate with Sellers, to cause to be fulfilled
those of the conditions to each Seller's obligations to consummate the
transactions contemplated by this Agreement that are
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dependent upon its actions and to execute and deliver such instruments and take
such other reasonable actions as may be necessary or appropriate in order to
carry out the intent of this Agreement and consummate the transactions
contemplated hereby.
5.2 Notification of Certain Matters. Buyer shall promptly notify Sellers
of any fact, event, circumstances or action the existence or occurrence of which
would cause Buyer's representations or warranties under this Agreement not to be
true in any material respect.
5.3 Expenses. Buyer shall bear its own expenses incurred in connection
with the negotiation and preparation of this Agreement and in connection with
all obligations required to be performed by it under this Agreement.
5.4 Consummation of Agreement. Subject to the provisions of Section 8 of
this Agreement: (a) Buyer shall use its reasonable best efforts to fulfill and
perform all conditions and obligations on its part to be fulfilled and performed
under this Agreement, and to cause the transactions contemplated by this
Agreement to be fully carried out on or before October 31, 1999; and (b) Buyer
shall not take any action or omit to take any action that would or could
reasonably be expected to (i) result in any of the representations and
warranties of Buyer set forth in this Agreement being or becoming untrue in any
respect that would cause Section 7.1 of this Agreement not to be satisfied, (ii)
result in any condition to the Closing set forth in Section 7 of this Agreement
not being satisfied, or (iii) result in a material violation of any provision of
this Agreement.
5.5 Confidentiality. Buyer agrees that it and its representatives will
hold in strict confidence, and will not use, any confidential or proprietary
data or information obtained from any Seller with respect to its business or
financial condition except for the purpose of evaluating, negotiating and
completing the transactions contemplated hereby. Information generally known in
Sellers' industry or which has been disclosed to Buyer by third parties which
have a right to do so shall not be deemed confidential or proprietary
information for purposes of this Agreement. If the transactions contemplated by
this Agreement are not consummated, Buyer will return, and cause its respective
officers, directors, agents and representatives to return, to Sellers (or
certify that they have destroyed) all copies of such data and information made
available to Buyer (and its officers, directors, agents and representatives) in
connection with the transaction.
5.6 Public Announcements. All press releases, filings and other public
announcements concerning the transactions contemplated hereby will be subject to
review and approval by Sellers, on the one hand, and Buyer, on the other hand,
such approval not to be unreasonably withheld. Such approval shall not be
required if the party issuing such release, filing or public announcement
reasonably believes, based on advice of counsel, that it is required by law to
do so, but in any such case, all reasonable efforts shall be made to consult
with the
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other party in advance of such release, filing or announcement and to provide
the other party with the content thereof, the reasons the release, filing or
announcement is required by law and the time and place that such release, filing
or announcement will be made.
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATION OF BUYER. Buyer's obligation to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions, unless otherwise waived by Buyer in writing:
6.1 Accuracy of Representations and Warranties. The representations and
warranties of each Seller contained in this Agreement shall be true and correct
in all material respects at the Closing Date with the same effect as though made
at such time and the representations and warranties of each Seller contained in
this Agreement which are qualified by materiality shall be true and correct in
all respects as of the Closing Date with the same effect as though made at such
time.
6.2 Performance of Agreements and Deliveries. Each Seller shall have
performed in all material respects all of its covenants, agreements and
obligations under this Agreement which are to be performed or complied with by
such Seller prior to or upon the Closing Date and shall have delivered all
documents and items required to be delivered at or prior to the Closing,
including, without limitation:
(a) A certificate, dated the Closing Date, from the President of
Seller to the effect that the conditions set forth in Sections 6.1 and 6.2 have
been satisfied;
(b) A certificate, dated the Closing Date, from Seller's Secretary as
to the Articles of Incorporation, code of regulations, authority and the
incumbency of all officers executing the Seller Documents on behalf of Seller;
(c) A copy of Seller's Articles of Incorporation as certified by the
Secretary of State of the State of Ohio as of August 27, 1999;
(d) An Amendment to the Articles of Incorporation and any other
required documentation, which effect a change of Seller's name;
(e) A certificate of good standing of the Seller from the Secretary of
State of the State of Ohio dated September 13, 1999;
(f) A copy of the declaration of trust for each Trust; and
(g) Such other certificates and instruments reasonably requested by
Buyer.
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6.3 No Material Adverse Effect. None of the schedules, documents or other
information to be furnished by Sellers to Buyer pursuant to this Agreement,
shall disclose any fact, circumstance or matter, or any change in or development
in connection with any matter disclosed in the original schedules or documents
previously delivered by any Seller to Buyer, which has, or could reasonably be
expected to have, a material adverse effect on the Assets or on the Business;
and there shall have been no other changes or developments affecting either the
Assets or the Business since the Base Balance Sheet Date which have, or could
reasonably be expected to have, a material adverse effect on the Assets or
Business.
6.4 Asset Transfer. Each Seller shall have delivered to Buyer the
following instruments of transfer and assignment in accordance with the
provisions hereof, transferring to Buyer all of such Seller's right, title and
interest in and to the Assets, free and clear of all Liens:
(a) A Bill of Sale in the form attached hereto as Exhibit D;
(b) An Assignment and Assumption Agreement in the form attached hereto
as Exhibit E;
(c) An Assignment of Patents and Trademarks in the form attached
hereto as Exhibit F;
(d) An Assignment of Internet Domain Name in the form attached hereto
as Exhibit G; and
(e) Such other instruments of transfer reasonably requested by Buyer.
6.5 Assignment of Contracts and Authorizations; Approvals. All Contracts
shall have been duly and validly assigned to Buyer by each Seller, and all
consents and approvals required in connection with the consummation of the
transactions contemplated hereby under any Contract or Authorization or
otherwise shall have been obtained in form and substance satisfactory to Buyer
and without conditions materially and adversely affecting Buyer and which do not
require Buyer to pay money to any party to any such Contract or Authorization in
excess of amounts required to be so paid pursuant to the terms and conditions
thereof. All such Contracts and Authorizations shall remain in full force and
effect and shall not have been amended, modified or repudiated in any material
respect by either party thereto. Neither any Seller nor, to the knowledge of
each Seller and the Principals, the other party thereto, shall have breached or
defaulted under any Contract or Authorization. No Seller shall have received
notice of or have knowledge of any fact which could result in the termination,
repudiation or breach of any Contract or Authorization. Notwithstanding
anything in this Section 6.5 to the contrary, the provisions of this Section 6
shall be subject in their entirety to the provisions of Sections 1.8, 1.9 and
2.14 hereof.
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6.6 Escrow Agreement. Each Seller shall have executed and delivered to
Buyer the Escrow Agreement.
6.7 Non-Competition Agreement. Each Seller and the Principals shall have
executed and delivered to Buyer a Non-Competition Agreement in substantially the
form attached hereto as Exhibit H.
6.8 Release of Liens. Sellers shall have obtained and delivered to Buyer
at or prior to the Closing instruments (including payoff letters, bills of sale
and UCC-3 termination statements) releasing any and all Liens on the Assets.
6.9 Revenues. Sellers shall have delivered to Buyer aggregate Revenues for
the business which are equal to or greater than $180,000 as of August 31, 1999,
and each Seller shall have furnished Buyer with a certificate, dated as of the
Closing Date, to that effect. For purposes hereof, "Revenues" shall mean
revenues of all Sellers for the month ended August 31, 1999.
6.10 Subscribers. As of the Closing Date, Sellers shall have delivered to
Buyer, in the aggregate, at least 11,000 Dial-up Subscribers, 15 Dedicated
Subscribers and 500 Web-hosting/Domain-hosting Subscribers, and each Seller
shall have furnished Buyer with a certificate, dated as of the Closing Date, to
that effect.
6.11 Due Diligence. The results of Buyer's due diligence review of Sellers
and their collective assets, liabilities and operations shall be reasonably
satisfactory to Buyer.
6.12 Opinion of Seller's Counsel. Buyer shall have received the opinion or
opinions of Stark & Knoll, counsel for Sellers, the Trusts and the Principals,
dated the Closing Date, substantially in the form of Exhibit I attached hereto.
6.13 Employment Agreements. Buyer and the Principals shall have entered
into employment agreements substantially in the form attached as Exhibit J
hereto.
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATION OF SELLERS. The obligation of
Sellers, Principals and Trusts to consummate the transactions contemplated by
this Agreement is subject to the satisfaction, on or prior to the Closing Date,
of the following conditions, unless waived by each Seller, Principals and Trusts
in writing:
7.1 Accuracy of Representations and Warranties. The representations and
warranties of Buyer contained in this Agreement shall be true and correct in all
material respects at the Closing Date with the same effect as though made at
such time, and the representations and warranties of Buyer contained in this
Agreement which are qualified by materiality shall be true
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and correct in all respects as of the Closing Date with the same effect as
though made at such time.
7.2 Performance of Agreement and Deliveries. Buyer shall have performed
in all material respects all of its covenants, agreements and obligations under
this Agreement which are to be performed or complied with by Buyer prior to or
upon the Closing Date and shall have delivered all documents and items required
to be delivered at or prior to the Closing, including, without limitation:
(a) A certificate, dated the Closing Date, from the President of Buyer
to the effect that the conditions set forth in Sections 7.1 and 7.2 have been
satisfied;
(b) A certificate, dated the Closing Date, from Buyer's Assistant
Secretary as to the Articles of Incorporation, by-laws, authority and the
incumbency of all officers executing the Buyer Documents on behalf of Buyer;
(c) A certified copy of Buyer's Articles of Incorporation from the
Secretary of State of the State of Michigan; and
(d) A certificate of good standing from the Secretary of State of the
State of Michigan.
7.3 Escrow Agreement. Buyer shall have executed and delivered to Sellers
the Escrow Agreement.
7.4 Purchase Price. Buyer shall have delivered to Sellers the Purchase
Price.
7.5 Employment Agreements. Buyer and the Principals shall have entered
into employment agreements substantially in the form attached as Exhibit J
hereto.
7.6 Stock Option Agreements. The Buyer shall have delivered to each of
the Principals options to purchase up to 100,000 shares of the common stock of
Voyager.net, Inc., a Delaware corporation, the owner of all of the stock of
Buyer, in the form attached hereto as Exhibit K.
SECTION 8. TERMINATION.
8.1 Events of Termination. This Agreement and the transactions
contemplated by this Agreement may be terminated at any time prior to the
Closing:
(a) By the mutual written consent of Buyer and each Seller.
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(b) By Sellers, if they are not in breach or default hereunder:
(i) if any representation or warranty of Buyer made herein is
untrue in any material respect and such breach is not cured within
thirty (30) days of Buyer's receipt of a written notice from Sellers
that such breach exists or has occurred;
(ii) if Buyer shall have defaulted in any material respect in
the performance of any material obligation under this Agreement and
such breach is not cured within thirty (30) days of Buyer's receipt of
a notice from Sellers that such default exists or has occurred; or
(iii) if the conditions to Sellers' obligations to consummate
the Closing as set forth in Section 7 cannot reasonably be satisfied
or performed on or before October 31, 1999 (unless such failure of
satisfaction, non-compliance or non-performance is the result,
directly or indirectly, of any action or failure to act on the part of
any Seller).
(c) by Buyer, if it is not in breach or default hereunder:
(i) if any representation or warranty of any Seller made
herein is untrue in any material respect and such breach is not cured
within thirty (30) days of such Seller's receipt of a written notice
from Buyer that such breach exists or has occurred;
(ii) if any Seller shall have defaulted in any material respect
in the performance of any material obligation under this Agreement and
such breach is not cured within thirty (30) days of such Seller's
receipt of a written notice from Buyer that such default exists or has
occurred; or
(iii) if the conditions to Buyer's obligations to consummate the
Closing as set forth in Section 6 cannot reasonably be satisfied or
performed on or before October 31, 1999 (unless such failure of
satisfaction, non-compliance or non-performance is the result directly
or indirectly of any action or failure to act on the part of Buyer).
8.2 Manner of Exercise. In the event of the termination of this Agreement
by either Buyer or Sellers pursuant to Section 8.1 notice thereof shall
forthwith be given to the other party in accordance with the provisions set
forth in Section 11 hereto and this Agreement shall terminate and the
transactions contemplated hereunder shall be abandoned without further action by
Buyer or Sellers.
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8.3 Effect of Termination; Liabilities. In the event of the termination
of this Agreement pursuant to Section 8.1 and prior to the Closing, all
obligations of the parties hereunder (other than pursuant to Sections 4.7, 4.8,
4.12 and 5.5 hereof) shall terminate, and neither Sellers nor Buyer shall have
any further liability hereunder, including for losses, liabilities, obligations,
damages, deficiencies, actions, suits, proceedings, demands, assessments,
orders, judgments, costs and expenses (including attorneys' fees) of any kind
whatsoever; except upon termination of this Agreement pursuant to Sections
8.1(c)(i) and 8.1(c)(ii), Buyer shall be entitled to any remedy which it may
have, whether at law or in equity.
SECTION 9. POST-CLOSING COVENANTS; SURVIVAL.
9.1 Use of Trade Names. After the Closing Date, neither any Seller, nor
any person controlling, controlled by or under common control with any Seller
will for any reason, directly or indirectly, for itself or any other person, (a)
use the names "Raex" or "raex.net" or "raex.com" or (b) use or disclose any
trade secrets, confidential information, know-how, proprietary information or
other intellectual property of any Seller transferred pursuant to this
Agreement.
9.2 Post-Closing Transitional Matters. For a period of ninety (90) days
following the Closing, Sellers shall provide, without additional cost to Buyer,
such assistance as is reasonably requested by Buyer in order to effect an
orderly transition in the ownership and operation of the Assets.
9.3 Access to Records. Following the date hereof, each Seller shall give
Buyer and its representatives, at reasonable times and with reasonable prior
notice, free access to the books and records of the Business and will furnish to
Buyer and its representatives such information regarding the Business and the
Assets as Buyer or its representatives may from time to time reasonably request.
9.4 Survival. All representations, warranties, covenants, agreements and
indemnities contained in this Agreement, or in any schedule, exhibit,
certificate, agreement, document or statement delivered pursuant hereto, are
material, shall be deemed to have been relied upon by the parties and, shall
survive the Closing for a period of two (2) years (the "Expiration Date")
regardless of any investigation conducted by or knowledge of any party hereto.
SECTION 10. INDEMNIFICATION.
10.1 Indemnification by Each Seller and the Principals. Each Seller, each
Trust and each of the Principals hereby agrees, jointly and severally, to
indemnify and hold harmless Buyer, its affiliates and its and their respective
directors, officers, stockholders, partners, members, employees, and agents
(individually, a "Buyer Indemnified Party" and collectively,
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"Buyer Indemnified Parties"), against and in respect of all losses, liabilities,
obligations, damages, deficiencies, actions, suits, proceedings, demands,
assessments, orders, judgments, costs and expenses (including the reasonable
fees, disbursements and expenses of attorneys and consultants) of any kind or
nature whatsoever, but net of the proceeds from any insurance policies or other
third party reimbursement for such loss, to the extent sustained, suffered or
incurred by or made against any Buyer Indemnified Party, to the extent based
upon, arising out of or in connection with: (a) any breach of any representation
or warranty made by any Seller and the Principals in this Agreement or in any
schedule, exhibit, certificate, agreement or other instrument delivered pursuant
to this Agreement; (b) any breach of any covenant or agreement made by any
Seller in this Agreement or in any schedule, exhibit, certificate, financial
statement, agreement or other instrument delivered pursuant to this Agreement;
(c) any claim made by any person or entity which relates to the operation of the
Assets or the Business which arises in connection with or on the basis of
events, acts, omissions, conditions or any other state of facts occurring prior
to or existing before the Closing Date; and (d) any claim which arises in
connection with any liability or obligation of any Seller other than the Assumed
Liabilities.
10.2 Indemnification by Buyer. Buyer agrees to indemnify and hold harmless
each Seller, the Principals and the Trusts, and its and their officers,
directors, stockholders, employees and agents and their representatives
(individually, a "Seller Indemnified Party" and collectively, "Seller
Indemnified Parties") at all times against and in respect of all losses,
liabilities, obligations, damages, deficiencies, actions, suits, proceedings,
demands, assessments, orders, judgments, costs and expenses (including the
reasonable fees, disbursements and expenses of attorneys and consultants), of
any kind or nature whatsoever, to the extent sustained, suffered or incurred by
or made against any Seller Indemnified Party, to the extent based upon, arising
out of or in connection with: (a) any breach of any representation or warranty
made by Buyer in this Agreement or in any schedule, exhibit, certificate,
agreement or other instrument delivered pursuant to this Agreement; (b) any
breach of any covenant or agreement made by Buyer in this Agreement or in any
schedule, exhibit, certificate, agreement or other instrument delivered pursuant
to this Agreement; (c) any claim made by any person or entity which relates to
the operation of the Assets or the Business which arises in connection with or
on the basis of events, acts, omissions, conditions or any other state of facts
occurring from and after the Closing Date; and (d) the Assumed Liabilities.
10.3 Notice; Defense of Claims.
-------------------------
(a) Notice of Claims. Promptly after receipt by an indemnified party
of notice of any claim, liability or expense to which the indemnification
obligations hereunder would apply, the indemnified party shall give notice
thereof in writing to the indemnifying party, but the omission to so notify the
indemnifying party promptly will not relieve the indemnifying party from any
liability except to the extent that the indemnifying party shall have been
prejudiced as a result of the failure or delay in giving such notice. Such
notice shall state the information then
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available regarding the amount and nature of such claim, liability or expense
and shall specify the provision or provisions of this Agreement under which the
liability or obligation is asserted.
(b) Third Party Claims. With respect to third party claims, if within
twenty (20) days after receiving the notice described in clause (a) above the
indemnifying party gives (i) written notice to the indemnified party stating
that (A) it would be liable under the provisions hereof for indemnity in the
amount of such claim if such claim were successful and (B) that it disputes and
intends to defend against such claim, liability or expense at its own cost and
expense and (ii) provides reasonable assurance to the indemnified party that
such claim will be promptly paid in full if required, then counsel for the
defense shall be selected by the indemnifying party (subject to the consent of
the indemnified party which consent shall not be unreasonably withheld) and the
indemnified party shall not be required to make any payment with respect to such
claim, liability or expense as long as the indemnifying party is conducting a
good faith and diligent defense at its own expense; provided, however, that the
assumption of defense of any such matters by the indemnifying party shall relate
solely to the claim, liability or expense that is subject or potentially subject
to indemnification. The indemnifying party shall have the right, with the
consent of the indemnified party, which consent shall not be unreasonably
withheld, to settle all indemnifiable matters related to claims by third parties
which are susceptible to being settled provided the indemnifying parties'
obligation to indemnify the indemnified party therefor will be fully satisfied.
The indemnifying party shall keep the indemnified party apprised of the status
of the claim, liability or expense and any resulting suit, proceeding or
enforcement action, shall furnish the indemnified party with all documents and
information that the indemnified party shall reasonably request and shall
consult with the indemnified party prior to acting on major matters, including
settlement discussions. Notwithstanding anything herein stated, the indemnified
party shall at all times have the right to fully participate in such defense at
its own expense directly or through counsel; provided, however, if the named
parties to the action or proceeding include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate under applicable standards of professional conduct, the expense
of separate counsel for the indemnified party shall be paid by the indemnifying
party. If no such notice of intent to dispute and defend is given by the
indemnifying party, or if such diligent good faith defense is not being or
ceases to be conducted, the indemnified party shall, at the expense of the
indemnifying party, undertake the defense of (with counsel selected by the
indemnified party), and shall have the right to compromise or settle, with the
consent of the indemnifying party, which consent may not be unreasonably
withheld, such claim, liability or expense. If such claim, liability or expense
is one that by its nature cannot be defended solely by the indemnifying party,
then the indemnified party shall make available all information and assistance
that the indemnifying party may reasonably request and shall cooperate with the
indemnifying party in such defense.
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(c) Non-Third Party Claims. With respect to non-third party claims,
if within twenty (20) days after receiving the notice described in clause (a)
above the indemnifying party does not give written notice to the indemnified
party that it contests such indemnity, the amount of indemnity payable for such
claim shall be as set forth in the indemnified party's notice. If the
indemnifying party provides written notice to the indemnified party within such
20-day period that it contests such indemnity, the parties shall attempt in good
faith to reach an agreement with regard thereto within thirty (30) days of
delivery of the indemnifying party's notice. If the parties cannot reach
agreement within such 30-day period, the matter may be submitted by either party
for binding arbitration in accordance with the provisions of Section 12.11
hereof.
10.4 Limitations of Indemnity Obligations. Notwithstanding anything in
this Section 10 to the contrary, the aggregate indemnity obligations of the
Sellers, the Principals and the Trusts shall not in any event exceed the
Purchase Price.
SECTION 11. NOTICES. All notices and other communications required to be given
hereunder, or which may be given pursuant or relative to the provisions hereof,
shall be in writing and shall be deemed to have been given when delivered by
hand or overnight courier, or via facsimile provided that the recipient has
specifically acknowledged by telephone the receipt of such facsimile, or mailed,
postage prepaid, by first class United States mail, certified return receipt
requested as follows:
If to any Seller: 7584 Whipple Avenue NW
North Canton, OH 44720
Facsimile: (330) 492-3627
Attn: Philip Patete
With a copy to: Stark & Knoll
1512 Ohio Edison Building
76 South Main Street
Akron, OH 44308
Facsimile: (330) 376-6237
Attn: Michael L. Stark, Esq.
If to the Principals: Philip Patete
or the Trusts P.O. Box 35834
Canton, OH 44735-5834
Christopher Gallo
P.O. Box 454
Malvern, OH 44644
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copy to: Stark & Knoll
1512 Ohio Edison Building
76 South Main Street
Akron, OH 44308
Facsimile: (330) 376-6237
Attn: Michael L. Stark, Esq.
If to Buyer: Voyager Information Networks, Inc.
4660 S. Hagadorn Road
Suite 320
East Lansing, MI 48823
Facsimile: (517) 324-8965
Attn: Christopher Torto
With a copy to: Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Facsimile: (617) 523-1231
Attn: David F. Dietz, P.C.
or to such other address of which any party may notify the other
parties as provided above. Notices shall be effective as of the date of such
delivery or mailing.
SECTION 12. MISCELLANEOUS.
12.1 Assignability; Binding Effect. This Agreement shall not be
assignable by Buyer or any Seller except with the written consent of the other,
except that Buyer may assign its rights hereunder either (a) to any Affiliate of
Buyer or its owners, (b) as a result of any merger, reorganization or other
consolidation or sale of Buyer, or (c) in connection with the granting of a
security interest to its senior lenders. For purposes of this Section 12.1,
"Affiliate" shall mean with respect to Buyer and its owners any person or entity
which directly or indirectly controls, is controlled by or is under common
control with Buyer or its owners. This Agreement shall be binding upon and shall
inure to the benefit of, the parties hereto and their respective successors, and
assigns.
12.2 Headings. The subject headings used in this Agreement are included
for purposes of convenience only and shall not affect the construction or
interpretation of any of its provisions.
12.3 Amendments; Waivers. This Agreement may not be amended or modified,
nor may compliance with any condition or covenant set forth herein be waived,
except by a writing duly and validly executed by Buyer, each Seller, the Trusts
and the Principals or, in the case of a
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waiver, the party waiving compliance. No delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party of any such right, power
or privilege, or any single or partial exercise of any such right, power or
privilege, preclude any further exercise thereof or the exercise of any other
such right, power or privilege.
12.4 Bulk Sales Law. Buyer hereby waives compliance by Sellers of any
applicable bulk sales law and each Seller agrees to make full and timely payment
when due of all amounts owed by such Seller to its creditors. Each Seller
agrees to indemnify and hold Buyer harmless from, and reimburse Buyer for, any
loss, cost, expense, liability or damage (including reasonable counsel fees and
disbursements and expenses) which Buyer may suffer or incur by virtue of the
non-compliance by such Seller with such laws.
12.5 Entire Agreement. This Agreement, together with the schedules and
exhibits hereto, constitutes the entire agreement between the parties with
respect to the subject matter hereof and supersedes and cancels any and all
prior or contemporaneous arrangements, understandings and agreements between
them relating to the subject matter hereof.
12.6 Severability. In the event that any provision or any portion of any
provision of this Agreement shall be held to be void or unenforceable, then the
remaining provisions of this Agreement (and the remaining portion of any
provision held to be void or unenforceable in part only) shall continue in full
force and effect.
12.7 Governing Law. This Agreement and the transactions contemplated
hereby shall be governed and construed by and enforced in accordance with the
laws of the State of Ohio, without regard to conflict of laws principles.
12.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which shall
constitute the same instrument.
12.9 Expenses. Each party shall pay its own expenses incident to the
negotiation, preparation and performance of this Agreement and the transactions
contemplated hereby, including all fees and expenses of its counsel and
accountants for all activities of such counsel and accountants undertaken
pursuant to this Agreement, whether or not the transactions contemplated hereby
are consummated; provided, however, if (i) Buyer terminates this Agreement other
than pursuant to Section 8.1 and (ii) Sellers have satisfied all conditions in
Section 6 and Sellers have complied with all of the covenants of Sellers in
Section 4, then Buyer shall reimburse Sellers for Sellers' documented expenses
incident to the negotiation, preparation and performance of this Agreement in an
amount up to one percent (1%) of the Purchase Price.
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12.10 Remedies. It is specifically understood and agreed that certain
breaches of this Agreement will result in irreparable injury to the parties
hereto, that the remedies available to the parties at law alone will be an
inadequate remedy for such breach, and that, in addition to any other legal or
equitable remedies which the parties may have, a party may enforce its rights by
an action for specific performance and the parties expressly waive the defense
that a remedy in damages will be adequate.
12.11 Dispute Resolution. Any dispute arising out of or relating to this
Agreement or the breach, termination or validity hereof shall be finally settled
solely and exclusively by arbitration conducted expeditiously in accordance with
the CPR Institute for Dispute Resolution Rules for Nonadministered Arbitration
of Business Disputes (the "CPR Rules"). The CPR Institute for Dispute
Resolution shall appoint a neutral advisor from its National CPR Panel. The
arbitration shall be governed by the United States Arbitration Act, 9 U.S.C.
(S)(S)1-16, and judgment upon the award rendered by the arbitrators may be
entered by any court having jurisdiction thereof. The place of arbitration
shall be Cleveland, Ohio.
Such proceedings shall be administered by the neutral advisor in accordance
with the CPR Rules as he/she deems appropriate; however, the parties hereto
agree in advance that the following procedures are reasonable:
(a) Mandatory exchange of all relevant documents, to be accomplished
within forty-five (45) days of the initiation of the procedure;
(b) No other discovery;
(c) Hearings before the neutral advisor which shall consist of a
summary presentation by each side of not more than three hours; such hearings to
take place in one or two days at a maximum; and
(d) Decision to be rendered not later than ten (10) days following
such hearings.
Each of the parties hereto (a) hereby unconditionally and irrevocably
submits to the jurisdiction of any United States District Court of competent
jurisdiction located in the State of Ohio for the purpose of enforcing the award
or decision in any such proceeding and (b) hereby waives, and agrees not to
assert in any civil action to enforce the award, any claim that it is not
subject personally to the jurisdiction of the above-named court, that its
property is exempt or immune from attachment or execution, that the civil action
is brought in an inconvenient forum, that the venue of the civil action is
improper or that this Agreement or the subject matter hereof may not be enforced
in or by such court, and (c) hereby waives and agrees not to seek any review by
any court of any other jurisdiction which may be called upon to grant an
enforcement of the judgment of any such court. Each of the parties hereto
hereby consents to service of process by
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registered mail at the address to which notices are to be given. Each of the
parties hereto agrees that its submission to jurisdiction and its consent to
service of process by mail is made for the express benefit of the other parties
hereto. Final judgment against any party hereto in any such action, suit or
proceeding may be enforced in other jurisdictions by suit, action or proceeding
on the judgment, or in any other manner provided by or pursuant to the laws of
such other jurisdiction; provided, however, that any party may at its option
bring suit, or institute other judicial proceedings, in any state or federal
court of the United States or of any country or place where the other parties or
their assets may be found.
Notwithstanding the foregoing, the parties may enforce their rights under
this Agreement in accordance with Section 12.10.
12.12 Third Party Rights. This Agreement is for the benefit of the
parties hereto and is not entered into for the benefit of, and shall not be
construed to confer any benefit upon, any other party or entity.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, Sellers, Trusts, Principals and Buyer have caused this
Asset Purchase Agreement to be executed as of the date first above written.
SELLERS:
RAEX INTERNET, INC.
By: /s/ Raex Internet, Inc.
----------------------------------------
Name:
Title:
RAEX COMMUNICATIONS, INC.
By: /s/ Raex Communications, Inc.
----------------------------------------
Name:
Title:
RAEX CORPORATION
By: /s/ Raex Corporation
----------------------------------------
Name:
Title:
PRINCIPALS:
/s/ Philip Patete
----------------------------------------
Philip Patete
/s/ Christopher Gallo
----------------------------------------
Christopher Gallo
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BUYER:
VOYAGER INFORMATION NETWORKS, INC.
By: /s/ Voyager Information Networks, Inc.
----------------------------------------
Name:
Title:
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TRUSTS:
PHILIP PATETE ELECTING SMALL BUSINESS
TRUST
By: /s/ Philip Patete Electing
Small Business Trust
----------------------------------------
Its:
CHRISTOPHER GALLO ELECTING SMALL
BUSINESS TRUST
By: /s/ Christopher Gallo Electing
Small Business Trust
----------------------------------------
Its:
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LIST OF EXHIBITS AND SCHEDULES
SCHEDULES
- -----------
Exhibit A - Form of Escrow Agreement
Exhibit B - Form of Consent (for contracts)
Exhibit C - Form of Consent (for leases)
Exhibit D - Form of Bill of Sale
Exhibit E - Form of Assignment and Assumption Agreement
Exhibit F - Form of Assignment of Patents and Trademarks
Exhibit G - Form of Assignment of Internet Domain Name
Exhibit H - Form of Non-Competition Agreement
Exhibit I - Form of Opinion of Sellers' Counsel
Exhibit J - Form of Employment Agreement
Exhibit K - Form of Stock Option Agreement
Schedule 1.1(a) Equipment
Schedule 1.1(b) Contracts
Schedule 1.1(c) Intellectual Property
Schedule 1.1(d) Licenses and Authorizations
Schedule 1.1(e) Accounts Receivable
Schedule 1.2(a) Excluded Assets
Schedule 1.2(b) Excluded Contracts
Schedule 1.2(d) Insurance Exclusions
Schedule 1.2(e) Excluded Tax Items
Schedule 1.6(b) Estimated Adjustment Statement
Schedule 1.7 Allocation of Purchase Price
Schedule 2.1(b) Subsidiaries
Schedule 2.3(a) Conflicts of Sellers
Schedule 2.3(b) Conflicts of Principals
Schedule 2.4 Taxes
Schedule 2.4(e) Taxes
Schedule 2.6 Insurance
Schedule 2.8 Title
Schedule 2.9 Litigation
Schedule 2.10 Employees; Labor Matters
Schedule 2.11 Financial Statements
Schedule 2.12 Business
Schedule 2.13 Licenses
Schedule 2.14 Approvals; Consents
Schedule 2.16(a) Subscribers
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Schedule 2.16(b) Complimentary Accounts
Schedule 2.16(c) Disconnection Policy
Schedule 2.17 Brokers
Schedule 2.19 Banking Relations
Schedule 2.20 Intellectual Property
Schedule 2.21 Absence of Restrictions
Schedule 2.22 Permits, Approvals
Schedule 2.23 Affiliated Transactions
Schedule 2.24 Employee Benefits
Schedule 2.25 Environmental Matters
Schedule 2.26 Undisclosed Liabilities
Schedule 2.27 Indebtedness
Schedule 2.28 Agreements
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Exhibit 2.3
ASSET PURCHASE AGREEMENT
Agreement made as of September 30, 1999 by and among Voyager Information
Networks, Inc., a Michigan corporation ("Buyer"), ChoiceDotNet, L.L.C., an Ohio
limited liability company ("Seller"), Choice.Net, Inc., an Ohio corporation
("Choice.Net") and Dotnet, Ltd., an Ohio limited liability company ("Dotnet" and
together with Choice.Net, the "Owners"), J. Michael Donovan ("Donovan"), Andrew
Larkins ("Larkins" and together with Donovan, the "Primary Principals"), Ronald
E. McKee, John B. Reynolds, Aaron Larkins, Allen Larkins, Nathan Fultz, David E.
Larkins and David E. Larkins Charitable Remainder Unitrust U/A September 23,
1999 (together with the Primary Principals, the "Principals").
WHEREAS, subject to the terms and conditions hereof, Seller desires to
sell, transfer and assign to Buyer, and Buyer desires to purchase from Seller,
all of the properties, rights and assets used or useful in connection with the
Internet service business of Seller (the "Business").
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
SECTION 1. PURCHASE AND SALE OF ASSETS.
1.1 Sale of Assets. Upon the terms and subject to the conditions set
forth in this Agreement, and the performance by the parties hereto of their
respective obligations hereunder, Seller agrees to sell, assign, transfer and
deliver to Buyer, and Buyer agrees to purchase from Seller, all of Seller's
right, title and interest in and to all of the properties, assets and business
of the Business of every kind and description, tangible and intangible, real,
personal or mixed, and wherever located, but excluding the Excluded Assets (as
defined in Section 1.2 below), including, without limitation, the following:
(a) Equipment. All free standing kiosks, servers, routers, modems,
computers, electronic devices, test equipment and all other fixed assets,
equipment, furniture, fixtures, leasehold improvements, parts, accessories,
inventory, office materials, software, supplies and other tangible personal
property of every kind and description owned by Seller and used or held for use
in connection with the Business, in each case together with any additions
thereto between the date of this Agreement and the Closing Date (as defined
below), all as set forth on Schedule 1.1(a) attached hereto (collectively,
"Equipment");
(b) Contracts. All of the rights of Seller under and interest of
Seller in and to all contracts relating to the Business (other than the Excluded
Contracts (as defined below)), including, without limitation, original contracts
for the provision of Internet connectivity, dedicated service, web-hosting, web-
domain, dial-up services, web-development and Internet commerce, all leases with
respect to real property and all co-location agreements, a true, correct and
complete list of which contracts is attached hereto as Schedule 1.1(b)
(collectively, the "Contracts");
<PAGE>
(c) Intellectual Property. All of Seller's Intellectual Property (as
defined in Section 2.20), as set forth on Schedule 1.1(c) attached hereto;
(d) Licenses and Authorizations. All rights associated with the
licenses, permits, easements, registrations and authorizations issued or granted
to Seller by any governmental authority with respect to the operation of the
Business, including, without limitation, those licenses and authorizations
listed on Schedule 1.1(d) attached hereto, and all applications therefor,
together with any renewals, extensions, or modifications thereof and additions
thereto;
(e) Current Assets; Accounts Receivable. All Current Assets of Seller
(as such term is hereinafter defined) and all accounts receivable of Seller
incurred in the ordinary course of business and such accounts receivable are
included on Seller's balance sheet, as determined in accordance with generally
accepted accounting principles ("GAAP"), consistently applied, a complete list
of such accounts receivable is attached hereto as Schedule 1.1(e) ("Accounts
Receivable");
(f) Goodwill. All of the goodwill of Seller in, and the going concern
value of, the Business, and all of the business and customer lists, proprietary
information, and trade secrets related to the Business; and
(g) Records. All of Seller's customer logs, location files and
records, employee records, and other business files and records, in each case
relating to the Business.
The assets, properties and business of Seller being sold to and purchased
by Buyer under this Section 1.1 are referred to herein collectively as the
"Assets."
1.2 Excluded Assets. There shall be excluded from the Assets and retained
by Seller, to the extent in existence on the Closing Date, the following assets
(the "Excluded Assets"):
(a) Other Assets. All other assets of Seller which are not used or
held for use in connection with the Business or otherwise necessary to the
operation of the Business now or after the Closing Date and which are set forth
on Schedule 1.2(a) attached hereto;
(b) Excluded Contracts. All of Seller's right, title and interest in,
to and under the contracts and agreements listed on Schedule 1.2(b) attached
hereto (the "Excluded Contracts");
(c) Insurance. All contracts of insurance (including any cash
surrender value thereof) and all insurance proceeds of settlement and insurance
claims made by Seller on or before the Closing Date as set forth on Schedule
1.2(c) attached hereto;
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(d) Tax Items. All claims, rights and interest in and to any refunds
for federal, state or local Taxes (as defined below) for periods prior to the
Closing Date as set forth on Schedule 1.2(d) attached hereto; and
(e) Corporate Records. All of Seller's corporate and other
organizational records.
1.3 Assumed Liabilities; Excluded Liabilities; Employees.
(a) Assumed Liabilities. Buyer shall, on and as of the Closing Date,
accept and assume, and shall become and be fully liable and responsible for, and
other than as expressly set forth herein Seller shall have no further liability
or responsibility for or with respect to, (i) liabilities and obligations
arising out of events occurring on and after the Closing Date related to Buyer's
ownership of the Assets and Buyer's operation of the Business after the Closing
Date; (ii) all obligations and liabilities of Seller which are to be performed
after the Closing Date arising under the Contracts, including, without
limitation, Seller's obligations to Subscribers under such Contracts for (A)
Subscriber deposits held by Seller as of the Closing Date in the amount for
which Buyer receives a credit pursuant to Section 1.6(a) below, (B) Subscriber
advance payments held by Seller as of the Closing Date for services to be
rendered in connection with the Business in the amount for which Buyer receives
a credit pursuant to Section 1.6(a) below, and (C) the delivery of Internet
connectivity service to Subscribers (whether pursuant to a Contract or
otherwise) after the Closing Date; and (iii) the Current Liabilities (as
hereinafter defined) of Seller ((i), (ii) and (iii) together, the "Assumed
Liabilities"). The assumption of the Assumed Liabilities by Buyer hereunder
shall not enlarge any rights of third parties under contracts or arrangements
with Buyer or Seller or any of their respective affiliates or subsidiaries. No
parties other than Buyer and Seller shall have any rights under this Agreement.
(b) Excluded Liabilities. It is expressly understood that, except for
the Assumed Liabilities, Buyer shall not assume, pay or be liable for any
liability or obligation of Seller of any kind or nature at any time existing or
asserted, whether, known, unknown, fixed, contingent or otherwise, not
specifically assumed herein by Buyer, including, without limitation, any
liability or obligation relating to, resulting from or arising out of (i) the
Excluded Assets, including, without limitation, the Excluded Contracts, (ii) the
employees of the Business, including, without limitation, any obligation to
provide any amounts due to the employees under any pension, profit sharing or
similar plan, any bonus or other compensation plan, or related to vacation or
other similar employee benefits, or arising as a result of the transactions
contemplated hereby or (iii) any fact existing or event occurring prior to the
Closing Date or relating to the operation of the Business prior to the Closing
Date. The liabilities which are not assumed by Buyer under this Agreement are
hereinafter sometimes referred to as the "Excluded Liabilities."
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(c) Employees, Wages and Benefits.
(i) Seller shall terminate all of its employees effective as of
the Closing Date and Buyer shall not assume or have any obligations or
liabilities with respect to such employees or such terminations, including,
without limitation, any severance obligation. Seller acknowledges and
agrees that Buyer has the right to interview and discuss employment terms
and issues with such employees prior to and after the Closing.
(ii) Buyer specifically reserves the right, on or after the
Closing Date, to employ or reject any of Seller's employees or other
applicants in its sole and absolute discretion; provided that Buyer shall
provide to Seller a list of employees to whom Buyer intends to offer
employment at least three (3) business days prior to the Closing. Nothing
in this Agreement shall be construed as a commitment or obligation of Buyer
to accept for employment, or otherwise continue the employment of, any of
Seller's employees, and no employee shall be a third-party beneficiary of
this Agreement.
(iii) Seller shall pay all wages, salaries, commissions, and the
cost of all fringe benefits provided to its employees which shall have
become due for work performed as of and through the day preceding the
Closing Date, and Seller shall collect and pay all Taxes in respect of such
wages, salaries, commissions and benefits.
(iv) Seller acknowledges and agrees that Buyer shall not acquire
any rights or interests of Seller in, or assume or have any obligations or
liabilities of Seller under, any benefit plans maintained by, or for the
benefit of any employees of Seller prior to the Closing Date, including,
without limitation, obligations for severance or vacation accrued but not
taken as of the Closing Date.
1.4 The Closing. The transactions contemplated by this Agreement shall
take place at a closing (the "Closing") to be held at 10:00 a.m., local time, at
the offices of Goodwin, Procter & Hoar LLP on ________ __, 1999, or at such
other time and place as shall be mutually agreed upon in writing by Buyer and
Seller (the "Closing Date").
1.5 Purchase Price. In consideration of the sale by Seller to Buyer of
the Assets, and subject to the assumption by Buyer of the Assumed Liabilities
and satisfaction of the conditions contained herein, Buyer shall pay to Seller
at the Closing an amount equal to $1,800,000 (as adjusted in accordance with
Section 1.6 below, the "Purchase Price") as follows:
(a) At the Closing, Buyer shall deliver the sum of $1,620,000 (as
adjusted in accordance with Section 1.6) to Seller by bank cashier's check or
bank wire transfer of immediately available funds pursuant to payment
instructions delivered by Seller to Buyer at least two (2) business days prior
to the Closing; and
(b) At the Closing, Buyer shall deposit the sum of $180,000 (the
"Escrow Deposit") with Boston Safe Deposit and Trust Company as Escrow Agent
under the Escrow
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Agreement in the form attached hereto as Exhibit A (the "Escrow Agreement"). The
Escrow Deposit shall be held, administered and distributed in accordance with
the terms of the Escrow Agreement.
1.6 Adjustments to Purchase Price. The Purchase Price shall be adjusted
at the Closing in the manner set forth below:
(a) The Purchase Price will be increased or decreased, as the case may
be, on a dollar-for-dollar basis, by the Working Capital Excess or Deficiency,
as applicable, as of the opening of business on the Closing Date.
For the purposes of this Agreement, the following terms shall
have the following meanings:
(i) "Working Capital" shall mean the difference between Seller's
Current Assets and Current Liabilities;
(ii) "Current Assets" shall mean and include all Accounts
Receivable of Seller outstanding on the Closing Date with balances of thirty
(30) days or less, all prepaid expenses (including postal deposits), and all
other current assets which have value to the business at the Closing and which
are used in the operation of Seller's Business, in each case as determined in
accordance with GAAP, consistently applied;
(iii) "Current Liabilities" shall mean and include accounts
payable, accrued expenses, all deferred revenues and all other current
liabilities incurred in the operation of Seller's Business and reflected on
Seller's balance sheet in each case as determined in accordance with GAAP,
consistently applied;
(iv) "Deficiency" shall mean the amount by which the Current
Liabilities exceeds the Current Assets; and
(v) "Excess" shall mean the amount by which the Current Assets
exceeds the Current Liabilities.
(b) (i) No later than five (5) days prior to the Closing, Buyer and
Seller shall prepare a statement to be attached hereto as Schedule 1.6(b)
(the "Estimated Adjustment Statement") which sets forth (i) the Company's
estimated Working Capital and the amount of any estimated Deficiency or
Excess, as the case may be, as of the Closing Date (the "Estimated
Adjustment"). The Purchase Price payable at the Closing shall be increased
on a dollar-for-dollar basis to the extent of any positive Estimated
Adjustment or decreased on a dollar-for-dollar basis to the extent of any
negative Estimated Adjustment, as the case may be, set forth on such
Estimated Adjustment Statement.
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(ii) No later than forty-five (45) days following the Closing,
Buyer shall prepare and deliver to Seller a statement (the "Final
Adjustment Statement") setting forth the actual Working Capital, and the
amount of any actual Deficiency or Excess, as the case may be, as well as
any other changes to the Estimated Adjustment, as of the Closing Date.
Subject to Section 1.6(b)(iii) below, within ten (10) days following the
delivery of such Final Adjustment Statement to Seller, Buyer or Seller, as
the case may be, shall pay to the other party, by wire transfer of
immediately available funds, the difference between the Estimated
Adjustment, as shown on the Estimated Adjustment Statement, and the actual
adjustment, as shown on the Final Adjustment Statement.
(iii) In the event Seller objects to the Final Adjustment
Statement, Seller shall notify Buyer in writing of such objection within
the ten (10) day period following the delivery thereof, stating in such
written objection the reasons therefor and setting forth the Seller's
calculation of Seller's actual Working Capital at the Closing. Upon
receipt by Buyer of such written objection, the parties shall attempt to
resolve the disagreement concerning the Final Adjustment Statement through
negotiation. Notwithstanding any other dispute resolution procedure
provided for in this Agreement, if Buyer and Seller cannot resolve such
disagreement concerning the Final Adjustment Statement within thirty (30)
days following the end of the foregoing 10-day period, the parties shall
submit the matter for resolution to a nationally recognized firm of
independent certified public accountants not affiliated with either party,
with the costs thereof to be shared equally by the parties. Such
accounting firm shall deliver a statement setting forth its own calculation
of the final adjustment to the parties within thirty (30) days of the
submission of the matter to such firm. Any payment shown to be due by a
party on the statement of such accounting firm shall be paid to the other
party promptly but in no event later than five (5) days following the
delivery of such statement by such accounting firm to the parties.
1.7 Purchase Price Allocation. At least two (2) business days prior to
the Closing, Buyer and Seller shall agree on the allocation of the Purchase
Price as set forth on Schedule 1.7 attached hereto. Such allocation shall be
binding upon Buyer and Seller for all purposes (including financial accounting
purposes, financial and regulatory reporting purposes and tax purposes). Buyer
and Seller each further agrees to file its Federal income tax returns and its
other tax returns reflecting such allocation, Form 8594 and any other reports
required by Section 1060 of the Internal Revenue Code of 1986, as amended.
1.8 Records and Contracts. To the extent not previously provided to
Buyer, at the Closing, Seller shall deliver to Buyer all of the Contracts, with
such assignments thereof and consents to assignments as are necessary to assure
Buyer of the full benefit of the same. Seller shall also deliver to Buyer at
the Closing all of Seller's files and records constituting Assets.
1.9 Further Assurances. Seller, from time to time after the Closing at
the request of Buyer and without further consideration, shall execute and
deliver further instruments of transfer and assignment and take such other
action as Buyer may reasonably require to more effectively
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transfer and assign to, and vest in, Buyer the Assets free and clear of all
Liens (as defined in Section 2.8).
1.10 Sales and Transfer Taxes. All sales, transfer, use, recordation,
documentary, stamp, excise taxes, personal property taxes, fees and duties
(including any real estate transfer taxes) under applicable law incurred in
connection with this Agreement or the transactions contemplated thereby will be
borne and paid by Seller, and Seller shall promptly reimburse Buyer for the
payment of any such tax, fee or duty which Buyer is required to make under
applicable law.
1.11 Transfer of Subject Assets. At the Closing, Seller shall deliver or
cause to be delivered to Buyer good and sufficient instruments of transfer
transferring to Buyer title to all of the Assets, together with all required
consents. Such instruments of transfer (a) shall contain appropriate warranties
and covenants which are usual and customary for transferring the type of
property involved under the laws of the jurisdictions applicable to such
transfers, (b) shall be in form and substance reasonably satisfactory to Buyer
and its counsel, (c) shall effectively vest in Buyer good and marketable title
to all of the Assets free and clear of all Liens, and (d) where applicable,
shall be accompanied by evidence of the discharge of all Liens against the
Assets.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLER, OWNERS AND PRIMARY
PRINCIPALS. In order to induce Buyer to enter into this Agreement, Seller, the
Owners and each of the Primary Principals, jointly and severally, hereby
represent and warrant to Buyer as follows:
2.1 Organization; Subsidiaries.
(a) Seller is a limited liability company duly organized, validly
existing and in good standing under the laws of Ohio, with full power and
authority to own or lease its properties and to conduct its business in the
manner and in the places where such properties are owned or leased or such
business is currently conducted or proposed to be conducted. The copies of
Seller's Articles of Organization and Operating Agreement, each as amended to
date, heretofore delivered to Buyer's counsel are complete and correct. Seller
is not in violation of any term of its Articles of Organization or Operating
Agreement. Seller is duly qualified to do business in the state of its
organization, and is not required to be licensed or qualified to conduct its
business or own its property in any other jurisdiction.
(b) Seller has no subsidiaries and does not own any securities issued
by any other business organization or governmental authority, except U.S.
Government securities, bank certificates of deposit and money market accounts
acquired as short-term investments in the ordinary course of its business.
Seller does not own or have any direct or indirect interest in or control over
any corporation, partnership, joint venture or entity of any kind.
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2.2 Required Action. All actions and proceedings necessary to be taken by
or on the part of Seller in connection with the transactions contemplated by
this Agreement have been duly and validly taken, and this Agreement and each
other agreement, document and instrument to be executed and delivered by or on
behalf of Seller pursuant to, or as contemplated by, this Agreement
(collectively, the "Seller Documents") has been duly and validly authorized,
executed and delivered by Seller and no other action on the part of Seller or
its stockholders is required in connection therewith. Each of Seller, Owners
and the Principals have full right, authority, power and capacity to execute and
deliver this Agreement and each other Seller Document and to carry out the
transactions contemplated hereby and thereby. This Agreement and each other
Seller Document constitutes, or when executed and delivered will constitute, the
legal, valid and binding obligation of each of Seller, Owners and the Principals
enforceable in accordance with its respective terms.
2.3 No Conflicts.
(a) The execution, delivery and performance by Seller of this
Agreement and each other Seller Document does not and will not (i) violate any
provision of the Articles of Organization and by-laws of Seller, in each case as
amended to date, (ii) constitute a violation of, or conflict with or result in
any breach of, acceleration of any obligation under, right of termination under,
or default under, any agreement or instrument to which Seller is a party or by
which Seller or the Assets is bound, (iii) violate any judgment, decree, order,
statute, rule or regulation applicable to Seller or the Assets, (iv) require
Seller to obtain any approval, consent or waiver of, or to make any filing with,
any person or entity (governmental or otherwise) that has not been obtained or
made or (v) result in the creation or imposition of any Lien on any of the
Assets.
(b) The execution, delivery and performance by each of the Seller,
Owners and the Principals of this Agreement and each other Seller Document does
not and will not (i) constitute a violation of, or conflict with or result in
any breach of, acceleration of any obligation under, right of termination under,
or default under, any agreement or instrument to which any or all of the Seller,
Owners and the Principals are a party or by which any or all of the Seller,
Owners and the Principals are bound, (ii) violate any judgment, decree, order,
statute, rule or regulation applicable to the Seller, Owners or Principals,
(iii) require the Seller, Owners or the Principals to obtain any approval,
consent or waiver of, or to make any filing with, any person or entity
(governmental or otherwise) that has not been obtained or made, or (iv) result
in the creation or imposition of any Lien on any of the Assets.
2.4 Taxes.
(a) Seller has paid or caused to be paid all federal, state, local,
foreign and other taxes, including, without limitation, income taxes, estimated
taxes, alternative minimum taxes, excise taxes, sales taxes, use taxes, value-
added taxes, gross receipts taxes, franchise taxes, capital stock taxes,
employment and payroll-related taxes, withholding taxes, stamp taxes, transfer
taxes, windfall profit taxes, environmental taxes and property taxes, whether or
not
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measured in whole or in part by net income, and all deficiencies, or other
additions to tax, interest, fines and penalties owed by it (collectively,
"Taxes"), required to be paid by it through the date hereof whether disputed or
not.
(b) Seller has in accordance with applicable law filed all federal,
state, local and foreign tax returns required to be filed by it through the date
hereof, and all such returns correctly and accurately set forth the amount of
any Taxes relating to the applicable period. A list of all federal, state,
local and foreign income tax returns filed with respect to Seller for taxable
periods ended on or after December 31, 1993, is set forth in Schedule 2.4
attached hereto, and said schedule indicates those returns that have been
audited or currently are the subject of an audit. Seller has delivered to Buyer
correct and complete copies of all federal, state, local and foreign income tax
returns listed on said schedule, and of all examination reports and statements
of deficiencies assessed against or agreed to by Seller with respect to said
returns.
(c) Neither the Internal Revenue Service ("IRS") nor any other
governmental authority is now asserting or, to the knowledge of Seller, Owners
or the Primary Principals, threatening to assert against Seller any deficiency
or claim for additional Taxes. To the knowledge of Seller, Owners and the
Primary Principals, no claim has ever been made by an authority in a
jurisdiction where Seller does not file reports and returns that Seller is or
may be subject to taxation by that jurisdiction. There are no security
interests on any of the Assets of Seller that arose in connection with any
failure (or alleged failure) to pay any Taxes. Seller has never entered into a
closing agreement pursuant to Section 7121 of the Internal Revenue Code of 1986,
as amended (the "Code").
(d) There has not been any audit of any tax return filed by Seller, no
audit of any tax return of Seller is in progress, and Seller has not been
notified by any tax authority that any such audit is contemplated or pending.
No extension of time with respect to any date on which a tax return was or is to
be filed by Seller is in force, and no waiver or agreement by Seller is in force
for the extension of time for the assessment or payment of any Taxes.
(e) Seller has never been (and has never had any liability for unpaid
Taxes because it once was) a member of an "affiliated group" (as defined in
Section 1504(a) of the Code). Seller has never filed, and has never been
required to file, a consolidated, combined or unitary tax return with any other
entity. Seller does not own and has never owned a direct or indirect interest
in any trust, partnership, corporation or other entity and therefore Buyer is
not acquiring from Seller an interest in any entity. Seller is not a party to
any tax sharing agreement.
(f) Seller is not a "foreign person" within the meaning of Section
1445 of the Code and Treasury Regulations Section 1.1445-2.
(g) For purposes of this Agreement, all references to Sections of the
Code shall include any predecessor provisions to such Sections and any similar
provisions of federal, state, local or foreign law.
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2.5 Compliance with Laws. Seller's operation of the Business and the
Assets is in compliance in all material respects with all applicable statutes,
ordinances, orders, rules and regulations promulgated by any federal, state,
municipal or other governmental authority (including the Federal Communications
Commission), and Seller has not received notice of a violation or alleged
violation of any such statute, ordinance, order, rule or regulation.
2.6 Insurance. The physical properties and tangible Assets are insured to
the extent disclosed in Schedule 2.6 attached hereto, and all insurance policies
and arrangements of Seller in effect as of the date hereof are disclosed in said
Schedule. Said insurance policies and arrangements are in full force and
effect, all premiums with respect thereto are currently paid, and Seller is in
compliance in all material respects with the terms thereof. Said insurance is
adequate and customary for the business engaged in by Seller and is sufficient
for compliance by Seller with all requirements of law and all agreements and
leases to which Seller is a party.
2.7 Contracts. The Contracts constitute all leases, contracts and
arrangements, whether oral or written, under which Seller is bound or to which
Seller is a party which relate to the Business or Assets. Schedule 1.1(b)
attached hereto contains a true, correct and complete list of all Contracts.
With respect to each oral agreement or understanding involving the Business,
Seller has provided a written summary of the material terms of each such
agreement or understanding on Schedule 1.1(b). Each Contract is valid, in full
force and effect and binding upon Seller and the other parties thereto in
accordance with its terms. Neither Seller nor, to the knowledge of Seller,
Owners and the Primary Principals, any other party is in default under or in
arrears in the performance, payment or satisfaction of any agreement or
condition on its part to be performed or satisfied under any Contract, nor does
any condition exist that with notice or lapse of time or both would constitute
such a default, and no waiver or indulgence has been granted by any party under
any Contract. Seller has not received notice of, and each of Seller, Owners and
the Primary Principals have no knowledge of, any fact which would result in a
termination, repudiation or breach of any Contract. Seller has provided Buyer
with true and complete copies of all of such Contracts, other than with respect
to the oral agreements or understandings described on Schedule 1.1(b).
2.8 Title. Seller has good and marketable title to all of the Assets free
and clear of all mortgages, pledges, security interests, charges, liens,
restrictions and encumbrances of any kind (collectively, "Liens") whatsoever.
Upon the sale, assignment, transfer and delivery of the Assets to Buyer
hereunder and under the Seller Documents, there will be vested in Buyer good,
marketable and indefeasible title to the Assets, free and clear of all Liens.
The Assets include all of the assets and properties (i) held for use by Seller
to conduct the Business as presently conducted and (ii) necessary for Buyer to
operate the Business in the same manner as such business is currently operated
by Seller. All of the tangible Assets are in good repair, have been well
maintained and are in good operating condition, do not require any material
modifications or repairs, and comply in all material respects with applicable
laws, ordinances and regulations, ordinary wear and tear excepted. Seller has
delivered complete and true copies of all real property leases (the "Leases")
set forth on Schedule 1.1(b). Seller holds good, clear, valid and enforceable
leasehold interest in the real property subject to the Leases (the "Leased Real
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Property"), subject only to the right of reversion of the landlord or lessor
under the Leases, free and clear of all other prior or subordinate interests,
including, without limitation, mortgages, deeds of trust, ground leases, leases,
subleases, assessments, tenancies, claims, covenants, conditions, restrictions,
easements, judgments or other encumbrances or matters affecting title, and free
of encroachments onto or off of the leased real property. To the knowledge of
Seller, Owners and the Primary Principals, there are no material defects in the
physical condition of any improvements constituting a part of the Leased Real
Property, including, without limitation, structural elements, mechanical
systems, roofs or parking and loading areas, and all of such improvements are in
good operating condition and repair, have been well maintained. All water,
sewer, gas, electric, telephone, drainage and other utilities required by law or
necessary for the current or planned operation of the Leased Real Property have
been installed and connected pursuant to valid permits, and are sufficient to
service the Leased Real Property. Seller does not hold or own a fee interest in
any real property.
2.9 No Litigation. Seller is not now involved in nor, to the knowledge of
Seller, Owners and the Primary Principals, is Seller threatened to be involved
in any litigation or legal or other proceedings related to or affecting the
Business or any Asset or which would prevent or hinder the consummation of the
transactions contemplated by this Agreement. Seller has not been operating the
Business under, and the Business is not subject to, any order, injunction or
decree of any court of federal, state, municipal or other governmental
department, commission, board, agency or instrumentality.
2.10 Employees; Labor Matters. Seller employs approximately _____ full-
time employees and _____ part-time employees and generally enjoys good employer-
employee relationships. Seller shall provide to Buyer a list of the employees
of Seller in connection with the Business at least ten (10) days prior to
Closing, including the name, date of hire and wages of such employees. Seller
is not delinquent in payments to any of its employees for any wages, salaries,
commissions, bonuses or other direct compensation for any services performed for
it to the date hereof or amounts required to be reimbursed to such employees.
Upon termination of the employment of any of said employees, neither Seller nor
Buyer will by reason of the transactions contemplated hereby or anything done
prior to the Closing be liable to any of said employees for so-called "severance
pay" or any other payments, except as set forth in Schedule 2.10 attached
hereto. Seller does not have any policy, practice, plan or program of paying
severance pay or any form of severance compensation in connection with the
termination of employment, except as set forth in said Schedule. Seller is in
compliance in all material respects with all applicable laws and regulations
respecting labor, employment, fair employment practices, work place safety and
health, terms and conditions of employment, and wages and hours. There are no
charges of employment discrimination or unfair labor practices, nor are there
any strikes, slowdowns, stoppages of work, or any other concerted interference
with normal operations existing, pending or, to the knowledge of Seller, Owners
and the Primary Principals, threatened against or involving Seller. No question
concerning representation exists respecting any group of employees of Seller.
There are no grievances, complaints or charges that have been filed against
Seller under any dispute resolution procedure (including, but not limited to,
any proceedings under any dispute resolution procedure under any collective
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bargaining agreement) that might have an adverse effect on Seller or the conduct
of its business and no arbitration or similar proceeding is pending and no claim
therefor has been asserted. No collective bargaining agreement is in effect or
is currently being or is about to be negotiated by Seller. Seller has received
no information to indicate that any of its employment policies or practices is
currently being audited or investigated by any federal, state or local
government agency. Seller is, and at all times since November 6, 1986 has been,
in compliance with the requirements of the Immigration Reform Control Act of
1986.
2.11 Financial Statements. Attached hereto as Schedule 2.11 are copies
of the balance sheet of Seller as at August 31, 1999 (the "Base Balance Sheet")
and the statements of income and expense of Seller for August 31, 1999
(collectively the "Financial Statements"). The Financial Statements have been
prepared on a tax basis in accordance with the accounting principles described
therein applied consistently during the periods covered thereby, are complete
and correct and present fairly and accurately the financial condition of the
Business on a tax basis at the dates of said statements and the results of the
operations of the Business for the periods covered thereby. Schedule 2.11
includes an itemized list of adjustments to the Financial Statements in order to
cause each of the Financial Statements, in light of such adjustments and viewed
as a whole, to constitute financial statements as of their respective dates and
for the periods therein ended, prepared on an accrual basis and in accordance
with generally accepted accounting principles ("GAAP"), consistently applied. As
of the date of the Base Balance Sheet (the "Base Balance Sheet Date"), Seller
had no liabilities or obligations of any kind with respect to the Business,
whether accrued, contingent or otherwise, that are not disclosed and adequately
reserved against on the Base Balance Sheet. As of the date hereof and at the
Closing, Seller had and will have no liabilities or obligations of any kind with
respect to the Business, whether accrued, contingent or otherwise, that are not
disclosed and adequately reserved against on the Base Balance Sheet.
2.12 Business Since the Base Balance Sheet Date. Since the Base Balance
Sheet Date:
(a) there has been no material adverse change in the Business or in
the Assets, operations or financial condition of the Business;
(b) the Business has, in all material respects, been conducted in the
ordinary course of business and in substantially the same manner as it was
conducted before the date of the Base Balance Sheet Date;
(c) there has not been any material obligation or liability
(contingent or other) incurred by Seller with respect to the Business, whether
or not incurred in the ordinary course of business including, without
limitation, any capital or operating leases with respect to Equipment;
(d) there has not been any purchase, sale or other disposition, or any
agreement or other arrangement, oral or written, for the purchase, sale or other
disposition, of any material properties or assets of the Business, whether or
not in the ordinary course of business;
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(e) there has not been any mortgage, encumbrance or lien placed on any
of the Assets, nor any payment or discharge of a material lien or liability of
Seller which was not reflected on the Base Balance Sheet;
(f) there has not been any damage, destruction or loss, whether or not
covered by insurance, adversely affecting the Business or Assets;
(g) there has not been any material change in Seller's pricing,
marketing, customer service, billing, accounting, operational or promotional
activities and policies of Seller;
(h) there has not been any change in the collection, payment and
accounting policies used by Seller in the Business; and
(i) there has not been any agreement or understanding, whether in
writing or otherwise, for Seller to take any of the actions specified above.
2.13 Licenses. As of the date of this Agreement, Seller is the holder of
all licenses, permits and authorizations with respect to the Business (the
"Authorizations"). The Authorizations constitute all of the licenses, permits
and authorizations required for operation of the Business as now operated. All
of the Authorizations are in full force and effect and no licenses, permits or
authorizations of any governmental department or agency are required for the
operation of the Business which have not been duly obtained. As of the date
hereof, there is not pending or, to the knowledge of Seller, Owners and the
Primary Principals, threatened any action by or before any governmental agency
to revoke, cancel, rescind or modify any of the Authorizations, and there is not
now issued or outstanding or, to the knowledge of Seller, Owners and the Primary
Principals, pending or threatened any order to show cause, notice of violation,
notice of apparent liability, or notice of forfeiture or complaint against
Seller with respect to the Business.
2.14 Approvals; Consents. Except as set forth on Schedule 2.14 attached
hereto, no approval, consent, authorization or exemption from or filing with any
person or entity not a party to this Agreement is required to be obtained or
made by Seller in connection with the execution and delivery of this Agreement
and the Seller Documents and the consummation of the transactions contemplated
hereby and thereby. All of the approvals, consents and authorizations listed on
Schedule 2.14 shall be obtained by Seller at or prior to the Closing in
accordance with Section 4.4 hereof.
2.15 Customers and Suppliers. Seller's relations with its customers and
suppliers, including its Subscribers (as defined below), are good and there are
not pending or, to Seller's knowledge, threatened claims or controversies with
any customer or suppliers that is material to the Assets or the Business.
2.16 Subscribers. Schedule 2.16(a) attached hereto sets forth, as of the
date hereof, the Subscribers of the Business as listed by class, type and
billing plan. For purposes of this
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Agreement, the terms "Subscriber" shall mean any active subscriber to Internet
services offered by Seller in the Business who has subscribed to a service for
at least one month and has paid at least one bill, including, without
limitation, any person who receives dial-up Internet access and e-mail services
through the Business (a "Dial-up Subscriber"), any person who receives dedicated
Internet access from Seller offering higher data transmission rates than
available from dial-up access (a "Dedicated Subscriber"), and any person with a
web page or domain name on Seller's server and to whom Seller provides Internet
access (a "Web-hosting/Domain-hosting Subscriber"); provided, however, that
"Subscriber" shall not include any person who is (i) more than thirty (30) days
delinquent in payment of such person's bill for such services provided by the
Business and (ii) any person receiving complimentary Internet services or
Internet services at a promotional discounted rate. Set forth on Schedule
2.16(b) attached hereto is a listing of all such accounts which receive
complimentary Internet services or Internet services at a promotional discounted
rate (including, but not limited to, those accounts that receive "student plan"
rates). Set forth on Schedule 2.16(c) attached hereto is Seller's policy and
practice with respect to the disconnection of Subscribers, with which Seller
has, except as set forth on Schedule on Schedule 2.16(c), at all times since its
inception, complied in all material respects.
2.17 Brokers. Seller has not retained any broker or finder or other
person who would have any valid claim against any of the parties to this
Agreement for a commission or brokerage fee in connection with this Agreement or
the transactions contemplated hereby.
2.18 Collectibility of Accounts Receivable. All of the Accounts
Receivable of Seller are or will be as of the Closing Date bona fide, valid and
enforceable claims, subject to no setoff or counterclaim and to Seller's
knowledge are collectible in accordance with their terms. Seller has no accounts
or loans receivable from any person, firm or corporation which is affiliated
with Seller or from any director, officer or employee of Seller, or from any of
their respective spouses or family members.
2.19 Banking Relations. All of the arrangements which Seller has with any
banking institution are completely and accurately described in Schedule 2.19
attached hereto, indicating with respect to each of such arrangements the type
of arrangement maintained (such as checking account, borrowing arrangements,
safe deposit box, etc.) and the person or persons authorized in respect thereof.
2.20 Intellectual Property.
(a) Set forth on Schedule 2.20 attached hereto are all computer
programs and related documentation sold, marketed, licensed and distributed by
Seller (the "Products"). All of the Intellectual Property of Seller is set
forth on Schedule 2.20 attached hereto. For purposes hereof, the term
"Intellectual Property" includes: (i) all patents, patent applications, patent
rights, and inventions and discoveries and invention disclosures (whether or not
patented) (collectively, "Patents"); (ii) Seller's rights to the name
"choice.net" and "ChoiceDotNet," all trade names, trade dress, logos, packaging
design, slogans, any and all Internet domain names used or useful in the
Business, registered and unregistered trademarks and service marks and
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applications (collectively, "Marks"); (iii) all copyrights in both published and
unpublished works, including, without limitation, all compilations, databases
and computer programs, and all copyright registrations and applications, and all
derivatives, translations, adaptations and combinations of the above
(collectively, "Copyrights"); (iv) all know-how, trade secrets, confidential or
proprietary information, customer lists, IP addresses, research in progress,
algorithms, data, designs, processes, formulae, drawings, schematics,
blueprints, flow charts, models, prototypes, techniques, Beta testing procedures
and Beta testing results (collectively, "Trade Secrets"); (v) Seller's web-sites
(including the domain name "choice.net," "choicedotnet.com," "choicedotnet.net,"
"pro-online.net" and "dot-net.net" and any other similar domain names); (vi) all
goodwill, franchises, licenses, permits, consents, approvals, technical
information, telephone numbers, and claims of infringement against third parties
(the "Rights"); and (vii) all contracts relating to the Products and the
Intellectual Property to which Seller is a party or is bound, including, without
limitation, all nondisclosure and/or confidentiality agreements entered into by
persons in connection with disclosures by Seller (collectively,"Assigned
Contracts").
(b) Except as described in Schedule 2.20, Seller has exclusive
ownership of, and has good, valid and marketable title to, all of the
Intellectual Property, free and clear of any Liens, and has the right to use all
of the Intellectual Property without payment to any third party. Seller's rights
in all of such Intellectual Property are freely transferable. There are no
claims or demands pending or, to the knowledge of Seller, Owners and the Primary
Principals, threatened of any other person pertaining to any of such
Intellectual Property and no proceedings have been instituted, or are pending
or, to the knowledge of Seller, Owners and the Primary Principals, threatened
against Seller and/or its officers, employees and consultants which challenge
the validity and enforceability of Seller's rights in respect of the
Intellectual Property. The Intellectual Property constitutes all of the assets
of Seller used in designing, creating and developing the Products, and represent
all of such Intellectual Property necessary for the operation of Seller's
Business as currently conducted.
All former and current employees, consultants and contractors of Seller
have executed written instruments with Seller that assign to Seller all rights
to any inventions, improvements, discoveries, or information relating to the
business of Seller. No employee, consultant or contractor of Seller has entered
into any agreement that restricts or limits in any way the scope or type of work
in which the employee, consultant or contractor may be engaged or requires the
employee, consultant or contractor to transfer, assign, or disclose information
concerning his work to anyone other than Seller.
(c) Schedule 2.20 sets forth a complete and accurate list and summary
description of all of Seller's Patents. All of the issued Patents are currently
in compliance with formal legal requirements (including without limitation
payment of filing, examination and maintenance fees and proofs of working or
use), are valid and enforceable, and are not subject to any maintenance fees or
taxes or actions falling due within ninety (90) days after the Closing Date. In
each case where a Patent is held by Seller by assignment, the assignment has
been duly recorded with the U.S. Patent and Trademark Office and all other
jurisdictions of registration.
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No Patent has been or is now involved in any interference, reissue,
re-examination or opposition proceeding. To the knowledge of Seller, Owners and
the Primary Principals, there is no potentially interfering Patent of any third
party. All products made, used or sold under the Patents have been marked with
the proper patent notice.
(d) Schedule 2.20 sets forth a complete and accurate list and summary
description of all of Seller's Marks. All Marks that have been registered with
the United States Patent and Trademark Office and/or any other jurisdiction are
currently in compliance with formal legal requirements (including, without
limitation, the timely post-registration filing of affidavits of use and
incontestability and renewal applications), are valid and enforceable, and are
not subject to any maintenance fees or taxes or actions falling due within
ninety (90) days after the Closing Date. In each case where a Trademark is held
by Seller by assignment, the assignment has been duly recorded with the U.S.
Patent and Trademark Office and all other jurisdictions of registration. No
Mark has been or is now involved in any opposition, invalidation or cancellation
proceeding and, to the knowledge of Seller, Owners and the Primary Principals,
no such action is threatened with respect to any of the Marks. All products and
materials containing a Mark bear the proper notice where permitted by law.
(e) Schedule 2.20 sets forth a complete and accurate list and summary
description of all of Seller's Copyrights. All the Copyrights have been
registered with the United States Copyright Office and are currently in
compliance with formal legal requirements, are valid and enforceable, and are
not subject to any fees or taxes or actions falling due within ninety (90) days
after the Closing Date. In each case where a Copyright is held by Seller by
assignment, the assignment has been duly recorded with the U.S. Copyright Office
and all other jurisdictions of registration. None of the source or object code,
algorithms, or structure included in the Products is copied from, based upon, or
derived from any other source or object code, algorithm or structure in
violation of the rights of any third party. Any substantial similarity of the
Products to any computer program owned by any third party did not result from
the Products being copied from, based upon, or derived from any such computer
software program in violation of the rights of any third party. All copies of
works encompassed by the Copyrights have been marked with the proper copyright
notice.
(f) Seller has taken all reasonable security measures (including,
without limitation, entering into appropriate confidentiality and non-disclosure
agreements with all officers, directors, employees, consultants and contractors
of Seller and any other persons with access to the Trade Secrets) to protect the
secrecy, confidentiality and value of all Trade Secrets. To the knowledge of
Seller, Owners and the Primary Principals, there has not been any breach by any
party to any such confidentiality or non-disclosure agreement. The Trade
Secrets have not been disclosed by Seller to any person or entity other than
employees or contractors of Seller who had a need to know and use the Trade
Secrets in the course of their employment or contract performance. Except as
set forth on Schedule 2.20, (i) Seller has not directly or indirectly granted
any rights or interests in the source code of the Products, and (ii) since
Seller developed the source code of the Products, Seller has not provided,
licensed or disclosed the source code of the Products to any person or entity.
Seller has the right to use, free and clear of claims of third
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parties, all Trade Secrets. To the knowledge of Seller, Owners and the Primary
Principals, there is not any assertion that the use by Seller of any Trade
Secret violates the rights of any third party.
(g) Seller has the exclusive right to use, license, distribute,
transfer and bring infringement actions with respect to the Intellectual
Property. Except as set forth on Schedule 2.20, Seller (i) has not licensed or
granted to anyone rights of any nature to use any of its Intellectual Property
and (ii) is not obligated to and does not pay royalties or other fees to anyone
for its ownership, use, license or transfer of any of its Intellectual Property.
(h) All licenses or other agreements under which Seller is granted
rights by others in Intellectual Property are listed in Schedule 2.20. All such
licenses or other agreements are in full force and effect, to the knowledge of
Seller, Owners and the Primary Principals there is no material default by any
party thereto, and all of the rights of Seller thereunder are freely assignable.
True and complete copies of all such licenses or other agreements, and any
amendments thereto, have been provided to Buyer, and Seller has no reason to
believe that the licensors under the licenses and other agreements under which
Seller is granted rights and has granted rights to others do not have and did
not have all requisite power and authority to grant the rights purported to be
conferred thereby.
(i) All licenses or other agreements under which Seller has granted
rights to others in Intellectual Property are listed in Schedule 2.20. All such
licenses or other agreements are in full force and effect, and to the knowledge
of Seller, Owners and the Primary Principals there is no material default by any
party thereto. True and complete copies of all such licenses or other
agreements, and any amendments thereto, have been provided to Buyer.
(j) Seller has no obligation to any other person to maintain, modify,
improve or upgrade the Products.
(k) None of the Products manufactured and sold, nor any process or
know-how used, by Seller infringes or is alleged to infringe any patent,
trademark, service mark, trade name, copyright or other proprietary right or is
a derivative work based on the work of any other person.
(l) There are no (i) actions, suits, claims, investigations or other
proceedings involving the Products, the Intellectual Property, or the Rights by
or before any governmental authority or arbitrator pending or, to the knowledge
of Seller, Owners and the Primary Principals, threatened against Seller, or (ii)
judgments, decrees, injunctions, or orders involving the Products, the
Intellectual Property or the Rights of any governmental authority or arbitrator
against Seller. Seller is not in default under any such judgment, decree,
injunction or order.
(m) The Products perform in accordance with their published
specifications and documentation and as Seller has warranted to its customers.
Seller has reviewed the areas within its businesses and operations which could
be adversely affected by, and has developed a
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program to address on a timely basis, the "Year 2000 Problem" (i.e., the risk
that applications used by Seller or its suppliers and/or providers may be unable
to recognize and properly perform date-sensitive functions involving certain
dates prior to and any date after December 31, 1999). Seller reasonably believes
that the "Year 2000 Problem" will not have any material adverse effect on the
business or operations of Seller.
2.21 Absence of Restrictions. Seller has not entered into any other
agreement or arrangement with any other party with respect to the sale, transfer
or any other disposition or encumbrance of the Business or the Assets, in whole
or in part.
2.22 Permits; Burdensome Agreements. Schedule 2.22 lists all permits,
registrations, licenses, franchises, certifications and other approvals
(collectively, the "Approvals") required from federal, state or local
authorities in order for Seller to conduct its Business. Seller has obtained
all such Approvals, which are valid and in full force and effect, and is
operating in compliance therewith. Such Approvals include, but are not limited
to, those required under federal, state or local statutes, ordinances, orders,
requirements, rules, regulations, or laws pertaining to environmental
protection, public health and safety, worker health and safety, buildings,
highways or zoning. Except as disclosed in Schedule 2.22, all such Approvals
will be available and assigned to Buyer and remain in full force and effect upon
Buyer's purchase of the Assets, and no further Approvals will be required in
order for Buyer to conduct the business currently conducted by Seller subsequent
to the Closing. Except as disclosed in Schedule 2.22 or in any other schedule
hereto, Seller is not subject to or bound by any agreement, arrangement,
judgment, decree or order which may materially and adversely affect its business
or prospects, its condition, financial or otherwise, or any of its assets or
properties.
2.23 Transactions with Interested Persons. Except as set forth in
Schedule 2.23 hereto, neither Seller, nor any stockholder, officer, supervisory
employee or director of Seller or, to the knowledge of Seller, Owners and the
Primary Principals, any of their respective spouses or family members owns
directly or indirectly on an individual or joint basis any material interest in,
or serves as an officer or director or in another similar capacity of, any
competitor or supplier of Seller, or any organization which has a material
contract or arrangement with Seller.
2.24 Employee Benefit Programs.
(a) Schedule 2.24 attached hereto sets forth a list of every Employee
Program (as defined below) that has been maintained by the Seller or an
Affiliate at any time during the six-year period ending on the Closing Date.
Each Employee Program which has ever been maintained by the Seller or an
Affiliate and which has been intended to qualify under Section 401(a) or
501(c)(9) of the Code has received a favorable determination or approval letter
from the IRS regarding its qualification under such section and has, in fact,
been qualified under the applicable section of the Code from the effective date
of such Employee Program through and including the Closing Date (or, if earlier,
the date that all of such Employee Program's assets were distributed). No event
or omission has occurred which would cause any such Employee Program to lose its
qualification or otherwise fail to satisfy the relevant requirements to provide
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tax-favored benefits under the applicable Code Section (including without
limitation Code Sections 105, 125, 401(a) and 501(c)(9)). With respect to any
Employee Program ever maintained by the Seller or any Affiliate, there has been
no (i) "prohibited transaction," as defined in Section 406 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") or Code Section
4975, (ii) non-deductible contribution, or (iii) failure to comply with any
provision of ERISA, other applicable law, or any agreement which, in the case of
any of (i), (ii) or (iii), could subject the Seller or any Affiliate to
liability either directly or indirectly (including, without limitation, through
any obligation of indemnification or contribution) for any damages, penalties,
or taxes, or any other loss or expense. No litigation or governmental
administrative proceeding (or investigation) or other proceeding (other than
those relating to routine claims for benefits) is pending or threatened with
respect to any such Employee Program. All payments and/or contributions
required to have been made (under the provisions of any agreements or other
governing documents or applicable law) with respect to all Employee Programs
ever maintained by the Seller or any Affiliate, for all periods prior to the
Closing Date, either have been made or have been accrued (and all such unpaid
but accrued amounts are described on Schedule 2.24). Each Employee Program ever
maintained by the Seller or an Affiliate has complied with the applicable
notification and other applicable requirements of the Consolidated Omnibus
Budget Reconciliation Act of 1985.
(b) Neither the Seller nor any Affiliate (A) has ever maintained any
Employee Program which has been subject to title IV of ERISA or Code Section
412, including, but not limited to, any Multiemployer Plan (as defined in
Section 3(37) of ERISA) or (B) has ever provided health care or any other non-
pension benefits to any employees after their employment is terminated (other
than as required by part 6 of subtitle B of title I of ERISA) or has ever
promised to provide such post-termination benefits.
(c) For purposes of this section:
(i) "Employee Program" means all employee benefit plans within
the meaning of ERISA Section 3(3) as well as all other employee benefit
plans, agreements and arrangements of any kind.
(ii) An entity "maintains" an Employee Program if such entity
sponsors, contributes to, or provides benefits under or through such
Employee Program, or has any obligation (by agreement or under applicable
law) to contribute to or provide benefits under or through such Employee
Program, or if such Employee Program provides benefits to or otherwise
covers employees of such entity (or their spouses, dependents, or
beneficiaries).
(iii) An entity is an "Affiliate" of the Seller if it would have
ever been considered a single employer with the Seller under ERISA Section
4001(b) or part of the same "controlled group" as the Seller for purposes
of ERISA Section 302(d)(8)(C).
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2.25 Environmental Matters.
(a) Except as set forth in Schedule 2.25 attached hereto, (i) Seller
has never generated, transported, used, stored, treated, disposed of, or managed
any Hazardous Waste (as defined below); (ii) to Seller's knowledge, no Hazardous
Material (as defined below) has ever been or is threatened to be spilled,
released, or disposed of at any site presently or formerly owned, operated,
leased, or used by Seller, or has ever been located in the soil or groundwater
at any such site; (iii) to the knowledge of Seller, Owners and the Primary
Principals, no Hazardous Material has ever been transported from any site
presently or formerly owned, operated, leased, or used by Seller for treatment,
storage, or disposal at any other place; (iv) Seller does not presently own,
operate, lease, or use, nor has it previously owned, operated, leased, or used
any site on which underground storage tanks are or were located; and (v) no lien
has ever been imposed by any governmental agency on any property, facility,
machinery, or equipment owned, operated, leased, or used by Seller in connection
with the presence of any Hazardous Material.
(b) Except as set forth in Schedule 2.25, (i) To the knowledge of
Seller, Owners and the Primary Principals, Seller has no liability under, nor
has it ever violated, any Environmental Law (as defined below); (ii) to the
knowledge of Seller, Owners and the Primary Principals, Seller, any property
owned, operated, leased, or used by Seller, and any facilities and operations
thereon are presently in compliance with all applicable Environmental Laws;
(iii) Seller has never entered into or been subject to any judgment, consent
decree, compliance order, or administrative order with respect to any
environmental or health and safety matter or received any request for
information, notice, demand letter, administrative inquiry, or formal or
informal complaint or claim with respect to any environmental or health and
safety matter or the enforcement of any Environmental Law; and (iv) Seller,
Owner and the Primary Principals have no knowledge or reason to know that any of
the items enumerated in clause (iii) of this subsection will be forthcoming.
(c) Except as set forth in Schedule 2.25, to the knowledge of Seller,
Owner and the Primary Principals, no site owned, operated, leased, or used by
Seller contains any asbestos or asbestos-containing material, any
polychlorinated biphenyls (PCBs) or equipment containing PCBs, or any urea
formaldehyde foam insulation.
(d) Seller has, to the knowledge of Seller, Owner and the Primary
Principals, provided to Buyer copies of all documents, records, and information
available to Seller concerning any environmental or health and safety matter
relevant to Seller, whether generated by Seller or others, including, without
limitation, environmental audits, environmental risk assessments, site
assessments, documentation regarding off-site disposal of Hazardous Materials,
spill control plans, and reports, correspondence, permits, licenses, approvals,
consents, and other authorizations related to environmental or health and safety
matters issued by any governmental agency.
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(e) For purposes of this Section 2.25, (i) "Hazardous Material" shall
mean and include any hazardous waste, hazardous material, hazardous substance,
petroleum product, oil, toxic substance, pollutant, contaminant, or other
substance which may pose a threat to the environment or to human health or
safety, as defined or regulated under any Environmental Law; (ii) "Hazardous
Waste" shall mean and include any hazardous waste as defined or regulated under
any Environmental Law; (iii) "Environmental Law" shall mean any environmental or
health and safety-related law, regulation, rule, ordinance, or by-law at the
foreign, federal, state, or local level, whether existing as of the date hereof,
previously enforced, or subsequently enacted; and (iv) "Seller" shall mean and
include Seller and all other entities for whose conduct Seller is or may be held
responsible under any Environmental Law.
2.26 Undisclosed Liabilities. Seller has no liabilities or obligations of
any nature (whether known or unknown and whether absolute, accrued, contingent
or otherwise) except for liabilities or obligations reflected on the Base
Balance Sheet and current liabilities incurred in the ordinary course of
business since the date thereof.
2.27 Indebtedness. Except as set forth in Schedule 2.27, Seller has no
bank debt or indebtedness (other than pursuant to operating or capitalized lease
obligations for leased equipment and other current liabilities).
2.28 Agreements. Except as set forth in Schedule 2.28, each Principal who
is employed by Seller is not a party to any non-competition, trade secret or
confidentiality agreement with any party other than Seller. There are no
agreements or arrangements not contained herein or disclosed in a Schedule
hereto, to which such Principal is a party relating to the business of Seller or
to such Principal's rights and obligations as a stockholder, director or officer
of Seller. Such Principal does not own, directly or indirectly, on an
individual or joint basis, any material interest in, or serve as an officer or
director of, any customer, competitor or supplier of Seller, or any organization
which has a contract or arrangement with the Seller. Such Principal has not at
any time transferred any of the stock of Seller held by or for such holder to
any employee of the Seller, which transfer constituted or could be viewed as
compensation for services rendered to Seller by said employee. The execution,
delivery and performance of this Agreement will not violate or result in a
default or acceleration of any obligation under any contract, agreement,
indenture or other instrument involving Seller to which such Principal is a
party.
2.29 Disclosure. The representations, warranties and statements contained
in this Agreement and in the certificates, exhibits and schedules delivered by
Seller, Owners and the Principals to Buyer pursuant to this Agreement do not
contain any untrue statement of a material fact, and, when taken together, do
not omit to state a material fact required to be stated therein or necessary in
order to make such representations, warranties or statements not misleading in
light of the circumstances under which they were made. There are no facts known
to Seller, Owners or the Primary Principals which presently or may in the future
have a material adverse affect on Seller's business, properties, assets,
prospects, operations or (financial or other) condition of Seller which has not
been specifically disclosed herein or in a Schedule furnished
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herewith, other than general economic conditions affecting the Internet services
industry generally.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF BUYER. As a material inducement
to Seller entering into this Agreement, Buyer hereby represents and warrants to
Seller as follows:
3.1 Organization. Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the State of Michigan. Buyer has all
requisite power and authority to conduct its business as it is now conducted and
to own, lease and operate its properties and assets.
3.2 Required Action. All actions and proceedings necessary to be taken by
or on the part of Buyer in connection with the transactions contemplated by this
Agreement have been duly and validly taken, and this Agreement and each other
agreement, document and instrument to be executed and delivered by or on behalf
of Buyer pursuant to, or as contemplated by, this Agreement (collectively, the
"Buyer Documents") has been duly and validly authorized, executed and delivered
by Buyer. Buyer has full right, authority, power and capacity to execute and
deliver this Agreement and each other Buyer Document and to carry out the
transactions contemplated hereby and thereby. This Agreement and each other
Buyer Document constitutes, or when executed and delivered will constitute, the
legal, valid and binding obligations of Buyer enforceable in accordance with its
respective terms.
3.3 No Conflicts. The execution, delivery and performance by Buyer of
this Agreement and each other Buyer Document does not and will not (a) violate
any provision of the Articles of Incorporation or by-laws of Buyer, as amended
to date, (b) constitute a violation of, or conflict with or result in any breach
of, acceleration of any obligation under, right of termination under, or default
under, any agreement or instrument to which Buyer is a party or by which it is
bound, (c) violate any judgment, decree, order, statute, rule or regulation
applicable to Buyer, (d) require Buyer to obtain any approval, consent or waiver
of, or to make any filing with, any person or entity (governmental or otherwise)
that has not been obtained or made. The officers who execute this Agreement and
the other Buyer Documents contemplated hereby on behalf of Buyer have and shall
have all requisite power to do so in the name of and on behalf of Buyer.
3.4 Brokers. Buyer has not retained any broker or finder or other person
who would have any valid claim against any of the parties to this Agreement for
a commission or brokerage fee in connection with this Agreement or the
transactions contemplated hereby.
SECTION 4. COVENANTS OF SELLER. Seller covenants and agrees that, from
the date hereof until consummation of the transactions contemplated hereby at
the Closing, Seller shall:
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4.1 Access to Premises and Records. From the date hereof until the
consummation of the transactions contemplated hereby at the Closing, Seller
shall give Buyer and its representatives, at reasonable times and with
reasonable prior notice, free access to the properties, books and records of the
Business and to the Assets and will furnish to Buyer and its representatives
such information regarding the Business and the Assets as Buyer or its
representatives may from time to time reasonably request in order that Buyer may
have full opportunity to make a diligent investigation consistent with this
Agreement. The foregoing shall include, without limitation, Buyer and its
representatives conducting, at Buyer's expense, an audit of the accounting books
and records of the Seller. In addition to, and not in limitation of the
foregoing, Seller shall provide Buyer with access to and copies of the records
of all: (a) Accounts Receivable, (b) Subscriber billings, (c) pre-paid accounts,
(d) accounts for which no remuneration is received by Seller and (e) general
reports with respect to each category of service provided by the Business.
4.2 Continuity and Maintenance of Operations of the Business. Except as
to actions which Buyer has been advised and to which Buyer has consented to in
writing, and except as specifically permitted or required by this Agreement,
Seller shall:
(a) Operate the Business in the ordinary course consistent with past
practices, use its commercially reasonable efforts to keep available the
services of the employees who are involved in the operation of the Business, and
use commercially reasonable efforts to preserve any beneficial business
relationships with Subscribers, customers, suppliers and others having business
dealings with Seller relating to the Business;
(b) Use and operate the Assets in a manner consistent with past
practice and maintain the Assets in good operating condition, ordinary wear and
tear excepted;
(c) Maintain adequate inventories of spare Equipment consistent with
past practices;
(d) Maintain insurance upon the Assets in such amounts and types as in
effect on the date of this Agreement as set forth in Schedule 2.6 attached
hereto;
(e) Keep all of its business books, records and files in the ordinary
course of business in accordance with past practices, and provide Buyer with
access thereto upon its reasonable request;
(f) Continue to implement and enforce its procedures for disconnection
and discontinuance of service to Subscribers whose accounts are delinquent in
accordance with those in effect on the date of this Agreement;
(g) Perform and comply in all material respects with the terms of the
Contracts and keep such Contracts in full force and effect; and
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(h) Use its reasonable best efforts to preserve the goodwill of the
Business.
4.3 Negative Covenants. Seller shall not, without the prior written
consent of Buyer:
(a) Sell, transfer, lease, assign or otherwise dispose of, or agree to
sell, transfer, lease, assign or otherwise dispose of, any Assets;
(b) Make any change in the number of shares of its capital stock,
authorized, issued or outstanding or grant any option, warrant or other right to
purchase, or to convert any obligation into, shares of its capital stock;
(c) Amend its Articles of Organization or Operating Agreement;
(d) Enter into any contract or commitment for the acquisition of goods
or services relating to the Business (other than in the ordinary course of
business) or which otherwise obligates Seller to perform in full or in part
beyond the Closing Date;
(e) Hire any new employees or enter into any employment arrangements
or otherwise increase the salary or compensation of any existing employees;
(f) Renegotiate, modify, amend or terminate any Contract;
(g) Create, assume, or permit to exist, or agree to incur, assume or
acquire, any Lien, claim or liability on the Assets;
(h) Make any modifications or changes to the existing rate schedules
or product offerings in effect with respect to the Business;
(i) Offer or employ any sales discounts, free services or other
extraordinary marketing practices or extraordinary promotions outside the
ordinary course of business and not consistent with Seller's past practices;
(j) Take any actions or permit its employees and agents to take any
actions which would materially interfere with or preclude the transactions
contemplated by this Agreement; and
(k) Cause or permit the provision for any new and material pension,
retirement or other employment benefits for employees who perform services in
connection with the conduct of the Business or any material increase in any
existing benefits (other than as required by law).
4.4 Consents. Seller will use its reasonable best efforts to obtain, as
soon as practicable and at its expense, the consent of all third parties under
the Contracts for which the prior approval of such third party is required
pursuant to the terms of the Contract, in the forms
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attached hereto as Exhibit B and Exhibit C; provided, however, that "reasonable
best efforts" for this purpose shall not require Seller to undertake
extraordinary or unreasonable measures to obtain such approvals and consents,
including, without limitation, the initiation or prosecution of legal
proceedings or the payment of fees in excess of customary filing, processing and
documentation fees.
4.5 Notification of Certain Matters. Seller shall promptly notify Buyer
of (i) any fact, event, circumstances or action the existence or occurrence of
which would cause any of Seller's representations or warranties under this
Agreement, or the disclosures in any schedules or exhibits attached hereto, not
to be true in any material respect and (ii) any failure on its part to comply
with or satisfy in any material respect any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement. Seller shall promptly
notify buyer in writing of the assertion, commencement or threat of any claim,
litigation, proceeding or investigation in which Seller is a party or in which
the Assets or Business may be affected and which could reasonably be expected to
be material or which relates to the transactions contemplated hereby.
4.6 Adverse Change. Seller shall promptly notify Buyer in writing of any
materially adverse developments affecting the Assets or the Business which
become known to Seller, including, without limitation, (i) any damage,
destruction or loss (whether or not covered by insurance) materially and
adversely affecting any of the Assets or the Business, (ii) any material notice
of violation, forfeiture or complaint under any material Contract, or (iii)
anything which, if not corrected prior to the Closing Date, would prevent Seller
from fulfilling any condition to Closing described in Section 6 hereof.
4.7 No Solicitation. From the date of this Agreement until the earlier of
(i) October 15, 1999 or (ii) termination of this Agreement pursuant to Section
8.1, Seller shall not, and Seller shall cause its officers, employees,
stockholders, agents and representatives (including, without limitation, any
investment banker, attorney or accountant retained by Seller) and all other
employees who perform services with respect to the operation of the Business not
to, initiate, solicit or encourage, directly or indirectly, any inquiries or the
making of any proposal with respect to the Assets or the Business, or engage in
any negotiations concerning, or provide to any other person any information or
data relating to, the Business, the Assets or Seller for the purpose of, or have
any discussions with, any person relating to, or otherwise cooperate in any way
with or assist or participate in, facilitate or encourage, any inquiries or the
making of any proposal which constitutes, or may reasonably be expected to lead
to, any effort or attempt by any other person to seek or effect a transaction,
or enter into a transaction with any person or persons, other than Buyer,
concerning the possible sale of the Assets or Business, or the capital stock of
Seller. Seller shall promptly inform Buyer of any such inquiries or proposals
and provide all pertinent documentation related thereto.
4.8 Cooperation. Seller shall use its best efforts to take all steps
within its power and will cooperate with Buyer to cause to be fulfilled those of
the conditions to Buyer's obligations to consummate the transactions
contemplated by this Agreement that are dependent upon its
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actions, and to execute and deliver such instruments and take such other
reasonable actions as may be necessary or appropriate in order to carry out the
intent of this Agreement and consummate the transactions contemplated hereby.
Without limiting the foregoing, Seller shall cooperate with all reasonable
requests of Buyer and its counsel in connection with Buyer's due diligence
investigation of the Business and Assets.
4.9 Expenses. Seller shall bear its own expenses incurred in connection
with the negotiation and preparation of this Agreement and in connection with
all obligations required to be performed by it under this Agreement.
4.10 Financial Information. Seller shall, as promptly as practical after
such information becomes available, deliver to Buyer copies of Seller's monthly
unaudited financial statements, prepared in accordance with the standards set
forth in Section 2.11 and Schedule 2.11, in form and presentation as is
reasonably acceptable to Buyer.
4.11 Consummation of Agreement. Subject to the provisions of Section 8 of
this Agreement: (a) Seller shall use its reasonable best efforts to fulfill and
perform all conditions and obligations on its part to be fulfilled and performed
under this Agreement, and to cause the transactions contemplated by this
Agreement to be fully carried out on or before October 15, 1999; and (b) Seller
shall not take any action or omit to take any action that would or could
reasonably be expected to (i) result in any of the representations and
warranties of Seller being or becoming untrue in any respect that would cause
Section 6.1 of this Agreement not to be satisfied, (ii) result in any conditions
to Closing set forth in Section 6 of this Agreement not to be satisfied, or
(iii) result in a material violation of any provision of this Agreement.
4.12 Confidentiality. Seller agrees that it and its representatives will
hold in strict confidence, and will not use, any confidential or proprietary
data or information ("Confidential Information") obtained from Buyer with
respect to its business or financial condition except for the purpose of
evaluating, negotiating and completing the transactions contemplated hereby.
Information generally known in Buyer's industry or which has been disclosed to
Seller by third parties which have a right to do so shall not be deemed
confidential or proprietary information for purposes of this Agreement. For
purposes of this Section 4.12, Confidential Information shall include financial
information of Buyer and its affiliates, information with respect to current or
future acquisition targets (including, but not limited to, transaction terms),
new lines of business Buyer or its affiliates may engage in now or in the
future, information with respect to current or potential arrangements with
vendors, affinity groups, resellers or any other group Buyer or its affiliates
may partner with, pricing strategies, new product development, and
organizational changes of Buyer or its affiliates. If the transactions
contemplated by this Agreement are not consummated, Seller will return, and
cause its respective officers, directors, agents and representatives to return,
to Buyer (or certify that they have destroyed) all copies of such data and
information made available to Seller (and its officers, directors, agents and
representatives) in connection with the transaction.
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4.13 Public Announcements. All press releases, filings and other public
announcements concerning the transactions contemplated hereby will be subject to
review and approval by Seller, on the one hand, and Buyer, on the other hand,
such approval not to be unreasonably withheld. Such approval shall not be
required if the party issuing such release, filing or public announcement
reasonably believes, based on advice of counsel, that it is required by law to
do so, but in any such case, all reasonable efforts shall be made to consult
with the other party in advance of such release, filing or announcement and to
provide the other party with the content thereof, the reasons the release,
filing or announcement is required by law and the time and place that such
release, filing or announcement will be made.
SECTION 5. COVENANTS OF BUYER. Buyer covenants and agrees that, from the
date hereof until consummation of the transactions contemplated hereby at the
Closing, Buyer shall:
5.1 Cooperation. Buyer shall use its reasonable best efforts to take all
steps within its power and will cooperate with Seller, to cause to be fulfilled
those of the conditions to Seller's obligations to consummate the transactions
contemplated by this Agreement that are dependent upon its actions and to
execute and deliver such instruments and take such other reasonable actions as
may be necessary or appropriate in order to carry out the intent of this
Agreement and consummate the transactions contemplated hereby.
5.2 Notification of Certain Matters. Buyer shall promptly notify Seller
of any fact, event, circumstances or action the existence or occurrence of which
would cause Buyer's representations or warranties under this Agreement not to be
true in any material respect.
5.3 Expenses. Buyer shall bear its own expenses incurred in connection
with the negotiation and preparation of this Agreement and in connection with
all obligations required to be performed by it under this Agreement.
5.4 Consummation of Agreement. Subject to the provisions of Section 8 of
this Agreement: (a) Buyer shall use its reasonable best efforts to fulfill and
perform all conditions and obligations on its part to be fulfilled and performed
under this Agreement, and to cause the transactions contemplated by this
Agreement to be fully carried out on or before October 15, 1999; and (b) Buyer
shall not take any action or omit to take any action that would or could
reasonably be expected to (i) result in any of the representations and
warranties of Buyer set forth in this Agreement being or becoming untrue in any
respect that would cause Section 7.1 of this Agreement not to be satisfied, (ii)
result in any condition to the Closing set forth in Section 7 of this Agreement
not being satisfied, or (iii) result in a material violation of any provision of
this Agreement.
5.5 Confidentiality. Buyer agrees that it and its representatives will
hold in strict confidence, and will not use, any confidential or proprietary
data or information obtained from Seller with respect to its business or
financial condition except for the purpose of evaluating, negotiating and
completing the transactions contemplated hereby. Information generally known in
Seller's industry or which has been disclosed to Buyer by third parties which
have a right to
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do so shall not be deemed confidential or proprietary information for purposes
of this Agreement. If the transactions contemplated by this Agreement are not
consummated, Buyer will return, and cause its respective officers, directors,
agents and representatives to return, to Seller (or certify that they have
destroyed) all copies of such data and information made available to Buyer (and
its officers, directors, agents and representatives) in connection with the
transaction.
5.6 Public Announcements. All press releases, filings and other public
announcements concerning the transactions contemplated hereby will be subject to
review and approval by Seller, on the one hand, and Buyer, on the other hand,
such approval not to be unreasonably withheld. Such approval shall not be
required if the party issuing such release, filing or public announcement
reasonably believes, based on advice of counsel, that it is required by law to
do so, but in any such case, all reasonable efforts shall be made to consult
with the other party in advance of such release, filing or announcement and to
provide the other party with the content thereof, the reasons the release,
filing or announcement is required by law and the time and place that such
release, filing or announcement will be made.
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATION OF BUYER. Buyer's obligation to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions, unless otherwise waived by Buyer in writing:
6.1 Accuracy of Representations and Warranties. The representations and
warranties of Seller contained in this Agreement shall be true and correct in
all material respects at the Closing Date with the same effect as though made at
such time and the representations and warranties of Seller contained in this
Agreement which are qualified by materiality shall be true and correct in all
respects as of the Closing Date with the same effect as though made at such
time.
6.2 Performance of Agreements and Deliveries. Seller shall have performed
in all material respects all of its covenants, agreements and obligations under
this Agreement which are to be performed or complied with by Seller prior to or
upon the Closing Date and shall have delivered all documents and items required
to be delivered at or prior to the Closing, including, without limitation:
(a) A certificate, dated the Closing Date, from the Manager of Seller
to the effect that the conditions set forth in Sections 6.1 and 6.2 have been
satisfied;
(b) A certificate, dated the Closing Date, from Seller's Manager as to
the charter, by-laws, authority and the incumbency of all officers executing the
Seller Documents on behalf of Seller;
(c) A certified copy of Seller's Articles of Organization from the
Secretary of State of the State of Ohio;
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(d) An Amendment to the Articles of Organization and any other
required documentation, which effect a change of Seller's name;
(e) A certificate of good standing from the Secretary State of the
State of Ohio; and
(f) Such other certificates and instruments reasonably requested by
Buyer.
6.3 No Material Adverse Effect. None of the schedules, documents or other
information to be furnished by Seller to Buyer pursuant to this Agreement, shall
disclose any fact, circumstance or matter, or any change in or development in
connection with any matter disclosed in the original schedules or documents
previously delivered by Seller to Buyer, which has, or could reasonably be
expected to have, a material adverse effect on the Assets or on the Business;
and there shall have been no other changes or developments affecting either the
Assets or the Business since the Base Balance Sheet Date which have, or could
reasonably be expected to have, a material adverse effect on the Assets or
Business.
6.4 Asset Transfer. Seller shall have delivered to Buyer the following
instruments of transfer and assignment in accordance with the provisions hereof,
transferring to Buyer all of Seller's right, title and interest in and to the
Assets, free and clear of all Liens:
(a) A Bill of Sale in the form attached hereto as Exhibit D;
(b) An Assignment and Assumption Agreement in the form attached hereto
as Exhibit E;
(c) An Assignment of Patents and Trademarks in the form attached
hereto as Exhibit F;
(d) An Assignment of Internet Domain Name in the form attached hereto
as Exhibit G; and
(e) Such other instruments of transfer reasonably requested by Buyer.
6.5 Assignment of Contracts and Authorizations; Approvals. All Contracts
shall have been duly and validly assigned to Buyer by Seller, and all consents
and approvals required in connection with the consummation of the transactions
contemplated hereby under any Contract or Authorization or otherwise shall have
been obtained in form and substance satisfactory to Buyer and without conditions
materially and adversely affecting Buyer and which do not require Buyer to pay
money to any party to any such Contract or Authorization in excess of amounts
required to be so paid pursuant to the terms and conditions thereof. All such
Contracts and Authorizations shall remain in full force and effect and shall not
have been amended, modified or repudiated in any material respect by either
party thereto. Neither Seller nor, to the knowledge of Seller, Owners and the
Primary Principals, the other party thereto, shall have breached or
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defaulted under any Contract or Authorization. Seller shall not have received
notice of or have knowledge of any fact which could result in the termination,
repudiation or breach of any Contract or Authorization.
6.6 Escrow Agreement. Seller, Owners and the Principals shall have
executed and delivered to Buyer the Escrow Agreement.
6.7 Non-competition Agreement. Seller, Owners and the Principals shall
have executed and delivered to Buyer a Non-Competition Agreement in
substantially the form attached hereto as Exhibit H.
6.8 Release of Liens. Seller shall have obtained and delivered to Buyer
at or prior to the Closing instruments (including payoff letters, bills of sale
and UCC-3 termination statements) releasing any and all Liens on the Assets.
6.9 Revenues. Seller shall have delivered to Buyer Recurring Revenues for
the business which are equal to or greater than $90,000.00 as of the Closing
Date, and Seller shall have furnished Buyer with a certificate, dated as of the
Closing Date, to that effect. For purposes hereof, "Recurring Revenues" shall
mean revenues of Seller from recurring sources, calculated by multiplying the
number of Subscribers as of the Closing Date by the average monthly rate in
effect for such Subscribers, by type, excluding any one-time set-up fees and
other ancillary charges.
6.10 Subscribers. Seller shall have delivered to Buyer at least 2,700
Dial-up Subscribers, 80 Dedicated Subscribers and 370 Web-hosting/Domain-hosting
Subscribers, and Seller shall have furnished Buyer with a certificate, dated as
of the Closing Date, to that effect.
6.11 Due Diligence. The results of Buyer's due diligence review of Seller
and its assets, liabilities and operations shall be reasonably satisfactory to
Buyer.
6.12 Opinion of Seller's Counsel. Buyer shall have received the
opinion or opinions of Burreson, Bradford & Hill, counsel for Seller, dated the
Closing Date, substantially in the form of Exhibit I attached hereto.
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATION OF SELLER. The obligation
of Seller to consummate the transactions contemplated by this Agreement is
subject to the satisfaction, on or prior to the Closing Date, of the following
conditions, unless waived by Seller in writing:
7.1 Accuracy of Representations and Warranties. The representations and
warranties of Buyer contained in this Agreement shall be true and correct in all
material respects at the Closing Date with the same effect as though made at
such time, and the representations and warranties of Buyer contained in this
Agreement which are qualified by materiality shall be true
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and correct in all respects as of the Closing Date with the same effect as
though made at such time.
7.2 Performance of Agreement and Deliveries. Buyer shall have performed
in all material respects all of its covenants, agreements and obligations under
this Agreement which are to be performed or complied with by Buyer prior to or
upon the Closing Date and shall have delivered all documents and items required
to be delivered at or prior to the Closing, including, without limitation:
(a) A certificate, dated the Closing Date, from the President of Buyer
to the effect that the conditions set forth in Sections 7.1 and 7.2 have been
satisfied;
(b) A certificate, dated the Closing Date, from Buyer's Assistant
Secretary as to the Articles of Incorporation, by-laws, authority and the
incumbency of all officers executing the Buyer Documents on behalf of Buyer;
(c) A certified copy of Buyer's Articles of Incorporation from the
Secretary of State of the State of Michigan; and
(d) A certificate of good standing from the Secretary of State of the
State of Michigan.
7.3 Escrow Agreement. Buyer shall have executed and delivered to Seller
the Escrow Agreement.
SECTION 8. TERMINATION.
8.1 Events of Termination. This Agreement and the transactions
contemplated by this Agreement may be terminated at any time prior to the
Closing:
(a) By the mutual written consent of Buyer and Seller.
(b) By Seller, if it is not in breach or default hereunder:
(i) if any representation or warranty of Buyer made herein is
untrue in any material respect and such breach is not cured within
thirty (30) days of Buyer's receipt of a notice from Seller that such
breach exists or has occurred;
(ii) if Buyer shall have defaulted in any material respect in the
performance of any material obligation under this Agreement and such
breach is not cured within thirty (30) days of Buyer's receipt of a
notice from Seller that such default exists or has occurred; or
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(iii) if the conditions to Seller's obligations to consummate the
Closing as set forth in Section 7 cannot reasonably be satisfied or
performed on or before October 15, 1999 (unless such failure of
satisfaction, non-compliance or non-performance is the result,
directly or indirectly, of any action or failure to act on the part of
Seller).
(c) by Buyer, if it is not in breach or default hereunder:
(i) if any representation or warranty of Seller made herein is
untrue in any material respect and such breach is not cured within
thirty (30) days of Seller's receipt of a notice from Buyer that such
breach exists or has occurred;
(ii) if Seller shall have defaulted in any material respect in
the performance of any material obligation under this Agreement and
such breach is not cured within thirty (30) days of Seller's receipt
of a notice from Buyer that such default exists or has occurred; or
(iii) if the conditions to Buyer's obligations to consummate the
Closing as set forth in Section 6 cannot reasonably be satisfied or
performed on or before October 15, 1999 (unless such failure of
satisfaction, non-compliance or non-performance is the result directly
or indirectly of any action or failure to act on the part of Buyer).
8.2 Manner of Exercise. In the event of the termination of this Agreement
by either Buyer or Seller pursuant to Section 8.1 notice thereof shall forthwith
be given to the other party in accordance with the provisions set forth in
Section 11 hereto and this Agreement shall terminate and the transactions
contemplated hereunder shall be abandoned without further action by Buyer or
Seller.
8.3 Effect of Termination; Liabilities. In the event of the termination
of this Agreement pursuant to Section 8.1 and prior to the Closing, all
obligations of the parties hereunder (other than pursuant to Sections 4.7, 4.8,
4.12 and 5.5 hereof) shall terminate, and neither Seller nor Buyer shall have
any further liability hereunder, including for losses, liabilities, obligations,
damages, deficiencies, actions, suits, proceedings, demands, assessments,
orders, judgments, costs and expenses (including attorneys' fees) of any kind
whatsoever; except upon termination of this Agreement pursuant to Sections
8.1(c)(i) and 8.1(c)(ii), Buyer shall be entitled to any remedy which it may
have, whether at law or in equity.
SECTION 9. POST-CLOSING COVENANTS; SURVIVAL.
9.1 Use of Trade Names. After the Closing Date, neither Seller, nor any
person controlling, controlled by or under common control with Seller will for
any reason, directly or indirectly, for itself or any other person, (a) use the
names "ChoiceDotNet," "Choice.net" or
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(b) use or disclose any trade secrets, confidential information, know-how,
proprietary information or other intellectual property of Seller transferred
pursuant to this Agreement.
9.2 Post-Closing Transitional Matters. For a period of ninety (90) days
following the Closing, Seller shall provide, without additional cost to Buyer,
such assistance as is reasonably requested by Buyer in order to effect an
orderly transition in the ownership and operation of the Assets.
9.3 Access to Records. For a period of one year following the date
hereof, Seller shall give Buyer and its representatives, at reasonable times and
with reasonable prior notice, free access to the books and records of the
Business and will furnish to Buyer and its representatives such information
regarding the Business and the Assets as Buyer or its representatives may from
time to time reasonably request.
9.4 Survival. All representations, warranties, covenants, agreements and
indemnities contained in this Agreement, or in any schedule, exhibit,
certificate, agreement, document or statement delivered pursuant hereto, are
material, shall be deemed to have been relied upon by the parties and, shall
survive the Closing for a period of two (2) years (the "Expiration Date")
regardless of any investigation conducted by or knowledge of any party hereto.
SECTION 10. INDEMNIFICATION.
10.1 Indemnification by Seller, Owners and the Principals. Seller, Owners
and each of the Principals hereby agrees, jointly and severally, to indemnify
and hold harmless Buyer, its affiliates and its and their respective directors,
officers, stockholders, partners, members, employees, and agents (individually,
a "Buyer Indemnified Party" and collectively, "Buyer Indemnified Parties"),
against and in respect of all losses, liabilities, obligations, damages,
deficiencies, actions, suits, proceedings, demands, assessments, orders,
judgments, costs and expenses (including the reasonable fees, disbursements and
expenses of attorneys and consultants) of any kind or nature whatsoever, but net
of the proceeds from any insurance policies or other third party reimbursement
for such loss, to the extent sustained, suffered or incurred by or made against
any Buyer Indemnified Party, to the extent based upon, arising out of or in
connection with: (a) any breach of any representation or warranty made by
Seller, Owners and the Primary Principals in this Agreement or in any schedule,
exhibit, certificate, agreement or other instrument delivered pursuant to this
Agreement; (b) any breach of any covenant or agreement made by Seller in this
Agreement or in any schedule, exhibit, certificate, financial statement,
agreement or other instrument delivered pursuant to this Agreement; (c) any
claim made by any person or entity which relates to the operation of the Assets
or the Business which arises in connection with or on the basis of events, acts,
omissions, conditions or any other state of facts occurring on or existing
before the Closing Date; and (d) any claim which arises in connection with any
liability or obligation of Seller other than the Assumed Liabilities.
Notwithstanding the foregoing, subsections (a) and (b) above shall survive for a
period of two (2) years from the Closing Date, and subsections (c) and (d) above
shall survive for a period of five (5) years from the Closing Date.
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10.2 Indemnification by Buyer. Buyer agrees to indemnify and hold
harmless Seller and its officers, directors, stockholders, employees and agents
(individually, a "Seller Indemnified Party" and collectively, "Seller
Indemnified Parties") at all times against and in respect of all losses,
liabilities, obligations, damages, deficiencies, actions, suits, proceedings,
demands, assessments, orders, judgments, costs and expenses (including the
reasonable fees, disbursements and expenses of attorneys and consultants), of
any kind or nature whatsoever, to the extent sustained, suffered or incurred by
or made against any Seller Indemnified Party, to the extent based upon, arising
out of or in connection with: (a) any breach of any representation or warranty
made by Buyer in this Agreement or in any schedule, exhibit, certificate,
agreement or other instrument delivered pursuant to this Agreement; (b) any
breach of any covenant or agreement made by Buyer in this Agreement or in any
schedule, exhibit, certificate, agreement or other instrument delivered pursuant
to this Agreement; (c) any claim made against Seller which relates to, results
from or arises out of Buyer's operation of the Assets or the Business from and
after the Closing Date; and (d) the Assumed Liabilities.
10.3 Notice; Defense of Claims.
(a) Notice of Claims. Promptly after receipt by an indemnified party
of notice of any claim, liability or expense to which the indemnification
obligations hereunder would apply, the indemnified party shall give notice
thereof in writing to the indemnifying party, but the omission to so notify the
indemnifying party promptly will not relieve the indemnifying party from any
liability except to the extent that the indemnifying party shall have been
prejudiced as a result of the failure or delay in giving such notice. Such
notice shall state the information then available regarding the amount and
nature of such claim, liability or expense and shall specify the provision or
provisions of this Agreement under which the liability or obligation is
asserted.
(b) Third Party Claims. With respect to third party claims, if within
twenty (20) days after receiving the notice described in clause (a) above the
indemnifying party gives (i) written notice to the indemnified party stating
that (A) it would be liable under the provisions hereof for indemnity in the
amount of such claim if such claim were successful and (B) that it disputes and
intends to defend against such claim, liability or expense at its own cost and
expense and (ii) provides reasonable assurance to the indemnified party that
such claim will be promptly paid in full if required, then counsel for the
defense shall be selected by the indemnifying party (subject to the consent of
the indemnified party which consent shall not be unreasonably withheld) and the
indemnified party shall not be required to make any payment with respect to such
claim, liability or expense as long as the indemnifying party is conducting a
good faith and diligent defense at its own expense; provided, however, that the
assumption of defense of any such matters by the indemnifying party shall relate
solely to the claim, liability or expense that is subject or potentially subject
to indemnification. The indemnifying party shall have the right, with the
consent of the indemnified party, which consent shall not be unreasonably
withheld, to settle all indemnifiable matters related to claims by third parties
which are susceptible to being settled provided the indemnifying parties'
obligation to indemnify the indemnified party therefor will be fully satisfied.
The indemnifying party shall keep the indemnified party apprised of the status
of the claim, liability or expense and any resulting suit,
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proceeding or enforcement action, shall furnish the indemnified party with all
documents and information that the indemnified party shall reasonably request
and shall consult with the indemnified party prior to acting on major matters,
including settlement discussions. Notwithstanding anything herein stated, the
indemnified party shall at all times have the right to fully participate in such
defense at its own expense directly or through counsel; provided, however, if
the named parties to the action or proceeding include both the indemnifying
party and the indemnified party and representation of both parties by the same
counsel would be inappropriate under applicable standards of professional
conduct, the expense of separate counsel for the indemnified party shall be paid
by the indemnifying party. If no such notice of intent to dispute and defend is
given by the indemnifying party, or if such diligent good faith defense is not
being or ceases to be conducted, the indemnified party shall, at the expense of
the indemnifying party, undertake the defense of (with counsel selected by the
indemnified party), and shall have the right to compromise or settle (exercising
reasonable business judgment), such claim, liability or expense. If such claim,
liability or expense is one that by its nature cannot be defended solely by the
indemnifying party, then the indemnified party shall make available all
information and assistance that the indemnifying party may reasonably request
and shall cooperate with the indemnifying party in such defense.
(c) Non-Third Party Claims. With respect to non-third party claims,
if within twenty (20) days after receiving the notice described in clause (a)
above the indemnifying party does not give written notice to the indemnified
party that it contests such indemnity, the amount of indemnity payable for such
claim shall be as set forth in the indemnified party's notice. If the
indemnifying party provides written notice to the indemnified party within such
20-day period that it contests such indemnity, the parties shall attempt in good
faith to reach an agreement with regard thereto within thirty (30) days of
delivery of the indemnifying party's notice. If the parties cannot reach
agreement within such 30-day period, the matter may be submitted by either party
for binding arbitration in accordance with the provisions of Section 12.11
hereof.
SECTION 11. NOTICES. All notices and other communications required to be given
hereunder, or which may be given pursuant or relative to the provisions hereof,
shall be in writing and shall be deemed to have been given when delivered in
hand or mailed, postage prepaid, by first class United States mail, certified
return receipt requested as follows:
If to Seller, Owners
and Principals: Choice.Net, Inc.
345 Glenrose Lane
Cincinnati, OH 45244
Attn: J. Michael Donovan
With a copy to: Burreson, Bradford & Hill
40 S. Third Street
Batavia, OH 45103
Attn: John C. Korfhagen
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If to Buyer: Voyager Information Networks, Inc.
4660 S. Hagadorn Road
Suite 320
East Lansing, MI 48823
Attn: Christopher Torto
With a copy to: Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Attn: David F. Dietz, P.C.
or to such other address of which any party may notify the other
parties as provided above. Notices shall be effective as of the date of such
delivery or mailing.
SECTION 12. MISCELLANEOUS.
12.1 Assignability; Binding Effect. This Agreement shall not be
assignable by Buyer or Seller except with the written consent of the other,
except that Buyer may assign its rights hereunder either (a) to any affiliate of
Buyer or its owners, (b) as a result of any merger, reorganization or other
consolidation or sale, or (c) in connection with the granting of a security
interest to its senior lenders. This Agreement shall be binding upon and shall
inure to the benefit of, the parties hereto and their respective successors, and
assigns.
12.2 Headings. The subject headings used in this Agreement are included
for purposes of convenience only and shall not affect the construction or
interpretation of any of its provisions.
12.3 Amendments; Waivers. This Agreement may not be amended or modified,
nor may compliance with any condition or covenant set forth herein be waived,
except by a writing duly and validly executed by Buyer and Seller or, in the
case of a waiver, the party waiving compliance. No delay on the part of any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any waiver on the part of any party of any such right,
power or privilege, or any single or partial exercise of any such right, power
or privilege, preclude any further exercise thereof or the exercise of any other
such right, power or privilege.
12.4 Bulk Sales Law. Buyer hereby waives compliance by Seller of any
applicable bulk sales law and Seller agrees, to make full and timely payment
when due of all amounts owed by such Seller to its creditors. Seller agrees to
indemnify and hold Buyer harmless from, and reimburse Buyer for, any loss, cost,
expense, liability or damage (including reasonable counsel fees and
disbursements and expenses) which Buyer may suffer or incur by virtue of the
non-compliance by Seller with such laws.
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12.5 Entire Agreement. This Agreement, together with the schedules and
exhibits hereto, constitutes the entire agreement between the parties with
respect to the subject matter hereof and supersedes and cancels any and all
prior or contemporaneous arrangements, understandings and agreements between
them relating to the subject matter hereof.
12.6 Severability. In the event that any provision or any portion of any
provision of this Agreement shall be held to be void or unenforceable, then the
remaining provisions of this Agreement (and the remaining portion of any
provision held to be void or unenforceable in part only) shall continue in full
force and effect.
12.7 Governing Law. This Agreement and the transactions contemplated
hereby shall be governed and construed by and enforced in accordance with the
laws of the State of Michigan, without regard to conflict of laws principles.
12.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which shall
constitute the same instrument.
12.9 Expenses. Each party shall pay its own expenses incident to the
negotiation, preparation and performance of this Agreement and the transactions
contemplated hereby, including all fees and expenses of its counsel and
accountants for all activities of such counsel and accountants undertaken
pursuant to this Agreement, whether or not the transactions contemplated hereby
are consummated.
12.10 Remedies. It is specifically understood and agreed that certain
breaches of this Agreement will result in irreparable injury to the parties
hereto, that the remedies available to the parties at law alone will be an
inadequate remedy for such breach, and that, in addition to any other legal or
equitable remedies which the parties may have, a party may enforce its rights by
an action for specific performance and the parties expressly waive the defense
that a remedy in damages will be adequate.
12.11 Dispute Resolution. Any dispute arising out of or relating to this
Agreement or the breach, termination or validity hereof shall be finally settled
solely and exclusively by arbitration conducted expeditiously in accordance with
the CPR Institute for Dispute Resolution Rules for Nonadministered Arbitration
of Business Disputes (the "CPR Rules"). The CPR Institute for Dispute
Resolution shall appoint a neutral advisor from its National CPR Panel. The
arbitration shall be governed by the United States Arbitration Act, 9 U.S.C.
(S)(S)1-16, and judgment upon the award rendered by the arbitrators may be
entered by any court having jurisdiction thereof. The place of arbitration
shall be Detroit, Michigan.
Such proceedings shall be administered by the neutral advisor in accordance
with the CPR Rules as he/she deems appropriate, however, such proceedings shall
be guided by the following agreed upon procedures:
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(a) Mandatory exchange of all relevant documents, to be accomplished
within forty-five (45) days of the initiation of the procedure;
(b) No other discovery;
(c) Hearings before the neutral advisor which shall consist of a
summary presentation by each side of not more than three hours; such hearings to
take place in one or two days at a maximum; and
(d) Decision to be rendered not later than ten (10) days following
such hearings.
Each of the parties hereto (a) hereby unconditionally and irrevocably
submits to the jurisdiction of any United States District Court of competent
jurisdiction located in the State of Michigan for the purpose of enforcing the
award or decision in any such proceeding and (b) hereby waives, and agrees not
to assert in any civil action to enforce the award, any claim that it is not
subject personally to the jurisdiction of the above-named court, that its
property is exempt or immune from attachment or execution, that the civil action
is brought in an inconvenient forum, that the venue of the civil action is
improper or that this Agreement or the subject matter hereof may not be enforced
in or by such court, and (c) hereby waives and agrees not to seek any review by
any court of any other jurisdiction which may be called upon to grant an
enforcement of the judgment of any such court. Each of the parties hereto
hereby consents to service of process by registered mail at the address to which
notices are to be given. Each of the parties hereto agrees that its submission
to jurisdiction and its consent to service of process by mail is made for the
express benefit of the other parties hereto. Final judgment against any party
hereto in any such action, suit or proceeding may be enforced in other
jurisdictions by suit, action or proceeding on the judgment, or in any other
manner provided by or pursuant to the laws of such other jurisdiction; provided,
however, that any party may at its option bring suit, or institute other
judicial proceedings, in any state or federal court of the United States or of
any country or place where the other parties or their assets, may be found.
Notwithstanding the foregoing, the parties may enforce their rights under
this Agreement in accordance with Section 12.10.
12.12 Third Party Rights. This Agreement is for the benefit of
the parties hereto and is not entered into for the benefit of, and shall not be
construed to confer any benefit upon, any other party or entity.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, Seller, Owners, Principals and Buyer have caused this
Asset Purchase Agreement to be executed as of the date first above written.
SELLER:
CHOICEDOTNET, L.L.C.
By: /s/ Choicedotnet, L.L.C.
------------------------------------------
Name:
Title:
OWNERS:
CHOICE.NET, INC.
By: /s/ Choice.net, Inc.
------------------------------------------
Name:
Title:
DOTNET, LTD.
By: /s/ Dotnet, Ltd.
------------------------------------------
Name:
Title:
PRINCIPALS:
/s/ J. Michael Donovan
----------------------------------------------
J. Michael Donovan
/s/ Andrew Larkins
----------------------------------------------
Andrew Larkins
/s/ Ronald E. McKee
----------------------------------------------
Ronald E. McKee
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/s/ John B. Reynolds
----------------------------------------------
John B. Reynolds
/s/ Aaron Larkins
----------------------------------------------
Aaron Larkins
/s/ Alan Larkins
----------------------------------------------
Alan Larkins
/s/ Nathan Fultz
----------------------------------------------
Nathan Fultz
/s/ David E. Larkins
----------------------------------------------
David E. Larkins
DAVID E. LARKINS CHARITABLE REMAINDER
UNITRUST U/A SEPTEMBER 23, 1999
By: /s/ David E. Larkins Charitable
Remainder Unitrust U/A
September 23, 1999
------------------------------------------
Name:
Title:
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BUYER:
VOYAGER INFORMATION NETWORKS, INC.
By: /s/ Dennis J. Stepaniak
-----------------------
Name: Dennis J. Stepaniak
Title: Chief Financial Officer
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LIST OF EXHIBITS AND SCHEDULES
SCHEDULES
- ---------
Exhibit A - Form of Escrow Agreement
Exhibit B - Form of Consent (for contracts)
Exhibit C - Form of Consent (for leases)
Exhibit D - Form of Bill of Sale
Exhibit E - Form of Assignment and Assumption Agreement
Exhibit F - Form of Assignment of Patents and Trademarks
Exhibit G - Form of Assignment of Internet Domain Name
Exhibit H - Form of Non-Competition Agreement
Exhibit I - Form of Opinion of Seller's Counsel
Schedule 1.1(a) Equipment
Schedule 1.1(b) Contracts
Schedule 1.1(c) Intellectual Property
Schedule 1.1(d) Licenses and Authorizations
Schedule 1.1(e) Accounts Receivable
Schedule 1.2(a) Excluded Assets
Schedule 1.2(b) Excluded Contracts
Schedule 1.2(c) Insurance Exclusions
Schedule 1.2(d) Excluded Tax Items
Schedule 1.6(b) Estimated Adjustment Statement
Schedule 1.7 Allocation of Purchase Price
Schedule 2.4 Taxes
Schedule 2.6 Insurance
Schedule 2.10 Employees; Labor Matters
Schedule 2.11 Financial Statements
Schedule 2.14 Approvals; Consents
Schedule 2.16(a) Subscribers
Schedule 2.16(b) Complimentary Accounts
Schedule 2.16(c) Disconnection Policy
Schedule 2.19 Banking Relations
Schedule 2.20 Intellectual Property
Schedule 2.22 Permits, Approvals
Schedule 2.23 Affiliated Transactions
Schedule 2.24 Employee Benefits
Schedule 2.25 Environmental Matters
Schedule 2.27 Indebtedness
Schedule 2.28 Agreements
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EXHIBIT 2.4
EXECUTION COPY
ASSET PURCHASE AGREEMENT
Agreement made as of December 14, 1999 by and among Voyager Information
Networks, Inc., a Michigan corporation ("Buyer"), Wholesale ISP, Inc., an Ohio
corporation ("Seller") and Todd Myers and Brian Krabach (collectively, the
"Principals").
WHEREAS, subject to the terms and conditions hereof, Seller desires to
sell, transfer and assign to Buyer, and Buyer desires to purchase from Seller,
all of the properties, rights and assets used or useful in connection with the
retail Internet service business of Seller (the "Business").
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
SECTION 1. PURCHASE AND SALE OF ASSETS.
1.1 Sale of Assets. Upon the terms and subject to the conditions set
forth in this Agreement, and the performance by the parties hereto of their
respective obligations hereunder, Seller agrees to sell, assign, transfer and
deliver to Buyer, and Buyer agrees to purchase from Seller, all of Seller's
right, title and interest in and to all of the properties, assets and business
of the Business of every kind and description, tangible and intangible, real,
personal or mixed, and wherever located, but excluding the Excluded Assets (as
defined in Section 1.2 below), including, without limitation, the following:
(a) Equipment. All free standing kiosks, servers, routers, modems,
computers, electronic devices, test equipment and all other fixed assets,
equipment, furniture, fixtures, leasehold improvements, parts, accessories,
inventory, office materials, software, supplies and other tangible personal
property of every kind and description owned by Seller and used or held for use
in connection with the Business, in each case together with any additions
thereto between the date of this Agreement and the Closing Date (as defined
below), all as set forth on Schedule 1.1(a) attached hereto (collectively,
"Equipment");
(b) Contracts. All of the rights of Seller under and interest of
Seller in and to all contracts relating to the Business (other than the Excluded
Contracts (as defined below)), including, without limitation, original contracts
for the provision of Internet connectivity, dedicated service, web-hosting, web-
domain, dial-up services, web-development and Internet commerce, all leases with
respect to real property and all co-location agreements, a true, correct and
complete list of which contracts is attached hereto as Schedule 1.1(b)
(collectively, the "Contracts");
(c) Intellectual Property. All of Seller's Intellectual Property (as
defined in Section 2.20), as set forth on Schedule 1.1(c) attached hereto;
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(d) Licenses and Authorizations. All rights associated with the
licenses, permits, easements, registrations and authorizations issued or granted
to Seller by any governmental authority with respect to the operation of the
Business, including, without limitation, those licenses and authorizations
listed on Schedule 1.1(d) attached hereto, and all applications therefor,
together with any renewals, extensions, or modifications thereof and additions
thereto;
(e) Current Assets; Accounts Receivable. All Current Assets of Seller
(as such term is hereinafter defined) and all accounts receivable of Seller
incurred in the ordinary course of business and such accounts receivable are
included on Seller's balance sheet, as determined in accordance with generally
accepted accounting principles ("GAAP"), consistently applied, a complete list
of such accounts receivable is attached hereto as Schedule 1.1(e) ("Accounts
Receivable");
(f) Goodwill. All of the goodwill of Seller in, and the going concern
value of, the Business, and all of the business and customer lists, proprietary
information, and trade secrets related to the Business; and
(g) Records. All of Seller's customer logs, location files and
records, employee records, and other business files and records, in each case
relating to the Business.
The assets, properties and business of Seller being sold to and purchased
by Buyer under this Section 1.1 are referred to herein collectively as the
"Assets."
1.2 Excluded Assets. There shall be excluded from the Assets and retained
by Seller, to the extent in existence on the Closing Date, the following assets
(the "Excluded Assets"):
(a) Other Assets. All other assets of Seller which are not used or
held for use in connection with the Business or otherwise necessary to the
operation of the Business now or after the Closing Date and which are set forth
on Schedule 1.2(a) attached hereto;
(b) Excluded Contracts. All of Seller's right, title and interest in,
to and under the contracts and agreements listed on Schedule 1.2(b) attached
hereto (the "Excluded Contracts");
(c) Insurance. All contracts of insurance (including any cash
surrender value thereof) and all insurance proceeds of settlement and insurance
claims made by Seller on or before the Closing Date as set forth on Schedule
1.2(c) attached hereto;
(d) Tax Items. All claims, rights and interest in and to any refunds
for federal, state or local Taxes (as defined below) for periods prior to the
Closing Date as set forth on Schedule 1.2(d) attached hereto; and
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(e) Corporate Records. All of Seller's corporate and other
organizational records.
1.3 Assumed Liabilities; Excluded Liabilities; Employees.
(a) Assumed Liabilities. Buyer shall, on and as of the Closing Date,
accept and assume, and shall become and be fully liable and responsible for, and
other than as expressly set forth herein Seller shall have no further liability
or responsibility for or with respect to, (i) liabilities and obligations
arising out of events occurring on and after the Closing Date related to Buyer's
ownership of the Assets and Buyer's operation of the Business after the Closing
Date; (ii) all obligations and liabilities of Seller which are to be performed
after the Closing Date arising under the Contracts, including, without
limitation, Seller's obligations to Subscribers under such Contracts for (A)
Subscriber deposits held by Seller as of the Closing Date in the amount for
which Buyer receives a credit pursuant to Section 1.6(a) below, (B) Subscriber
advance payments held by Seller as of the Closing Date for services to be
rendered in connection with the Business in the amount for which Buyer receives
a credit pursuant to Section 1.6(a) below, and (C) the delivery of Internet
connectivity service to Subscribers (whether pursuant to a Contract or
otherwise) after the Closing Date; and (iii) the Current Liabilities (as
hereinafter defined) of Seller ((i), (ii) and (iii) together, the "Assumed
Liabilities"). The assumption of the Assumed Liabilities by Buyer hereunder
shall not enlarge any rights of third parties under contracts or arrangements
with Buyer or Seller or any of their respective affiliates or subsidiaries. No
parties other than Buyer and Seller shall have any rights under this Agreement.
(b) Excluded Liabilities. It is expressly understood that, except for
the Assumed Liabilities, Buyer shall not assume, pay or be liable for any
liability or obligation of Seller of any kind or nature at any time existing or
asserted, whether, known, unknown, fixed, contingent or otherwise, not
specifically assumed herein by Buyer, including, without limitation, any
liability or obligation relating to, resulting from or arising out of (i) the
Excluded Assets, including, without limitation, the Excluded Contracts, (ii) the
employees of the Business, including, without limitation, any obligation to
provide any amounts due to the employees under any pension, profit sharing or
similar plan, any bonus or other compensation plan, or related to vacation or
other similar employee benefits, or arising as a result of the transactions
contemplated hereby or (iii) any fact existing or event occurring prior to the
Closing Date or relating to the operation of the Business prior to the Closing
Date. The liabilities which are not assumed by Buyer under this Agreement are
hereinafter sometimes referred to as the "Excluded Liabilities."
(c) Employees, Wages and Benefits.
(i) Seller shall terminate all of its employees effective as of
the Closing Date and Buyer shall not assume or have any obligations or
liabilities with respect to such employees or such terminations, including,
without limitation, any severance obligation. Seller acknowledges and
agrees that Buyer has the right to interview and discuss employment terms
and issues with such employees prior to and after the Closing.
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(ii) Buyer specifically reserves the right, on or after the
Closing Date, to employ or reject any of Seller's employees or other
applicants in its sole and absolute discretion; provided that Buyer shall
provide to Seller a list of employees to whom Buyer intends to offer
employment at least three (3) business days prior to the Closing. Nothing
in this Agreement shall be construed as a commitment or obligation of Buyer
to accept for employment, or otherwise continue the employment of, any of
Seller's employees, and no employee shall be a third-party beneficiary of
this Agreement.
(iii) Seller shall pay all wages, salaries, commissions, and the
cost of all fringe benefits provided to its employees which shall have
become due for work performed as of and through the day preceding the
Closing Date, and Seller shall collect and pay all Taxes in respect of such
wages, salaries, commissions and benefits.
(iv) Seller acknowledges and agrees that Buyer shall not acquire
any rights or interests of Seller in, or assume or have any obligations or
liabilities of Seller under, any benefit plans maintained by, or for the
benefit of any employees of Seller prior to the Closing Date, including,
without limitation, obligations for severance or vacation accrued but not
taken as of the Closing Date.
1.4 The Closing. The transactions contemplated by this Agreement shall
take place at a closing (the "Closing") to be held at 10:00 a.m., local time, at
the offices of McHugh, DeNune & McCarthy, Ltd. on December 14, 1999, or at such
other time and place as shall be mutually agreed upon in writing by Buyer and
Seller (the "Closing Date").
1.5 Purchase Price. In consideration of the sale by Seller to Buyer of
the Assets, and subject to the assumption by Buyer of the Assumed Liabilities
and satisfaction of the conditions contained herein, Buyer shall pay to Seller
at the Closing an amount equal to $5,000,000 (as adjusted in accordance with
Section 1.6 below, the "Purchase Price") as follows:
(a) At the Closing, Buyer shall deliver the sum of $4,500,000 (as
adjusted in accordance with Section 1.6) to Seller by bank cashier's check or
bank wire transfer of immediately available funds pursuant to payment
instructions delivered by Seller to Buyer at least two (2) business days prior
to the Closing; and
(b) At the Closing, Buyer shall deposit the sum of $500,000 (the
"Escrow Deposit") with Boston Safe Deposit and Trust Company as Escrow Agent
under the Escrow Agreement in the form attached hereto as Exhibit A (the "Escrow
Agreement"). The Escrow Deposit shall be held, administered and distributed in
accordance with the terms of the Escrow Agreement.
1.6 Adjustments to Purchase Price. The Purchase Price shall be adjusted
at the Closing in the manner set forth below:
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(a) The Purchase Price will be increased or decreased, as the case may
be, on a dollar-for-dollar basis, by the Working Capital Excess or Deficiency,
as applicable, as of the opening of business on the Closing Date.
For the purposes of this Agreement, the following terms shall
have the following meanings:
(i) "Working Capital" shall mean the difference between Seller's
Current Assets and Current Liabilities;
(ii) "Current Assets" shall mean and include all Accounts
Receivable of Seller outstanding on the Closing Date with balances of thirty
(30) days or less, all prepaid expenses (including postal deposits), and all
other current assets which have value to the business at the Closing and which
are used in the operation of Seller's Business, in each case as determined in
accordance with GAAP, consistently applied;
(iii) "Current Liabilities" shall mean and include accounts
payable, accrued expenses, all deferred revenues and all other current
liabilities incurred in the operation of Seller's Business and reflected on
Seller's balance sheet in each case as determined in accordance with GAAP,
consistently applied;
(iv) "Deficiency" shall mean the amount by which the Current
Liabilities exceeds the Current Assets; and
(v) "Excess" shall mean the amount by which the Current Assets
exceeds the Current Liabilities.
(b) (i) No later than one (1) day prior to the Closing, Buyer and
Seller shall prepare a statement to be attached hereto as Schedule 1.6(b)
(the "Estimated Adjustment Statement") which sets forth (i) the Company's
estimated Working Capital and the amount of any estimated Deficiency or
Excess, as the case may be, as of the Closing Date (the "Estimated
Adjustment"). The Purchase Price payable at the Closing shall be increased
on a dollar-for-dollar basis to the extent of any positive Estimated
Adjustment or decreased on a dollar-for-dollar basis to the extent of any
negative Estimated Adjustment, as the case may be, set forth on such
Estimated Adjustment Statement.
(ii) No later than sixty (60) days following the Closing, Buyer
shall prepare and deliver to Seller a statement (the "Final Adjustment
Statement") setting forth the actual Working Capital, and the amount of any
actual Deficiency or Excess, as the case may be, as well as any other
changes to the Estimated Adjustment, as of the Closing Date. Subject to
Section 1.6(b)(iii) below, within ten (10) days following the delivery of
such Final Adjustment Statement to Seller, Buyer or Seller, as the case may
be, shall pay to the other party, by wire transfer of immediately available
funds, the difference
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between the Estimated Adjustment, as shown on the Estimated Adjustment
Statement, and the actual adjustment, as shown on the Final Adjustment
Statement.
(iii) In the event Seller objects to the Final Adjustment
Statement, Seller shall notify Buyer in writing of such objection within
the ten (10) day period following the delivery thereof, stating in such
written objection the reasons therefor and setting forth the Seller's
calculation of Seller's actual Working Capital at the Closing. Upon
receipt by Buyer of such written objection, the parties shall attempt to
resolve the disagreement concerning the Final Adjustment Statement through
negotiation. Notwithstanding any other dispute resolution procedure
provided for in this Agreement, if Buyer and Seller cannot resolve such
disagreement concerning the Final Adjustment Statement within thirty (30)
days following the end of the foregoing 10-day period, the parties shall
submit the matter for resolution to a nationally recognized firm of
independent certified public accountants not affiliated with either party,
with the costs thereof to be shared equally by the parties. Such
accounting firm shall deliver a statement setting forth its own calculation
of the final adjustment to the parties within thirty (30) days of the
submission of the matter to such firm. Any payment shown to be due by a
party on the statement of such accounting firm shall be paid to the other
party promptly but in no event later than five (5) days following the
delivery of such statement by such accounting firm to the parties.
1.7 Purchase Price Allocation. At least two (2) business days prior to
the Closing, Buyer and Seller shall agree on the allocation of the Purchase
Price as set forth on Schedule 1.7 attached hereto. Such allocation shall be
binding upon Buyer and Seller for all purposes (including financial accounting
purposes, financial and regulatory reporting purposes and tax purposes). Buyer
and Seller each further agrees to file its Federal income tax returns and its
other tax returns reflecting such allocation, Form 8594 and any other reports
required by Section 1060 of the Internal Revenue Code of 1986, as amended.
1.8 Records and Contracts. To the extent not previously provided to
Buyer, at the Closing, Seller shall deliver to Buyer all of the Contracts, with
such assignments thereof and consents to assignments as are necessary to assure
Buyer of the full benefit of the same. Seller shall also deliver to Buyer at
the Closing all of Seller's files and records constituting Assets.
1.9 Further Assurances. Seller, from time to time after the Closing at
the request of Buyer and without further consideration, shall execute and
deliver further instruments of transfer and assignment and take such other
action as Buyer may reasonably require to more effectively transfer and assign
to, and vest in, Buyer the Assets free and clear of all Liens (as defined in
Section 2.8).
1.10 Sales and Transfer Taxes. All sales, transfer, use, recordation,
documentary, stamp, excise taxes, personal property taxes, fees and duties
(including any real estate transfer taxes) under applicable law incurred in
connection with this Agreement or the transactions contemplated thereby will be
borne and paid by Seller, and Seller shall promptly reimburse
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Buyer for the payment of any such tax, fee or duty which Buyer is required to
make under applicable law.
1.11 Transfer of Subject Assets. At the Closing, Seller shall deliver or
cause to be delivered to Buyer good and sufficient instruments of transfer
transferring to Buyer title to all of the Assets, together with all required
consents. Such instruments of transfer (a) shall contain appropriate warranties
and covenants which are usual and customary for transferring the type of
property involved under the laws of the jurisdictions applicable to such
transfers, (b) shall be in form and substance reasonably satisfactory to Buyer
and its counsel, (c) shall effectively vest in Buyer good and marketable title
to all of the Assets free and clear of all Liens, and (d) where applicable,
shall be accompanied by evidence of the discharge of all Liens against the
Assets.
1.12 Software License. Buyer acknowledges that Seller shall maintain
ownership of the source code VB and SQL automated process billing software (the
"VB Software"). Seller hereby grants to Buyer a perpetual, royalty-free, paid-
up, worldwide, non-exclusive license to use the VB Software.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLER AND PRINCIPALS. In
order to induce Buyer to enter into this Agreement, Seller and each of the
Principals, jointly and severally, hereby represent and warrant to Buyer as
follows:
2.1 Organization; Subsidiaries.
(a) Seller is a corporation duly organized, validly existing and in
good standing under the laws of Ohio, with full corporate power and authority to
own or lease its properties and to conduct its business in the manner and in the
places where such properties are owned or leased or such business is currently
conducted or proposed to be conducted. The copies of Seller's Articles of
Incorporation, Restated Close Corporation Agreement dated November 1, 1998 and
by-laws, each as amended to date, heretofore delivered to Buyer's counsel are
complete and correct. Seller is not in violation of any term of its Articles of
Organization or by-laws. Seller is duly qualified to do business in the state
of its organization, and is not required to be licensed or qualified to conduct
its business or own its property in any other jurisdiction.
(b) Seller has no subsidiaries and does not own any securities issued
by any other business organization or governmental authority, except U.S.
Government securities, bank certificates of deposit and money market accounts
acquired as short-term investments in the ordinary course of its business.
Seller does not own or have any direct or indirect interest in or control over
any corporation, partnership, joint venture or entity of any kind.
2.2 Required Action. All actions and proceedings necessary to be taken by
or on the part of Seller in connection with the transactions contemplated by
this Agreement have been duly and validly taken, and this Agreement and each
other agreement, document and instrument to be executed and delivered by or on
behalf of Seller pursuant to, or as contemplated by, this
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Agreement (collectively, the "Seller Documents") has been duly and validly
authorized, executed and delivered by Seller and no other action on the part of
Seller or its stockholders is required in connection therewith. Each of Seller
and the Principals have full right, authority, power and capacity to execute and
deliver this Agreement and each other Seller Document and to carry out the
transactions contemplated hereby and thereby. This Agreement and each other
Seller Document constitutes, or when executed and delivered will constitute, the
legal, valid and binding obligation of each of Seller and the Principals
enforceable in accordance with its respective terms.
2.3 No Conflicts.
(a) The execution, delivery and performance by Seller of this
Agreement and each other Seller Document does not and will not (i) violate any
provision of the Articles of Organization and by-laws of Seller, in each case as
amended to date, (ii) constitute a violation of, or conflict with or result in
any breach of, acceleration of any obligation under, right of termination under,
or default under, any agreement or instrument to which Seller is a party or by
which Seller or the Assets is bound, (iii) violate any judgment, decree, order,
statute, rule or regulation applicable to Seller or the Assets, (iv) require
Seller to obtain any approval, consent or waiver of, or to make any filing with,
any person or entity (governmental or otherwise) that has not been obtained or
made or (v) result in the creation or imposition of any Lien on any of the
Assets.
(b) The execution, delivery and performance by each of the Principals
of this Agreement and each other Seller Document does not and will not (i)
constitute a violation of, or conflict with or result in any breach of,
acceleration of any obligation under, right of termination under, or default
under, any agreement or instrument to which any or all of the Principals are a
party or by which any or all of the Principals are bound, (ii) violate any
judgment, decree, order, statute, rule or regulation applicable to the
Principals, (iii) require the Principals to obtain any approval, consent or
waiver of, or to make any filing with, any person or entity (governmental or
otherwise) that has not been obtained or made, or (iv) result in the creation or
imposition of any Lien on any of the Assets.
2.4 Taxes.
(a) Seller has paid or caused to be paid all federal, state, local,
foreign and other taxes, including, without limitation, income taxes, estimated
taxes, alternative minimum taxes, excise taxes, sales taxes, use taxes, value-
added taxes, gross receipts taxes, franchise taxes, capital stock taxes,
employment and payroll-related taxes, withholding taxes, stamp taxes, transfer
taxes, windfall profit taxes, environmental taxes and property taxes, whether or
not measured in whole or in part by net income, and all deficiencies, or other
additions to tax, interest, fines and penalties owed by it (collectively,
"Taxes"), required to be paid by it through the date hereof whether disputed or
not.
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(b) Seller has in accordance with applicable law filed all federal,
state, local and foreign tax returns required to be filed by it through the date
hereof, and all such returns correctly and accurately set forth the amount of
any Taxes relating to the applicable period. A list of all federal, state,
local and foreign income tax returns filed with respect to Seller for taxable
periods ended on or after December 31, 1993, is set forth in Schedule 2.4
attached hereto, and said schedule indicates those returns that have been
audited or currently are the subject of an audit. Seller has delivered to Buyer
correct and complete copies of all federal, state, local and foreign income tax
returns listed on said schedule, and of all examination reports and statements
of deficiencies assessed against or agreed to by Seller with respect to said
returns.
(c) Neither the Internal Revenue Service ("IRS") nor any other
governmental authority is now asserting or, to the knowledge of Seller or the
Principals, threatening to assert against Seller any deficiency or claim for
additional Taxes. To the knowledge of Seller and the Principals, no claim has
ever been made by an authority in a jurisdiction where Seller does not file
reports and returns that Seller is or may be subject to taxation by that
jurisdiction. There are no security interests on any of the Assets of Seller
that arose in connection with any failure (or alleged failure) to pay any Taxes.
Seller has never entered into a closing agreement pursuant to Section 7121 of
the Internal Revenue Code of 1986, as amended (the "Code").
(d) There has not been any audit of any tax return filed by Seller, no
audit of any tax return of Seller is in progress, and Seller has not been
notified by any tax authority that any such audit is contemplated or pending.
No extension of time with respect to any date on which a tax return was or is to
be filed by Seller is in force, and no waiver or agreement by Seller is in force
for the extension of time for the assessment or payment of any Taxes.
(e) Seller has never been (and has never had any liability for unpaid
Taxes because it once was) a member of an "affiliated group" (as defined in
Section 1504(a) of the Code). Seller has never filed, and has never been
required to file, a consolidated, combined or unitary tax return with any other
entity. Seller does not own and has never owned a direct or indirect interest
in any trust, partnership, corporation or other entity and therefore Buyer is
not acquiring from Seller an interest in any entity. Seller is not a party to
any tax sharing agreement.
(f) Seller is not a "foreign person" within the meaning of Section
1445 of the Code and Treasury Regulations Section 1.1445-2.
(g) For purposes of this Agreement, all references to Sections of the
Code shall include any predecessor provisions to such Sections and any similar
provisions of federal, state, local or foreign law.
2.5 Compliance with Laws. Seller's operation of the Business and the
Assets is in compliance in all material respects with all applicable statutes,
ordinances, orders, rules and regulations promulgated by any federal, state,
municipal or other governmental authority
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(including the Federal Communications Commission), and Seller has not received
notice of a violation or alleged violation of any such statute, ordinance,
order, rule or regulation.
2.6 Insurance. The physical properties and tangible Assets are insured to
the extent disclosed in Schedule 2.6 attached hereto, and all insurance policies
and arrangements of Seller in effect as of the date hereof are disclosed in said
Schedule. Said insurance policies and arrangements are in full force and
effect, all premiums with respect thereto are currently paid, and Seller is in
compliance in all material respects with the terms thereof. Said insurance is
adequate and customary for the business engaged in by Seller and is sufficient
for compliance by Seller with all requirements of law and all agreements and
leases to which Seller is a party.
2.7 Contracts. The Contracts constitute all leases, contracts and
arrangements, whether oral or written, under which Seller is bound or to which
Seller is a party which relate to the Business or Assets. Schedule 1.1(b)
attached hereto contains a true, correct and complete list of all Contracts.
With respect to each oral agreement or understanding involving the Business,
Seller has provided a written summary of the material terms of each such
agreement or understanding on Schedule 1.1(b). Each Contract is valid, in full
force and effect and binding upon Seller and the other parties thereto in
accordance with its terms. Neither Seller nor, to the knowledge of Seller and
the Principals, any other party is in default under or in arrears in the
performance, payment or satisfaction of any agreement or condition on its part
to be performed or satisfied under any Contract, nor does any condition exist
that with notice or lapse of time or both would constitute such a default, and
no waiver or indulgence has been granted by any party under any Contract.
Seller has not received notice of, and each of Seller and the Principals have no
knowledge of, any fact which would result in a termination, repudiation or
breach of any Contract. Seller has provided Buyer with true and complete copies
of all of such Contracts, other than with respect to the oral agreements or
understandings described on Schedule 1.1(b).
2.8 Title. Seller has good and marketable title to all of the Assets free
and clear of all mortgages, pledges, security interests, charges, liens,
restrictions and encumbrances of any kind (collectively, "Liens") whatsoever.
Upon the sale, assignment, transfer and delivery of the Assets to Buyer
hereunder and under the Seller Documents, there will be vested in Buyer good,
marketable and indefeasible title to the Assets, free and clear of all Liens.
The Assets include all of the assets and properties (i) held for use by Seller
to conduct the Business as presently conducted and (ii) necessary for Buyer to
operate the Business in the same manner as such business is currently operated
by Seller. All of the tangible Assets are in good repair, have been well
maintained and are in good operating condition, do not require any material
modifications or repairs, and comply in all material respects with applicable
laws, ordinances and regulations, ordinary wear and tear excepted. Seller has
delivered complete and true copies of all real property leases (the "Leases")
set forth on Schedule 1.1(b). Seller holds good, clear, marketable, valid and
enforceable leasehold interest in the real property subject to the Leases (the
"Leased Real Property"), subject only to the right of reversion of the landlord
or lessor under the Leases, free and clear of all other prior or subordinate
interests, including, without limitation, mortgages, deeds of trust, ground
leases, leases, subleases, assessments, tenancies, claims, covenants,
conditions, restrictions, easements, judgments or other encumbrances or
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matters affecting title, and free of encroachments onto or off of the leased
real property. There are no material defects in the physical condition of any
improvements constituting a part of the Leased Real Property, including, without
limitation, structural elements, mechanical systems, roofs or parking and
loading areas, and all of such improvements are in good operating condition and
repair, have been well maintained. All water, sewer, gas, electric, telephone,
drainage and other utilities required by law or necessary for the current or
planned operation of the Leased Real Property have been installed and connected
pursuant to valid permits, and are sufficient to service the Leased Real
Property. Seller does not hold or own a fee interest in any real property.
2.9 No Litigation. Seller is not now involved in nor, to the knowledge of
Seller and the Principals, is Seller threatened to be involved in any litigation
or legal or other proceedings related to or affecting the Business or any Asset
or which would prevent or hinder the consummation of the transactions
contemplated by this Agreement. Seller has not been operating the Business
under, and the Business is not subject to, any order, injunction or decree of
any court of federal, state, municipal or other governmental department,
commission, board, agency or instrumentality.
2.10 Employees; Labor Matters. Seller employs approximately fourteen (14)
full-time employees and zero (0) part-time employees and generally enjoys good
employer-employee relationships. Seller shall provide to Buyer a list of the
employees of Seller in connection with the Business at least ten (10) days prior
to Closing, including the name, date of hire and wages of such employees.
Seller is not delinquent in payments to any of its employees for any wages,
salaries, commissions, bonuses or other direct compensation for any services
performed for it to the date hereof or amounts required to be reimbursed to such
employees. Upon termination of the employment of any of said employees, neither
Seller nor Buyer will by reason of the transactions contemplated hereby or
anything done prior to the Closing be liable to any of said employees for so-
called "severance pay" or any other payments, except as set forth in Schedule
2.10 attached hereto. Seller does not have any policy, practice, plan or
program of paying severance pay or any form of severance compensation in
connection with the termination of employment, except as set forth in said
Schedule. Seller is in compliance in all material respects with all applicable
laws and regulations respecting labor, employment, fair employment practices,
work place safety and health, terms and conditions of employment, and wages and
hours. There are no charges of employment discrimination or unfair labor
practices, nor are there any strikes, slowdowns, stoppages of work, or any other
concerted interference with normal operations existing, pending or, to the
knowledge of Seller and the Principals, threatened against or involving Seller.
No question concerning representation exists respecting any group of employees
of Seller. There are no grievances, complaints or charges that have been filed
against Seller under any dispute resolution procedure (including, but not
limited to, any proceedings under any dispute resolution procedure under any
collective bargaining agreement) that might have an adverse effect on Seller or
the conduct of its business and no arbitration or similar proceeding is pending
and no claim therefor has been asserted. No collective bargaining agreement is
in effect or is currently
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being or is about to be negotiated by Seller. Seller has received no information
to indicate that any of its employment policies or practices is currently being
audited or investigated by any federal, state or local government agency. Seller
is, and at all times since November 6, 1986 has been, in compliance with the
requirements of the Immigration Reform Control Act of 1986.
2.11 Financial Statements. Attached hereto as Schedule 2.11 are
copies of the balance sheet of Seller as at September 30, 1999 (the "Base
Balance Sheet") and the statements of income and expense of Seller for September
30, 1999 (collectively the "Financial Statements"). The Financial Statements
have been prepared in accordance with generally accepted accounting principles
applied consistently during the periods covered thereby (except for the absence
of footnotes with respect to unaudited financials), are complete and correct and
present fairly and accurately the financial condition of the Business at the
dates of said statements and the results of operations of the Business for the
periods covered thereby. As of the date of the Base Balance Sheet (the "Base
Balance Sheet Date"), Seller had no liabilities or obligations of any kind with
respect to the Business, whether accrued, contingent or otherwise, that are not
disclosed and adequately reserved against on the Base Balance Sheet. As of the
date hereof and at the Closing, Seller had and will have no liabilities or
obligations of any kind with respect to the Business, whether accrued,
contingent or otherwise, that are not disclosed and adequately reserved against
on the Base Balance Sheet.
2.12 Business Since the Base Balance Sheet Date. Since the Base Balance
Sheet Date:
(a) there has been no material adverse change in the Business or in
the Assets, operations or financial condition of the Business;
(b) the Business has, in all material respects, been conducted in the
ordinary course of business and in substantially the same manner as it was
conducted before the date of the Base Balance Sheet Date;
(c) there has not been any material obligation or liability
(contingent or other) incurred by Seller with respect to the Business, whether
or not incurred in the ordinary course of business including, without
limitation, any capital or operating leases with respect to Equipment;
(d) there has not been any purchase, sale or other disposition, or any
agreement or other arrangement, oral or written, for the purchase, sale or other
disposition, of any material properties or assets of the Business, whether or
not in the ordinary course of business;
(e) there has not been any mortgage, encumbrance or lien placed on any
of the Assets, nor any payment or discharge of a material lien or liability of
Seller which was not reflected on the Base Balance Sheet;
(f) there has not been any damage, destruction or loss, whether or not
covered by insurance, adversely affecting the Business or Assets;
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(g) there has not been any material change in Seller's pricing,
marketing, customer service, billing, accounting, operational or promotional
activities and policies of Seller;
(h) there has not been any change in the collection, payment and
accounting policies used by Seller in the Business; and
(i) there has not been any agreement or understanding, whether in
writing or otherwise, for Seller to take any of the actions specified above.
2.13 Licenses. As of the date of this Agreement, Seller is the holder of
all licenses, permits and authorizations with respect to the Business (the
"Authorizations"). The Authorizations constitute all of the licenses, permits
and authorizations required for operation of the Business as now operated. All
of the Authorizations are in full force and effect and no licenses, permits or
authorizations of any governmental department or agency are required for the
operation of the Business which have not been duly obtained. As of the date
hereof, there is not pending or, to the knowledge of Seller and the Principals,
threatened any action by or before any governmental agency to revoke, cancel,
rescind or modify any of the Authorizations, and there is not now issued or
outstanding or, to the knowledge of Seller and the Principals, pending or
threatened any order to show cause, notice of violation, notice of apparent
liability, or notice of forfeiture or complaint against Seller with respect to
the Business.
2.14 Approvals; Consents. Except as set forth on Schedule 2.14 attached
hereto, no approval, consent, authorization or exemption from or filing with any
person or entity not a party to this Agreement is required to be obtained or
made by Seller in connection with the execution and delivery of this Agreement
and the Seller Documents and the consummation of the transactions contemplated
hereby and thereby. All of the approvals, consents and authorizations listed on
Schedule 2.14 shall be obtained by Seller at or prior to the Closing in
accordance with Section 4.4 hereof.
2.15 Customers and Suppliers. Seller's relations with its customers and
suppliers, including its Subscribers (as defined below), are good and there are
not pending or, to Seller's knowledge, threatened claims or controversies with
any customer or suppliers that is material to the Assets or the Business.
2.16 Subscribers. Schedule 2.16(a) attached hereto sets forth, as of the
date hereof, the Subscribers of the Business as listed by class, type and
billing plan. For purposes of this Agreement, the terms "Subscriber" shall mean
any active subscriber to Internet services offered by Seller in the Business who
has subscribed to a service for at least one month and has paid at least one
bill, including, without limitation, any person who receives dial-up Internet
access and e-mail services through the Business (a "Dial-up Subscriber"), any
person who receives dedicated Internet access from Seller offering higher data
transmission rates than available from dial-up access (a "Dedicated
Subscriber"), and any person with a web page or domain name on Seller's server
and to whom Seller provides Internet access (a "Web-hosting/Domain-hosting
Subscriber"); provided, however, that "Subscriber" shall not include any person
who is (i) more
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than thirty (30) days delinquent in payment of such person's bill for such
services provided by the Business and (ii) any person receiving complimentary
Internet services or Internet services at a promotional discounted rate. Set
forth on Schedule 2.16(b) attached hereto is a listing of all such accounts
which receive complimentary Internet services or Internet services at a
promotional discounted rate (including, but not limited to, those accounts that
receive "student plan" rates). Set forth on Schedule 2.16(c) attached hereto is
Seller's policy and practice with respect to the disconnection of Subscribers,
with which Seller has, except as set forth on Schedule on Schedule 2.16(c), at
all times since its inception, complied in all material respects.
2.17 Brokers. Seller has not retained any broker or finder or other
person who would have any valid claim against any of the parties to this
Agreement for a commission or brokerage fee in connection with this Agreement or
the transactions contemplated hereby.
2.18 Collectibility of Accounts Receivable. All of the Accounts
Receivable of Seller are or will be as of the Closing Date bona fide, valid and
enforceable claims, subject to no setoff or counterclaim and to Seller's
knowledge are collectible in accordance with their terms. Seller has no accounts
or loans receivable from any person, firm or corporation which is affiliated
with Seller or from any director, officer or employee of Seller, or from any of
their respective spouses or family members.
2.19 Banking Relations. All of the arrangements which Seller has with any
banking institution are completely and accurately described in Schedule 2.19
attached hereto, indicating with respect to each of such arrangements the type
of arrangement maintained (such as checking account, borrowing arrangements,
safe deposit box, etc.) and the person or persons authorized in respect thereof.
2.20 Intellectual Property.
(a) Set forth on Schedule 2.20 attached hereto are all computer
programs and related documentation sold, marketed, licensed and distributed by
Seller (the "Products"). All of the Intellectual Property of Seller is set
forth on Schedule 2.20 attached hereto. For purposes hereof, the term
"Intellectual Property" includes: (i) all patents, patent applications, patent
rights, and inventions and discoveries and invention disclosures (whether or not
patented) (collectively, "Patents"); (ii) Seller's rights to the name "GlassCity
Internet," all trade names, trade dress, logos, packaging design, slogans, any
and all Internet domain names used or useful in the Business, registered and
unregistered trademarks and service marks and applications (collectively,
"Marks"); (iii) all copyrights in both published and unpublished works,
including, without limitation, all compilations, databases and computer
programs, and all copyright registrations and applications, and all derivatives,
translations, adaptations and combinations of the above (collectively,
"Copyrights"); (iv) all know-how, trade secrets, confidential or proprietary
information, customer lists, IP addresses, research in progress, algorithms,
data, designs, processes, formulae, drawings, schematics, blueprints, flow
charts, models, prototypes, techniques, Beta testing procedures and Beta testing
results (collectively, "Trade Secrets"); (v) Seller's web-sites (including the
domain name "GlassCity Internet," and any other similar
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domain names); (vi) all goodwill, franchises, licenses, permits, consents,
approvals, technical information, telephone numbers, and claims of infringement
against third parties (the "Rights"); and (vii) all contracts relating to the
Products and the Intellectual Property to which Seller is a party or is bound,
including, without limitation, all nondisclosure and/or confidentiality
agreements entered into by persons in connection with disclosures by Seller
(collectively,"Assigned Contracts").
(b) Except as described in Schedule 2.20, Seller has exclusive
ownership of, and has good, valid and marketable title to, all of the
Intellectual Property, free and clear of any Liens, and has the right to use all
of the Intellectual Property without payment to any third party. Seller's rights
in all of such Intellectual Property are freely transferable. There are no
claims or demands pending or, to the knowledge of Seller and the Principals,
threatened of any other person pertaining to any of such Intellectual Property
and no proceedings have been instituted, or are pending or, to the knowledge of
Seller and the Principals, threatened against Seller and/or its officers,
employees and consultants which challenge the validity and enforceability of
Seller's rights in respect of the Intellectual Property. The Intellectual
Property constitutes all of the assets of Seller used in designing, creating and
developing the Products, and represent all of such Intellectual Property
necessary for the operation of Seller's Business as currently conducted.
No employee, consultant or contractor of Seller has entered into any
agreement that restricts or limits in any way the scope or type of work in which
the employee, consultant or contractor may be engaged or requires the employee,
consultant or contractor to transfer, assign, or disclose information concerning
his work to anyone other than Seller.
(c) Schedule 2.20 sets forth a complete and accurate list and summary
description of all of Seller's Patents. All of the issued Patents are currently
in compliance with formal legal requirements (including without limitation
payment of filing, examination and maintenance fees and proofs of working or
use), are valid and enforceable, and are not subject to any maintenance fees or
taxes or actions falling due within ninety (90) days after the Closing Date. In
each case where a Patent is held by Seller by assignment, the assignment has
been duly recorded with the U.S. Patent and Trademark Office and all other
jurisdictions of registration. No Patent has been or is now involved in any
interference, reissue, re-examination or opposition proceeding. To the
knowledge of Seller and the Principals, there is no potentially interfering
Patent of any third party. All products made, used or sold under the Patents
have been marked with the proper patent notice.
(d) Schedule 2.20 sets forth a complete and accurate list and summary
description of all of Seller's Marks. All Marks that have been registered with
the United States Patent and Trademark Office and/or any other jurisdiction are
currently in compliance with formal legal requirements (including, without
limitation, the timely post-registration filing of affidavits of use and
incontestability and renewal applications), are valid and enforceable, and are
not subject to any maintenance fees or taxes or actions falling due within
ninety (90) days after the Closing Date. In each case where a Trademark is held
by Seller by assignment, the assignment has been duly recorded with the U.S.
Patent and Trademark Office and all other
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jurisdictions of registration. No Mark has been or is now involved in any
opposition, invalidation or cancellation proceeding and, to the knowledge of
Seller and the Principals, no such action is threatened with respect to any of
the Marks. All products and materials containing a Mark bear the proper notice
where permitted by law.
(e) Schedule 2.20 sets forth a complete and accurate list and summary
description of all of Seller's Copyrights. All the Copyrights have been
registered with the United States Copyright Office and are currently in
compliance with formal legal requirements, are valid and enforceable, and are
not subject to any fees or taxes or actions falling due within ninety (90) days
after the Closing Date. In each case where a Copyright is held by Seller by
assignment, the assignment has been duly recorded with the U.S. Copyright Office
and all other jurisdictions of registration. None of the source or object code,
algorithms, or structure included in the Products is copied from, based upon, or
derived from any other source or object code, algorithm or structure in
violation of the rights of any third party. Any substantial similarity of the
Products to any computer program owned by any third party did not result from
the Products being copied from, based upon, or derived from any such computer
software program in violation of the rights of any third party. All copies of
works encompassed by the Copyrights have been marked with the proper copyright
notice.
(f) Seller has taken all reasonable security measures (including,
without limitation, entering into appropriate confidentiality and non-disclosure
agreements with all officers, directors, employees, consultants and contractors
of Seller and any other persons with access to the Trade Secrets) to protect the
secrecy, confidentiality and value of all Trade Secrets. To the knowledge of
Seller and the Principals, there has not been any breach by any party to any
such confidentiality or non-disclosure agreement. The Trade Secrets have not
been disclosed by Seller to any person or entity other than employees or
contractors of Seller who had a need to know and use the Trade Secrets in the
course of their employment or contract performance. Except as set forth on
Schedule 2.20, (i) Seller has not directly or indirectly granted any rights or
interests in the source code of the Products, and (ii) since Seller developed
the source code of the Products, Seller has not provided, licensed or disclosed
the source code of the Products to any person or entity. Seller has the right
to use, free and clear of claims of third parties, all Trade Secrets. To the
knowledge of Seller and the Principals, there is not any assertion that the use
by Seller of any Trade Secret violates the rights of any third party.
(g) Seller has the exclusive right to use, license, distribute,
transfer and bring infringement actions with respect to the Intellectual
Property. Except as set forth on Schedule 2.20, Seller (i) has not licensed or
granted to anyone rights of any nature to use any of its Intellectual Property
and (ii) is not obligated to and does not pay royalties or other fees to anyone
for its ownership, use, license or transfer of any of its Intellectual Property.
(h) All licenses or other agreements under which Seller is granted
rights by others in Intellectual Property are listed in Schedule 2.20. All such
licenses or other agreements are in full force and effect, to the knowledge of
Seller and the Principals there is no material default by any party thereto, and
all of the rights of Seller thereunder are freely assignable. True
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and complete copies of all such licenses or other agreements, and any amendments
thereto, have been provided to Buyer, and Seller has no reason to believe that
the licensors under the licenses and other agreements under which Seller is
granted rights and has granted rights to others do not have and did not have all
requisite power and authority to grant the rights purported to be conferred
thereby.
(i) All licenses or other agreements under which Seller has granted
rights to others in Intellectual Property are listed in Schedule 2.20. All such
licenses or other agreements are in full force and effect, and to the knowledge
of Seller and the Principals there is no material default by any party thereto.
True and complete copies of all such licenses or other agreements, and any
amendments thereto, have been provided to Buyer.
(j) Seller has no obligation to any other person to maintain, modify,
improve or upgrade the Products.
(k) None of the Products manufactured and sold, nor any process or
know-how used, by Seller infringes or is alleged to infringe any patent,
trademark, service mark, trade name, copyright or other proprietary right or is
a derivative work based on the work of any other person.
(l) There are no (i) actions, suits, claims, investigations or other
proceedings involving the Products, the Intellectual Property, or the Rights by
or before any governmental authority or arbitrator pending or, to the knowledge
of Seller and the Principals, threatened against Seller, or (ii) judgments,
decrees, injunctions, or orders involving the Products, the Intellectual
Property or the Rights of any governmental authority or arbitrator against
Seller. Seller is not in default under any such judgment, decree, injunction or
order.
(m) The Products perform in accordance with their published
specifications and documentation and as Seller has warranted to its customers.
Seller has reviewed the areas within its businesses and operations which could
be adversely affected by, and has developed a program to address on a timely
basis, the "Year 2000 Problem" (i.e., the risk that applications used by Seller
or its suppliers and/or providers may be unable to recognize and properly
perform date-sensitive functions involving certain dates prior to and any date
after December 31, 1999). Seller reasonably believes that the "Year 2000
Problem" will not have any material adverse effect on the business or operations
of Seller.
2.21 Absence of Restrictions. Seller has not entered into any other
agreement or arrangement with any other party with respect to the sale, transfer
or any other disposition or encumbrance of the Business or the Assets, in whole
or in part.
2.22 Permits; Burdensome Agreements. Schedule 2.22 lists all permits,
registrations, licenses, franchises, certifications and other approvals
(collectively, the "Approvals") required from federal, state or local
authorities in order for Seller to conduct its Business. Seller has obtained
all such Approvals, which are valid and in full force and effect, and is
operating in
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compliance therewith. Such Approvals include, but are not limited to, those
required under federal, state or local statutes, ordinances, orders,
requirements, rules, regulations, or laws pertaining to environmental
protection, public health and safety, worker health and safety, buildings,
highways or zoning. Except as disclosed in Schedule 2.22, all such Approvals
will be available and assigned to Buyer and remain in full force and effect upon
Buyer's purchase of the Assets, and no further Approvals will be required in
order for Buyer to conduct the business currently conducted by Seller subsequent
to the Closing. Except as disclosed in Schedule 2.22 or in any other schedule
hereto, Seller is not subject to or bound by any agreement, arrangement,
judgment, decree or order which may materially and adversely affect its business
or prospects, its condition, financial or otherwise, or any of its assets or
properties.
2.23 Transactions with Interested Persons. Except as set forth in
Schedule 2.23 hereto, neither Seller, nor any stockholder, officer, supervisory
employee or director of Seller or, to the knowledge of Seller or the Principals,
any of their respective spouses or family members owns directly or indirectly on
an individual or joint basis any material interest in, or serves as an officer
or director or in another similar capacity of, any competitor or supplier of
Seller, or any organization which has a material contract or arrangement with
Seller.
2.24 Employee Benefit Programs.
(a) Schedule 2.24 attached hereto sets forth a list of every Employee
Program (as defined below) that has been maintained by the Seller or an
Affiliate at any time during the six-year period ending on the Closing Date.
Each Employee Program which has ever been maintained by the Seller or an
Affiliate and which has been intended to qualify under Section 401(a) or
501(c)(9) of the Code has received a favorable determination or approval letter
from the IRS regarding its qualification under such section and has, in fact,
been qualified under the applicable section of the Code from the effective date
of such Employee Program through and including the Closing Date (or, if earlier,
the date that all of such Employee Program's assets were distributed). No event
or omission has occurred which would cause any such Employee Program to lose its
qualification or otherwise fail to satisfy the relevant requirements to provide
tax-favored benefits under the applicable Code Section (including without
limitation Code Sections 105, 125, 401(a) and 501(c)(9)). With respect to any
Employee Program ever maintained by the Seller or any Affiliate, there has been
no (i) "prohibited transaction," as defined in Section 406 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") or Code Section
4975, (ii) non-deductible contribution, or (iii) failure to comply with any
provision of ERISA, other applicable law, or any agreement which, in the case of
any of (i), (ii) or (iii), could subject the Seller or any Affiliate to
liability either directly or indirectly (including, without limitation, through
any obligation of indemnification or contribution) for any damages, penalties,
or taxes, or any other loss or expense. No litigation or governmental
administrative proceeding (or investigation) or other proceeding (other than
those relating to routine claims for benefits) is pending or threatened with
respect to any such Employee Program. All payments and/or contributions
required to have been made (under the provisions of any agreements or other
governing documents or applicable law) with respect to all Employee Programs
ever maintained by the Seller or any Affiliate, for all periods prior to the
Closing
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Date, either have been made or have been accrued (and all such unpaid but
accrued amounts are described on Schedule 2.24). Each Employee Program ever
maintained by the Seller or an Affiliate has complied with the applicable
notification and other applicable requirements of the Consolidated Omnibus
Budget Reconciliation Act of 1985.
(b) Neither the Seller nor any Affiliate (A) has ever maintained any
Employee Program which has been subject to title IV of ERISA or Code Section
412, including, but not limited to, any Multiemployer Plan (as defined in
Section 3(37) of ERISA) or (B) has ever provided health care or any other non-
pension benefits to any employees after their employment is terminated (other
than as required by part 6 of subtitle B of title I of ERISA) or has ever
promised to provide such post-termination benefits.
(c) For purposes of this section:
(i) "Employee Program" means all employee benefit plans within
the meaning of ERISA Section 3(3) as well as all other employee benefit
plans, agreements and arrangements of any kind.
(ii) An entity "maintains" an Employee Program if such entity
sponsors, contributes to, or provides benefits under or through such
Employee Program, or has any obligation (by agreement or under applicable
law) to contribute to or provide benefits under or through such Employee
Program, or if such Employee Program provides benefits to or otherwise
covers employees of such entity (or their spouses, dependents, or
beneficiaries).
(iii) An entity is an "Affiliate" of the Seller if it would have
ever been considered a single employer with the Seller under ERISA Section
4001(b) or part of the same "controlled group" as the Seller for purposes
of ERISA Section 302(d)(8)(C).
2.25 Environmental Matters.
(a) Except as set forth in Schedule 2.25 attached hereto, (i) Seller
has never generated, transported, used, stored, treated, disposed of, or managed
any Hazardous Waste (as defined below); (ii) to Seller's knowledge, no Hazardous
Material (as defined below) has ever been or is threatened to be spilled,
released, or disposed of at any site presently or formerly owned, operated,
leased, or used by Seller, or has ever been located in the soil or groundwater
at any such site; (iii) to Seller's knowledge, no Hazardous Material has ever
been transported from any site presently or formerly owned, operated, leased, or
used by Seller for treatment, storage, or disposal at any other place; (iv)
Seller does not presently own, operate, lease, or use, nor has it previously
owned, operated, leased, or used any site on which underground storage tanks are
or were located; and (v) no lien has ever been imposed by any governmental
agency on any property, facility, machinery, or equipment owned, operated,
leased, or used by Seller in connection with the presence of any Hazardous
Material.
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(b) Except as set forth in Schedule 2.25, (i) To Seller's knowledge,
Seller has no liability under, nor has it ever violated, any Environmental Law
(as defined below); (ii) to Seller's knowledge, Seller, any property owned,
operated, leased, or used by Seller, and any facilities and operations thereon
are presently in compliance with all applicable Environmental Laws; (iii) Seller
has never entered into or been subject to any judgment, consent decree,
compliance order, or administrative order with respect to any environmental or
health and safety matter or received any request for information, notice, demand
letter, administrative inquiry, or formal or informal complaint or claim with
respect to any environmental or health and safety matter or the enforcement of
any Environmental Law; and (iv) Seller has no knowledge or reason to know that
any of the items enumerated in clause (iii) of this subsection will be
forthcoming.
(c) Except as set forth in Schedule 2.25, to the knowledge of Seller
and the Principals, no site owned, operated, leased, or used by Seller contains
any asbestos or asbestos-containing material, any polychlorinated biphenyls
(PCBs) or equipment containing PCBs, or any urea formaldehyde foam insulation.
(d) Seller has, to the knowledge of Seller and the Principals,
provided to Buyer copies of all documents, records, and information available to
Seller concerning any environmental or health and safety matter relevant to
Seller, whether generated by Seller or others, including, without limitation,
environmental audits, environmental risk assessments, site assessments,
documentation regarding off-site disposal of Hazardous Materials, spill control
plans, and reports, correspondence, permits, licenses, approvals, consents, and
other authorizations related to environmental or health and safety matters
issued by any governmental agency.
(e) For purposes of this Section 2.25, (i) "Hazardous Material" shall
mean and include any hazardous waste, hazardous material, hazardous substance,
petroleum product, oil, toxic substance, pollutant, contaminant, or other
substance which may pose a threat to the environment or to human health or
safety, as defined or regulated under any Environmental Law; (ii) "Hazardous
Waste" shall mean and include any hazardous waste as defined or regulated under
any Environmental Law; (iii) "Environmental Law" shall mean any environmental or
health and safety-related law, regulation, rule, ordinance, or by-law at the
foreign, federal, state, or local level, whether existing as of the date hereof,
previously enforced, or subsequently enacted; and (iv) "Seller" shall mean and
include Seller and all other entities for whose conduct Seller is or may be held
responsible under any Environmental Law.
2.26 Undisclosed Liabilities. Seller has no liabilities or obligations of
any nature (whether known or unknown and whether absolute, accrued, contingent
or otherwise) except for liabilities or obligations reflected on the Base
Balance Sheet and current liabilities incurred in the ordinary course of
business since the date thereof.
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2.27 Indebtedness. Except as set forth in Schedule 2.27, Seller has no
bank debt or indebtedness (other than pursuant to operating or capitalized lease
obligations for leased equipment and other current liabilities).
2.28 Agreements. Except as set forth in Schedule 2.28, each Principal who
is employed by Seller is not a party to any non-competition, trade secret or
confidentiality agreement with any party other than Seller. There are no
agreements or arrangements not contained herein or disclosed in a Schedule
hereto, to which such Principal is a party relating to the business of Seller or
to such Principal's rights and obligations as a stockholder, director or officer
of Seller. Such Principal does not own, directly or indirectly, on an
individual or joint basis, any material interest in, or serve as an officer or
director of, any customer, competitor or supplier of Seller, or any organization
which has a contract or arrangement with the Seller. Such Principal has not at
any time transferred any of the stock of Seller held by or for such holder to
any employee of the Seller, which transfer constituted or could be viewed as
compensation for services rendered to Seller by said employee. The execution,
delivery and performance of this Agreement will not violate or result in a
default or acceleration of any obligation under any contract, agreement,
indenture or other instrument involving Seller to which such Principal is a
party.
2.29 Disclosure. The representations, warranties and statements contained
in this Agreement and in the certificates, exhibits and schedules delivered by
Seller and the Principals to Buyer pursuant to this Agreement do not contain any
untrue statement of a material fact, and, when taken together, do not omit to
state a material fact required to be stated therein or necessary in order to
make such representations, warranties or statements not misleading in light of
the circumstances under which they were made. There are no facts known to
Seller or the Principals which presently or may in the future have a material
adverse affect on Seller's business, properties, assets, prospects, operations
or (financial or other) condition of Seller which has not been specifically
disclosed herein or in a Schedule furnished herewith, other than general
economic conditions affecting the Internet services industry generally.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF BUYER. As a material
inducement to Seller entering into this Agreement, Buyer hereby represents and
warrants to Seller as follows:
3.1 Organization. Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the State of Michigan. Buyer has all
requisite power and authority to conduct its business as it is now conducted and
to own, lease and operate its properties and assets.
3.2 Required Action. All actions and proceedings necessary to be taken by
or on the part of Buyer in connection with the transactions contemplated by this
Agreement have been duly and validly taken, and this Agreement and each other
agreement, document and instrument to be executed and delivered by or on behalf
of Buyer pursuant to, or as contemplated by, this
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Agreement (collectively, the "Buyer Documents") has been duly and validly
authorized, executed and delivered by Buyer. Buyer has full right, authority,
power and capacity to execute and deliver this Agreement and each other Buyer
Document and to carry out the transactions contemplated hereby and thereby. This
Agreement and each other Buyer Document constitutes, or when executed and
delivered will constitute, the legal, valid and binding obligations of Buyer
enforceable in accordance with its respective terms.
3.3 No Conflicts. The execution, delivery and performance by Buyer of
this Agreement and each other Buyer Document does not and will not (a) violate
any provision of the Articles of Incorporation or by-laws of Buyer, as amended
to date, (b) constitute a violation of, or conflict with or result in any breach
of, acceleration of any obligation under, right of termination under, or default
under, any agreement or instrument to which Buyer is a party or by which it is
bound, (c) violate any judgment, decree, order, statute, rule or regulation
applicable to Buyer, (d) require Buyer to obtain any approval, consent or waiver
of, or to make any filing with, any person or entity (governmental or otherwise)
that has not been obtained or made. The officers who execute this Agreement and
the other Buyer Documents contemplated hereby on behalf of Buyer have and shall
have all requisite power to do so in the name of and on behalf of Buyer.
3.4 Brokers. Buyer has not retained any broker or finder or other person
who would have any valid claim against any of the parties to this Agreement for
a commission or brokerage fee in connection with this Agreement or the
transactions contemplated hereby.
SECTION 4. COVENANTS OF SELLER. Seller covenants and agrees that, from
the date hereof until consummation of the transactions contemplated hereby at
the Closing, Seller shall:
4.1 Access to Premises and Records. From the date hereof until the
consummation of the transactions contemplated hereby at the Closing, Seller
shall give Buyer and its representatives, at reasonable times and with
reasonable prior notice, free access to the properties, books and records of the
Business and to the Assets and will furnish to Buyer and its representatives
such information regarding the Business and the Assets as Buyer or its
representatives may from time to time reasonably request in order that Buyer may
have full opportunity to make a diligent investigation consistent with this
Agreement. The foregoing shall include, without limitation, Buyer and its
representatives conducting, at Buyer's expense, an audit of the accounting books
and records of the Seller. In addition to, and not in limitation of the
foregoing, Seller shall provide Buyer with access to and copies of the records
of all: (a) Accounts Receivable, (b) Subscriber billings, (c) pre-paid accounts,
(d) accounts for which no remuneration is received by Seller and (e) general
reports with respect to each category of service provided by the Business.
4.2 Continuity and Maintenance of Operations of the Business. Except as
to actions which Buyer has been advised and to which Buyer has consented to in
writing, and except as specifically permitted or required by this Agreement,
Seller shall:
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(a) Operate the Business in the ordinary course consistent with past
practices, use its commercially reasonable efforts to keep available the
services of the employees who are involved in the operation of the Business, and
use commercially reasonable efforts to preserve any beneficial business
relationships with Subscribers, customers, suppliers and others having business
dealings with Seller relating to the Business;
(b) Use and operate the Assets in a manner consistent with past
practice and maintain the Assets in good operating condition, ordinary wear and
tear excepted;
(c) Maintain adequate inventories of spare Equipment consistent with
past practices;
(d) Maintain insurance upon the Assets in such amounts and types as in
effect on the date of this Agreement as set forth in Schedule 2.6 attached
hereto;
(e) Keep all of its business books, records and files in the ordinary
course of business in accordance with past practices, and provide Buyer with
access thereto upon its reasonable request;
(f) Continue to implement and enforce its procedures for disconnection
and discontinuance of service to Subscribers whose accounts are delinquent in
accordance with those in effect on the date of this Agreement;
(g) Perform and comply in all material respects with the terms of the
Contracts and keep such Contracts in full force and effect; and
(h) Use its reasonable best efforts to preserve the goodwill of the
Business.
4.3 Negative Covenants. Seller shall not, without the prior written
consent of Buyer:
(a) Sell, transfer, lease, assign or otherwise dispose of, or agree to
sell, transfer, lease, assign or otherwise dispose of, any Assets;
(b) Make any change in the number of shares of its capital stock,
authorized, issued or outstanding or grant any option, warrant or other right to
purchase, or to convert any obligation into, shares of its capital stock;
(c) Amend its Articles of Organization or by-laws;
(d) Enter into any contract or commitment for the acquisition of goods
or services relating to the Business (other than in the ordinary course of
business) or which otherwise obligates Seller to perform in full or in part
beyond the Closing Date;
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(e) Hire any new employees or enter into any employment arrangements
or otherwise increase the salary or compensation of any existing employees;
(f) Renegotiate, modify, amend or terminate any Contract;
(g) Create, assume, or permit to exist, or agree to incur, assume or
acquire, any Lien, claim or liability on the Assets;
(h) Make any modifications or changes to the existing rate schedules
or product offerings in effect with respect to the Business;
(i) Offer or employ any sales discounts, free services or other
extraordinary marketing practices or extraordinary promotions outside the
ordinary course of business and not consistent with Seller's past practices;
(j) Take any actions or permit its employees and agents to take any
actions which would materially interfere with or preclude the transactions
contemplated by this Agreement; and
(k) Cause or permit the provision for any new and material pension,
retirement or other employment benefits for employees who perform services in
connection with the conduct of the Business or any material increase in any
existing benefits (other than as required by law).
4.4 Consents. Seller will use its reasonable best efforts to obtain, as
soon as practicable and at its expense, the consent of all third parties under
the Contracts for which the prior approval of such third party is required
pursuant to the terms of the Contract, in the forms attached hereto as Exhibit B
and Exhibit C; provided, however, that "reasonable best efforts" for this
purpose shall not require Seller to undertake extraordinary or unreasonable
measures to obtain such approvals and consents, including, without limitation,
the initiation or prosecution of legal proceedings or the payment of fees in
excess of customary filing, processing and documentation fees.
4.5 Notification of Certain Matters. Seller shall promptly notify Buyer
of (i) any fact, event, circumstances or action the existence or occurrence of
which would cause any of Seller's representations or warranties under this
Agreement, or the disclosures in any schedules or exhibits attached hereto, not
to be true in any material respect and (ii) any failure on its part to comply
with or satisfy in any material respect any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement. Seller shall promptly
notify buyer in writing of the assertion, commencement or threat of any claim,
litigation, proceeding or investigation in which Seller is a party or in which
the Assets or Business may be affected and which could reasonably be expected to
be material or which relates to the transactions contemplated hereby.
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4.6 Adverse Change. Seller shall promptly notify Buyer in writing of any
materially adverse developments affecting the Assets or the Business which
become known to Seller, including, without limitation, (i) any damage,
destruction or loss (whether or not covered by insurance) materially and
adversely affecting any of the Assets or the Business, (ii) any material notice
of violation, forfeiture or complaint under any material Contract, or (iii)
anything which, if not corrected prior to the Closing Date, would prevent Seller
from fulfilling any condition to Closing described in Section 6 hereof.
4.7 No Solicitation. From the date of this Agreement until the earlier
of (i) February 1, 2000 or (ii) termination of this Agreement pursuant to
Section 8.1, Seller shall not, and Seller shall cause its officers, employees,
stockholders, agents and representatives (including, without limitation, any
investment banker, attorney or accountant retained by Seller) and all other
employees who perform services with respect to the operation of the Business not
to, initiate, solicit or encourage, directly or indirectly, any inquiries or the
making of any proposal with respect to the Assets or the Business, or engage in
any negotiations concerning, or provide to any other person any information or
data relating to, the Business, the Assets or Seller for the purpose of, or have
any discussions with, any person relating to, or otherwise cooperate in any way
with or assist or participate in, facilitate or encourage, any inquiries or the
making of any proposal which constitutes, or may reasonably be expected to lead
to, any effort or attempt by any other person to seek or effect a transaction,
or enter into a transaction with any person or persons, other than Buyer,
concerning the possible sale of the Assets or Business, or the capital stock of
Seller. Seller shall promptly inform Buyer of any such inquiries or proposals
and provide all pertinent documentation related thereto.
4.8 Cooperation. Seller shall use its best efforts to take all steps
within its power and will cooperate with Buyer to cause to be fulfilled those of
the conditions to Buyer's obligations to consummate the transactions
contemplated by this Agreement that are dependent upon its actions, and to
execute and deliver such instruments and take such other reasonable actions as
may be necessary or appropriate in order to carry out the intent of this
Agreement and consummate the transactions contemplated hereby. Without limiting
the foregoing, Seller shall cooperate with all reasonable requests of Buyer and
its counsel in connection with Buyer's due diligence investigation of the
Business and Assets.
4.9 Expenses. Seller shall bear its own expenses incurred in connection
with the negotiation and preparation of this Agreement and in connection with
all obligations required to be performed by it under this Agreement.
4.10 Financial Information. Seller shall, as promptly as practical after
such information becomes available, deliver to Buyer copies of Seller's monthly
unaudited financial statements, prepared in accordance with GAAP, consistently
applied, and in form and presentation as is reasonably acceptable to Buyer.
4.11 Consummation of Agreement. Subject to the provisions of Section 8 of
this Agreement: (a) Seller shall use its reasonable best efforts to fulfill and
perform all conditions
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and obligations on its part to be fulfilled and performed under this Agreement,
and to cause the transactions contemplated by this Agreement to be fully carried
out on or before February 1, 2000; and (b) Seller shall not take any action or
omit to take any action that would or could reasonably be expected to (i) result
in any of the representations and warranties of Seller being or becoming untrue
in any respect that would cause Section 6.1 of this Agreement not to be
satisfied, (ii) result in any conditions to Closing set forth in Section 6 of
this Agreement not to be satisfied, or (iii) result in a material violation of
any provision of this Agreement.
4.12 Confidentiality. Seller agrees that it and its representatives will
hold in strict confidence, and will not use, any confidential or proprietary
data or information obtained from Buyer with respect to its business or
financial condition except for the purpose of evaluating, negotiating and
completing the transactions contemplated hereby. Information generally known in
Buyer's industry or which has been disclosed to Seller by third parties which
have a right to do so shall not be deemed confidential or proprietary
information for purposes of this Agreement. If the transactions contemplated by
this Agreement are not consummated, Seller will return, and cause its respective
officers, directors, agents and representatives to return, to Buyer (or certify
that they have destroyed) all copies of such data and information made available
to Seller (and its officers, directors, agents and representatives) in
connection with the transaction.
4.13 Public Announcements. All press releases, filings and other public
announcements concerning the transactions contemplated hereby will be subject to
review and approval by Seller, on the one hand, and Buyer, on the other hand,
such approval not to be unreasonably withheld. Such approval shall not be
required if the party issuing such release, filing or public announcement
reasonably believes, based on advice of counsel, that it is required by law to
do so, but in any such case, all reasonable efforts shall be made to consult
with the other party in advance of such release, filing or announcement and to
provide the other party with the content thereof, the reasons the release,
filing or announcement is required by law and the time and place that such
release, filing or announcement will be made.
SECTION 5. COVENANTS OF BUYER. Buyer covenants and agrees that, from the
date hereof until consummation of the transactions contemplated hereby at the
Closing, Buyer shall:
5.1 Cooperation. Buyer shall use its reasonable best efforts to take all
steps within its power and will cooperate with Seller, to cause to be fulfilled
those of the conditions to Seller's obligations to consummate the transactions
contemplated by this Agreement that are dependent upon its actions and to
execute and deliver such instruments and take such other reasonable actions as
may be necessary or appropriate in order to carry out the intent of this
Agreement and consummate the transactions contemplated hereby.
5.2 Notification of Certain Matters. Buyer shall promptly notify Seller
of any fact, event, circumstances or action the existence or occurrence of which
would cause Buyer's representations or warranties under this Agreement not to be
true in any material respect.
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5.3 Expenses. Buyer shall bear its own expenses incurred in connection
with the negotiation and preparation of this Agreement and in connection with
all obligations required to be performed by it under this Agreement.
5.4 Consummation of Agreement. Subject to the provisions of Section 8 of
this Agreement: (a) Buyer shall use its reasonable best efforts to fulfill and
perform all conditions and obligations on its part to be fulfilled and performed
under this Agreement, and to cause the transactions contemplated by this
Agreement to be fully carried out on or before February 1, 2000; and (b) Buyer
shall not take any action or omit to take any action that would or could
reasonably be expected to (i) result in any of the representations and
warranties of Buyer set forth in this Agreement being or becoming untrue in any
respect that would cause Section 7.1 of this Agreement not to be satisfied, (ii)
result in any condition to the Closing set forth in Section 7 of this Agreement
not being satisfied, or (iii) result in a material violation of any provision of
this Agreement.
5.5 Confidentiality. Buyer agrees that it and its representatives will
hold in strict confidence, and will not use, any confidential or proprietary
data or information obtained from Seller with respect to its business or
financial condition except for the purpose of evaluating, negotiating and
completing the transactions contemplated hereby. Information generally known in
Seller's industry or which has been disclosed to Buyer by third parties which
have a right to do so shall not be deemed confidential or proprietary
information for purposes of this Agreement. If the transactions contemplated by
this Agreement are not consummated, Buyer will return, and cause its respective
officers, directors, agents and representatives to return, to Seller (or certify
that they have destroyed) all copies of such data and information made available
to Buyer (and its officers, directors, agents and representatives) in connection
with the transaction.
5.6 Public Announcements. All press releases, filings and other public
announcements concerning the transactions contemplated hereby will be subject to
review and approval by Seller, on the one hand, and Buyer, on the other hand,
such approval not to be unreasonably withheld. Such approval shall not be
required if the party issuing such release, filing or public announcement
reasonably believes, based on advice of counsel, that it is required by law to
do so, but in any such case, all reasonable efforts shall be made to consult
with the other party in advance of such release, filing or announcement and to
provide the other party with the content thereof, the reasons the release,
filing or announcement is required by law and the time and place that such
release, filing or announcement will be made.
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATION OF BUYER. Buyer's obligation to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions, unless otherwise waived by Buyer in writing:
6.1 Accuracy of Representations and Warranties. The representations and
warranties of Seller contained in this Agreement shall be true and correct in
all material respects at the
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Closing Date with the same effect as though made at such time and the
representations and warranties of Seller contained in this Agreement which are
qualified by materiality shall be true and correct in all respects as of the
Closing Date with the same effect as though made at such time.
6.2 Performance of Agreements and Deliveries. Seller shall have performed
in all material respects all of its covenants, agreements and obligations under
this Agreement which are to be performed or complied with by Seller prior to or
upon the Closing Date and shall have delivered all documents and items required
to be delivered at or prior to the Closing, including, without limitation:
(a) A certificate, dated the Closing Date, from the President of
Seller to the effect that the conditions set forth in Sections 6.1 and 6.2 have
been satisfied;
(b) A certificate, dated the Closing Date, from Seller's Secretary as
to the charter, by-laws, authority and the incumbency of all officers executing
the Seller Documents on behalf of Seller;
(c) A certified copy of Seller's Articles of Incorporation from the
Secretary of State of the State of Ohio;
(d) An Amendment to the Articles of Incorporation and any other
required documentation, which effect a change of Seller's name;
(e) A certificate of good standing from the Secretary State of the
State of Ohio; and
(f) Such other certificates and instruments reasonably requested by
Buyer.
6.3 No Material Adverse Effect. None of the schedules, documents or other
information to be furnished by Seller to Buyer pursuant to this Agreement, shall
disclose any fact, circumstance or matter, or any change in or development in
connection with any matter disclosed in the original schedules or documents
previously delivered by Seller to Buyer, which has, or could reasonably be
expected to have, a material adverse effect on the Assets or on the Business;
and there shall have been no other changes or developments affecting either the
Assets or the Business since the Base Balance Sheet Date which have, or could
reasonably be expected to have, a material adverse effect on the Assets or
Business.
6.4 Asset Transfer. Seller shall have delivered to Buyer the following
instruments of transfer and assignment in accordance with the provisions hereof,
transferring to Buyer all of Seller's right, title and interest in and to the
Assets, free and clear of all Liens:
(a) A Bill of Sale in the form attached hereto as Exhibit D;
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(b) An Assignment and Assumption Agreement in the form attached hereto
as Exhibit E;
(c) An Assignment of Patents and Trademarks in the form attached
hereto as Exhibit F;
(d) An Assignment of Internet Domain Name in the form attached hereto
as Exhibit G; and
(e) Such other instruments of transfer reasonably requested by Buyer.
6.5 Assignment of Contracts and Authorizations; Approvals. All Contracts
shall have been duly and validly assigned to Buyer by Seller, and all consents
and approvals required in connection with the consummation of the transactions
contemplated hereby under any Contract or Authorization or otherwise shall have
been obtained in form and substance satisfactory to Buyer and without conditions
materially and adversely affecting Buyer and which do not require Buyer to pay
money to any party to any such Contract or Authorization in excess of amounts
required to be so paid pursuant to the terms and conditions thereof. All such
Contracts and Authorizations shall remain in full force and effect and shall not
have been amended, modified or repudiated in any material respect by either
party thereto. Neither Seller nor, to the knowledge of Seller and the
Principals, the other party thereto, shall have breached or defaulted under any
Contract or Authorization. Seller shall not have received notice of or have
knowledge of any fact which could result in the termination, repudiation or
breach of any Contract or Authorization.
6.6 Escrow Agreement. Seller shall have executed and delivered to Buyer
the Escrow Agreement.
6.7 Non-competition Agreement. Seller and the Principals shall have
executed and delivered to Buyer a Non-Competition Agreement in substantially the
form attached hereto as Exhibit H.
6.8 Release of Liens. Seller shall have obtained and delivered to Buyer
at or prior to the Closing instruments (including payoff letters, bills of sale
and UCC-3 termination statements) releasing any and all Liens on the Assets.
6.9 Revenues. Seller shall have delivered to Buyer Recurring Revenues for
the business which are equal to or greater than $201,500 as of the Closing Date,
and Seller shall have furnished Buyer with a certificate, dated as of the
Closing Date, to that effect. For purposes hereof, "Recurring Revenues" shall
mean revenues of Seller from recurring sources, calculated by multiplying the
number of Subscribers as of the Closing Date by the average monthly rate in
effect for such Subscribers, by type, excluding any one-time set-up fees and
other ancillary charges.
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6.10 Subscribers. Seller shall have delivered to Buyer at least 9,000
Dial-up Subscribers, 113 dedicated access accounts and 630 Web-hosting/Domain-
hosting Subscribers, and Seller shall have furnished Buyer with a certificate,
dated as of the Closing Date, to that effect.
6.11 Due Diligence. The results of Buyer's due diligence review of Seller
and its assets, liabilities and operations shall be reasonably satisfactory to
Buyer.
6.12 Opinion of Seller's Counsel. Buyer shall have received the
opinion or opinions of McHugh, DeNune & McCarthy, Ltd., counsel for Seller,
dated the Closing Date, substantially in the form of Exhibit I attached hereto.
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATION OF SELLER. The obligation of
Seller to consummate the transactions contemplated by this Agreement is subject
to the satisfaction, on or prior to the Closing Date, of the following
conditions, unless waived by Seller in writing:
7.1 Accuracy of Representations and Warranties. The representations and
warranties of Buyer contained in this Agreement shall be true and correct in all
material respects at the Closing Date with the same effect as though made at
such time, and the representations and warranties of Buyer contained in this
Agreement which are qualified by materiality shall be true and correct in all
respects as of the Closing Date with the same effect as though made at such
time.
7.2 Performance of Agreement and Deliveries. Buyer shall have performed
in all material respects all of its covenants, agreements and obligations under
this Agreement which are to be performed or complied with by Buyer prior to or
upon the Closing Date and shall have delivered all documents and items required
to be delivered at or prior to the Closing, including, without limitation:
(a) A certificate, dated the Closing Date, from the President of Buyer
to the effect that the conditions set forth in Sections 7.1 and 7.2 have been
satisfied;
(b) A certificate, dated the Closing Date, from Buyer's Assistant
Secretary as to the Articles of Incorporation, by-laws, authority and the
incumbency of all officers executing the Buyer Documents on behalf of Buyer;
(c) A certified copy of Buyer's Articles of Incorporation from the
Secretary of State of the State of Michigan; and
(d) A certificate of good standing from the Secretary of State of the
State of Michigan.
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7.3 Escrow Agreement. Buyer shall have executed and delivered to Seller
the Escrow Agreement.
SECTION 8. TERMINATION.
8.1 Events of Termination. This Agreement and the transactions
contemplated by this Agreement may be terminated at any time prior to the
Closing:
(a) By the mutual written consent of Buyer and Seller.
(b) By Seller, if it is not in breach or default hereunder:
(i) if any representation or warranty of Buyer made herein is
untrue in any material respect and such breach is not cured within
thirty (30) days of Buyer's receipt of a notice from Seller that such
breach exists or has occurred;
(ii) if Buyer shall have defaulted in any material respect in the
performance of any material obligation under this Agreement and such
breach is not cured within thirty (30) days of Buyer's receipt of a
notice from Seller that such default exists or has occurred; or
(iii) if the conditions to Seller's obligations to consummate the
Closing as set forth in Section 7 cannot reasonably be satisfied or
performed on or before February 1, 2000 (unless such failure of
satisfaction, non-compliance or non-performance is the result,
directly or indirectly, of any action or failure to act on the part of
Seller).
(c) by Buyer, if it is not in breach or default hereunder:
(i) if any representation or warranty of Seller made herein is
untrue in any material respect and such breach is not cured within
thirty (30) days of Seller's receipt of a notice from Buyer that such
breach exists or has occurred;
(ii) if Seller shall have defaulted in any material respect in
the performance of any material obligation under this Agreement and
such breach is not cured within thirty (30) days of Seller's receipt
of a notice from Buyer that such default exists or has occurred; or
(iii) if the conditions to Buyer's obligations to consummate the
Closing as set forth in Section 6 cannot reasonably be satisfied or
performed on or before February 1, 2000 (unless such failure of
satisfaction, non-compliance or non-performance is the result directly
or indirectly of any action or failure to act on the part of Buyer).
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8.2 Manner of Exercise. In the event of the termination of this Agreement
by either Buyer or Seller pursuant to Section 8.1 notice thereof shall forthwith
be given to the other party in accordance with the provisions set forth in
Section 11 hereto and this Agreement shall terminate and the transactions
contemplated hereunder shall be abandoned without further action by Buyer or
Seller.
8.3 Effect of Termination; Liabilities. In the event of the termination
of this Agreement pursuant to Section 8.1 and prior to the Closing, all
obligations of the parties hereunder (other than pursuant to Sections 4.7, 4.8,
4.12 and 5.5 hereof) shall terminate, and neither Seller nor Buyer shall have
any further liability hereunder, including for losses, liabilities, obligations,
damages, deficiencies, actions, suits, proceedings, demands, assessments,
orders, judgments, costs and expenses (including attorneys' fees) of any kind
whatsoever; except upon termination of this Agreement pursuant to Sections
8.1(c)(i) and 8.1(c)(ii), Buyer shall be entitled to any remedy which it may
have, whether at law or in equity.
SECTION 9. POST-CLOSING COVENANTS; SURVIVAL.
9.1 Use of Trade Names. After the Closing Date, neither Seller, nor any
person controlling, controlled by or under common control with Seller will for
any reason, directly or indirectly, for itself or any other person, (a) use the
name "GlassCity Internet," or (b) use or disclose any trade secrets,
confidential information, know-how, proprietary information or other
intellectual property of Seller transferred pursuant to this Agreement.
9.2 Post-Closing Transitional Matters. For a period of ninety (90) days
following the Closing, Seller shall provide, without additional cost to Buyer,
such assistance as is reasonably requested by Buyer in order to effect an
orderly transition in the ownership and operation of the Assets.
9.3 Access to Records. For a period of one year following the date
hereof, Seller shall give Buyer and its representatives, at reasonable times and
with reasonable prior notice, free access to the books and records of the
Business and will furnish to Buyer and its representatives such information
regarding the Business and the Assets as Buyer or its representatives may from
time to time reasonably request.
9.4 Survival. All representations, warranties, covenants, agreements and
indemnities contained in this Agreement, or in any schedule, exhibit,
certificate, agreement, document or statement delivered pursuant hereto, are
material, shall be deemed to have been relied upon by the parties and, shall
survive the Closing for a period of two (2) years (the "Expiration Date")
regardless of any investigation conducted by or knowledge of any party hereto.
SECTION 10. INDEMNIFICATION.
10.1 Indemnification by Seller and the Principals. Seller and each of the
Principals hereby agrees, jointly and severally, to indemnify and hold harmless
Buyer, its affiliates and its
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and their respective directors, officers, stockholders, partners, members,
employees, and agents (individually, a "Buyer Indemnified Party" and
collectively, "Buyer Indemnified Parties"), against and in respect of all
losses, liabilities, obligations, damages, deficiencies, actions, suits,
proceedings, demands, assessments, orders, judgments, costs and expenses
(including the reasonable fees, disbursements and expenses of attorneys and
consultants) of any kind or nature whatsoever, but net of the proceeds from any
insurance policies or other third party reimbursement for such loss, to the
extent sustained, suffered or incurred by or made against any Buyer Indemnified
Party, to the extent based upon, arising out of or in connection with: (a) any
breach of any representation or warranty made by Seller and the Principals in
this Agreement or in any schedule, exhibit, certificate, agreement or other
instrument delivered pursuant to this Agreement; (b) any breach of any covenant
or agreement made by Seller in this Agreement or in any schedule, exhibit,
certificate, financial statement, agreement or other instrument delivered
pursuant to this Agreement; (c) any claim made by any person or entity which
relates to the operation of the Assets or the Business which arises in
connection with or on the basis of events, acts, omissions, conditions or any
other state of facts occurring on or existing before the Closing Date; and (d)
any claim which arises in connection with any liability or obligation of Seller
other than the Assumed Liabilities.
10.2 Indemnification by Buyer. Buyer agrees to indemnify and hold
harmless Seller and its officers, directors, stockholders, employees and agents
(individually, a "Seller Indemnified Party" and collectively, "Seller
Indemnified Parties") at all times against and in respect of all losses,
liabilities, obligations, damages, deficiencies, actions, suits, proceedings,
demands, assessments, orders, judgments, costs and expenses (including the
reasonable fees, disbursements and expenses of attorneys and consultants), of
any kind or nature whatsoever, to the extent sustained, suffered or incurred by
or made against any Seller Indemnified Party, to the extent based upon, arising
out of or in connection with: (a) any breach of any representation or warranty
made by Buyer in this Agreement or in any schedule, exhibit, certificate,
agreement or other instrument delivered pursuant to this Agreement; (b) any
breach of any covenant or agreement made by Buyer in this Agreement or in any
schedule, exhibit, certificate, agreement or other instrument delivered pursuant
to this Agreement; (c) any claim made against Seller which relates to, results
from or arises out of Buyer's operation of the Assets or the Business from and
after the Closing Date; and (d) the Assumed Liabilities.
10.3 Notice; Defense of Claims.
(a) Notice of Claims. Promptly after receipt by an indemnified party
of notice of any claim, liability or expense to which the indemnification
obligations hereunder would apply, the indemnified party shall give notice
thereof in writing to the indemnifying party, but the omission to so notify the
indemnifying party promptly will not relieve the indemnifying party from any
liability except to the extent that the indemnifying party shall have been
prejudiced as a result of the failure or delay in giving such notice. Such
notice shall state the information then available regarding the amount and
nature of such claim, liability or expense and shall specify the provision or
provisions of this Agreement under which the liability or obligation is
asserted.
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(b) Third Party Claims. With respect to third party claims, if within
twenty (20) days after receiving the notice described in clause (a) above the
indemnifying party gives (i) written notice to the indemnified party stating
that (A) it would be liable under the provisions hereof for indemnity in the
amount of such claim if such claim were successful and (B) that it disputes and
intends to defend against such claim, liability or expense at its own cost and
expense and (ii) provides reasonable assurance to the indemnified party that
such claim will be promptly paid in full if required, then counsel for the
defense shall be selected by the indemnifying party (subject to the consent of
the indemnified party which consent shall not be unreasonably withheld) and the
indemnified party shall not be required to make any payment with respect to such
claim, liability or expense as long as the indemnifying party is conducting a
good faith and diligent defense at its own expense; provided, however, that the
assumption of defense of any such matters by the indemnifying party shall relate
solely to the claim, liability or expense that is subject or potentially subject
to indemnification. The indemnifying party shall have the right, with the
consent of the indemnified party, which consent shall not be unreasonably
withheld, to settle all indemnifiable matters related to claims by third parties
which are susceptible to being settled provided the indemnifying parties'
obligation to indemnify the indemnified party therefor will be fully satisfied.
The indemnifying party shall keep the indemnified party apprised of the status
of the claim, liability or expense and any resulting suit, proceeding or
enforcement action, shall furnish the indemnified party with all documents and
information that the indemnified party shall reasonably request and shall
consult with the indemnified party prior to acting on major matters, including
settlement discussions. Notwithstanding anything herein stated, the indemnified
party shall at all times have the right to fully participate in such defense at
its own expense directly or through counsel; provided, however, if the named
parties to the action or proceeding include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate under applicable standards of professional conduct, the expense
of separate counsel for the indemnified party shall be paid by the indemnifying
party. If no such notice of intent to dispute and defend is given by the
indemnifying party, or if such diligent good faith defense is not being or
ceases to be conducted, the indemnified party shall, at the expense of the
indemnifying party, undertake the defense of (with counsel selected by the
indemnified party), and shall have the right to compromise or settle (exercising
reasonable business judgment), such claim, liability or expense. If such claim,
liability or expense is one that by its nature cannot be defended solely by the
indemnifying party, then the indemnified party shall make available all
information and assistance that the indemnifying party may reasonably request
and shall cooperate with the indemnifying party in such defense.
(c) Non-Third Party Claims. With respect to non-third party claims,
if within twenty (20) days after receiving the notice described in clause (a)
above the indemnifying party does not give written notice to the indemnified
party that it contests such indemnity, the amount of indemnity payable for such
claim shall be as set forth in the indemnified party's notice. If the
indemnifying party provides written notice to the indemnified party within such
20-day period that it contests such indemnity, the parties shall attempt in good
faith to reach an agreement with regard thereto within thirty (30) days of
delivery of the indemnifying party's notice. If the
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parties cannot reach agreement within such 30-day period, the matter may be
submitted by either party for binding arbitration in accordance with the
provisions of Section 12.11 hereof.
SECTION 11. NOTICES. All notices and other communications required to be
given hereunder, or which may be given pursuant or relative to the provisions
hereof, shall be in writing and shall be deemed to have been given when
delivered in hand or mailed, postage prepaid, by first class United States mail,
certified return receipt requested as follows:
If to Seller: Wholesale ISP, Inc.
715 Jefferson Avenue
P.O. Box 407
Toledo, OH 43697
Phone: 419-382-6800
Fax: 419-324-0577
With a copy to: McHugh, DeNune & McCarthy, Ltd.
5580 Monroe Street
Toledo, OH 43560
Attention: John J. McHugh III, Esq.
If to the Principals: Todd Myers
Brian Krabach
James Otte
F. Robert Kitzler
c/o Wholesale ISP, Inc.
715 Jefferson Avenue
P.O. Box 554
Toledo, OH 43697
Phone: 419-382-6800
Fax: 419-324-0577
If to Buyer: Voyager Information Networks, Inc.
4660 S. Hagadorn Road
Suite 320
East Lansing, MI 48823
Attn: Christopher Torto
With a copy to: Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Attn: David F. Dietz, P.C.
or to such other address of which any party may notify the other
parties as provided above. Notices shall be effective as of the date of such
delivery or mailing.
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SECTION 12. MISCELLANEOUS.
12.1 Assignability; Binding Effect. This Agreement shall not be
assignable by Buyer or Seller except with the written consent of the other,
except that Buyer may assign its rights hereunder either (a) to any affiliate of
Buyer or its owners, (b) as a result of any merger, reorganization or other
consolidation or sale, or (c) in connection with the granting of a security
interest to its senior lenders. This Agreement shall be binding upon and shall
inure to the benefit of, the parties hereto and their respective successors, and
assigns.
12.2 Headings. The subject headings used in this Agreement are included
for purposes of convenience only and shall not affect the construction or
interpretation of any of its provisions.
12.3 Amendments; Waivers. This Agreement may not be amended or modified,
nor may compliance with any condition or covenant set forth herein be waived,
except by a writing duly and validly executed by Buyer and Seller or, in the
case of a waiver, the party waiving compliance. No delay on the part of any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any waiver on the part of any party of any such right,
power or privilege, or any single or partial exercise of any such right, power
or privilege, preclude any further exercise thereof or the exercise of any other
such right, power or privilege.
12.4 Bulk Sales Law. Buyer hereby waives compliance by Seller of any
applicable bulk sales law and Seller agrees, to make full and timely payment
when due of all amounts owed by such Seller to its creditors. Seller agrees to
indemnify and hold Buyer harmless from, and reimburse Buyer for, any loss, cost,
expense, liability or damage (including reasonable counsel fees and
disbursements and expenses) which Buyer may suffer or incur by virtue of the
non-compliance by Seller with such laws.
12.5 Entire Agreement. This Agreement, together with the schedules and
exhibits hereto, constitutes the entire agreement between the parties with
respect to the subject matter hereof and supersedes and cancels any and all
prior or contemporaneous arrangements, understandings and agreements between
them relating to the subject matter hereof.
12.6 Severability. In the event that any provision or any portion of any
provision of this Agreement shall be held to be void or unenforceable, then the
remaining provisions of this Agreement (and the remaining portion of any
provision held to be void or unenforceable in part only) shall continue in full
force and effect.
12.7 Governing Law. This Agreement and the transactions contemplated
hereby shall be governed and construed by and enforced in accordance with the
laws of the State of Ohio, without regard to conflict of laws principles.
12.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which shall
constitute the same instrument.
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12.9 Expenses. Each party shall pay its own expenses incident to the
negotiation, preparation and performance of this Agreement and the transactions
contemplated hereby, including all fees and expenses of its counsel and
accountants for all activities of such counsel and accountants undertaken
pursuant to this Agreement, whether or not the transactions contemplated hereby
are consummated.
12.10 Remedies. It is specifically understood and agreed that certain
breaches of this Agreement will result in irreparable injury to the parties
hereto, that the remedies available to the parties at law alone will be an
inadequate remedy for such breach, and that, in addition to any other legal or
equitable remedies which the parties may have, a party may enforce its rights by
an action for specific performance and the parties expressly waive the defense
that a remedy in damages will be adequate.
12.11 Dispute Resolution. Any dispute arising out of or relating to this
Agreement or the breach, termination or validity hereof shall be finally settled
solely and exclusively by arbitration conducted expeditiously in accordance with
the CPR Institute for Dispute Resolution Rules for Nonadministered Arbitration
of Business Disputes (the "CPR Rules"). The CPR Institute for Dispute
Resolution shall appoint a neutral advisor from its National CPR Panel. The
arbitration shall be governed by the United States Arbitration Act, 9 U.S.C.
(S)(S)1-16, and judgment upon the award rendered by the arbitrators may be
entered by any court having jurisdiction thereof. The place of arbitration
shall be Detroit, Michigan.
Such proceedings shall be administered by the neutral advisor in accordance
with the CPR Rules as he/she deems appropriate, however, such proceedings shall
be guided by the following agreed upon procedures:
(a) Mandatory exchange of all relevant documents, to be accomplished
within forty-five (45) days of the initiation of the procedure;
(b) No other discovery;
(c) Hearings before the neutral advisor which shall consist of a
summary presentation by each side of not more than three hours; such hearings to
take place in one or two days at a maximum; and
(d) Decision to be rendered not later than ten (10) days following
such hearings.
Each of the parties hereto (a) hereby unconditionally and irrevocably
submits to the jurisdiction of any United States District Court of competent
jurisdiction located in the State of Michigan for the purpose of enforcing the
award or decision in any such proceeding and (b) hereby waives, and agrees not
to assert in any civil action to enforce the award, any claim that it is not
subject personally to the jurisdiction of the above-named court, that its
property is exempt or immune from attachment or execution, that the civil action
is brought in an inconvenient forum, that the venue of the civil action is
improper or that this Agreement or the subject matter hereof
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may not be enforced in or by such court, and (c) hereby waives and agrees not to
seek any review by any court of any other jurisdiction which may be called upon
to grant an enforcement of the judgment of any such court. Each of the parties
hereto hereby consents to service of process by registered mail at the address
to which notices are to be given. Each of the parties hereto agrees that its
submission to jurisdiction and its consent to service of process by mail is made
for the express benefit of the other parties hereto. Final judgment against any
party hereto in any such action, suit or proceeding may be enforced in other
jurisdictions by suit, action or proceeding on the judgment, or in any other
manner provided by or pursuant to the laws of such other jurisdiction; provided,
however, that any party may at its option bring suit, or institute other
judicial proceedings, in any state or federal court of the United States or of
any country or place where the other parties or their assets, may be found.
Notwithstanding the foregoing, the parties may enforce their rights under
this Agreement in accordance with Section 12.10.
12.12 Third Party Rights. This Agreement is for the benefit of
the parties hereto and is not entered into for the benefit of, and shall not be
construed to confer any benefit upon, any other party or entity.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, Seller, Principals and Buyer have caused this Asset
Purchase Agreement to be executed as of the date first above written.
SELLER:
WHOLESALE ISP, INC.
By: /s/ Todd Myers
----------------------------------
Name:
Title:
PRINCIPALS:
/s/ Todd Myers
----------------------------------
Todd Myers
/s/ Brian Krabach
----------------------------------
Brian Krabach
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BUYER:
VOYAGER INFORMATION NETWORKS, INC.
By: /s/ Christopher Torto
----------------------------------
Name:
Title:
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LIST OF EXHIBITS AND SCHEDULES
SCHEDULES
- -----------
Exhibit A - Form of Escrow Agreement
Exhibit B - Form of Consent (for contracts)
Exhibit C - Form of Consent (for leases)
Exhibit D - Form of Bill of Sale
Exhibit E - Form of Assignment and Assumption Agreement
Exhibit F - Form of Assignment of Patents and Trademarks
Exhibit G - Form of Assignment of Internet Domain Name
Exhibit H - Form of Non-Competition Agreement
Exhibit I - Form of Opinion of Seller's Counsel
Schedule 1.1(a) Equipment
Schedule 1.1(b) Contracts
Schedule 1.1(c) Intellectual Property
Schedule 1.1(d) Licenses and Authorizations
Schedule 1.1(e) Accounts Receivable
Schedule 1.2(a) Excluded Assets
Schedule 1.2(b) Excluded Contracts
Schedule 1.2(c) Insurance Exclusions
Schedule 1.2(d) Excluded Tax Items
Schedule 1.6(b) Estimated Adjustment Statement
Schedule 1.7 Allocation of Purchase Price
Schedule 2.4 Taxes
Schedule 2.6 Insurance
Schedule 2.10 Employees; Labor Matters
Schedule 2.11 Financial Statements
Schedule 2.14 Approvals; Consents
Schedule 2.16(a) Subscribers
Schedule 2.16(b) Complimentary Accounts
Schedule 2.16(c) Disconnection Policy
Schedule 2.19 Banking Relations
Schedule 2.20 Intellectual Property
Schedule 2.22 Permits, Approvals
Schedule 2.23 Affiliated Transactions
Schedule 2.24 Employee Benefits
Schedule 2.25 Environmental Matters
Schedule 2.27 Indebtedness
Schedule 2.28 Agreements
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