Exhibit 2.2
ASSET PURCHASE AGREEMENT
Agreement made as of March 26, 1999 by and between DURO Communications,
Inc., a Delaware corporation ("Buyer"), ▇▇▇▇▇▇▇.▇▇▇, l.l.c., a Florida limited
liability company ("Seller"), and Digicom USA, LLC, a West Virginia limited
liability company and the manager and sole member of Seller ("Digicom").
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 provider and related businesses of Seller, all as hereinafter
described (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, including but not limited to that equipment
identified 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), including but not limited to that Intellectual
Property identified on Schedule 1.1(c) attached hereto;
(d) Licenses and Authorizations. All transferable 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, any license to operate as a
Competitive Local Exchange Carrier, 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
("Current Assets") of Seller including cash on hand and in bank accounts, 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 reasonable and commercially acceptable accounting principles,
consistently applied, that reflect in all material respects the actual financial
condition and results of operations of Seller ("Accounting Principles") a
complete list of such accounts receivable is attached hereto as Schedule 1.1(e)
("Accounts Receivable");
(f) Goodwill. All of the goodwill of Seller in, and the going
concern value of, the Business, and all of the business and customer lists,
proprietary information, and trade secrets related to the Business; and
(g) Records. All of Seller's customer logs, location files and
records, employee records, and other business files and records, in each case
relating to the Business.
The assets, properties and business of Seller being sold to and purchased
by Buyer under this Section 1.1 are referred to herein collectively as the
"Assets."
1.2 Excluded Assets. There shall be excluded from the Assets and retained
by Seller, to the extent in existence on the Closing Date, the
following assets (the "Excluded Assets"):
(a) Other Assets. All other assets of Seller which are not used or
held for use in connection with the Business or otherwise necessary to the
operation of the Business now or after the Closing Date and which are set forth
on Schedule 1.2(a) attached hereto;
(b) Excluded Contracts. All of Seller's right, title and interest
in, to and under the Contracts listed on Schedule 1.2(b) attached hereto (the
"Excluded Contracts");
(c) Licenses and Authorizations. All of Seller's right, title and
interest in non-transferable 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, and all
applications therefor, together with any renewals, extensions, or modifications
thereof and additions thereto. A true and complete list of such licenses is
attached hereto as Schedule 1.2(c).
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(d) Insurance. The cash surrender value of Seller's contracts of
insurance 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;
(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;
(f) Intellectual Property. The company name "Digicom;" and
(g) 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 on and after the
Closing; (ii) those current liabilities and accrued expenses of Seller as of the
Closing Date consisting of (A) accounts payable arising in the ordinary course
of business and (B) unearned revenues (the "Assumed Current Liabilities and
Accrued Expenses") and (iii) all obligations and liabilities of Seller which are
to be performed after the Closing Date arising under the Contracts and the
Authorizations (as defined in Section 2.13), including, without limitation,
Seller's obligations to Subscribers (as defined in Section 2.16) under such
Contracts for (A) Subscriber deposits held by Seller as of the Closing Date in
the amount for which Buyer receives a credit pursuant to Section 1.6(a) below,
(B) Subscriber advance payments held by Seller as of the Closing Date for
services to be rendered in connection with the Business in the amount for which
Buyer receives a credit pursuant to Section 1.6(a) below, and (C) the delivery
of Internet connectivity service to Subscribers (whether pursuant to a Contract
or otherwise) after the Closing Date ((i), (ii) and (iii) together, 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 or granted 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
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vacation or other similar employee benefits, or arising as a result of the
transactions contemplated hereby, except any obligation created by Buyer's
express actions, 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 (excluding
Seller's officers: ▇.▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇) 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, except any
obligation created by Buyer's express actions. Seller acknowledges and
agrees that Buyer has the right to interview and discuss employment terms
and issues with such employees prior to and after the Closing.
(ii) Buyer specifically reserves the right, on or after the
Closing Date, to employ or reject any of Seller's employees or other
applicants in its sole and absolute discretion; provided that Buyer shall
provide to Seller a list of employees to whom Buyer intends to offer
employment at the Closing. Nothing in this Agreement shall be construed as
a commitment or obligation of Buyer to accept for employment 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 ▇▇▇▇▇▇▇, Procter & ▇▇▇▇ LLP, on the date of this Agreement 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 at the Closing
an amount (as adjusted in accordance with Section 1.6 below, the "Purchase
Price") equal to $4,700,000 as follows:
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(a) Buyer shall deliver to Kataro, Inc., f/k/a SuNet Direct
Corporation ("Kataro") cash in an amount equal to the outstanding indebtedness,
including all accrued interest fees and penalties, of Seller under that certain
promissory note dated as of January 8, 1999 (the "Kataro Amount"), such amount
to be set forth in a payoff letter to be delivered by Seller to the Buyer prior
to the Closing;
(b) Buyer shall deliver to XIU, Inc., f/k/a InternetU, Inc. ("XIU")
cash in an amount equal to the outstanding indebtedness, including all accrued
interest fees and penalties, of Seller under that certain promissory note dated
as of September 1, 1998 (the "XIU Amount"), such amount to be set forth in a
payoff letter to be delivered by Seller to the Buyer prior to the Closing;
(c) Buyer shall deliver to GE Capital Colonial Pacific Leasing
("Colonial") cash in an amount equal to the outstanding indebtedness, including
all accrued interest fees and penalties, of Seller under that certain promissory
note dated as of October 16, 1997 (the "Colonial Amount"), such amount to be set
forth in a payoff letter to be delivered by Seller to the Buyer prior to the
Closing;
(d) (intentionally omitted);
(e) Buyer shall deposit the sum of $470,000 (the "Escrow Deposit")
with Boston Safe Deposit and Trust Company as Escrow Agent under the Escrow
Agreement in the form attached hereto and incorporated by reference herein as
Exhibit A (the "Escrow Agreement"), to be held, administered and distributed in
accordance with the terms of the Escrow Agreement, which, subject to the terms
and conditions thereof, shall have a term of twelve (12) months commencing on
the Closing Date; and
(f) Buyer shall deliver the sum of $4,230,000 less (i) the Kataro
Amount, (ii) the XIU Amount, (iii) the Colonial Amount, (iv) $80,688.20 owing to
Ascend Communication, Inc. under that certain lease dated August 6, 1996, (v)
$12,490.66 owing to Solunet under that certain lease dated October 20, 1997, and
(vi) the Estimated Adjustment (as defined below) if such number is a positive
number to Seller by bank cashier's check or bank wire transfer pursuant to
payment instructions delivered by Seller to Buyer at the Closing; provided that
if the Estimated Adjustment is a negative number, the amount payable to Seller
at Closing shall be increased by the absolute value of such number.
1.6 Adjustments to Purchase Price.
(a) The Purchase Price shall be reduced dollar for dollar by the
amount of Seller's Net Working Capital (as defined herein) if such amount
is negative, or increased dollar for dollar by the amount of Seller's Net
Working Capital if such amount is positive. "Net Working Capital" means an
amount equal to Current Assets as of the Closing Date minus the sum of
Assumed Current Liabilities and Accrued Expenses as of the Closing Date
that are assumed by Buyer.
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(b) The Purchase Price shall be decreased, on a dollar for dollar
basis, by the Revenues Adjustment Amount in the event Recurring Revenues
for the month ending February 28, 1999 are less than $253,000 (the "Target
Revenues"). For purposes hereof, the term "Revenues Adjustment Amount"
shall equal the product obtained by multiplying (i) $1,700 by (ii) the
quotient obtained by dividing (X) the Annualized Recurring Revenues
Deficiency, by (Y) one thousand dollars ($1,000). For purposes hereof,
"Recurring Revenues" shall mean revenues of Seller from recurring sources,
calculated by multiplying the number of Subscribers as of February 28,
1999 by the average monthly rate in effect for such Subscribers, by type,
excluding one-time set-up fees and other ancillary charges. For purposes
hereof, the term "Annualized Recurring Revenues Deficiency" shall equal
the product of (i) the difference between (A) the Target Revenues and (B)
Recurring Revenues, multiplied by (ii) twelve (12).
(c) (i) Buyer and Seller shall prepare a statement to be attached
hereto as Schedule 1.6(c) (the "Estimated Adjustment Statement") which
sets forth (x) the estimated amount of the Net Working Capital as of the
Closing Date (the "Estimated Net Working Capital") and (y) the estimated
Revenues Adjustment Amount (the "Estimated Revenues Adjustment Amount").
The Purchase Price payable at the Closing shall be decreased on a
dollar-for-dollar basis to the extent of the Estimated Adjustment (as
herein defined), set forth on the Estimated Adjustment Statement, if such
number is a positive number, or increased on a dollar-for-dollar basis by
the absolute value of the Estimated Adjustment set forth on such Estimated
Adjustment Statement, if such number is a positive number. "Estimated
Adjustment" means (a) if Estimated Net Working Capital is a negative
number, the sum of the absolute value of Estimate Net Working Capital and
the Estimated Revenues Adjustment Amount, or (b) if Estimated Net Working
Capital is a positive number, the amount equal to the Estimated Revenues
Adjustment Amount minus Estimated Net Working Capital.
(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 Net Working Capital.
Subject to Section 1.6(c)(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 Net
Working Capital, as shown on the Estimated Adjustment Statement, and the
actual Net Working Capital, 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 Net 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,
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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 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
Code.
1.8 Records and Contracts. To the extent not previously provided to Buyer
and except as set forth in Section 4.5 hereof, at the Closing, Seller shall
deliver to Buyer all of the Contracts, with such assignments thereof and
consents to assignments as are necessary to assure Buyer of the full benefit of
the same. Seller shall also deliver to Buyer at the Closing all of Seller's
files and records constituting Assets.
1.9 Sales and Transfer Taxes. All sales, transfer, use, recordation,
documentary, stamp, excise taxes, 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 hereby 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.
1.10 Transfer of Subject Assets. Except as set forth in Section 4.5
hereof, 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 be in form and substance reasonably satisfactory to the parties and
their respective counsel, (b) shall effectively vest in Buyer good and
marketable title to all of the Assets free and clear of all Liens (as defined in
Section 2.8), and (c) where applicable, shall be accompanied by evidence of the
discharge of all Liens against the Assets.
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SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLER AND DIGICOM.
In order to induce Buyer to enter into this Agreement, Seller and Digicom,
jointly and severally, hereby represent and warrant to Buyer as follows:
2.1 Organization; Subsidiaries.
(a) Seller is a limited liability company duly formed, validly
existing and in good standing under the laws of the State of Florida, with all
requisite limited liability company 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 certificate of formation and
limited liability company 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 certificate of formation and limited liability
company operating agreement. Seller is duly qualified to do business in the
State of Florida, 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 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
Digicom is required in connection therewith. Each of Seller and Digicom 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 Digicom enforceable in accordance with its
respective terms.
2.3 No Conflicts.
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(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 certificate of formation and limited liability company
operating agreement of Seller, in each case as amended to date, (ii) constitute
a material violation of, or materially conflict with or result in any material
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) except as
set forth on Schedule 4.5 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 undertaken or (v) result in the
creation or imposition of any Lien on any of the Assets.
(b) The execution, delivery and performance by Digicom of this
Agreement and each other Seller Document does not and will not (i) constitute a
material violation of, or materially conflict with or result in any material
breach of, acceleration of any obligation under, right of termination under, or
default under, any agreement or instrument to which Digicom is a party or by
which Digicom is bound, (ii) violate any judgment, decree, order, statute, rule
or regulation applicable to Digicom, (iii) require Digicom 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 undertaken, or
(iv) result in the creation or imposition of any Lien on any of the Assets.
2.4 Taxes.
(a) Seller has paid or caused to be paid all federal, state, local,
foreign and other taxes, including, without limitation, income taxes, estimated
taxes, alternative minimum taxes, excise taxes, sales taxes, use taxes,
value-added taxes, gross receipts taxes, franchise taxes, capital stock taxes,
employment and payroll-related taxes, withholding taxes, stamp taxes, transfer
taxes, windfall profit taxes, environmental taxes and property taxes, whether or
not measured in whole or in part by net income, and all deficiencies, or other
additions to tax, interest, fines and penalties owed by it (collectively,
"Taxes"), required to be paid by it through the date hereof whether disputed or
not.
(b) Seller has in accordance with applicable law filed all federal,
state, local and foreign tax returns required to be filed by it through the date
hereof, and all such returns correctly and accurately set forth the amount of
any Taxes relating to the applicable period. A list of all federal and state
income tax returns filed with respect to Seller for taxable periods ended on or
after August 31, 1998, is set forth in Schedule 2.4 attached hereto. Seller has
delivered to Buyer correct and complete copies of all federal and state income
tax returns listed on said schedule, and of all examination reports and
statements of deficiencies assessed against or agreed to by Seller with respect
to said returns.
(c) Neither the Internal Revenue Service nor any other governmental
authority is now asserting or, to the knowledge of Seller or Digicom,
threatening to assert against Seller
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any deficiency or claim for additional Taxes. To the knowledge of Seller and
Digicom, 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 (including the Federal Communications
Commission), and Seller has not received notice of a material 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 material 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
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the Business or Assets. Schedule 1.1(b) attached hereto contains a true, correct
and complete list of all Contracts. With respect to each material 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 Digicom, any other party is in material 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 material default, and no material waiver or indulgence has
been granted by any party under any Contract. Seller has not received notice of,
and each of Seller and Digicom 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 on Schedule 2.8, 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. Subject to Section 4.5 hereof, upon the
sale, assignment, transfer and delivery of the Assets to Buyer hereunder and
under the Seller Documents, there will be vested in Buyer good, marketable and
indefeasible title to the Assets, free and clear of all Liens. Except for the
Excluded Assets, the Assets include all of the assets and properties (i) held
for use by Seller to conduct the Business as presently conducted and (ii)
necessary or useful for Buyer to operate the Business in the same manner as such
business is currently operated by Seller. All of the tangible Assets are in good
repair, have been well maintained and are in good operating condition, 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). To our knowledge,
seller holds good, clear, marketable, valid and enforceable leasehold interest
in the real property subject to the Leases (the "Leased Real Property"), subject
only to the right of reversion of the landlord or lessor under the Leases, free
and clear of all other prior or subordinate interests, including, without
limitation, mortgages, deeds of trust, ground leases, leases, subleases,
assessments, tenancies, claims, covenants, conditions, restrictions, easements,
judgments or other encumbrances or matters affecting title, and free of
encroachments onto or off of the leased real property. To our knowledge, and
without further investigation, there are no material defects in the physical
condition of any improvements constituting a part of the Leased Real Property,
including, without limitation, structural elements, mechanical systems, roofs or
parking and loading areas, and all of such improvements are in good operating
condition and repair and have been adequately maintained. 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 Digicom, is Seller threatened to be involved in any material adverse
litigation or legal or other proceedings related to or affecting the Business or
any Asset (including any Intellectual
11
Property) or any litigation or legal or other proceedings 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 23 full-time
employees and 1 part-time employee and generally enjoys good employer-employee
relationships. Seller shall provide to Buyer a list of the employees of Seller
in connection with the Business at the Closing, including the name, date of hire
and wages of such employees. Seller is not delinquent in payments to any of its
employees for any wages, salaries, commissions, bonuses or other direct
compensation for any services performed for it to the date hereof or amounts
required to be reimbursed to such employees. Upon termination of the employment
of any of said employees, neither Seller nor Buyer will by reason of the
transactions contemplated hereby or anything done prior to the Closing be liable
to any of said employees for so-called "severance pay" or any other payments,
except as set forth 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 Digicom, threatened against
or involving Seller. No question concerning representation exists respecting any
group of employees of Seller. No collective bargaining agreement is in effect or
is currently being or is about to be negotiated by Seller. Seller has received
no information to indicate that any of its employment policies or practices is
currently being audited or investigated by any federal, state or local
government agency. Seller is, and at all times since August 31, 1998 has been,
in compliance with the requirements of the Immigration Reform Control Act of
1986.
2.11 Financial Statements. Attached hereto as Schedule 2.11 are copies of
the balance sheet of Seller as at December 31, 1998 (the "Base Balance Sheet")
and the statements of income and expense of Seller for the year then ended
(collectively the "Financial Statements"). The Financial Statements have been
prepared in accordance with 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
substantially accurately in all material respects 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 material liabilities or
obligations of any kind with respect to the Business, whether accrued,
contingent or otherwise, that are not disclosed and adequately reserved against
on the Base Balance Sheet. Except as set forth on Schedule 2.11, as of the date
hereof and at the Closing, Seller had and will have no material liabilities or
obligations of any kind with respect to the Business, whether accrued,
12
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 as set forth on
Schedule 2.12, since the Base Balance Sheet Date:
(a) there has been no material adverse change in the Business or in
the Assets, operations or financial condition of the Business;
(b) the Business has, in all material respects, been conducted in
the ordinary course of business and in substantially the same manner as it was
conducted before the date of the Base Balance Sheet Date;
(c) there has not been any material obligation or liability
(contingent or other) incurred by Seller with respect to the Business, whether
or not incurred in the ordinary course of business;
(d) there has not been any purchase, sale or other disposition, or
any agreement or other arrangement, oral or written, for the purchase, sale or
other disposition, of any material properties or assets of the Business, whether
or not in the ordinary course of business;
(e) there has not been any mortgage, encumbrance or lien placed on
any of the Assets, nor any payment or discharge of a material lien or liability
of Seller which was not reflected on the Base Balance Sheet;
(f) there has not been any damage, destruction or loss, whether or
not covered by insurance, materially adversely affecting the Business or Assets;
(g) there has not been any change in Seller's pricing, marketing,
customer service, billing, operational or promotional activities in any material
way from that which Seller was providing these activities directly prior to the
Base Balance Sheet Date; and
(h) there has not been any agreement or understanding, whether in
writing or otherwise, for Seller to take any of the actions specified above.
2.13 Licenses. As of the date of this Agreement, Seller is the holder of
all of the licenses, permits and authorizations required for operation of the
Business as now operated (the "Authorizations"). All of the Authorizations are
in full force and effect and no material 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 Digicom, threatened any material
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 Digicom, pending
13
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 material 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. Except as set forth in Section 4.5 hereof, all
of the approvals, consents and authorizations listed on Schedule 2.14 shall be
obtained by Seller at or prior to the Closing.
2.15 Customers and Suppliers. Seller's relations with its customers and
suppliers, including its Subscribers, 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
▇▇▇▇, including, without limitation, any person who receives dial-up Internet
access through the Business (a "Dial-up Subscriber"), any person who receives
dedicated Internet access from 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 ▇▇▇▇ 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.
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.
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2.19 Banking Relations. All of the arrangements which Seller has with any
banking institution are 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 (except for Trade Secrets and Copyrights (each
as hereinafter defined)). 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 "Florida Online"
"SuNet" "▇▇▇▇▇▇▇.▇▇▇" and "InternetU", and any and all other Internet domain
names, trade names, trade dress, logos, packaging design, slogans, registered
and unregistered trademarks and service marks and applications used or useful in
the business of Seller (expressly excluding the name "Digicom") (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 but
not limited to the domain name "▇▇▇▇▇▇▇.▇▇▇"); (vi) all goodwill, franchises,
licenses, permits, consents, approvals, technical information, telephone
numbers, and claims of infringement against third parties (the "Rights"); and
(vii) all contracts relating to the 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 to its knowledge 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 Digicom, 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 Digicom, 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.
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To Seller's knowledge after inquiry, no employee, consultant or contractor
of Seller has entered into any agreement that restricts or limits in any way the
scope or type of work in which the employee, consultant or contractor may be
engaged or requires the employee, consultant or contractor to transfer, assign,
or disclose information concerning his work to anyone other than Seller.
(c) Schedule 2.20 sets forth a complete and accurate list and
summary description of all of Seller's Patents. All of the issued Patents are
currently in compliance with formal legal requirements (including without
limitation 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 Digicom, 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 to
Seller's knowledge 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. Except as set forth on Schedule 2.20 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
▇▇▇▇ has been or is now involved in any opposition, invalidation or cancellation
proceeding and, to the knowledge of Seller and Digicom, no such action is
threatened with respect to any of the Marks.
(e) Seller holds no registered Copyrights. To Seller's knowledge,
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. To
Seller's knowledge, 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.
(f) Seller has taken all reasonable security measures to protect the
secrecy, confidentiality and value of all Trade Secrets. 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
16
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 Digicom, there is not any assertion that the use by Seller of any Trade
Secret violates the rights of any third party.
(g) Except as set forth on Schedule 2.20, 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 contractually obligated to and does
not pay royalties or other fees to anyone for its ownership, use, license or
transfer of any of its Intellectual Property.
(h) All licenses or other agreements under which Seller is granted
rights by others in Intellectual Property are listed in Schedule 2.20. Except as
set forth on Schedule 2.20, all such licenses or other agreements are in full
force and effect, to the knowledge of Seller and Digicom 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 Digicom 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) The Products perform in accordance with their published
specifications and documentation and as Seller has warranted to its customers.
To Seller's and Digicom's knowledge 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) will not have any material
adverse effect on the business or operations of Seller.
2.21 Absence of Restrictions. Except as set forth on Schedule 2.21 hereto,
Seller has not entered into any other agreement or arrangement with any other
party with respect to the sale, transfer or any other disposition or encumbrance
of the Business or the Assets, in whole or in part.
2.22 Transactions with Interested Persons. Except as set forth in Schedule
2.22 hereto, neither Seller, nor any manager, member, officer, supervisory
employee or director of Seller or, to the knowledge of Seller or Digicom, any of
their respective spouses or family members owns directly or indirectly on an
individual or joint basis any material interest in, or
17
serves as an officer or director or in another similar capacity of, any
competitor or supplier of Seller, or any organization which has a material
contract or arrangement with Seller.
2.23 Employee Benefit Programs.
(a) Schedule 2.23 sets forth a list of every Employee Program that
has been maintained by 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 Seller or an Affiliate and which has been intended to qualify
under Section 401(a) or 501(c)(9) of the Internal Revenue Code of 1986, as
amended (the "Code") has received a favorable determination or approval letter
from the Internal Revenue Service ("IRS") regarding its qualification under such
section and has, in fact, been qualified under the applicable section of the
Code from the effective date of such Employee Program through and including the
Closing Date (or, if earlier, the date that all of such Employee Program's
assets were distributed). No event or omission has occurred which would cause
any such Employee Program to lose its qualification or otherwise fail to satisfy
the relevant requirements to provide tax-favored benefits under the applicable
Code Section (including without limitation Code Sections 105, 125, 401(a) and
501(c)(9)). With respect to any Employee Program ever maintained by 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, or (ii) failure to comply with any provision of
ERISA, other applicable law, or any agreement which, in the case of either of
(i) or (ii), could subject Seller or any Affiliate to liability either directly
or indirectly (including, without limitation, through any obligation of
indemnification or contribution) for any damages, penalties, or taxes, or any
other loss or expense. All payments and/or contributions required to have been
made (under the provisions of any agreements or other governing documents or
applicable law) with respect to all Employee Programs ever maintained by Seller
or any Affiliate, for all periods prior to the Closing Date, either have been
made or have been accrued (and all such unpaid but accrued amounts are described
on Schedule 2.23). Each Employee Program ever maintained by 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 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.
18
(ii) An entity "maintains" an Employee Program if such entity
sponsors, contributes to, or provides benefits under or through such
Employee Program, or has any obligation (by agreement or under applicable
law) to contribute to or provide benefits under or through such Employee
Program, or if such Employee Program provides benefits to or otherwise
covers employees of such entity (or their spouses, dependents, or
beneficiaries).
(iii) An entity is an "Affiliate" of the Seller if it would
have ever been considered a single employer with the Seller under ERISA
Section 4001(b) or part of the same "controlled group" as the Seller for
purposes of ERISA Section 302(d)(8)(C).
2.24 Environmental Matters.
(a) Except as set forth in Schedule 2.24, to Seller's knowledge (i)
Seller has not generated, transported, used, stored, treated, disposed of, or
managed any Hazardous Waste (as defined below) at any time; (ii) no Hazardous
Material (as defined below) has ever been or is threatened to be spilled,
released, or disposed of at any site associated with a structure 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) no Hazardous Material has ever
been transported from any site associated with a structure presently or formerly
owned, operated, leased, or used by Seller for treatment, storage, or disposal
at any other place; (iv) Seller does not presently own, operate, lease, or use,
and has not previously owned, operated, leased, or used any site associated with
a structure on which underground storage tanks are or were located; and (v) no
lien has ever been imposed by any governmental agency on any property, facility,
machinery, or equipment owned, operated, leased, or used by either Seller in
connection with the presence of any Hazardous Material.
(b) Except as set forth in Schedule 2.24, to Seller's knowledge (i)
Seller does not have any liability under, nor has it ever violated, any
Environmental Law (as defined below); (ii) neither Seller, nor any property
associated with a structure owned, operated, leased, or used by Seller, nor
facilities or operations thereon are presently not in compliance with all
applicable Environmental Laws; (iii) Seller has not entered into or been subject
to any judgment, consent decree, compliance order, or administrative order with
respect to any environmental or health and safety matter or received any request
for information, notice, demand letter, administrative inquiry, or formal or
informal complaint or claim with respect to any environmental or health and
safety matter or the enforcement of any Environmental Law; and (iv) neither
Seller nor Digicom has any knowledge or reason to know that any of the items
enumerated in clause (iii) of this subsection will be forthcoming.
(c) For purposes of this Agreement, (i) "Hazardous Material" shall
mean and include any hazardous waste, hazardous material, hazardous substance,
petroleum product, oil, toxic substance, pollutant, contaminant, or other
substance which may pose a threat to the environment or to human health or
safety, as defined or regulated under any Environmental
19
Law; (ii) "Hazardous Waste" shall mean and include any hazardous waste as
defined or regulated under any Environmental Law; and (iii) "Environmental Law"
shall mean any environmental or health and safety-related law, regulation, rule,
ordinance, or By-law at the foreign, federal, state, or local level, whether
existing as of the date hereof or previously enforced.
2.25 Disclosure. The representations, warranties and statements contained
in this Agreement and in the certificates, exhibits and schedules delivered by
Seller and Digicom 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
Digicom which presently or may in the future have a material adverse affect on
the 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 and Digicom entering into this
Agreement, Buyer hereby represents and warrants to Seller and Digicom 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; Authority. 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 and no other action on the part of
Buyer or its shareholders or directors is required in connection therewith.
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 Certificate of Incorporation or bylaws 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,
20
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 No Litigation. Buyer is not now involved in and, to its knowledge is
not threatened to be involved in any litigation or legal or other proceedings
which would prevent or hinder the consummation of the transactions contemplated
by this Agreement.
3.5 Approvals; Consents. No material 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 Buyer in connection with the execution and
delivery of this Agreement and the Buyer Documents and the consummation of the
transactions contemplated hereby and thereby.
3.6 Brokers. Except for Rampart Associates, LLC, whose fees will be paid
by Buyer at or prior to the Closing, 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 Seller shall:
4.1 Confidentiality. Unless otherwise agreed by the parties, from the date
hereof, 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.
4.2 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 "Florida Online" "SuNet" "▇▇▇▇▇▇▇.▇▇▇" and "InternetU" and any and all
other Internet domain names or trade names used or useful in the Business, or
(b) use or disclose any trade secrets, confidential information, proprietary
information or other intellectual property of Seller transferred pursuant to
this Agreement.
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4.3 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 and which Seller is
reasonably capable of providing in order to effect an orderly transition in the
ownership and operation of the Assets; provided, however, such post- Closing
assistance shall not, in any event, exceed ten (10) hours per week.
4.4 Collection of Assets. Subsequent to the Closing, Buyer shall have the
right and authority to collect all receivables and other items to the extent
transferred and assigned to Buyer by Seller hereunder and to endorse with the
name of Seller any checks received on account of such receivables or other
items, and Seller agrees that it will promptly transfer or deliver to Buyer from
time to time, any cash or other property that Seller may receive with respect to
any claims, contracts, licenses, leases, commitments, sales orders, purchase
orders, receivables of any character or any other items included in the Assets.
4.5 Removal of Liens; Transfer of Contracts and Authorizations. Schedule
4.5 attached hereto identifies (i) all Liens on the Assets which will not be
released prior to or as of the Closing (the "Remaining Liens"); and (ii) all
Contracts and Authorizations, the assignment and transfer of which will not be
approved or consented to by the governmental authority issuing the Authorization
or the other party to the Contract prior to or as of the Closing (the "Remaining
Contracts and Authorizations"). Subsequent to the Closing, Seller shall promptly
obtain the release of the Remaining Liens and obtain third party and
governmental approvals and consents for the Remaining Contracts and
Authorizations.
4.6 Payment of Obligations. Seller shall pay all of the Excluded
Liabilities in the ordinary course of business as they become due.
4.7 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).
SECTION 5. 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:
5.1 Performance of Agreements and Deliveries. Seller shall have performed
in all material respects all of its covenants, agreements and obligations under
this Agreement which are to be performed or complied with by Seller prior to or
upon the Closing Date and shall have delivered all documents and items required
to be delivered at or prior to the Closing, including, without limitation:
22
(a) A certificate, dated the Closing Date, from the President of
Seller to the effect that the conditions set forth in Sections 5.1 and 5.2 have
been satisfied;
(b) A certificate, dated the Closing Date, from Seller's Secretary
as to the certificate of formation, limited liability company operating
agreement, authority and the incumbency of all officers executing the Seller
Documents on behalf of Seller;
(c) A certified copy of Seller's certificate of formation from the
Secretary of State of the State of Florida;
(d) An Amendment to the certificate of formation and any other
required documentation, which effect a change of Seller's name;
(e) A certificate of good standing from the Secretary of State of
the State of Florida; and
(f) Such other certificates and instruments reasonably requested by
Buyer.
5.2 Asset Transfer. Seller shall have delivered to Buyer the following
instruments of transfer and assignment in accordance with the provisions hereof,
transferring to Buyer all of Seller's right, title and interest in and to the
Assets, free and clear of all Liens:
(a) A ▇▇▇▇ of Sale in the form attached hereto as Exhibit B;
(b) An Assignment and Assumption Agreement in the form attached
hereto as Exhibit C;
(c) An Assignment of Patents and Trademarks in the form attached
hereto as Exhibit D;
(d) Assignments of Internet Domain Names in the forms attached
hereto as Exhibit E; and
(e) Such other instruments of transfer reasonably requested by
Buyer.
5.3 Assignment of Contracts and Authorizations; Approvals. Except as set
forth on Schedule 4.5 attached hereto, 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. Neither Seller nor, to the
knowledge of Seller and Digicom, the other party thereto, shall have breached or
defaulted under any material Contract or Authorization.
23
5.4 Escrow Agreement. Seller shall have executed and delivered to Buyer
the Escrow Agreement.
5.5 Non-competition Agreements. Seller, Digicom, ▇.▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇ (the officers of Digicom) shall have executed and
delivered to Buyer the Non-competition Agreements in substantially the form
attached hereto as Exhibit F.
5.6 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.
5.7 Subscribers. Seller shall have delivered to Buyer at least 12,200
Internet access accounts, and Seller shall have furnished Buyer with a
certificate, dated as of the Closing Date, to that effect.
5.8 Opinion of Seller's Counsel. Buyer shall have received the opinion or
opinions of ▇▇▇▇▇▇▇ & ▇▇▇▇▇ PLLC, counsel for Seller and Digicom, dated the
Closing Date, substantially in the form of Exhibit G attached hereto.
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATION OF SELLER AND DIGICOM.
The obligation of Seller and Digicom to consummate the transactions
contemplated by this Agreement is subject to the satisfaction, on or prior to
the Closing Date, of the following conditions, unless waived by Seller and
Digicom in writing:
6.1 Performance of Agreement and Deliveries. Buyer shall have performed in
all material respects all of its covenants, agreements and obligations under
this Agreement which are to be performed or complied with by Buyer prior to or
upon the Closing Date and shall have delivered all documents and items required
to be delivered at or prior to the Closing, including, without limitation:
(a) A certificate, dated the Closing Date, from the President of
Buyer to the effect that the conditions set forth in Sections 6.1 and 6.2 have
been satisfied;
(b) A certificate, dated the Closing Date, from Buyer's Secretary as
to the Certificate of Incorporation, bylaws, authority and the incumbency of all
officers executing the Buyer Documents on behalf of Buyer;
(c) A certified copy of Buyer's Certificate of Incorporation from
the Secretary of State of the State of Delaware; and
(d) A certificate of good standing from the Secretary of State of
the State of Delaware.
24
6.2 Assumed Liabilities. Buyer shall have delivered to Seller an
Assignment and Assumption Agreement in the form attached hereto as Exhibit C.
6.3 Opinion of Buyer's Counsel. Seller shall have received the opinion of
▇▇▇▇▇▇▇, Procter & ▇▇▇▇ LLP, counsel for Buyer, dated the Closing Date,
substantially in the form of Exhibit H attached hereto.
6.4 Escrow Agreement. Buyer shall have executed and delivered to Seller
the Escrow Agreement.
SECTION 7. SURVIVAL.
7.1 Survival of Warranties. Each of the representations, warranties,
agreements, covenants and obligations herein or in any schedule, exhibit,
certificate or financial statement delivered by any party to the other party
incident to the transactions contemplated hereby are material, shall be deemed
to have been relied upon by the other party and shall survive the Closing for a
period of one (1) year immediately following the Closing regardless of any
investigation and shall not merge in the performance of any obligation by either
party hereto; provided, however, that Seller shall not be so released after such
period as to Excluded Liabilities or obligations of indemnification and any
other liability resulting from representations and warranties made in Sections
2.1, 2.2 and 2.3 of this Agreement.
SECTION 8. INDEMNIFICATION.
8.1 Indemnification by Seller and Digicom. Seller and Digicom hereby
agree, jointly and severally, to indemnify and hold harmless Buyer, its
affiliates and its and their respective directors, officers, stockholders,
partners, members, employees, and agents (individually, a "Buyer Indemnified
Party" and collectively, "Buyer Indemnified Parties"), against and in respect of
all losses, liabilities, obligations, damages, deficiencies, actions, suits,
proceedings, demands, assessments, orders, judgments, costs and expenses
(including the reasonable fees, disbursements and expenses of attorneys and
consultants) of any kind or nature whatsoever ("Damages"), but net of the
proceeds from any insurance policies or other third party reimbursement for such
loss, to the extent sustained, suffered or incurred by or made against any Buyer
Indemnified Party, to the extent based upon, arising out of or in connection
with: (i) any breach of any representation or warranty made by Seller and
Digicom in this Agreement or in any schedule, exhibit, certificate, agreement or
other instrument delivered pursuant to this Agreement; (ii) any breach of any
covenant or agreement made by Seller or Digicom in this Agreement or in any
schedule, exhibit, certificate, financial statement, agreement or other
instrument delivered pursuant to this Agreement; (iii) any claim made by any
person or entity which relates to the operation of the Assets or the Business
which arises in connection with or on the basis of events, acts, omissions,
conditions or any other state of facts occurring on or existing before the
Closing Date; and (iv) any claim which arises in connection with any liability
or obligation of Seller other than the Assumed Liabilities.
25
8.2 Indemnification by Buyer. Buyer hereby agrees to indemnify and hold
harmless Seller, Digicom and their officers, directors, managers, members,
employees and agents (individually, a "Seller Indemnified Party" and
collectively, "Seller Indemnified Parties") at all times against and in respect
of all losses, liabilities, obligations, damages, deficiencies, actions, suits,
proceedings, demands, assessments, orders, judgments, costs and expenses
(including the reasonable fees, disbursements and expenses of attorneys and
consultants), of any kind or nature whatsoever, to the extent sustained,
suffered or incurred by or made against any Seller Indemnified Party, to the
extent based upon, arising out of or in connection with: (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 a
Seller Indemnified Party which relates to, results from or arises out of Buyer's
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.
8.3 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
26
are susceptible to being settled provided the indemnifying party's 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 with the prior
written consent of the indemnifying party, which consent shall not be
unreasonably withheld. 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 10.10
hereof.
8.4 Claims Against Escrow Deposit. In the event that any Buyer Indemnified
Party sustains or incurs damages, liabilities, losses, taxes, fines, penalties,
costs or expenses, including, without limitation, attorneys fees, for which it
is entitled to indemnification from Seller or Digicom under this Agreement, in
addition to all other rights or remedies that Buyer may have (including the
right to collect directly from Seller or Digicom), such Buyer Indemnified Party
shall be entitled to receive in cash from the Escrow Deposit an amount equal to
the damages, liabilities, losses, taxes, fines, penalties, costs and expenses,
including, without limitation, attorneys fees, sustained or incurred by such
Buyer Indemnified Party. In order to receive payment from the Escrow Deposit
such Buyer Indemnified Party shall first deliver to Seller, with a copy to the
Escrow Agent, a written claim for damages arising under or by virtue of this
Agreement specifying the nature of the claim and the type and amount of damages,
liabilities, losses, taxes, fines, penalties, costs and expenses sustained or
incurred by such Buyer
27
Indemnified Party. Within thirty (30) calendar days of receiving a claim against
the Escrow Deposit from or on behalf of any Buyer Indemnified Party, Seller
shall provide a written response to such Buyer Indemnified Party with a copy to
the Escrow Agent, which either accepts or rejects all or any portion of such
Buyer Indemnified Party's claim, the amount accepted by Seller shall be paid to
such Buyer Indemnified Party from the Escrow Deposit by the Escrow Agent within
ten (10) calendar days of the Escrow Agent's receipt of Seller's acceptance of
such Buyer Indemnified Party's claim. If Seller rejects any portion of such
Buyer Indemnified Party's claim, Seller's written response shall specify the
specific reason(s) for the rejection and the amount, if any, of such Buyer
Indemnified Party's claim which is accepted. The amount of any claim rejected by
Seller shall be retained in escrow and distributed by the Escrow Agent only as
directed by a written settlement agreement signed by both Seller and such Buyer
Indemnified Party or in accordance with an award rendered by an arbitrator(s) in
accordance with Section 10.11 of this Agreement.
8.5 Time Limitations. The parties hereto will be released from all
obligations of indemnification and any other liability under this Agreement and
the Buyer and Seller Documents on March 26, 2000, unless a notice in the form
required hereunder is received by the indemnifying party before March 26, 2000;
provided, however, that Seller shall not be so released as to Excluded
Liabilities or obligations of indemnification and any other liability resulting
from representations and warranties made in Sections 2.1, 2.2 and 2.3 of this
Agreement.
8.6 Limitations on Amount. (a) Neither party hereto will have any
liability (for indemnification or otherwise) until the total Damages claimed by
the other party exceed $5,000.00, and then only for the amount by which such
damages exceed $5,000.00.
(b) Except with respect to Damages arising from breach of the
representations and warranties set forth in Sections 2.1 and 2.2 or arising in
connection with any Excluded Liabilities, the aggregate amount of Damages
recoverable pursuant to the provisions of this Section 10 by all the Buyer
Indemnified Parties in the aggregate shall be limited to $1,000,000.
SECTION 9. 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: ▇▇▇▇▇▇▇.▇▇▇, l.l.c.
------------ c/o Digicom USA, LLC
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇. ▇, ▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Mr. ▇▇▇ ▇▇▇▇▇▇
28
With a copy to: ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
If to Digicom: Digicom USA, LLC
------------- ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇. ▇, ▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Mr. ▇▇▇ ▇▇▇▇▇▇
With a copy to: ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
If to Buyer: Duro Communications, Inc.
----------- ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇ ▇▇▇▇▇▇▇ ▇▇
With a copy to: ▇▇▇▇▇▇▇, Procter & ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇, P.C.
SECTION 10. MISCELLANEOUS.
10.1 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 or (b) as a result of any merger, reorganization or other
consolidation. This Agreement shall be binding upon and shall inure to the
benefit of, the parties hereto and their respective successors, and assigns.
10.2 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.
10.3 Amendments; Waivers. Except as otherwise expressly provided herein,
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
29
Seller or, in the case of a waiver, the party waiving compliance. Except as
otherwise expressly provided herein, 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.
10.4 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
Seller's non-compliance with such laws.
10.5 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.
10.6 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.
10.7 Governing Law. This Agreement and the transactions contemplated
hereby shall be governed and construed by and enforced in accordance with the
laws of The Commonwealth of Massachusetts, without regard to conflict of laws
principles.
10.8 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.
10.9 Expenses. Except as otherwise provided herein, 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.
10.10 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.
30
10.11 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 Commercial Arbitration Rules (the "AAA Rules") of the American Arbitration
Association (the "AAA"), as amended and in effect on the date that the demand
for arbitration is filed with the AAA. The American Arbitration Association
shall appoint a neutral advisor from its National Panel of Commercial
Arbitrators. The arbitration shall be governed by the United States Arbitration
Act, 9 U.S.C. ss.1-16, and judgment upon the award rendered by the arbitrators
may be entered by any court having jurisdiction thereof. The place of
arbitration shall be Boston, Massachusetts.
Such proceedings shall be administered by the neutral advisor in
accordance with the AAA 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 Massachusetts 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.
31
Notwithstanding the foregoing, the parties may enforce their rights under
this Agreement in accordance with Section 10.10.
10.12 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.
32
IN WITNESS WHEREOF, Seller, Digicom and Buyer have caused this Asset
Purchase Agreement to be executed as of the date first above written.
SELLER:
▇▇▇▇▇▇▇.▇▇▇, l.l.c.
By: /s/ E.F. (▇▇▇) ▇▇▇▇▇▇
----------------------------
Name: E.F. (▇▇▇) ▇▇▇▇▇▇
Title: President
DIGICOM:
DIGICOM USA, LLC
By: /s/ E.F. (▇▇▇) ▇▇▇▇▇▇
----------------------------
Name: E.F. (▇▇▇) ▇▇▇▇▇▇
Title: President
BUYER:
DURO COMMUNICATIONS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
LIST OF EXHIBITS AND SCHEDULES
SCHEDULES
Exhibit A - Form of Escrow Agreement
Exhibit B - Form of ▇▇▇▇ of Sale
Exhibit C - Form of Assignment and Assumption Agreement
Exhibit D - Form of Assignment of Patents and Trademarks
Exhibit E - Forms of Assignments of Internet Domain Names
Exhibit F - Forms of Non-competition Agreements
Exhibit G - Form of Opinion of Seller's Counsel
Exhibit H - Form of Opinion of Buyer'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) Non-Transferable Licenses
Schedule 1.2(d) Insurance Exclusions
Schedule 1.2(e) Excluded Tax Items
Schedule 1.6(c) Estimated Adjustment Statement
Schedule 1.7 Allocation of Purchase Price
Schedule 2.4 Taxes
Schedule 2.6 Insurance
Schedule 2.8 Title to Assets
Schedule 2.10 Employees; Labor Matters
Schedule 2.11 Financial Statements
Schedule 2.12 Post-Balance Sheet Business
Schedule 2.14 Approvals; Consents
Schedule 2.16(a)Subscribers
Schedule 2.16(b)Complimentary Accounts
Schedule 2.19 Banking Relations
Schedule 2.20 Intellectual Property
Schedule 2.21 Restrictions on Transfer
Schedule 2.22 Affiliated Transactions
Schedule 2.23 Employee Benefits
Schedule 2.24 Environmental Matters
Schedule 4.5 Remaining Liens, Contracts and Assignments
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