Exhibit 2.4
ASSET PURCHASE AGREEMENT
Agreement made as of April 20, 1999 by and between DURO Communications,
Inc., a Delaware corporation ("Buyer"), Voyager Online, LLC, a Tennessee limited
liability company ("Seller"), and ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇, as
principals of the Seller (collectively the "Principals").
WHEREAS, subject to the terms and conditions hereof, Seller desires to
sell, transfer and assign to Buyer, and Buyer desires to purchase from Seller,
all of the properties, rights and assets used or useful in connection with the
Internet service business of Seller (the "Business").
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
SECTION 1. PURCHASE AND SALE OF ASSETS.
1.1 Sale of Assets. Upon the terms and subject to the conditions set forth
in this Agreement, and the performance by the parties hereto of their respective
obligations hereunder, Seller agrees to sell, assign, transfer and deliver to
Buyer, and Buyer agrees to purchase from Seller, all of Seller's right, title
and interest in and to all of the properties, assets and business of the
Business of every kind and description, tangible and intangible, real, personal
or mixed, and wherever located, but excluding the Excluded Assets (as defined in
Section 1.2 below), including, without limitation, the following:
(a) Equipment. All free standing kiosks, servers, routers, modems,
computers, electronic devices, test equipment and all other fixed assets,
equipment, furniture, fixtures, leasehold improvements, parts, accessories,
inventory, office materials, software, supplies and other tangible personal
property of every kind and description owned by Seller and used or held for use
in connection with the Business, all as set forth on Schedule 1.1(a) attached
hereto (collectively, "Equipment");
(b) Contracts. All of the rights of Seller under and interest of
Seller in and to all contracts relating to the Business (other than the Excluded
Contracts (as defined below)), including, without limitation, original contracts
for the provision of Internet connectivity, dedicated service, web-hosting,
web-domain, dial-up services, web-development and Internet commerce, all leases
with respect to real property and all co-location agreements, a true, correct
and complete list of which contracts is attached hereto as Schedule 1.1(b)
(collectively, the "Contracts");
(c) Intellectual Property. All of Seller's Intellectual Property (as
defined in Section 2.20), as set forth on Schedule 1.1(c) attached hereto;
(d) Licenses and Authorizations. All rights associated with the
licenses, permits, easements, registrations, domains and authorizations issued
or granted to Seller by any governmental authority with respect to the operation
of the Business, including, without limitation, those licenses and
authorizations listed on Schedule 1.1(d) attached hereto, and all applications
therefor, together with any renewals, extensions, or modifications thereof and
additions thereto;
(e) Current Assets; Accounts Receivable. All current assets of
Seller, including cash, and all accounts receivable of Seller incurred in the
ordinary course of business and such accounts receivable as are included on
Seller's balance sheet, as determined in accordance with generally accepted
accounting principles ("GAAP"), consistently applied ("Accounts Receivable"); a
complete list of such accounts receivable is attached hereto as Schedule 1.1(e)
(such current assets, cash and Accounts Receivable collectively referred to as
the "Current Assets");
(f) Goodwill. All of the goodwill of Seller in, and the going
concern value of, the Business, and all of the business and customer lists,
proprietary information, and trade secrets related to the Business; and
(g) Records. All of Seller's customer logs, location files and
records, employee records, and other business files and records, in each case
relating to the Business.
The assets, properties and business of Seller being sold to and purchased
by Buyer under this Section 1.1 are referred to herein collectively as the
"Assets."
1.2 Excluded Assets. There shall be excluded from the Assets and retained
by Seller, to the extent in existence on the Closing Date, the following assets
(the "Excluded Assets"):
(a) Other Assets. All other assets of Seller which are not used or
held for use in connection with the Business or otherwise necessary to the
operation of the Business now or after the Closing Date and which are set forth
on Schedule 1.2(a) attached hereto;
(b) Excluded Contracts. All of Seller's right, title and interest
in, to and under the Contracts listed on Schedule 1.2(b) attached hereto (the
"Excluded Contracts");
(c) Insurance. All contracts of insurance of Seller;
(d) Tax Items. All claims, rights and interest in and to any refunds
for federal, state or local Taxes (as defined below) for periods prior to the
Closing Date; and
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(e) Corporate Records. All of Seller's corporate and other
organizational records.
1.3 Assumed Liabilities; Excluded Liabilities; Employees.
(a) Assumed Liabilities. Buyer shall, on and as of the Closing Date,
accept and assume, and shall become and be fully liable and responsible for, and
other than as expressly set forth herein Seller shall have no further liability
or responsibility for or with respect to, (i) liabilities and obligations
arising out of events occurring on and after the Closing Date related to Buyer's
ownership of the Assets and Buyer's operation of the Business after the Closing
Date including, without limitation utility charges, rent under assumed leases
and similar obligations to third parties, which shall be prorated between Seller
and Buyer as of the Closing Date; (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, 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, (B) Subscriber
advance payments held by Seller as of the Closing Date for services to be
rendered in connection with the Business ((A) and (B) are collectively referred
to as the "Subscriber Obligations"), 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 by Buyer, including, without limitation, any
liability or obligation relating to, resulting from or arising out of (i) the
Excluded Assets, including, without limitation, the Excluded Contracts, (ii) the
employees of the Business, including, without limitation, any obligation to
provide any amounts due to the employees under any pension, profit sharing or
similar plan, any bonus or other compensation plan, or related to vacation or
other similar employee benefits, or arising as a result of the transactions
contemplated hereby or (iii) any fact existing or event occurring prior to the
Closing Date or relating to the operation of the Business prior to the Closing
Date. The liabilities which are not assumed by Buyer under this Agreement are
hereinafter sometimes referred to as the "Excluded Liabilities."
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(c) Employees, Wages and Benefits.
(i) Seller shall terminate all of its employees effective as
of the Closing Date and Buyer shall not assume or have any obligations or
liabilities with respect to such employees or such terminations except as
provided in Section 7.4 with respect to the Principals, including, without
limitation, any severance obligation. Seller acknowledges and agrees that
Buyer has the right to interview and discuss employment terms and issues
with such employees prior to and after the Closing Date.
(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 Date. Except as set forth in Section 7.4,
nothing in this Agreement shall be construed as a commitment or obligation
of Buyer to accept for employment, or otherwise continue the employment
of, any of Seller's employees, and no employee shall be a third-party
beneficiary of this Agreement.
(iii) Seller shall pay all wages, salaries, commissions, and
the cost of all fringe benefits provided to its employees which shall have
become due for work performed as of and through the day preceding the
Closing Date, and Seller shall collect and pay all Taxes in respect of
such wages, salaries, commissions and benefits.
(iv) Seller acknowledges and agrees that Buyer shall not
acquire any rights or interests of Seller in, or assume or have any
obligations or liabilities of Seller under, any benefit plans maintained
by, or for the benefit of any employees of Seller prior to the Closing
Date, including, without limitation, obligations for severance or vacation
accrued but not taken as of the Closing Date.
1.4 The Closing Date. 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 Chattanooga, Tennessee office of ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, or by phone
and facsimile, on the date on which all of the conditions to Closing set forth
in Sections 6 and 7 of this Agreement have been satisfied or waived pursuant to
the terms 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
Date an amount (as adjusted in accordance with Section 1.6 below, the "Purchase
Price") equal to Two Million Eight Hundred Forty Thousand Dollars ($2,840,000)
as follows:
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(a) Buyer shall deliver the sum of Two Million Five Hundred Fifty
Six Thousand Dollars ($2,556,000) minus the Estimated Adjustment (as such term
is hereinafter defined) to Seller by bank cashier's check or bank wire transfer
pursuant to payment instructions delivered by Seller to Buyer at the Closing
Date; and
(b) Buyer shall deposit the sum of Two Hundred Eighty Four Thousand
Dollars ($284,000) (the "Escrow Deposit") with Boston Safe Deposit and Trust
Company as Escrow Agent under the Escrow Agreement in the form attached hereto
as Exhibit A (the "Escrow Agreement"). The Escrow Deposit shall be held,
administered and distributed in accordance with the terms of the Escrow
Agreement, and shall be Buyer's remedy for any indemnification claims made
pursuant to Section 10 hereof.
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 minus the sum of (i) Assumed Current
Liabilities and Accrued Expenses as of the Closing Date and (ii)
Subscriber Obligations as of the Closing Date.
(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 March 31, 1999 are less than One Hundred Forty Three
Thousand Dollars ($143,000) (the "Target Revenues"). For purposes hereof,
the term "Revenues Adjustment Amount" shall equal the product obtained by
multiplying (i) One Thousand Six Hundred Fifty Five Dollars ($1,655) 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 March
31, 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"). The
Purchase Price payable at the Closing Date shall be decreased on a
dollar-for-dollar basis to the extent of the Estimated Revenues
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Adjustment and increased or decreased, as the case may be, on a
dollar-for-dollar basis to the extent Estimated Net Working Capital is
more or less than zero dollars ($0) (the "Estimated Adjustment").
(ii) No later than sixty (60) days following the Closing Date,
Buyer shall prepare and deliver to Seller a statement (the "Final
Adjustment Statement") setting forth the actual Net Working Capital as of
the Closing Date and the actual Revenues Adjustment (the "Actual
Adjustment") which shall be prepared in the same manner as the Estimated
Adjustment Statement. Subject to Section 1.6(b)(iii) below, within twenty
(20) days following the delivery of such Final Adjustment Statement to
Seller, Buyer or Seller, as the case may be, shall pay to the other party,
by wire transfer of immediately available funds, the difference between
the Estimated Adjustment, as shown on the Estimated Adjustment Statement,
and the Actual Adjustment, as shown on the Final Adjustment Statement.
(iii) In the event Seller objects to the Final Adjustment
Statement, Seller shall notify Buyer in writing of such objection within
the twenty (20) 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 as of the Closing Date
and the actual Revenues Adjustment. Upon receipt by Buyer of such written
objection, the parties shall attempt to resolve the disagreement
concerning the Final Adjustment Statement through negotiation.
Notwithstanding any other dispute resolution procedure provided for in
this Agreement, if Buyer and Seller cannot resolve such disagreement
concerning the Final Adjustment Statement within thirty (30) days
following the end of the foregoing twenty (20) 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 according firm to the parties.
1.7 Purchase Price Allocation. At the Closing Date, 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.
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1.8 Records and Contracts. To the extent not previously provided to Buyer,
at the Closing Date, Seller shall deliver to Buyer all of the Contracts, with
such assignments thereof and consents to assignments as are necessary to assure
Buyer the full benefit of the same. Seller shall also deliver to Buyer at the
Closing Date 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 thereby will be
borne and paid by Seller, and Seller shall promptly reimburse Buyer for the
payment of any such tax, fee or duty which Buyer is required to make under
applicable law.
1.10 Transfer of Subject Assets. At the Closing Date, Seller shall deliver
or cause to be delivered to Buyer good and sufficient instruments of transfer
transferring to Buyer title to all of the Assets, together with all required
consents. Such instruments of transfer (a) shall contain appropriate warranties
and covenants which are usual and customary for transferring the type of
property involved under the laws of the jurisdictions applicable to such
transfers, (b) shall be in form and substance reasonably satisfactory to Buyer
and its counsel, (c) shall effectively vest in Buyer good and marketable title
to all of the Assets free and clear of all Liens (as defined in Section 2.8),
and (d) where applicable, shall be accompanied by evidence of the discharge of
all Liens against the Assets.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLER AND PRINCIPALS.
In order to induce Buyer to enter into this Agreement, Seller and each of
the Principals, jointly and severally, hereby represent and warrant to Buyer as
follows:
2.1 Organization; Subsidiaries.
(a) Seller is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Tennessee. Seller
has all requisite power and authority to conduct its business as it is now
conducted or proposed to be conducted and to own, lease and operate its
properties and assets. The copies of Seller's certificate of organization 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 the certificate of organization and limited
liability company operating agreement. Seller is duly qualified to do business
in the state of its organization, and is not required to be licensed or
qualified to conduct its business or own its property in any other jurisdiction.
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(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
its officers or members is required in connection therewith. Each of Seller and
the Principals have full right, authority, power and capacity to execute and
deliver this Agreement and each other Seller Document and to carry out the
transactions contemplated hereby and thereby. This Agreement and each other
Seller Document constitutes, or when executed and delivered will constitute, the
legal, valid and binding obligation of each of Seller and the Principals
enforceable in accordance with its respective terms.
2.3 No Conflicts.
(a) The execution, delivery and performance by Seller of this
Agreement and each other Seller Document does not and will not (i) violate any
provision of the certificate of organization and limited liability company
operating agreement of Seller, in each case as amended to date, (ii) constitute
a violation of, or conflict with or result in any breach of, acceleration of any
obligation under, right of termination under, or default under, any agreement or
instrument to which Seller is a party or by which Seller or the Assets is bound,
(iii) violate any judgment, decree, order, statute, rule or regulation
applicable to Seller or the Assets, (iv) except for the consents and approvals
set forth on Schedule 2.14, require Seller to obtain any approval, consent or
waiver of, or to make any filing with, any person or entity (governmental or
otherwise) that has not been obtained or made or (v) result in the creation or
imposition of any Lien on any of the Assets.
(b) The execution, delivery and performance by each of the
Principals of this Agreement and each other Seller Document does not and will
not (i) constitute a violation of, or conflict with or result in any breach of,
acceleration of any obligation under, right of termination under, or default
under, any agreement or instrument to which any or all of the Principals are a
party or by which any or all of the Principals are bound, (ii) violate any
judgment, decree, order, statute, rule or regulation applicable to the
Principals, (iii) require the Principals to obtain any approval, consent or
waiver of, or to make any filing with, any person or entity (governmental or
otherwise) that has not been obtained or made, or (iv) result in the creation or
imposition of any Lien on any of the Assets.
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2.4 Taxes.
(a) Seller has paid or caused to be paid all federal, state, local,
foreign and other taxes, including, without limitation, income taxes, estimated
taxes, alternative minimum taxes, excise taxes, sales taxes, use taxes,
value-added taxes, gross receipts taxes, franchise taxes, capital stock taxes,
employment and payroll-related taxes, withholding taxes, stamp taxes, transfer
taxes, windfall profit taxes, environmental taxes and property taxes, whether or
not measured in whole or in part by net income, and all deficiencies, or other
additions to tax, interest, fines and penalties owed by it (collectively,
"Taxes"), required to be paid by it through the date hereof whether disputed or
not.
(b) Seller has in accordance with applicable law filed all federal,
state, local and foreign tax returns required to be filed by it through the date
hereof, and all such returns correctly and accurately set forth the amount of
any Taxes relating to the applicable period. A list of all federal, state, local
and foreign income tax returns filed with respect to Seller for taxable periods
ended on or after December 31, 1993, is set forth in Schedule 2.4 attached
hereto. Seller has delivered to Buyer correct and complete copies of all
federal, state, local and foreign income tax returns listed on said schedule,
and of all examination reports and statements of deficiencies assessed against
or agreed to by Seller with respect to said returns.
(c) Neither the Internal Revenue Service nor any other governmental
authority is now asserting or, to the knowledge of Seller or the Principals,
threatening to assert against Seller any deficiency or claim for additional
Taxes. To the knowledge of Seller and the Principals, no claim has ever been
made by an authority in a jurisdiction where Seller does not file reports and
returns that Seller is or may be subject to taxation by that jurisdiction. There
are no security interests on any of the Assets of Seller that arose in
connection with any failure (or alleged failure) to pay any Taxes. Seller has
never entered into a closing agreement pursuant to Section 7121 of the Internal
Revenue Code of 1986, as amended (the "Code")
(d) There has not been any audit of any tax return filed by Seller,
no audit of any tax return of Seller is in progress, and Seller has not been
notified by any tax authority that any such audit is contemplated or pending. No
extension of time with respect to any date on which a tax return was or is to be
filed by Seller is in force, and no waiver or agreement by Seller is in force
for the extension of time for the assessment or payment of any Taxes.
(e) Seller has never been (and has never had any liability for
unpaid Taxes because it once was) a member of an "affiliated group" (as defined
in Section 1504(a) of the Code). Seller has never filed, and has never been
required to file, a consolidated, combined or unitary tax return with any other
entity. Seller does not own and has never owned a direct or indirect interest in
any trust, partnership, corporation or other entity and therefore Buyer is not
acquiring from Seller an interest in any entity. Seller is not a party to any
tax sharing agreement.
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(f) Seller is not a "foreign person" within the meaning of Section
1445 of the Code and Treasury Regulations Section 1.1445-2.
(g) For purposes of this Agreement, all references to Sections of
the Code shall include any predecessor provisions to such Sections and any
similar provisions of federal, state, local or foreign law.
2.5 Compliance with Laws. Seller's operation of the Business and the
Assets is in compliance in all material respects with all applicable statutes,
ordinances, orders, rules and regulations promulgated by any federal, state,
municipal or other governmental authority (including the Federal Communications
Commission), and Seller has not received notice of a violation or alleged
violation of any such statute, ordinance, order, rule or regulation.
2.6 Insurance. The physical properties and tangible Assets are insured to
the extent disclosed in Schedule 2.6 attached hereto, and all insurance policies
and arrangements of Seller in effect as of the date hereof are disclosed in said
Schedule. Said insurance policies and arrangements are in full force and effect,
all premiums with respect thereto are currently paid, and Seller is in
compliance in all material respects with the terms thereof. Said insurance is
adequate and customary for the business engaged in by Seller and is sufficient
for compliance by Seller with all requirements of law and all agreements and
leases to which Seller is a party.
2.7 Contracts. The Contracts constitute all leases, contracts and
arrangements, whether oral or written, under which Seller is bound or to which
Seller is a party which relate to the Business or Assets. Schedule 1.1(b)
attached hereto contains a true, correct and complete list of all Contracts.
With respect to each oral agreement or understanding involving the Business,
Seller has provided a written summary of the material terms of each such
agreement or understanding on Schedule 1.1(b). Each Contract is valid, in full
force and effect and binding upon Seller and the other parties thereto in
accordance with its terms. Neither Seller nor, to the knowledge of Seller and
the Principals, any other party is in default under or in arrears in the
performance, payment or satisfaction of any agreement or condition on its part
to be performed or satisfied under any Contract, nor does any condition exist
that with notice or lapse of time or both would constitute such a default, and
no waiver or indulgence has been granted by any party under any Contract. Seller
has not received notice of, and each of Seller and the Principals have no
knowledge of, any fact which would result in a termination, repudiation or
breach of any Contract. Seller has provided Buyer with true and complete copies
of all of such Contracts, other than with respect to the oral agreements or
understandings described on Schedule 1.1(b).
2.8 Title. Seller has good and marketable title to all of the Assets free
and clear of all mortgages, pledges, security interests, charges, liens,
restrictions and encumbrances of any kind (collectively, "Liens") whatsoever.
Upon the sale, assignment, transfer and delivery of the Assets to Buyer
hereunder and under the Seller Documents, there will be vested in Buyer
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good, marketable and indefeasible title to the Assets, free and clear of all
Liens. The Assets include all of the assets and properties (i) held for use by
Seller to conduct the Business as presently conducted and (ii) necessary or
useful for Buyer to operate the Business in the same manner as such business is
currently operated by Seller. All of the tangible Assets are in good repair,
have been well maintained and are in good operating condition, do not require
any material modifications or repairs, and comply in all material respects with
applicable laws, ordinances and regulations, ordinary wear and tear excepted.
Seller has delivered complete and true copies of all real property leases (the
"Leases") set forth on Schedule 1.1(b). Seller holds good, clear, marketable,
valid and enforceable leasehold interest in the real property subject to the
Leases (the "Leased Real Property"), subject only to the right of reversion of
the landlord or lessor under the Leases, free and clear, to the knowledge of
Seller and the Principals, of all other prior or subordinate interests,
including, without limitation, mortgages, deeds of trust, ground leases, leases,
subleases, assessments, tenancies, claims, covenants, conditions, restrictions,
easements, judgments or other encumbrances or matters affecting title, and free
of encroachments onto or off of the leased real property. To the knowledge of
the Seller and the Principals, there are no material defects in the physical
condition of any improvements constituting a part of the Leased Real Property,
including, without limitation, structural elements, mechanical systems, roofs or
parking and loading areas, and all of such improvements are in good operating
condition and repair, have been well maintained. All water, sewer, gas,
electric, telephone, drainage and other utilities required by law or necessary
for the current or planned operation of the Leased Real Property have been
installed and connected pursuant to valid permits, and are sufficient to service
the Leased Real Property. Seller does not hold or own a fee interest in any real
property.
2.9 No Litigation. Seller is not now involved in nor, to the knowledge of
Seller and the Principals, is Seller threatened to be involved in any litigation
or legal or other proceedings related to or affecting the Business or any Asset
(including any Intellectual Property) or which would prevent or hinder the
consummation of the transactions contemplated by this Agreement. Seller has not
been operating the Business under, and the Business is not subject to, any
order, injunction or decree of any court of federal, state, municipal or other
governmental department, commission, board, agency or instrumentality.
2.10 Employees; Labor Matters. Seller employs approximately fifteen (15)
full-time employees and five (5) part-time employees and there are no existing
disputes with such employees. Seller shall provide to Buyer a list of the
employees of Seller in connection with the Business at the Closing Date,
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 Date be liable to any of said employees for so-called
"severance pay" or any other payments, except as set forth in
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Schedule 2.10 attached hereto. Seller does not have any policy, practice, plan
or program of paying severance pay or any form of severance compensation in
connection with the termination of employment, except as set forth in said
Schedule. Seller is in compliance in all material respects with all applicable
laws and regulations respecting labor, employment, fair employment practices,
work place safety and health, terms and conditions of employment, and wages and
hours. There are no charges of employment discrimination or unfair labor
practices, nor are there any strikes, slowdowns, stoppages of work, or any other
concerted interference with normal operations existing, pending or, to the
knowledge of Seller and the Principals, threatened against or involving Seller.
No question concerning representation exists respecting any group of employees
of Seller. No collective bargaining agreement is in effect or is currently being
or is about to be negotiated by Seller. Seller has received no information to
indicate that any of its employment policies or practices is currently being
audited or investigated by any federal, state or local government agency. Seller
is, and at all times since November 6, 1986 has been, in compliance with the
requirements of the Immigration Reform Control Act of 1986.
2.11 Financial Statements. Attached hereto as Schedule 2.11 are copies of
the balance sheet of Seller as at January 31, 1999 (the "Base Balance Sheet")
and the statements of income and expense of Seller for January 31, 1999
(collectively the "Financial Statements"). The Financial Statements have been
prepared in accordance with generally accepted accounting principles applied
consistently ("GAAP") during the periods covered thereby (except for the absence
of footnotes and normal year-end adjustments which will not be material
individually or in the aggregate) and present fairly and accurately the
financial condition of the Business at the dates of said statements and the
results of operations of the Business for the periods covered thereby. As of the
date of the Base Balance Sheet (the "Base Balance Sheet Date"), Seller had no
liabilities or obligations of any kind with respect to the Business which are
required to be disclosed in accordance with GAAP, whether accrued, contingent or
otherwise, that are not disclosed and adequately reserved against on the Base
Balance Sheet. As of the date hereof and at the Closing Date, Seller had and
will have no liabilities or obligations of any kind with respect to the Business
which are required to be disclosed in accordance with GAAP, whether accrued,
contingent or otherwise, that are not disclosed and adequately reserved against
on the Base Balance Sheet.
2.12 Business Since the Base Balance Sheet Date. Since the Base Balance
Sheet Date:
(a) there has been no material adverse change in the Business or in
the Assets, operations or financial condition of the Business;
(b) the Business has, in all material respects, been conducted in
the ordinary course of business and in substantially the same manner as it was
conducted before the date of the Base Balance Sheet Date;
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(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, 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 licenses, permits and authorizations with respect to the Business (the
"Authorizations"). The Authorizations constitute all of the licenses, permits
and authorizations required for operation of the Business as now operated. All
of the Authorizations are in full force and effect and no licenses, permits or
authorizations of any governmental department or agency are required for the
operation of the Business which have not been duly obtained. As of the date
hereof, there is not pending or, to the knowledge of Seller and the Principals,
threatened any action by or before any governmental agency to revoke, cancel,
rescind or modify any of the Authorizations, and there is not now issued or
outstanding or, to the knowledge of Seller and the Principals, pending or
threatened any order to show cause, notice of violation, notice of apparent
liability, or notice of forfeiture or complaint against Seller with respect to
the Business.
2.14 Approvals; Consents. Except as set forth on Schedule 2.14 attached
hereto, no approval, consent, authorization or exemption from or filing with any
person or entity not a party to this Agreement is required to be obtained or
made by Seller in connection with the execution and delivery of this Agreement
and the Seller Documents and the consummation of the transactions contemplated
hereby and thereby.
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2.15 Customers and Suppliers. There are not pending or, to Seller's
knowledge, threatened claims or controversies with any customer or suppliers,
including its Subscribers (as defined in Section 2.16 below) that are material
to the Assets or the Business.
2.16 Subscribers. Schedule 2.16(a) attached hereto sets forth, as of the
date hereof, the subscribers of the Business as listed by class, type and
billing plan. For purposes of this Agreement, the terms "Subscriber" shall mean
any active subscriber to Internet services offered by Seller in the Business who
has subscribed to a service for at least two months and has paid at least two
bills, 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"), 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"), and any person who receives
on a recurring basis other Internet services from the Seller; provided, however,
that "Subscriber" shall not include any person who is (i) more than thirty (30)
days, or sixty (60) days for customers who are businesses, 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. Set forth on Schedule
2.16(c) attached hereto is Seller's policy and practice with respect to the
disconnection of Subscribers, with which Seller has, except as set forth on
Schedule on Schedule 2.16(c), at all times since its inception, complied in all
material respects.
2.17 Brokers. Seller has not retained any broker or finder or other person
who would have any valid claim against any of the parties to this Agreement for
a commission or brokerage fee in connection with this Agreement or the
transactions contemplated hereby.
2.18 Collectibility of Accounts Receivable. All of the Accounts Receivable
of Seller are or will be as of the Closing Date bona fide, valid and enforceable
claims, subject to no setoff or counterclaim and to Seller's knowledge are
collectible in accordance with their terms. Seller has no accounts or loans
receivable from any person, firm or corporation which is affiliated with Seller
or from any director, officer or employee of Seller, or from any of their
respective spouses or family members.
2.19 Banking Relations. All of the arrangements which Seller has with any
banking institution are completely and accurately described in Schedule 2.19
attached hereto, indicating with respect to each of such arrangements the type
of arrangement maintained (such as checking account, borrowing arrangements,
safe deposit box, etc.) and the person or persons authorized in respect thereof.
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2.20 Intellectual Property.
(a) Seller does not market, license or distribute computer programs
or related documentation. All of the Intellectual Property of Seller is set
forth on Schedule 1.1(c) attached hereto. For purposes hereof, the term
"Intellectual Property" includes: (i) all patents, patent applications, patent
rights, and inventions and discoveries and invention disclosures (whether or not
patented) (collectively, "Patents"); (ii) Seller's rights to the name Voyager
Online, all trade names, trade dress, logos, packaging design, slogans, any and
all Internet domain names used or useful in the business of Seller, registered
and unregistered trademarks and service marks and applications (collectively,
"Marks"); (iii) all copyrights in both published and unpublished works,
including, without limitation, all compilations, databases and computer
programs, and all copyright registrations and applications, and all derivatives,
translations, adaptations and combinations of the above (collectively,
"Copyrights"), (iv) all know-how, trade secrets, confidential or proprietary
information, customer lists, IP addresses, research in progress, algorithms,
data, designs, processes, formulae, drawings, schematics, blueprints, flow
charts, models, prototypes, techniques, Beta testing procedures and Beta testing
results (collectively, "Trade Secrets"); (v) Seller's web-sites (including the
domain names "▇▇▇.▇▇▇.▇▇▇," "▇▇▇.▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇," "▇▇▇.▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇" and
"▇▇▇.▇▇▇" and any other similar domain name); (vi) all goodwill, franchises,
licenses, permits, consents, approvals, technical information, telephone
numbers, and claims of infringement against third parties (the "Rights"); and
(vii) all contracts relating to the Intellectual Property to which Seller is a
party or is bound, including, without limitation, all nondisclosure and/or
confidentiality agreements entered into by persons in connection with
disclosures by Seller (collectively,"Assigned Contracts").
(b) Except as described in Schedule 1.1(c), Seller has exclusive
ownership of, and has good, valid and marketable title to, all of the
Intellectual Property, free and clear of any Liens, and has the right to use all
of the Intellectual Property without payment to any third party. Seller's rights
in all of such Intellectual Property are freely transferable. There are no
claims or demands pending or, to the knowledge of Seller and the Principals,
threatened of any other person pertaining to any of such Intellectual Property
and no proceedings have been instituted, or are pending or, to the knowledge of
Seller and the Principals, threatened against Seller and/or its officers,
employees and consultants which challenge the validity and enforceability of
Seller's rights in respect of the Intellectual Property. The Intellectual
Property constitutes all of the Intellectual Property necessary for the
operation of Seller's Business as currently conducted.
All former and current employees, consultants and contractors of Seller
have executed written instruments with Seller that assign to Seller all rights
to any inventions, improvements, discoveries, or information relating to the
business of Seller. No employee, consultant or contractor of Seller has entered
into any agreement that restricts or limits in any way the scope or type of work
in which the employee, consultant or contractor may be engaged or requires
15
the employee, consultant or contractor to transfer, assign, or disclose
information concerning his work to anyone other than Seller.
(c) Seller owns no Patents.
(d) Schedule 1.1(c) sets forth a complete and accurate list and
summary description of all of Seller's Marks. All Marks that have been
registered with the United States Patent and Trademark Office and/or any other
jurisdiction are currently in compliance with formal legal requirements
(including, without limitation, the timely post-registration filing of
affidavits of use and incontestability and renewal applications), are valid and
enforceable, and are not subject to any maintenance fees or taxes or actions
falling due within ninety (90) days after the Closing Date. In each case where a
Trademark or Service ▇▇▇▇ 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 the Principals, no such action is threatened with respect to any of
the Marks. All products and materials containing a ▇▇▇▇ ▇▇▇▇ the proper notice
where permitted by law.
(e) Seller owns no Copyrights.
(f) Seller has taken all reasonable security measures (including,
without limitation, entering into appropriate confidentiality and non-disclosure
agreements with all officers, directors, employees, consultants and contractors
of Seller and any other persons with access to the Trade Secrets) to protect the
secrecy, confidentiality and value of all Trade Secrets. To the knowledge of
Seller and the Principals, there has not been any breach by any party to any
such confidentiality or non-disclosure agreement. The Trade Secrets have not
been disclosed by Seller to any person or entity other than employees or
contractors of Seller who had a need to know and use the Trade Secrets in the
course of their employment or contract performance. Seller has the right to use,
free and clear of claims of third parties, all Trade Secrets. To the knowledge
of Seller and the Principals, there is not any assertion that the use by Seller
of any Trade Secret violates the rights of any third party.
(g) Seller has the exclusive right to use, license, distribute,
transfer and bring infringement actions with respect to the Intellectual
Property. Except as set forth on Schedule 1.1(c), Seller (i) has not licensed or
granted to anyone rights of any nature to use any of its Intellectual Property
and (ii) is not obligated to and does not pay royalties or other fees to anyone
for its ownership, use, license or transfer of any of its Intellectual Property.
(h) All licenses or other agreements under which Seller is granted
rights by others in Intellectual Property are listed in Schedule 1.1(c). All
such licenses or other agreements are in full force and effect, to the knowledge
of Seller and the Principals there is no material default by any party thereto,
and all of the rights of Seller thereunder are freely
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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 1.1(c). All
such licenses or other agreements are in full force and effect, and to the
knowledge of Seller and the Principals there is no material default by any party
thereto. True and complete copies of all such licenses or other agreements, and
any amendments thereto, have been provided to Buyer.
(j) Seller has reviewed the areas within its businesses and
operations which could be adversely affected by the "Year 2000 Problem" (i.e.,
the risk that applications used by Seller or its suppliers and/or providers may
be unable to recognize and properly perform date-sensitive functions involving
certain dates prior to and any date after December 31, 1999). Seller and the
Principals reasonably believe that the "Year 2000 Problem" will not have any
material adverse effect on the business or operations of Seller.
2.21 Absence of Restrictions. Seller has not entered into any other
agreement or arrangement with any other party with respect to the sale, transfer
or any other disposition or encumbrance of the Business or the Assets, in whole
or in part.
2.22 Transactions with Interested Persons. Except as set forth in Schedule
2.22 hereto, neither Seller, nor any shareholder, officer, supervisory employee
or director of Seller or, to the knowledge of Seller or the Principals, any of
their respective spouses or family members owns directly or indirectly on an
individual or joint basis any material interest in, or serves as an officer or
director or in another similar capacity of, any competitor or supplier of
Seller, or any organization which has a material contract or arrangement with
Seller.
2.23 Employee Benefit Programs.
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(a) Schedule 2.23 sets forth a list of every Employee Program that
has been maintained by the Seller or an Affiliate at any time during the
six-year period ending on the Closing Date. Each Employee Program which has ever
been maintained by the Seller or an Affiliate and which has been intended to
qualify under Section 401(a) or 501(c)(9) of the 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 the Seller or any Affiliate, there has been no (i) "prohibited transaction,"
as defined in Section 406 of the Employee Retirement Income Security Act of
1974, as amended ("ERISA") or Code Section 4975, or (ii) failure to comply with
any provision of ERISA, other applicable law, or any agreement which, in the
case of either of (i) or (ii), could subject the Seller or any Affiliate to
liability either directly or indirectly (including, without limitation, through
any obligation of indemnification or contribution) for any damages, penalties,
or taxes, or any other loss or expense. All payments and/or contributions
required to have been made (under the provisions of any agreements or other
governing documents or applicable law) with respect to all Employee Programs
ever maintained by the Seller or any Affiliate, for all periods prior to the
Closing Date, either have been made or have been accrued (and all such unpaid
but accrued amounts are described on Schedule 2.23). Each Employee Program ever
maintained by the Seller or an Affiliate has complied with the applicable
notification and other applicable requirements of the Consolidated Omnibus
Budget Reconciliation Act of 1985.
(b) Neither the Seller nor any Affiliate (A) has ever maintained any
Employee Program which has been subject to title IV of ERISA or Code Section
412, including, but not limited to, any Multiemployer Plan (as defined in
Section 3(37) of ERISA) or (B) has ever provided health care or any other
non-pension benefits to any employees after their employment is terminated
(other than as required by part 6 of subtitle B of title I of ERISA) or has ever
promised to provide such post-termination benefits.
(c) For purposes of this section:
(i) "Employee Program" means all employee benefit plans within
the meaning of ERISA Section 3(3) as well as all other employee benefit
plans, agreements and arrangements of any kind.
(ii) An entity "maintains" an Employee Program if such entity
sponsors, contributes to, or provides benefits under or through such
Employee
18
Program, or has any obligation (by agreement or under applicable law) to
contribute to or provide benefits under or through such Employee Program,
or if such Employee Program provides benefits to or otherwise covers
employees of such entity (or their spouses, dependents, or beneficiaries).
(iii) An entity is an "Affiliate" of the Seller if it would
have ever been considered a single employer with the Seller under ERISA
Section 4001(b) or part of the same "controlled group" as the Seller for
purposes of ERISA Section 302(d)(8)(C).
2.24 Environmental Matters.
(a) Except as set forth in Schedule 2.24, (i) Seller has not
generated, transported, used, stored, treated, disposed of, or managed any
Hazardous Waste (as defined below) at any time; (ii) to the knowledge of Seller
and the Principals, 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) to the
knowledge of Seller and the Principals, no Hazardous Material has ever been
transported from any site associated with a structure presently or formerly
owned, operated, leased, or used by Seller for treatment, storage, or disposal
at any other place; (iv) to the knowledge of Seller and the Principals, 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) to the knowledge of
Seller and the Principals, no lien has ever been imposed by any governmental
agency on any property, facility, machinery, or equipment owned, operated,
leased, or used by Seller in connection with the presence of any Hazardous
Material.
(b) Except as set forth in Schedule 2.24, (i) Seller does not have
any liability under, nor has it ever violated, any Environmental Law (as defined
below); (ii) neither Seller, nor to the knowledge of Seller and the Principals,
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 Principal 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,
19
oil, toxic substance, pollutant, contaminant, or other substance which may pose
a threat to the environment or to human health or safety, as defined or
regulated under any Environmental Law; (ii) "Hazardous Waste" shall mean and
include any hazardous waste as defined or regulated under any Environmental Law;
and (iii) "Environmental Law" shall mean any environmental or health and
safety-related law, regulation, rule, ordinance, or By-law at the foreign,
federal, state, or local level, whether existing as of the date hereof 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 the Principals to Buyer pursuant to this Agreement do not contain any
untrue statement of a material fact, and, when taken together, do not omit to
state a material fact required to be stated therein or necessary in order to
make such representations, warranties or statements not misleading in light of
the circumstances under which they were made. There are no facts known to Seller
or the Principals which presently or are reasonably likely to 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 entering into this Agreement, Buyer
hereby represents and warrants to Seller as follows:
3.1 Organization. Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. Buyer has all
requisite power and authority to conduct its business as it is now conducted and
to own, lease and operate its properties and assets.
3.2 Required Action; 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. 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.
20
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, as amended to
date, (b) constitute a violation of, or conflict with or result in any breach
of, acceleration of any obligation under, right of termination under, or default
under, any agreement or instrument to which Buyer is a party or by which it is
bound, (c) violate any judgment, decree, order, statute, rule or regulation
applicable to Buyer, (d) require Buyer to obtain any approval, consent or waiver
of, or to make any filing with, any person or entity (governmental or otherwise)
that has not been obtained or made. The officers who execute this Agreement and
the other Buyer Documents contemplated hereby on behalf of Buyer have and shall
have all requisite power to do so in the name of and on behalf of Buyer.
3.4 Brokers. Except for Rampart Associates, LLC, whose fees will be paid
by Buyer at or prior to the Closing Date, Buyer has not retained any broker or
finder or other person who would have any valid claim against any of the parties
to this Agreement for a commission or brokerage fee in connection with this
Agreement or the transactions contemplated hereby.
SECTION 4. COVENANTS OF SELLER.
Seller covenants and agrees that, from the date hereof until consummation
of the transactions contemplated hereby at the Closing Date, Seller shall:
4.1 Access to Premises and Records. Seller shall give Buyer and its
representatives, at reasonable times and with reasonable prior notice, free
access to the properties, books and records of the Business and to the Assets
and will furnish to Buyer and its representatives such information regarding the
Business and the Assets as Buyer or its representatives may from time to time
reasonably request in order that Buyer may have full opportunity to make a
diligent investigation consistent with this Agreement. In addition to, and not
in limitation of the foregoing, Seller shall provide Buyer with access to and
copies of the records of all: (a) Accounts Receivable, (b) Subscriber ▇▇▇▇▇▇▇▇,
(c) pre-paid accounts, (d) accounts for which no remuneration is received by
Seller and (e) general reports with respect to each category of service provided
by the Business.
4.2 Continuity and Maintenance of Operations of the Business. Except as to
actions which Buyer has been advised and to which Buyer has consented to in
writing, and except as specifically permitted or required by this Agreement,
Seller shall:
(a) Operate the Business in the ordinary course consistent with past
practices, use its commercially reasonable efforts to keep available the
services of the employees who are involved in the operation of the Business, and
use commercially reasonable efforts to preserve any beneficial business
relationships with Subscribers, customers, suppliers and others having business
dealings with Seller relating to the Business;
21
(b) Use and operate the Assets in a manner consistent with past
practice and maintain the Assets in good operating condition, ordinary wear and
tear excepted;
(c) Maintain adequate inventories of spare Equipment consistent with
past practices;
(d) Maintain insurance upon the Assets in such amounts and types as
in effect on the date of this Agreement as set forth in Schedule 2.6 attached
hereto;
(e) Keep all of its business books, records and files in the
ordinary course of business in accordance with past practices, and provide Buyer
with access thereto upon its reasonable request;
(f) Continue to implement and enforce its procedures for
disconnection and discontinuance of service to Subscribers whose accounts are
delinquent in accordance with those in effect on the date of this Agreement;
(g) Perform and comply in all material respects with the terms of
the Contracts and use its commercially reasonable efforts to keep such Contracts
in full force and effect; and
(h) Use its reasonable best efforts to preserve the goodwill of the
Business.
4.3 Negative Covenants. Seller shall not, without the prior written
consent of Buyer:
(a) Sell, transfer, lease, assign or otherwise dispose of, or agree
to sell, transfer, lease, assign or otherwise dispose of, any Assets;
(b) Enter into any contract or commitment for the acquisition of
goods or services relating to the Business (other than in the ordinary course of
business) or which otherwise obligates Seller to perform in full or in part
beyond the Closing Date;
(c) Hire any new employees or enter into any employment arrangements
or otherwise increase the salary or compensation of any existing employees;
(d) Renegotiate, modify, amend or terminate any Contract;
(e) Create, assume, or permit to exist, or agree to incur, assume or
acquire, any Lien, claim or liability on the Assets;
22
(f) Make any modifications or changes to the existing rate schedules
or product offerings in effect with respect to the Business;
(g) Offer or employ any sales discounts, free services or other
extraordinary marketing practices or extraordinary promotions outside the
ordinary course of business and not consistent with Seller's past practices;
(h) Take any actions or permit its employees and agents to take any
actions which would materially interfere with or preclude the transactions
contemplated by this Agreement; and
(i) Cause or permit the provision for any new and material pension,
retirement or other employment benefits for employees who perform services in
connection with the conduct of the Business or any material increase in any
existing benefits (other than as required by law).
4.4 Consents. Seller will use its reasonable best efforts to obtain, as
soon as practicable and at its expense, the consent of all third parties under
the Contracts for which the prior approval of such third party is required
pursuant to the terms of the Contract, in the forms attached hereto as Exhibit
B; provided, however, that "reasonable best efforts" for this purpose shall not
require Seller to undertake extraordinary or unreasonable measures to obtain
such approvals and consents, including, without limitation, the initiation or
prosecution of legal proceedings or the payment of fees in excess of customary
filing and processing fees.
4.5 Notification of Certain Matters. Seller shall promptly notify Buyer of
(i) any fact, event, circumstances or action the existence or occurrence of
which would cause any of Seller's representations or warranties under this
Agreement, or the disclosures in any schedules or exhibits attached hereto, not
to be true in any material respect and (ii) any failure on its part to comply
with or satisfy in any material respect any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement. Seller shall promptly
notify Buyer in writing of the assertion, commencement or threat of any claim,
litigation, proceeding or investigation in which Seller is a party or in which
the Assets or Business may be affected and which could reasonably be expected to
be material or which relates to the transactions contemplated hereby.
4.6 Adverse Change. Seller shall promptly notify Buyer in writing of any
materially adverse developments affecting the Assets or the Business which
become known to Seller, including, without limitation, (i) any damage,
destruction or loss (whether or not covered by insurance) materially and
adversely affecting any of the Assets or the Business, (ii) any material notice
of violation, forfeiture or complaint under any material Contract, or (iii)
anything which, if not corrected prior to the Closing Date, would prevent Seller
from fulfilling any condition to Closing described in Section 6 hereof.
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4.7 No Solicitation. Seller shall not, and Seller shall cause its
officers, employees, stockholders, agents and representatives (including,
without limitation, any investment banker, attorney or accountant retained by
Seller) and all other employees who perform services with respect to the
operation of the Business not to, initiate, solicit or encourage, directly or
indirectly, any inquiries or the making of any proposal with respect to the
Assets or the Business, or engage in any negotiations concerning, or provide to
any other person any information or data relating to, the Business, the Assets
or Seller for the purpose of, or have any discussions with, any person relating
to, or otherwise cooperate in any way with or assist or participate in,
facilitate or encourage, any inquiries or the making of any proposal which
constitutes, or may reasonably be expected to lead to, any effort or attempt by
any other person to seek or effect a transaction, or enter into a transaction
with any person or persons, other than Buyer, concerning the possible sale of
the Assets or Business, or the capital stock of Seller. Seller shall promptly
inform Buyer of any such inquiries or proposals and provide all pertinent
documentation related thereto.
4.8 Cooperation. Seller shall use its best efforts to take all steps
within its power and will cooperate with Buyer to cause to be fulfilled those of
the conditions to Buyer's obligations to consummate the transactions
contemplated by this Agreement that are dependent upon its actions, and to
execute and deliver such instruments and take such other reasonable actions as
may be necessary or appropriate in order to carry out the intent of this
Agreement and consummate the transactions contemplated hereby. Without limiting
the foregoing, Seller shall cooperate with all reasonable requests of Buyer and
its counsel in connection with Buyer's due diligence investigation of the
Business and Assets.
4.9 Expenses. Seller shall bear its own expenses incurred in connection
with the negotiation and preparation of this Agreement and in connection with
all obligations required to be performed by it under this Agreement.
4.10 Financial Information. Seller shall, as promptly as practical after
such information become available, deliver to Buyer copies of Seller's monthly
unaudited financial statements, prepared in accordance with GAAP, consistently
applied, and in form and presentation as is reasonably acceptable to Buyer.
4.11 Consummation of Agreement. Subject to the provisions of Section 8 of
this Agreement: (a) Seller shall use its best efforts to fulfill and perform all
conditions and obligations on its part to be fulfilled and performed under this
Agreement, and to cause the transactions contemplated by this Agreement to be
fully carried out on or before April 15, 1999; and (b) Seller shall not take any
action or omit to take any action that would or could reasonably be expected to
(i) result in any of the representations and warranties of Seller being or
becoming untrue in any respect that would cause Section 6.1 of this Agreement
not to be satisfied, (ii) result in any conditions to Closing set forth in
Section 6 of this Agreement not to be satisfied including, without limitation,
the release of any and all Liens on the Assets
24
pursuant to Section 6.8 of the Agreement, or (iii) result in a material
violation of any provision of this Agreement.
4.12 Confidentiality. Seller agrees that it and its representatives will
hold in strict confidence, and will not use, any confidential or proprietary
data or information obtained from Buyer with respect to its business or
financial condition except for the purpose of evaluating, negotiating and
completing the transactions contemplated hereby. Information generally known in
Buyer's industry or which has been disclosed to Seller by third parties which
have a right to do so shall not be deemed confidential or proprietary
information for purposes of this Agreement. If the transactions contemplated by
this Agreement are not consummated, Seller will return, and cause its respective
officers, directors, agents and representatives to return, to Buyer (or certify
that they have destroyed) all copies of such data and information made available
to Seller (and its officers, directors, agents and representatives) in
connection with the transaction.
4.13 Use of Trade Names. After the Closing Date, neither Seller, nor any
person controlling, controlled by or under common control with Seller will for
any reason, directly or indirectly, for itself or any other person, (a) use the
name Voyager Online or the domain names "▇▇▇.▇▇▇.▇▇▇," "▇▇▇.▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇,"
"▇▇▇.▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇" or "▇▇▇.▇▇▇" or any other Internet domain name used or
useful in the business of Seller, or any other or (b) use or disclose any trade
secrets, confidential information, know-how, proprietary information or other
intellectual property of Seller transferred pursuant to this Agreement.
4.14 Collection of Assets. Subsequent to the Closing Date, Buyer shall
have the right and authority to collect all receivables and other items
transferred and assigned to Buyer by Seller hereunder and to endorse with the
name of Seller any checks received on account of such receivables or other
items, and Seller agrees that it will promptly transfer or deliver to Buyer from
time to time, any cash or other property that such Seller may receive with
respect to any claims, contracts, licenses, leases, commitments, sales orders,
purchase orders, receivables of any character or any other items included in the
Assets.
4.15 Payment of Obligations. Seller shall pay all of the Excluded
Liabilities in the ordinary course of business as they become due.
4.16 Further Assurances. Seller, from time to time after the Closing Date
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).
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SECTION 5. COVENANTS OF BUYER.
Buyer covenants and agrees that, from the date hereof until consummation
of the transactions contemplated hereby at the Closing Date, Buyer shall:
5.1 Consummation of Agreement. Subject to the provisions of Section 8 of
this Agreement:
(a) Buyer shall use its best efforts to fulfill and perform all
conditions and obligations on its part to be fulfilled and performed under this
Agreement; and to cause the transactions contemplated by this Agreement to be
fully carried out on or before April 15, 1999; and (b) Buyer shall not take any
action or omit to take any action that would or could reasonably be expected to
(i) result in any representations and warranties of Buyer being or becoming
untrue in any respect that would cause Section 7.1 of this Agreement not to be
satisfied; (ii) result in any conditions to Closing set forth in Section 7 of
this Agreement not to be satisfied; or (iii) result in a material violation of
any provision of this Agreement.
5.2 Confidentiality. Buyer agrees that it and its representatives will
hold in strict confidence, and will not use, any confidential or proprietary
data or information obtained from Seller with respect to its business or
financial condition except for the purpose of evaluating, negotiating and
completing the transactions contemplated hereby. Information generally known in
Seller's industry or which has been disclosed to Buyer by third parties which
have a right to do so shall not be deemed confidential or proprietary
information for purposes of this Agreement. If the transactions contemplated by
this Agreement are not consummated, Buyer will return, and cause its respective
officers, directors, agents and representatives to return, to Seller (or certify
that they have destroyed) all copies of such data and information made available
to Buyer (and its officers, directors, agents and representatives) in connection
with the transaction.
5.2 Expenses. Buyer shall bear its own expenses incurred in connection
with the negotiation and preparation of this Agreement and in connection with
all obligations required to be performed by it under this Agreement.
5.3 Payment of Obligations. From and after the Closing Date, Buyer shall
pay all of the Assumed Liabilities in the ordinary course of business as they
become due.
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATION OF BUYER.
Buyer's obligation to consummate the transactions contemplated by this
Agreement is subject to the satisfaction, on or prior to the Closing Date, of
each of the following conditions, unless otherwise waived by Buyer in writing:
26
6.1 Accuracy of Representations and Warranties. The representations and
warranties of Seller contained in this Agreement shall be true and correct in
all material respects at the Closing Date with the same effect as though made at
such time and the representations and warranties of Seller contained in this
Agreement which are qualified by materiality shall be true and correct in all
respects as of the Closing Date with the same effect as though made at such
time.
6.2 Performance of Agreements and Deliveries. Seller shall have performed
in all material respects all of its covenants, agreements and obligations under
this Agreement which are to be performed or complied with by Seller prior to or
upon the Closing Date and shall have delivered all documents and items required
to be delivered at or prior to the Closing Date, including, without limitation:
(a) A certificate, dated the Closing Date, from the President of
Seller to the effect that the conditions set forth in Sections 6.1, 6.2, 6.8,
6.9 and 6.12 have been satisfied;
(b) A certificate, dated the Closing Date, from Seller's Secretary
as to the certificate of organization, 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 organization from
the Secretary of State of the State of Tennessee;
(d) An Amendment to the certificate of organization 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 Tennessee; and
(f) Such other certificates and instruments reasonably requested by
Buyer.
6.3 No Material Adverse Effect. None of the schedules, documents or other
information to be furnished by Seller to Buyer pursuant to this Agreement, shall
disclose any fact, circumstance or matter, or any change in or development in
connection with any matter disclosed in the original schedules or documents
previously delivered by Seller to Buyer, which has, or could reasonably be
expected to have, a material adverse effect on the Assets or on the Business;
and there shall have been no other changes or developments affecting either the
Assets or the Business since the Base Balance Sheet Date which have, or could
reasonably be expected to have, a material adverse effect on the Assets or
Business.
6.4 Asset Transfer. Seller shall have delivered to Buyer the following
instruments of transfer and assignment in accordance with the provisions hereof,
transferring to Buyer all of Seller's right, title and interest in and to the
Assets, free and clear of all Liens:
27
(a) A ▇▇▇▇ of Sale in the form attached hereto as Exhibit C;
(b) An Assignment and Assumption Agreement in the form attached
hereto as Exhibit D;
(c) An Assignment of Patents and Trademarks in the form attached
hereto as Exhibit E;
(d) An Assignment of Internet Domain Name in the form attached
hereto as Exhibit F; and
(e) Such other instruments of transfer reasonably requested by
Buyer.
6.5 Assignment of Contracts and Authorizations; Approvals. All Contracts
shall have been duly and validly assigned to Buyer by Seller, and all consents
and approvals required in connection with the consummation of the transactions
contemplated hereby under any Contract or Authorization or otherwise shall have
been obtained in form and substance satisfactory to Buyer and without conditions
materially and adversely affecting Buyer and which do not require Buyer to pay
money to any party to any such Contract or Authorization in excess of amounts
required to be so paid pursuant to the terms and conditions thereof. All such
Contracts and Authorizations shall remain in full force and effect and shall not
have been amended, modified or repudiated in any material respect by either
party thereto. Neither Seller nor, to the knowledge of Seller and the
Principals, the other party thereto, shall have breached or defaulted under any
Contract or Authorization. Seller shall not have received notice of or have
knowledge of any fact which could result in the termination, repudiation or
breach of any Contract or Authorization.
6.6 Escrow Agreement. Seller shall have executed and delivered to Buyer
the Escrow Agreement.
6.7 Non-competition Agreement. Seller and the Principals shall have
executed and delivered to Buyer a Non-competition Agreement in substantially the
form attached hereto as Exhibit G.
6.8 Release of Liens. Seller shall have obtained and delivered to Buyer at
or prior to the Closing Date instruments (including payoff letters, bills of
sale and UCC-3 termination statements) releasing any and all Liens on the
Assets.
6.9 Revenues. Seller shall have delivered to Buyer total monthly Recurring
Revenues equal to or greater than One Hundred Forty Three Thousand Dollars
($143,000) as
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of the Closing Date, and Seller shall have furnished Buyer with a certificate,
dated as of the Closing Date, to that effect.
6.10 Subscribers. Seller shall have delivered to Buyer at least 5,970
Subscribers who contribute to monthly Recurring Revenues (unless total monthly
Recurring Revenues are less than One Hundred Forty Three Thousand Dollars
($143,000), in which case Seller shall have delivered to Buyer at least 6,100
Subscribers) and Seller shall have furnished Buyer with a certificate, dated as
of the Closing Date, to that effect.
6.11 Opinion of Seller's Counsel. Buyer shall have received the opinion or
opinions of ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, counsel for Seller, dated the Closing Date,
substantially in the form of Exhibit H attached hereto.
6.12 US LEC and ICG.
(a) The installation and hook-up of new equipment by US LEC for
services to be provided in the Chattanooga area and by ICG in the Nashville area
shall be complete; and
(b) The migration of Seller's subscribers to the US LEC and ICG
services, as applicable, shall be complete.
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATION OF SELLER.
The obligation of Seller to consummate the transactions contemplated by
this Agreement is subject to the satisfaction, on or prior to the Closing Date,
of the following conditions, unless waived by Seller in writing:
7.1 Accuracy of Representations and Warranties. The representations and
warranties of Buyer contained in this Agreement shall be true and correct in all
material respects at the Closing Date with the same effect as though made at
such time, and the representations and warranties of Buyer contained in this
Agreement which are qualified by materiality shall be true and correct in all
respects as of the Closing Date with the same effect as though made at such
time.
7.2 Performance of Agreement and Deliveries. Buyer shall have performed in
all material respects all of its covenants, agreements and obligations under
this Agreement which are to be performed or complied with by Buyer prior to or
upon the Closing Date and shall have delivered all documents and items required
to be delivered at or prior to the Closing Date, including, without limitation:
29
(a) A certificate, dated the Closing Date, from the President of
Buyer to the effect that the conditions set forth in Sections 7.1 and 7.2 have
been satisfied;
(b) A certificate, dated the Closing Date, from Buyer's Secretary as
to the Certificate of Incorporation, 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.
7.3 Escrow Agreement. Buyer shall have executed and delivered to Seller
the Escrow Agreement.
7.4 Employment Agreements. Buyer and each of the Principals shall have
entered into an Employment Agreement in substantially the form of Exhibit I
attached hereto.
7.5 Seller shall have received the opinion or opinions of ▇▇▇▇▇▇▇, Procter
& ▇▇▇▇ LLP, counsel for Buyer, dated the Closing Date, substantially in the form
of Exhibit J attached hereto.
SECTION 8. TERMINATION.
8.1 Events of Termination. This Agreement and the transactions
contemplated by this Agreement may be terminated at any time prior to the
Closing Date:
(a) By the mutual written consent of Buyer and Seller.
(b) By Seller, if it is not in breach or default hereunder:
(i) if any representation or warranty of Buyer made herein is
untrue in any material respect and such breach is not cured within
thirty (30) days of Buyer's receipt of a notice from Seller that
such breach exists or has occurred;
(ii) if Buyer shall have defaulted in any material respect in
the performance of any material obligation under this Agreement and
such breach is not cured within thirty (30) days of Buyer's receipt
of a notice from Seller that such default exists or has occurred;
(iii) subject to Section 8.4 below, if the conditions to
Seller's obligations to consummate the Closing Date as set forth in
Section 7 cannot
30
reasonably be satisfied or performed on or before May 7, 1999
(unless such failure of satisfaction, non-compliance or
non-performance is the result, directly or indirectly, of any action
or failure to act on the part of Seller); or
(iv) if the Closing Date has not occurred prior to June 30,
1999.
(c) By Buyer, if it is not in breach or default hereunder:
(i) if any representation or warranty of Seller made herein is
untrue in any material respect and such breach is not cured within
thirty (30) days of Seller's receipt of a notice from Buyer that
such breach exists or has occurred;
(ii) if Seller shall have defaulted in any material respect in
the performance of any material obligation under this Agreement and
such breach is not cured within thirty (30) days of Seller's receipt
of a notice from Buyer that such default exists or has occurred; or
(iii) subject to Section 8.4 below, if the conditions to
Buyer's obligations to consummate the Closing Date as set forth in
Section 6 cannot reasonably be satisfied or performed on or before
May 7, 1999 (unless such failure of satisfaction, non-compliance or
non-performance is the result directly or indirectly of any action
or failure to act on the part of Buyer); or
(iv) if the Closing Date has not occurred prior to June 30,
1999.
8.2 Manner of Exercise. In the event of the termination of this Agreement
by either Buyer or Seller pursuant to Section 8.1 notice thereof shall forthwith
be given to the other party in accordance with the provisions set forth in
Section 11 hereto and this Agreement shall terminate and the transactions
contemplated hereunder shall be abandoned without further action by Buyer or
Seller.
8.3 Effect of Termination; Liabilities. In the event of the termination of
this Agreement pursuant to Section 8.1 and prior to the Closing Date, all
obligations of the parties hereunder (other than pursuant to Sections 4.12 and
5.2 hereof) shall terminate, and neither Seller nor Buyer shall have any further
liability hereunder, including for losses, liabilities, obligations, damages,
deficiencies, actions, suits, proceedings, demands, assessments, orders,
judgments, costs and expenses (including attorneys' fees) of any kind
whatsoever; except upon termination of this Agreement pursuant to Sections
8.1(c)(i) and 8.1(c)(ii), Buyer shall be entitled to any remedy which it may
have, whether at law or in equity.
8.4 Waiver; Extension of Time for Performance. Seller may extend the time
for the performance of any of the obligations or other acts of Buyer hereunder,
waive any
31
inaccuracies in the representations and warranties of Buyer contained herein or
in any document delivered pursuant hereto, or waive compliance by Buyer with any
of the agreements or conditions contained herein. Any such extension or waiver
shall be valid if set forth in an instrument in writing signed by Seller. Buyer
may extend the time for the performance of any of the obligations or other acts
of Seller or the Principals hereunder, waive any inaccuracies in the
representations and warranties of Seller or the Principals contained herein or
in any document delivered pursuant hereto, or waive compliance by Seller or the
Principals with any of the agreements or conditions contained herein. Any such
extension or waiver shall be valid if set forth in an instrument in writing
signed by Buyer.
SECTION 9. SURVIVAL.
9.1 Survival of Warranties. Subject to Sections 10.2 and 10.3 hereof, each
of the representations, warranties, agreements, covenants and obligations herein
or in any schedule, exhibit or certificate 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
Date regardless of any investigation and shall not merge in the performance of
any obligation by either party hereto.
SECTION 10. INDEMNIFICATION.
10.1 Indemnification by Seller and the Principals. Seller and each of the
Principals hereby agrees, jointly and severally, to indemnify and hold harmless
Buyer, its affiliates and its and their respective directors, officers,
stockholders, partners, members, employees, and agents (individually, a "Buyer
Indemnified Party" and collectively, "Buyer Indemnified Parties"), against and
in respect of all losses, liabilities, obligations, damages, deficiencies,
actions, suits, proceedings, demands, assessments, orders, judgments, costs and
expenses (including the reasonable fees, disbursements and expenses of attorneys
and consultants) of any kind or nature whatsoever, but net of the proceeds from
any insurance policies or other third party reimbursement for such loss, to the
extent sustained, suffered or incurred by or made against any Buyer Indemnified
Party, to the extent based upon, arising out of or in connection with: (i) any
breach of any representation or warranty made by Seller and the Principals in
this Agreement or in any schedule, exhibit, certificate, agreement or other
instrument delivered pursuant to this Agreement; (ii) any breach of any covenant
or agreement made by Seller or the Principals in this Agreement or in any
schedule, exhibit, certificate, 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 other than the Assumed
Liabilities; and (iv) any claim which arises in connection with any liability or
obligation of Seller other than the Assumed Liabilities.
32
10.2 Limitations of Indemnity Obligations of Seller and the Principals.
The indemnity obligations of the Seller and each of the Principals under this
Agreement shall be subject to the following limitations:
(a) The indemnity obligations of the Seller and the Principals shall
expire on the eighteen month anniversary of the Closing Date; provided, however,
that such obligations with respect to (i) the representations and warranties
contained in Sections 2.1, 2.2 and 2.24 and the obligations contained in Section
4.15 shall continue in effect for the full period of any applicable statute of
limitations, and (ii) the representations and warranties regarding taxes, which
are contained in Section 2.4, shall remain in effect until all claims for taxes
due by or on account of the Seller for any period up to and including the
Closing Date have been settled and any statute of limitations period with
respect to such taxes has expired; and provided further that the indemnity
obligations of the Seller and the Principals for claims timely asserted by a
Buyer Indemnified Party in the manner provided in this Agreement shall continue
until such claims are fully resolved and discharged.
(b) The aggregate indemnity obligations of the Seller and the
Principals for any damages shall not in any event exceed Two Million Dollars
($2,000,000).
(c) The Buyer Indemnified Parties shall be entitled to
indemnification only if the aggregate and collective damages incurred or
suffered by them exceed Fifty Thousand Dollars ($50,000), in which event they
shall be entitled to indemnification for the full amount of such damages.
10.3 Indemnification by Buyer. Buyer agrees to indemnify and hold harmless
Seller and its officers, directors, managers, members, employees and agents
(individually, a "Seller Indemnified Party" and collectively, "Seller
Indemnified Parties") at all times against and in respect of all losses,
liabilities, obligations, damages, deficiencies, actions, suits, proceedings,
demands, assessments, orders, judgments, costs and expenses (including the
reasonable fees, disbursements and expenses of attorneys and consultants), of
any kind or nature whatsoever, to the extent sustained, suffered or incurred by
or made against any Seller Indemnified Party, to the extent based upon, arising
out of or in connection with: (A) any breach of any representation or warranty
made by Buyer in this Agreement or in any schedule, exhibit, certificate,
agreement or other instrument delivered pursuant to this Agreement; (B) any
breach of any covenant or agreement made by Buyer in this Agreement or in any
schedule, exhibit, certificate, agreement or other instrument delivered pursuant
to this Agreement; (C) any claim made against Seller which relates to, results
from or arises out of Buyer's operation of the Assets or the Business from and
after the Closing Date; and (D) the Assumed Liabilities. The indemnity
obligations of the Buyer hereunder shall expire on the eighteen month
anniversary of the Closing Date, and the Seller Indemnified Parties shall be
entitled to indemnification only if the aggregate and collective damages
incurred or suffered by them
33
exceed Fifty Thousand Dollars ($50,000) in which case they shall be entitled to
indemnification of the full amount of such damages.
10.4 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, and
provided that such notice is given within the time limitations set forth in
Sections 10.2(a) and 10.3. 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) 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 to settle all
indemnifiable matters related to claims by third parties which are susceptible
to being settled; provided, however, that (i) the indemnifying parties'
obligation to indemnify the indemnified party therefor will be fully satisfied,
and (ii) the indemnified party will be fully released from any liability or
obligation with respect to such claim. 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
34
professional conduct, the expense of separate counsel for the indemnified party
shall be paid by the indemnifying party. If no such notice of intent to dispute
and defend is given by the indemnifying party, or if such diligent good faith
defense is not being or ceases to be conducted, the indemnified party shall, at
the expense of the indemnifying party, undertake the defense of (with counsel
selected by the indemnified party), and shall have the right to compromise or
settle (exercising reasonable business judgment), such claim, liability or
expense. If such claim, liability or expense is one that by its nature cannot be
defended solely by the indemnifying party, then the indemnified party shall make
available all information and assistance that the indemnifying party may
reasonably request and shall cooperate with the indemnifying party in such
defense.
(c) Non-Third Party Claims. With respect to non-third party claims,
if within twenty (20) days after receiving the notice described in clause (a)
above the indemnifying party does not give written notice to the indemnified
party that it contests such indemnity, the amount of indemnity payable for such
claim shall be as set forth in the indemnified party's notice. If the
indemnifying party provides written notice to the indemnified party within such
20-day period that it contests such indemnity, the parties shall attempt in good
faith to reach an agreement with regard thereto within thirty (30) days of
delivery of the indemnifying party's notice. If the parties cannot reach
agreement within such 30-day period, the matter may be submitted by either party
for binding arbitration in accordance with the provisions of Section 12.11
hereof.
10.5 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 the Principals under this
Agreement, subject to Section 10.6 hereof, such Buyer Indemnified Party shall
first be paid 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. To the extent the Escrow Deposit is unavailable or
insufficient to satisfy such claim(s) in full, Buyer Indemnified Party shall
have the right to collect directly from the Seller or the Principals. In order
to receive payment from the Escrow Deposit such Buyer Indemnified Party shall
first deliver to Seller 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 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
35
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 12.11 of this Agreement.
10.6 Certain Remedies. It is specifically understood and agreed that (a)
fraud, intentional misrepresentation or a deliberate or willful breach by the
Seller or any Principal or Buyer of any of their representations or warranties
under this Agreement or in any certificate, schedule or exhibit delivered
pursuant hereto or (b) breach by the Seller or any Principal of the covenant
contained in Section 4.15 hereof or breach by Buyer of the covenant contained in
Section 5.3 hereof 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. Except for the items set forth in Sections 10.6(a)
and (b) above, the sole and exclusive remedy of Buyer, Seller and the Principals
for a breach of this Agreement shall be restricted to the remedies set forth in
this Section 10.
SECTION 11. NOTICES.
All notices and other communications required to be given hereunder, or
which may be given pursuant or relative to the provisions hereof, shall be in
writing and shall be deemed to have been given when delivered in hand or three
(3) days after mailing if mailed, postage prepaid, by first class United States
mail, certified return receipt requested as follows:
36
If to Seller: Voyager Online, LLC
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
With a copy to: ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
Volunteer Building, Suite 1000
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇. Esq.
If to Buyer: DURO Communications, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇ ▇▇▇▇▇▇▇ ▇▇
With a copy to: ▇▇▇▇▇▇▇, Procter & ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇, P.C.
SECTION 12. MISCELLANEOUS.
12.1 Assignability; Binding Effect. This Agreement shall not be assignable
by Buyer or Seller except with the written consent of the other, except that
Buyer may assign its rights hereunder either (a) to any affiliate of Buyer or
its owners, (b) as a result of any merger, reorganization or other
consolidation, or (c) in connection with the granting of a security interest to
its senior lender. This Agreement shall be binding upon and shall inure to the
benefit of, the parties hereto and their respective successors, and assigns.
12.2 Headings. The subject headings used in this Agreement are included
for purposes of convenience only and shall not affect the construction or
interpretation of any of its provisions.
12.3 Amendments; Waivers. This Agreement may not be amended or modified,
nor may compliance with any condition or covenant set forth herein be waived,
except by a writing duly and validly executed by Buyer and Seller or, in the
case of a waiver, the party waiving compliance. No delay on the part of any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any waiver on the part of any party of any such right,
power or privilege, or any single or partial exercise of any such right, power
or privilege, preclude any further exercise thereof or the exercise of any other
such right, power or privilege.
37
12.4 Bulk Sales Law. Buyer hereby waives compliance by Seller of any
applicable bulk sales law and Seller agrees, to make full and timely payment
when due of all amounts owed by such Seller to its creditors. Seller agrees to
indemnify and hold Buyer harmless from, and reimburse Buyer for, any loss, cost,
expense, liability or damage (including reasonable counsel fees and
disbursements and expenses) which Buyer may suffer or incur by virtue of the
non-compliance by Seller with such laws.
12.5 Entire Agreement. This Agreement, together with the schedules and
exhibits hereto, constitutes the entire agreement between the parties with
respect to the subject matter hereof and supersedes and cancels any and all
prior or contemporaneous arrangements, understandings and agreements between
them relating to the subject matter hereof.
12.6 Severability. In the event that any provision or any portion of any
provision of this Agreement shall be held to be void or unenforceable, then the
remaining provisions of this Agreement (and the remaining portion of any
provision held to be void or unenforceable in part only) shall continue in full
force and effect.
12.7 Governing Law. This Agreement and the transactions contemplated
hereby shall be governed and construed by and enforced in accordance with the
laws of the State of Tennessee, without regard to conflict of laws principles.
12.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which shall
constitute the same instrument.
12.9 Expenses. Each party shall pay its own expenses incident to the
negotiation, preparation and performance of this Agreement and the transactions
contemplated hereby, including all fees and expenses of its counsel and
accountants for all activities of such counsel and accountants undertaken
pursuant to this Agreement, whether or not the transactions contemplated hereby
are consummated.
12.10 [Intentionally Deleted]
12.11 Dispute Resolution. Any dispute arising out of or relating to this
Agreement or the breach, termination or validity hereof shall be finally settled
solely and exclusively by arbitration conducted expeditiously in accordance with
the CPR Institute for Dispute Resolution Rules for Nonadministered Arbitration
of Business Disputes (the "CPR Rules"). The CPR Institute for Dispute Resolution
shall appoint a neutral advisor from its National CPR Panel. The arbitration
shall be governed by the United States Arbitration Act, 9 U.S.C. ss.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 Atlanta, Georgia.
38
Such proceedings shall be administered by the neutral advisor in
accordance with the CPR Rules as he/she deems appropriate, however, such
proceedings shall be guided by the following agreed upon procedures:
(a) Mandatory exchange of all relevant documents, to be accomplished
within forty-five (45) days of the initiation of the procedure;
(b) No other discovery;
(c) Hearings before the neutral advisor which shall consist of a
summary presentation by each side of not more than three hours; such hearings to
take place in one or two days at a maximum; and
(d) Decision to be rendered not later than ten (10) days following
such hearings.
Each of the parties hereto (a) hereby unconditionally and irrevocably
submits to the jurisdiction of any United States District Court of competent
jurisdiction located in the Commonwealth 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.
Notwithstanding the foregoing, the parties may enforce their rights under
this Agreement in accordance with Section 12.11.
12.12 Third Party Rights. This Agreement is for the benefit of the parties
hereto and is not entered into for the benefit of, and shall not be construed to
confer any benefit upon, any other party or entity.
39
IN WITNESS WHEREOF, Seller, Principals and Buyer have caused this Asset
Purchase Agreement to be executed as of the date first above written.
SELLER:
VOYAGER ONLINE, LLC
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
PRINCIPALS:
/s/ ▇▇▇ ▇▇▇▇▇
------------------------------
▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
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 Consent
Exhibit C - Form of ▇▇▇▇ of Sale
Exhibit D - Form of Assignment and Assumption Agreement
Exhibit E-1- Form of Assignment of Trademarks
Exhibit E-2- Form of Assignment (to be filed with US PTO on Closing Date)
Exhibit F - Form of Assignment of Internet Domain Name
Exhibit G - Form of Non-competition Agreement
Exhibit H - Form of Opinion of Seller's Counsel
Exhibit I-1- Form of Employment Agreement
Exhibit I-2- Form of Employment Agreement
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(d) 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 2.10 Employees; Labor Matters
Schedule 2.11 Financial Statements
Schedule 2.14 Approvals; Consents
Schedule 2.16(a)Subscribers
Schedule 2.16(b)Complimentary Accounts
Schedule 2.16(c)Disconnection Policy
Schedule 2.19 Banking Relations
Schedule 2.22 Affiliated Transactions
Schedule 2.23 Employee Benefits
Schedule 2.24 Environmental Matters