Exhibit 2.3
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
ADVANCED TELCOM, INC.
AND
FAIRPOINT COMMUNICATIONS SOLUTIONS CORP.
OCTOBER 19, 2001
TABLE OF CONTENTS
PAGE
----
ARTICLE 1 DEFINITIONS AND CONSTRUCTION..............................................................................2
1.1 CAPITALIZED TERMS...................................................................................2
1.2 CONSTRUCTION.......................................................................................11
ARTICLE 2 TRANSFERS AND ASSIGNMENTS................................................................................12
2.1 TRANSFER OF ASSETS.................................................................................12
2.2 EXCLUDED ASSETS....................................................................................12
2.3 DELIVERY OF ACQUIRED ASSETS........................................................................13
2.4 ASSIGNMENTS........................................................................................13
2.5 TRANSFERRED CONTRACTS..............................................................................13
2.6 FURTHER ASSURANCES; POST-CLOSING COOPERATION.......................................................14
2.7 ASSUMED LIABILITIES................................................................................15
2.8 EXCLUDED LIABILITIES...............................................................................15
ARTICLE 3 CLOSING AND PURCHASE PRICE...............................................................................16
3.1 CLOSING............................................................................................16
3.2 PURCHASE PRICE.....................................................................................16
3.3 ALLOCATION OF PURCHASE PRICE.......................................................................17
3.4 TRANSFER TAXES.....................................................................................17
3.5 CLOSING DATE DELIVERIES OF SELLER..................................................................18
3.6 CLOSING DATE DELIVERIES OF BUYER...................................................................18
ARTICLE 4 LICENSE GRANTS...........................................................................................19
4.1 LICENSE OF LICENSED TECHNOLOGY.....................................................................19
4.2 BANKRUPTCY.........................................................................................19
4.3 TRANSITION TRADEMARK LICENSE.......................................................................19
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF SELLER.................................................................19
5.1 ORGANIZATION OF SELLER.............................................................................19
5.2 AUTHORITY..........................................................................................20
5.3 NO CONFLICT........................................................................................20
5.4 TRANSFERRED CONTRACTS..............................................................................21
5.5 CONSENTS...........................................................................................21
5.6 NO LIQUIDATION, INSOLVENCY, WINDING-UP.............................................................21
5.7 RESTRICTIONS ON BUSINESS ACTIVITIES................................................................22
5.8 TITLE TO PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES; CONDITION OF EQUIPMENT; INVENTORY..........22
5.9 CUSTOMERS AND SALES................................................................................23
5.10 PERMITS............................................................................................23
5.11 TECHNOLOGY.........................................................................................23
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
5.12 LITIGATION.........................................................................................25
5.13 TAX RETURNS AND AUDITS.............................................................................25
5.14 POWER OF ATTORNEY..................................................................................26
5.15 AFFILIATED TRANSACTIONS............................................................................26
5.16 COMPLIANCE WITH LAWS...............................................................................26
5.17 WARRANTIES.........................................................................................26
5.18 COMPLETE COPIES OF MATERIALS.......................................................................27
5.19 BULK TRANSFER LAWS.................................................................................27
5.20 EMPLOYEE MATTERS...................................................................................27
5.21 ENVIRONMENTAL MATTERS..............................................................................28
5.22 SUFFICIENCY........................................................................................29
5.23 INSURANCE..........................................................................................29
5.24 FINANCIAL STATEMENTS...............................................................................29
5.25 NO UNDISCLOSED LIABILITIES.........................................................................30
5.26 ABSENCE OF CHANGES.................................................................................30
5.27 ACCOUNTS RECEIVABLE................................................................................31
5.28 ADEQUATE RESOURCES.................................................................................32
5.29 BROKERS............................................................................................32
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF BUYER..................................................................32
6.1 ADEQUATE RESOURCES.................................................................................32
6.2 AUTHORITY..........................................................................................32
6.3 ORGANIZATION OF BUYER..............................................................................32
6.4 CONSENTS...........................................................................................32
6.5 NO CONFLICT........................................................................................33
6.6 BUYER PARENT FINANCIAL STATEMENTS..................................................................33
6.7 NO LIQUIDATION, INSOLVENCY, WINDING-UP.............................................................33
6.8 LITIGATION.........................................................................................34
6.9 BROKERS............................................................................................34
ARTICLE 7 COVENANTS AND AGREEMENTS.................................................................................34
7.1 ACCESS.............................................................................................34
7.2 OPERATION OF THE BUSINESS OF SELLER................................................................35
7.3 CONDUCT PRIOR TO CLOSING...........................................................................36
7.4 CONFIDENTIALITY....................................................................................37
7.5 OTHER AGREEMENTS...................................................................................37
7.6 NOTIFICATION OF CERTAIN MATTERS....................................................................38
7.7 ASSIGNMENT OF CONTRACTS AND FEES...................................................................38
7.8 LEASE ASSIGNMENT...................................................................................38
-ii-
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
7.9 PUBLIC DISCLOSURE..................................................................................38
7.10 USE OF CONFIDENTIAL INFORMATION....................................................................38
7.11 REASONABLE EFFORTS.................................................................................39
7.12 ADDITIONAL DOCUMENTS AND FURTHER ASSURANCES........................................................39
7.13 CALEA COMPLIANCE AND LAW ENFORCEMENT TRAP AND TRACE, PEN REGISTER, AND OTHER INFORMATION SUBPOENAS
AND ORDERS.........................................................................................39
7.14 TAX MATTERS........................................................................................39
7.15 BUSINESS FILINGS...................................................................................40
7.16 INSURANCE CLAIMS...................................................................................40
7.17 AUDIT RIGHTS.......................................................................................40
7.18 NOTICE TO THE ESCROW AGENT.........................................................................40
7.19 CERTAIN CUSTOMERS..................................................................................40
ARTICLE 8 CONDITIONS TO THE CLOSING................................................................................40
8.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY............................................................40
8.2 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF BUYER..................................................41
8.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF SELLER.....................................................43
ARTICLE 9 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION..............................................45
9.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS..............................................45
9.2 SELLER INDEMNIFICATION.............................................................................45
9.3 BUYER INDEMNIFICATION..............................................................................45
9.4 INDEMNIFICATION PROCEDURE..........................................................................46
9.5 RESOLUTION OF CONFLICTS; ARBITRATION...............................................................46
9.6 THIRD-PARTY CLAIMS.................................................................................47
9.7 LIMITATION ON INDEMNIFICATION; ESCROW..............................................................48
ARTICLE 10 TERMINATION, AMENDMENT AND WAIVER........................................................................49
10.1 TERMINATION........................................................................................49
10.2 EFFECT OF TERMINATION..............................................................................50
10.3 AMENDMENT..........................................................................................50
10.4 EXTENSION; WAIVER..................................................................................50
ARTICLE 11 GENERAL..................................................................................................50
11.1 NOTICES............................................................................................50
11.2 ENTIRE AGREEMENT; ASSIGNMENT.......................................................................52
11.3 SEVERABILITY.......................................................................................52
11.4 OTHER REMEDIES.....................................................................................52
-iii-
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
11.5 GOVERNING LAW......................................................................................52
11.6 JURISDICTION AND VENUE.............................................................................52
11.7 WAIVER OF JURY TRIAL...............................................................................53
11.8 FEES AND EXPENSES..................................................................................53
11.9 COUNTERPARTS.......................................................................................53
11.10 SPECIFIC PERFORMANCE...............................................................................53
-iv-
EXHIBITS
Exhibit A - Transitional Services Agreement
Exhibit B - Escrow Agreement
Exhibit C - Non-Solicitation Agreement Amendment
Exhibit D - Non-Competition Agreement
Exhibit E - Telecommunications Facilities Agreement
Exhibit F - Voicemail Services Agreement
Exhibit G - Lease Assignment
Exhibit H - General Assignment and ▇▇▇▇ of Sale
-iv-
SCHEDULES
Schedule 1.1(f) - Assigned Lease
Schedule 1.1(cc) - Continuing Employee
Schedule 1.1(vv) - Facilities
Schedule 1.1(kkk) - Inventory
Schedule 1.1(ooo) - Licensed Technology
Schedule 1.1(aaaa) - Permitted Liens
Schedule 1.1(llll) - Sales Orders
Schedule 1.1(tttt) - Tangible Assets
Schedule 1.1(xxxx) - Third Party Technology
Schedule 1.1(yyyy) - Transferred Contracts
Schedule 1.1(aaaaa) - Transferred Technology
Schedule 2.5(a) - Consent Required Contract
Schedule 7.3(k) - Actions or Proceedings
Schedule 8.1(c)(i) - Buyer Third Party Consents
Schedule 8.1(c)(ii) - Buyer and Seller Third Party Consents
Schedule 8.2(e)(i) - Third Party Consents
Schedule 8.2(f) - Release of Liens
ASSET PURCHASE AGREEMENT
THIS
ASSET PURCHASE AGREEMENT (this "AGREEMENT") is made and entered into
as of October 19, 2001 (the "SIGNING DATE"), by and between Advanced TelCom,
Inc., ("BUYER") a Delaware corporation with its principal place of business at
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and
wholly-owned subsidiary of Advanced TelCom Group, Inc., a Delaware corporation
("BUYER PARENT"), and FairPoint Communications Solutions Corp., a Delaware
corporation with its principal place of business at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("SELLER") and a wholly-owned subsidiary of
FairPoint Communications, Inc. ("SELLER PARENT").
RECITALS:
A. Buyer desires to purchase from Seller, and Seller desires to sell to
Buyer, certain assets of Seller relating to the Business (as defined below),
excluding the Excluded Assets (as defined below), in exchange for the assumption
of certain liabilities of Seller relating to the Business, payment of the
Purchase Price (as defined below) contemporaneous herewith and the additional
consideration set forth below; and
B. In connection with the execution and delivery of this Agreement, Seller
and Buyer are concurrently herewith entering into a transitional services
agreement in the form attached hereto as EXHIBIT A (the "TRANSITIONAL SERVICES
AGREEMENT"), an escrow agreement in the form attached hereto as EXHIBIT B (the
"ESCROW AGREEMENT"), an amendment to that certain Non-Solicitation Agreement
entered into as of September 25, 2001 by and between Buyer and Seller Parent in
the form attached hereto as EXHIBIT C (the "NON-SOLICITATION AGREEMENT
AMENDMENT"), a non-competition agreement in the form attached hereto as
EXHIBIT D (the "NON-COMPETITION AGREEMENT"), a telecommunications facilities
agreement in the form attached hereto as EXHIBIT E (the "TELECOMMUNICATIONS
FACILITIES AGREEMENT") and a voicemail services agreement in the form attached
hereto as EXHIBIT F (the "VOICEMAIL SERVICES AGREEMENT").
NOW, THEREFORE, in consideration of the covenants, representations,
warranties and mutual agreements hereinafter set forth, the parties hereto agree
as follows:
ARTICLE 1
DEFINITIONS AND CONSTRUCTION
1.1 CAPITALIZED TERMS. The following capitalized terms shall have the
meanings set forth below:
(a) "ACCOUNTS RECEIVABLE" shall have the meaning set forth in
SECTION 5.27.
(b) "ACQUIRED ASSETS" shall have the meaning set forth in SECTION 2.1.
-2-
(c) "ACTIONS OR PROCEEDINGS" means any and all actions, suits,
proceedings, arbitrations, or governmental or regulatory investigations or
audits.
(d) "AFFILIATE" shall have the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act of 1934 as amended of
the United States.
(e) "AGREEMENT" means this
Asset Purchase Agreement and all exhibits
and schedules hereto, including the Disclosure Schedule.
(f) "ASSIGNED LEASE" means that certain lease identified on
SCHEDULE 1.1(f).
(g) "ALLOCATION" shall have the meaning set forth in SECTION 3.3.
(h) "ASSUMED LIABILITIES" shall have the meaning set forth in
SECTION 2.7.
(i) "BALANCE SHEET" shall have the meaning set forth in SECTION 5.24.
(j) "BASIS" shall mean any past or present fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction that forms or could reasonably
form the basis for any specified consequence.
(k) "BENEFITS LIABILITIES" means any and all claims, debts,
liabilities, commitments and obligations, whether fixed, contingent or absolute,
matured or unmatured, liquidated or unliquidated, accrued or unaccrued, known or
unknown, whenever or however arising, including all costs and expenses relating
thereto, and including those debts, liabilities and obligations arising under
law, rule, regulation, permits, actions or proceedings before any Governmental
Entity, order or consent decree or any award of any arbitrator of any kind
relating to any Employee Plan, International Employee Plan or otherwise to a
Continuing Employee.
(l) "BOOKS AND RECORDS" means all papers and records (in paper or
electronic format) in Seller's care, custody, or control relating to the
Business, including all purchasing and sales records, Customer and vendor lists,
accounting and financial records, product or service documentation, product or
service specifications, marketing requirements, documents, lists, drawings,
notebooks, promotional materials, marketing materials, studies and reports.
(m) "BUSINESS" means the business, services, operations and tangible
and intangible assets of Seller related to, associated with, used in, or engaged
in the Restricted Territory, including voice, data and Internet access services.
(n) "BUYER" shall have the meaning set forth in the preamble.
(o) "BUYER CERTIFICATE OF OFFICER" shall mean the certificate required
by SECTION 8.3(b).
-3-
(p) "BUYER CERTIFICATE OF SECRETARY" shall mean the certificate
required by SECTION 8.3(c).
(q) "BUYER PARENT" shall have the meaning set forth in the preamble.
(r) "BUYER PARENT BALANCE SHEET" shall have the meaning set forth in
SECTION 6.6.
(s) "BUYER PARENT INCOME STATEMENT" shall have the meaning set forth
in SECTION 6.6.
(t) "CALEA" shall mean the Federal Communications Assistance for Law
Enforcement Act and implementing orders and rules of the Federal Communications
Commission.
(u) "CLOSING" shall have the meaning set forth in SECTION 3.1.
(v) "CLOSING DATE" shall have the meaning set forth in SECTION 3.1.
(w) "COBRA" means the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended.
(x) "CODE" means the Internal Revenue Code of 1986, as amended.
(y) "COLLATERAL AGREEMENTS" shall have the meaning set forth in
SECTION 2.4.
(z) "CONFLICT" shall have the meaning set forth in SECTION 5.3(a)
(aa) "CONSENT" shall have the meaning set forth in SECTION 2.5(a).
(bb) "CONSENT REQUIRED CONTRACT" shall have the meaning set forth in
SECTION 2.5(a).
(cc) "CONTINUING EMPLOYEES" means those employees of Seller identified
on SCHEDULE 1.1(cc).
(dd) "CONTRACT" means any mortgage, indenture, lease, contract,
covenant or other agreement, instrument or commitment, permit, concession,
franchise or license.
(ee) "CONTROL DATE" shall mean the later of (i) November 1, 2001, and
(ii) the date that the consent, waiver and/or approval from the Public Utilities
Commission from the State of
Washington identified on SCHEDULE 8.1(c)(ii) has
been received by Buyer and/or Seller.
(ff) "COST OF GOODS SOLD" shall mean (without duplication with Costs)
any and all charges (i) billed by third party providers to Seller for providing
to the Customers telecommunications and related services, including the
following: services purchased through wholesale agreements with the incumbent
local exchange carrier and resold to the Customers;
-4-
primary interexchange carrier charges; network access charges; all unbundled
network elements leased from the incumbent local exchange carrier through an
interconnection agreement; and unbundled network element platform costs,
(ii) applicable to terminating any traffic to another carrier's network,
(iii) related to rent and power for transferred and non-transferred
collocations, (iv) for transport to carry all Customers' traffic, (v) from
federal, state or local governments related to the Business, including USF
obligations, and (vi) billed by Seller under the Telecommunications Facilities
Agreement and the Voicemail Services Agreement; all as determined in accordance
with past practices, and excluding charges which pertain to periods prior to the
Control Date (it being understood that Cost of Goods Sold shall not include:
(A) any general overhead or similar allocated costs or expenses associated with
the operation of the Business; (B) any handling fees or similar ▇▇▇▇-ups to any
costs or expenses incurred by third parties; or (C) any capital expenditures for
the provision of the Services, as defined in the Transitional Services
Agreement, in each case without the prior written agreement of Buyer).
(gg) "COSTS" shall mean (without duplication with Cost of Goods Sold)
the direct costs or expenses of Seller in providing the Services (as defined in
the Transitional Services Agreement) and any and all third party costs or
expenses approved by Buyer in writing, which costs or expenses for avoidance of
doubt shall not include: (i) any general overhead or similar allocated costs or
expenses associated with the operation of the Business; (ii) any handling fees
or similar ▇▇▇▇-ups to any costs or expenses incurred by third parties; or
(iii) any capital expenditures for the provision of the Services (as defined in
the Transitional Services Agreement), in each case without the prior written
agreement of Buyer.
(hh) "CUSTOMER INFORMATION" shall mean all customer lists, customer
contact information (including addresses, telephone numbers, e-mail address and
Internet Protocol addresses, in each case, as known by Seller), customer
correspondence and customer licensing and purchasing histories relating to the
Customers.
(ii) "CUSTOMERS" shall mean all customers of Seller as of the Signing
Date related to the Business (including those Persons who have ordered products
or services from Seller but for whom Seller has not either provided such
products or services or invoiced or received payment for such products or
services).
(jj) "DISCLOSURE SCHEDULE" shall have the meaning set forth in
ARTICLE 5.
(kk) "EMPLOYEE PLAN" means any plan, program, policy, practice,
contract, Employment Agreement, agreement or other material arrangement
providing for compensation, severance, termination pay, deferred compensation,
performance awards, stock or stock-related awards, fringe benefits (including
health, dental, vision, life, disability, sabbatical, accidental death and
dismemberment benefits), or other employee benefits or remuneration of any kind,
whether written, unwritten or otherwise, funded or unfunded, including each
"employee benefit plan," within the meaning of Section 3(3) of ERISA, which is
or has been maintained, sponsored by, contributed to, or required to be
contributed to, by Seller for the benefit of any Continuing Employee, or with
respect to which Seller has any Liability or obligation to any Continuing
Employee.
-5-
(ll) "EMPLOYMENT AGREEMENT" means each management, employment,
severance, consulting, relocation, repatriation, expatriation, visas, work
permit or other agreement, contract or understanding between Seller or any
Affiliate of Seller and any Continuing Employee.
(mm) "ENVIRONMENTAL LAWS" means all applicable laws, directives,
guidance, rules, regulations, orders, treaties, statutes and codes promulgated
by any Governmental Entity which prohibit, regulate or control any Hazardous
Material or activity involving Hazardous Materials, including the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, the Resource
Recovery and Conservation Act of 1976, the Federal Water Pollution Control Act,
the Toxic Substances Control Act, the Clean Air Act, the Hazardous Materials
Transportation Act, the Clean Water Act and the Occupational Safety and Health
Act, all as amended from time to time.
(nn) "ENVIRONMENTAL PERMITS" shall have the meaning set forth in
SECTION 5.21(b).
(oo) "ESCROW AGREEMENT" shall have the meaning set forth in Recital B.
(pp) "ESCROW AMOUNT" shall have the meaning set forth in SECTION 3.2.
(qq) "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
(rr) "ERISA AFFILIATE" for purposes of SECTION 5.20 only, shall mean
any other person or entity under common control with Seller within the meaning
of Section 414(b), (c), (m) or (o) of the Code and the regulations issued
thereunder.
(ss) "EXCLUDED ASSETS" shall have the meaning set forth in SECTION 2.2.
(tt) "EXCLUDED LIABILITIES" shall have the meaning set forth in
SECTION 2.8.
(uu) "EXPEDITED PROCEDURES" shall have the meaning set forth in
SECTION 9.5(d).
(vv) "FACILITIES" means the leasehold interests and collocation
facilities identified on SCHEDULE 1.1(vv).
(ww) "FEES" shall have the meaning set forth in SECTION 2.5(c).
(xx) "FINANCIAL STATEMENTS" shall mean the Balance Sheet and the Income
Statement.
(yy) "GAAP" means United States generally accepted accounting
principles as of the date hereof.
(zz) "GENERAL ASSIGNMENT" shall have the meaning set forth in
SECTION 2.4.
-6-
(aaa) "GOVERNMENTAL ENTITY" means any court, administrative agency or
commission or other federal, state, county, local or foreign governmental
authority, instrumentality, agency or commission.
(bbb) "HAZARDOUS MATERIALS" shall have the meaning set forth in
SECTION 5.21(a).
(ccc) "INCOME STATEMENT" shall have the meaning set forth in
SECTION 5.24.
(ddd) "INDEMNIFIED BUYER PARTIES" shall have the meaning set forth in
SECTION 9.2.
(eee) "INDEMNIFIED PARTIES" shall have the meaning set forth in
SECTION 9.3.
(fff) "INDEMNIFIED SELLER PARTIES" shall have the meaning set forth in
SECTION 9.3.
(ggg) "INDEMNIFYING PARTY" shall have the meaning set forth in
SECTION 9.4.
(hhh) "INDEPENDENT ACCOUNTING FIRM" shall have the meaning set forth in
SECTION 3.3(b).
(iii) "INTENTIONAL MISREPRESENTATION" shall have the meaning set forth
in SECTION 9.7(f).
(jjj) "INTERNATIONAL EMPLOYEE PLAN" means each Employee Plan that has
been adopted or maintained by Seller or any ERISA Affiliate, whether informally
or formally, or with respect to which Seller or any ERISA Affiliate will or may
have any Liability, for the benefit of Continuing Employees who perform services
outside the United States.
(kkk) "INVENTORY" means those items identified on SCHEDULE 1.1(kkk),
including the customer premise equipment, supplies and spare parts of Seller
related to the Business.
(lll) "IRS" means the Internal Revenue Service.
(mmm) "LEASE ASSIGNMENT" shall mean that certain lease assignment in
substantially the form attached hereto as EXHIBIT G for the leasehold interests
of Seller identified on SCHEDULE 1.1(f).
(nnn) "LIABILITY" shall mean any liability or obligation (whether known
or unknown, whether asserted or unasserted, whether absolute or contingent,
whether accrued or unaccrued, whether liquidated or unliquidated, whether
incurred or consequential and whether due or to become due), including any
liability for Taxes.
(ooo) "LICENSED TECHNOLOGY" means: (i) all Technology (other than the
Transferred Technology) owned or licensable by Seller to the extent currently
related to, used in, or necessary to the operation of the Business, including
the development, use, distribution or other exploitation of the Acquired Assets
which Technology is described in SCHEDULE 1.1(ooo); and (ii) any Technology
-7-
(other than Transferred Technology) owned or licenseable by Seller currently
related to, used in, or necessary for the operation of the Business that is
disclosed to, or learned by, Buyer as a result of the transactions contemplated
hereby, including the employment by Buyer of Continuing Employees.
(ppp) "LIEN" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind whatsoever in
respect of such asset, not including liens for Taxes not yet due and payable.
(qqq) "LOA" means a Customer's written authorization to change the
Customer's preferred carrier or telecommunications service from one
telecommunications provider to another, as required by applicable federal and
state laws and regulations.
(rrr) "LOSS" and "LOSSES" shall have the meanings set forth in
SECTION 9.2.
(sss) "MANAGED REVENUE" shall have the meaning set forth in SECTION 7.2.
(ttt) "MULTIEMPLOYER PLAN" means any Pension Plan which is a
"multiemployer plan," as defined in Section 3(37) of ERISA.
(uuu) "NON-COMPETITION AGREEMENT" shall have the meaning set forth in
Recital B.
(vvv) "NON-DISCLOSURE AGREEMENT" shall mean that certain Mutual
Confidentiality and Non-Disclosure Agreement dated as of September 5, 2001, as
revised on September 28, 2001.
(www) "NON-SOLICITATION AGREEMENT AMENDMENT" shall have the meaning set
forth in Recital B.
(xxx) "NON-TRANSFERRED CONTRACT" shall have the meaning set forth in
SECTION 2.5(b).
(yyy) "PANEL" shall have the meaning set forth in SECTION 9.5(c).
(zzz) "PENSION PLAN" means each Employee Plan of Seller which is an
"employee pension benefit plan," within the meaning of Section 3(2) of ERISA.
(aaaa) "PERMITTED LIENS" means those items listed on SCHEDULE 1.1(aaaa).
(bbbb) "PERSON" means any individual, partnership, firm, corporation,
association, trust, unincorporated organization or other entity, as well as any
syndicate or group of any of the foregoing.
(cccc) "PRE-EXISTING CONTAMINATION" shall have the meaning set forth in
SECTION 1.1(qqqq).
(dddd) "PRIMARY ARBITRATOR" shall have the meaning set forth in
SECTION 9.5(b).
-8-
(eeee) "PURCHASE PRICE" shall have the meaning set forth in
SECTION 3.2(a).
(ffff) "PURCHASE PRICE ADJUSTMENT" shall have the meaning set forth in
SECTION 3.2(b).
(gggg) "REAL ESTATE CONSENT EXPENSES" shall have the meaning set forth in
SECTION 7.8.
(hhhh) "RELATED AGREEMENTS" shall mean all such ancillary agreements
required in this Agreement to be executed and delivered in connection with the
transactions contemplated hereby, including the Collateral Agreements, the
Transitional Services Agreement, the Lease Assignment, the Escrow Agreement, the
Non-Solicitation Agreement Amendment, the Telecommunications Facilities
Agreement, the Voicemail Services Agreement and the Non-Competition Agreement.
(iiii) "RESIDUAL KNOWLEDGE" means ideas, concepts, know-how or techniques
relating to information of a proprietary or confidential nature of Seller that
are retained in the unaided memory of the Continuing Employees.
(jjjj) "RESTRICTED TERRITORY" shall mean the states of
Washington and
Oregon and every city or other political subdivision located within the
geographic boundaries of
Washington and Oregon, including those in which Seller
is currently engaged in business or otherwise offers services or distributes,
licenses or sells products.
(kkkk) "RETURNS" shall have the meaning set forth in SECTION 5.13(a).
(llll) "SALES ORDERS" means those firm sales orders outstanding on the
Signing Date, as listed on SCHEDULE 1.1(llll).
(mmmm) "SELLER" shall have the meaning set forth in the preamble.
(nnnn) "SELLER CERTIFICATE OF OFFICER" shall mean the certificate
required by SECTION 8.2(b).
(oooo) "SELLER CERTIFICATE OF SECRETARY" shall mean the certificate
required by SECTION 8.2(g).
(pppp) "SELLER PARENT" shall have the meaning set forth in the preamble.
(qqqq) "SELLER'S RETAINED ENVIRONMENTAL LIABILITIES" means any penalty,
fine or other Losses with respect to: (i) the presence before the Control Date
of any Hazardous Materials in the soil, groundwater, surface water, air or
building materials of any Facility, or known to be migrating to a Facility as of
the Control Date ("PRE-EXISTING CONTAMINATION"); (ii) the migration at any time
prior to or after the Control Date of Pre-Existing Contamination to any other
real property, or the
-9-
soil, groundwater, surface water, air or building materials thereof; (iii) the
exposure of any Person to Pre-Existing Contamination or to Hazardous Materials
in the course of or as a consequence of any activities of the Business, without
regard to whether any health effect of the exposure has been manifested as of
the Control Date; (iv) the violation of any Environmental Laws by the Seller or
its agents, employees, predecessors in interest, contractors, invitees or
licensees prior to the Control Date or in connection with the operation of the
Business prior to the Control Date; or (v) any actions or proceedings brought or
threatened by any third party with respect to any of the foregoing.
(rrrr) "SIGNING DATE" shall have the meaning set forth in the preamble.
(ssss) "SOFTWARE" means any and all computer software and code, including
assemblers, applets, compilers, source code, object code, data (including image
and sound data), design tools and user interfaces, in any form or format,
however fixed. Software shall include any source code listings and documentation
Seller may have in its possession.
(tttt) "TANGIBLE ASSETS" means the tangible assets owned by Seller or
FairPoint Solutions Capital, LLC: (i) the possession and/or title of which is
given to Buyer in connection with the Closing; (ii) that are located at the
Facilities; (iii) that are in the possession, custody or control of the
Continuing Employees and primarily used in or necessary to the operation of the
Business; or (iv) that are primarily used in or necessary to the operation of
the Business, which, for avoidance of doubt, are identified on
SCHEDULE 1.1(tttt).
(uuuu) "TAX" or, collectively, "TAXES", means any and all taxes,
assessments and other governmental charges, duties, impositions and liabilities
imposed by any governmental entity, including taxes based upon or measured by
gross receipts, income, profits, sales, use and occupation, and value added, ad
valorem, transfer, franchise, withholding, payroll, recapture, employment,
excise and property taxes, together with all interest, penalties and additions
imposed with respect to such amounts and any obligations under any agreements or
arrangements with any other person with respect to such amounts and including
any Liability for taxes of a predecessor entity.
(vvvv) "TECHNOLOGY" means all information related to, constituting or
disclosing, and all tangible copies and embodiments in any media of, technology,
including all know-how, show-how, techniques, trade secrets, inventions (whether
or not patented or patentable), algorithms, routines, Software, files,
databases, works of authorship or processes.
(wwww) "TERMINATION DATE" shall have the meaning set forth in
SECTION 9.1.
(xxxx) "THIRD PARTY TECHNOLOGY" means any Technology of a third party or
in the public domain, including open source, public source or freeware
Technology or any modification or derivative thereof, including any version of
any Software licensed pursuant to any general public license or limited general
public license that was used in, incorporated into, integrated or bundled with
any Technology that is or was, used in the Business, or incorporated in or used
in the development or compilation of any product which are listed in
SCHEDULE 1.1(xxxx).
-10-
(yyyy) "TRANSFERRED CONTRACTS" means (i) all Contracts with Customers
(other than the Non-Transferred Contracts) and (ii) those Contracts identified
on SCHEDULE 1.1(yyyy).
(zzzz) "TRANSFER TAXES" shall have the meaning set forth in SECTION 3.4.
(aaaaa) "TRANSFERRED TECHNOLOGY" means all Technology owned or
transferable by Seller necessary to the operation of, or primarily related to,
the Acquired Assets, including the Technology constituting the World Wide Web
content, and such other Technology necessary to the operation of, or primarily
related to, the Business, which Transferred Technology is identified on
SCHEDULE 1.1(aaaaa). To the extent that any Software constitutes Transferred
Technology under this SECTION 1.1(aaaaa), all versions and releases of such
Software and Software from which such Software was derived that are in Seller's
possession, in both source and object code form, shall be included as
Transferred Technology.
(bbbbb) "TRANSITIONAL LICENSED TRADEMARKS" shall have the meaning set
forth in SECTION 4.3.
(ccccc) "TRANSITIONAL SERVICES AGREEMENT" shall have the meaning set forth
in Recital B.
(ddddd) "TRANSITION TRADEMARK LICENSE" shall have the meaning set forth in
SECTION 4.3.
1.2 CONSTRUCTION.
(a) For purposes of this Agreement, whenever the context requires: the
singular number will include the plural, and vice versa; the masculine gender
will include the feminine and neuter genders; the feminine gender will include
the masculine and neuter genders; and the neuter gender will include the
masculine and feminine genders.
(b) Any rule of construction to the effect that ambiguities are to be
resolved against the drafting party will not be applied in the construction or
interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and "including" and
variations thereof will not be deemed to be terms of limitation, but rather will
be deemed to be followed by the words "without limitation."
(d) Except as otherwise indicated, all references in this Agreement to
"Articles," "Schedules," "Sections" and "Exhibits" are intended to refer to
Articles, Schedules, Sections and Exhibits to this Agreement.
(e) The table of contents and headings in this Agreement are for
convenience of reference only, will not be deemed to be a part of this
Agreement, and will not be referred to in connection with the construction or
interpretation of this Agreement.
-11-
ARTICLE 2
TRANSFERS AND ASSIGNMENTS
2.1 TRANSFER OF ASSETS. Subject to the terms and conditions set forth in
this Agreement, at the Closing, Seller will sell, convey, transfer and assign to
Buyer, or Buyer's designee, and Buyer shall acquire from Seller, all right,
title and interest in and to the following (the "ACQUIRED ASSETS"), free and
clear of any and all Liens, except for Permitted Liens:
(a) the Tangible Assets;
(b) all rights of Seller under the Transferred Contracts;
(c) all accounts receivable of Seller related to the Business as of
October 31, 2001, other than accounts receivable of Seller constituting carrier
access ▇▇▇▇▇▇▇▇ prior to the Control Date and accounts receivable of Seller
relating to inactive accounts prior to the Control Date;
(d) the Transferred Technology;
(e) all Inventory;
(f) the Books and Records;
(g) the Facilities;
(h) all files, notes, and records of any nature in Seller's possession
or control, whether written or electronically stored, relating to product
warranty and support obligations for the products sold or services rendered by
Seller and related to the Acquired Assets;
(i) all blueprints, schematics, prototypes, drawings, computer
software and the like, including all media and other embodiments of or
containing the Licensed Technology;
(j) all Customer Information;
(k) all goodwill associated with the foregoing to the extent such may
be transferred to Buyer; and
(l) all rights to recover past, present and future damages for the
breach, infringement or misappropriation, as the case may be, of any of the
foregoing as they relate to the Acquired Assets.
2.2 EXCLUDED ASSETS. Notwithstanding anything contained in SECTION 2.1 to
the contrary, Buyer expressly understands and agrees that the following assets
(the "EXCLUDED ASSETS") shall not be considered or deemed an Acquired Asset:
-12-
(a) the Non-Transferred Contracts;
(b) Seller's rights to the "FairPoint" brand;
(c) all Technology, other than the Transferred Technology;
(d) accounts receivable of Seller constituting carrier access ▇▇▇▇▇▇▇▇
prior to the Control Date and accounts receivable of Seller relating to inactive
accounts prior to the Control Date;
(e) accounts receivable of Seller consisting of carrier access
▇▇▇▇▇▇▇▇ revenue earned by Seller prior to the Control Date; and
(f) all other assets not specifically described in SECTION 2.1.
2.3 DELIVERY OF ACQUIRED ASSETS. At the Closing, Seller shall, at Seller's
sole cost and expense, in the manner and form, and to the locations, specified
by Buyer, deliver to Buyer or other entity designated by Buyer, possession of
(to the extent not previously delivered) and title to all of the Acquired
Assets, or in the case of intangible assets, such instruments as are necessary
or appropriate to document and to transfer title to such assets from Seller to
Buyer in accordance with SECTION 2.4.
2.4 ASSIGNMENTS. Without limiting the foregoing, at the Closing, Seller
shall duly execute and deliver to Buyer (a) a General Assignment and ▇▇▇▇ of
Sale in substantially the form of EXHIBIT H (the "GENERAL ASSIGNMENT"), (b) such
other good and sufficient instruments of conveyance, assignment and transfer, in
form and substance reasonably acceptable to Buyer's counsel and Seller's
counsel, as shall be necessary or appropriate to vest in Buyer good and valid
title in and to the Acquired Assets and (c) the Lease Assignment (the General
Assignment and the other instruments referred to in clauses (a) through (c) of
this SECTION 2.4 being collectively referred to herein as the "COLLATERAL
AGREEMENTS").
2.5 TRANSFERRED CONTRACTS.
(a) At the Closing: (i) Seller shall deliver to Buyer all of the
Transferred Contracts; and (ii) for each Transferred Contract identified on
SCHEDULE 2.5(a) (the "CONSENT REQUIRED CONTRACTS"), Seller shall deliver to
Buyer a written agreement in a form reasonably satisfactory to Buyer and Seller,
signed by the party or parties (other than Seller) to such Consent Required
Contract, pursuant to which such party or parties thereto consent to the
transfer and assignment of such Consent Required Contract to Buyer (each, a
"CONSENT").
(b) Notwithstanding anything in SECTION 2.5(a) to the contrary, if any
Consent for a Consent Required Contract shall not have been obtained by the
Closing, such Consent Required Contract shall not be treated as a Transferred
Contract (each such Contract, a "NON-TRANSFERRED
-13-
CONTRACT") and the rights of Seller under such Non-Transferred Contracts shall
be deemed an Excluded Asset.
(c) With respect to each Non-Transferred Contract (i) if Buyer
requests, Seller shall continue to use commercially reasonable efforts for a
period not to exceed six (6) months following the Closing Date, to obtain such
Consent, and (ii) Seller and Buyer agree to cooperate with each other in any
reasonable and lawful arrangement designed to provide to Buyer the benefits of
use of such Non-Transferred Contract, for a period not to exceed the earlier of
the termination of such Non-Transferred Contract or six (6) months from the
Closing Date, of any right or benefit of Seller arising thereunder, including
the enforcement for the benefit of Buyer of any and all rights of Seller against
a third party thereunder and the payment to Buyer of all amounts (the "FEES")
received by Seller after the Closing Date under such Non-Transferred Contract
attributable to Buyer's performance or discharge of Seller's obligations
thereunder, in accordance with SECTION 7.2.
(d) In the event that Seller, after the Signing Date and before the
Control Date, amends the terms of any Transferred Contract or Non-Transferred
Contract relating to Fees due to Seller under such Contract, the amount paid to
Buyer by Seller under SECTION 2.5(c) shall equal the greater of (i) the Fee in
effect prior to such amendment and (ii) the amended Fee.
(e) The relationship, if any, between the parties established by this
SECTION 2.5 is that of an independent contractor, and nothing in this
SECTION 2.5 shall be construed to create a relationship of agency or partnership
between the parties or to create any obligation to or provide any benefit for
any other Person.
(f) Upon receipt by Buyer of any such Consent after the Closing,
Seller's obligations under the Non-Transferred Contract shall be deemed an
Assumed Liability under this Agreement, effective as of the date such Consent is
delivered to Buyer; PROVIDED that the obligations of Seller under such
Non-Transferred Contract have not been adversely modified or amended since the
Signing Date.
2.6 FURTHER ASSURANCES; POST-CLOSING COOPERATION.
(a) At any time or from time to time after the Closing, at Buyer's
reasonable request and without further consideration, Seller shall: (i) execute
and deliver to Buyer such other instruments of sale, transfer, conveyance,
assignment and confirmation; (ii) provide such materials and information; and
(iii) take such other commercially reasonable actions as Buyer may deem
necessary or desirable in order to more effectively record, grant, transfer,
convey or assign to Buyer, or its successors and assigns, or confirm Buyer's
title to, all of the Acquired Assets, and, to the fullest extent permitted by
law, to put Buyer in actual possession and operating control of the Acquired
Assets and assist Buyer in exercising all rights with respect thereto, and
otherwise fulfill Seller's obligations under this Agreement and the Collateral
Agreements.
(b) Effective as of the Closing, Seller hereby constitutes and
appoints Buyer the true and lawful attorney of Seller, with full power of
substitution, in the name of Seller or Buyer, but
-14-
on behalf of and for the benefit of Buyer, only as necessary and proper to
demand and receive from time to time any accounts receivable of Seller
constituting an Acquired Asset and other intangibles of that nature and to make
endorsements and give receipts and releases for and in respect of the same and
any part thereof. Seller hereby acknowledges that the appointment hereby made
and the powers hereby granted are coupled with an interest and are not and shall
not be revocable by Seller in any manner or for any reason.
(c) Following the Closing, Seller will afford Buyer, its counsel and
its accountants, at Buyer's expense, during normal business hours, reasonable
access to the books, records and other data relating to the Business in Seller's
possession with respect to periods prior to the Closing and the right to make
copies and extracts therefrom.
2.7 ASSUMED LIABILITIES. Unless otherwise specifically provided for in the
Transitional Services Agreement or SECTION 7.19, as of the Closing (or if the
Closing does not occur, as of the Control Date and for a period ending upon the
termination of Buyer's rights set forth in SECTIONS 7.2(a) and 7.2(b)), upon the
terms and subject to the conditions set forth in this Agreement, Buyer, or
Buyer's designee, hereby agrees to assume the obligations of Seller related to
(a) the Transferred Contracts (with respect to obligations arising in periods on
or after the Control Date only), (b) the ownership of the Acquired Assets and
operation of the Business by Seller on or after the Control Date (other than
those obligations arising from a breach of Seller's obligations under
SECTION 7.2(a), 7.2(b), 7.2(g) or 7.3) and (c) any written warranty obligation
of Seller with respect to the ownership and operation of the Acquired Assets by
Seller entered into on or after the Control Date (other than those obligations
arising from a breach of Seller's obligations under SECTION 7.2(a) or 7.3)
(collectively, the "ASSUMED LIABILITIES").
2.8 EXCLUDED LIABILITIES. Except for the Assumed Liabilities specifically
set forth in SECTION 2.7 and, except as provided in SECTION 7.17, 7.19 or the
Transitional Services Agreement, Buyer is not assuming, and the Assumed
Liabilities expressly exclude, any debt, Liability, duty or obligation, whether
known or unknown, fixed or contingent, of Seller, including any Benefits
Liabilities (the "EXCLUDED LIABILITIES"). Without limiting the generality of the
foregoing, all liabilities, including any liabilities for Taxes, arising from or
related to: (a) Seller's operations, whenever arising or incurred, and Seller's
ownership of the Acquired Assets and operation of the Business before the
Control Date, and if the Closing does not occur, after the termination of
Buyer's rights set forth in SECTIONS 7.2(a) and 7.2(b); (b) Seller's termination
of any Contract relating to the Business before the Control Date; (c) any of
Seller's agents, consultants, independent contractors, employees, whenever
arising, in each case including workers' compensation, severance, salary,
bonuses or under any Employee Plan, whether or not any such employees shall
accept employment with Buyer in connection with the transactions contemplated
hereby; (d) any implied or explicit warranty obligations of Seller with respect
to the ownership of the Acquired Assets and the operation of the Business
entered into prior to the Control Date, and if the Closing does not occur, after
the termination of Buyer's rights set forth in SECTIONS 7.2(a) and 7.2(b); and
(e) Seller's Retained Environmental Liabilities, shall be Excluded Liabilities
and shall remain the responsibility of Seller.
-15-
ARTICLE 3
CLOSING AND PURCHASE PRICE
3.1 CLOSING. Unless this Agreement shall have been terminated pursuant to
ARTICLE 10, the closing of the transactions contemplated by this Agreement (the
"CLOSING") will take place at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇,
Professional Corporation, in Palo Alto, California commencing at 10:00 a.m.,
local time, two (2) business days following the satisfaction or written waiver
of the conditions to the Closing set forth in ARTICLE 8 hereof (other than those
conditions which by their terms are not to be satisfied until the Closing), or
on such other date as the parties may mutually determine (the "CLOSING DATE").
3.2 PURCHASE PRICE.
(a) On the Signing Date, Buyer will deliver the following amounts (the
"PURCHASE PRICE") to an escrow account maintained by the Escrow Agent by wire
transfer of immediately available funds according to instructions provided by
the Escrow Agent to Buyer by the Signing Date (a) $2,866,000, which portion of
the Purchase Price (subject to adjustment pursuant to SECTION 3.2(b)) shall be
delivered to Seller by the Escrow Agent at the Closing in accordance with the
Escrow Agreement, and (b) $1,000,000 (the "ESCROW AMOUNT"), which Escrow Amount
(in whole, or in part or if any then remains) will be delivered to Seller by the
Escrow Agent in accordance with the Escrow Agreement.
(b) The Purchase Price will be adjusted as follows (the "PURCHASE
PRICE ADJUSTMENT"): (i) to the extent that the product obtained by multiplying
(A) the current (i.e. less than 35 days from the date of invoice, and not
including accounts receivable for inactive accounts) accounts receivable of
Seller related to the Business (other than carrier access ▇▇▇▇▇▇▇▇) as of
October 31, 2001 by (B) 78% is less than $1,000,000, the Purchase Price will be
reduced by such difference; and (ii) to the extent that the product obtained by
multiplying (1) the current (i.e. less than 35 days from the date of invoice,
and not including accounts receivable for inactive accounts) accounts receivable
of Seller related to the Business (other than carrier access ▇▇▇▇▇▇▇▇) as of
October 31, 2001 by (2) 78%, is greater than $1,000,000, the Purchase Price will
be increased by such difference. By no later than the earlier of the Closing
Date and November 15, 2001, Seller will deliver a certificate, certified by the
Chief Financial Officer of Seller, setting forth in detail the Basis for and the
calculations described in this SECTION 3.2(b).
(c) Subject to SECTION 3.2(d), (i) in the event of a Purchase Price
Adjustment pursuant to SECTION 3.2(b)(i), Buyer and Seller shall instruct the
Escrow Agent in writing, in accordance with the Escrow Agreement, to promptly
disburse the Purchase Price Adjustment to Buyer, and (ii) in the event of a
Purchase Price Adjustment pursuant to SECTION 3.2(b)(ii), Buyer shall promptly
deliver to the Escrow Agent, in accordance with the Escrow Agreement, the
Purchase Price Adjustment, which amount shall be deemed part of the "Signing
Escrow Amount" as defined in the Escrow Agreement.
-16-
(d) Buyer and Seller shall cooperate in good faith to resolve any
disputes between them arising under this SECTION 3.2. In the event that Buyer
and Seller cannot resolve any such dispute, the parties will follow the dispute
resolution procedures set forth in SECTION 3.3(b) to resolve any such dispute.
3.3 ALLOCATION OF PURCHASE PRICE.
(a) Promptly following the Closing, Buyer and Seller shall agree to
jointly allocate the Purchase Price (and all other capitalized costs) among the
Acquired Assets pursuant to Section 1060 of the Code (the "ALLOCATION"). Buyer
and Seller agree to negotiate in good faith in order to determine the
Allocation. If Buyer and Seller are unable to agree on the Allocation, the
dispute shall be resolved in accordance with the procedures set forth in
SECTION 3.3(b). The Allocation shall be conclusive and binding upon Buyer and
Seller for all purposes, and the parties agree that all Tax Returns and reports
(including IRS Form 8594) and all financial statements shall be prepared in a
manner consistent with (and the parties shall not otherwise file a tax return
position inconsistent with) the Allocation unless required by the IRS or any
other applicable taxing authority.
(b) If Buyer and Seller are unable to resolve any dispute referred to
in SECTION 3.3(a) above, Buyer and Seller shall each submit the name of a "big
five" independent accounting firm which does not at the time provide, and has
not in the prior two (2) years provided, services to either Buyer or Seller or
any Affiliate of Buyer or Seller, and the firm shall be randomly selected among
the other "big five" firms having an office in Seattle,
Washington. Each of the
parties to this Agreement shall, and shall cause their respective Affiliates and
representatives to, provide full cooperation to such independent accounting firm
(the "INDEPENDENT ACCOUNTING FIRM"). The Independent Accounting Firm shall
(i) act in its capacity as an expert and not as an arbitrator, (ii) review only
those matters to which there is a dispute between the parties and (iii) be
instructed to reach its conclusions regarding any such dispute within 30 days
after its appointment and provide a written explanation of its decision. In the
event that Seller and Buyer submit any dispute to arbitration, each such party
may submit a "position paper" to the Independent Accounting Firm setting forth
the position of such party with respect to such dispute, to be considered by
such Independent Accounting Firm as it deems fit. The determination of the
Independent Accounting Firm shall be final and binding on the parties and shall
be deemed a final arbitration award that is enforceable pursuant to all terms of
the Federal Arbitration Act, 9 U.S.C. Sec. 1 et seq. Any expenses relating to
the engagement of the Independent Accounting Firm shall be shared equally by
Seller and Buyer.
3.4 TRANSFER TAXES. All sales, use, value-added, gross receipts, excise,
registration, stamp, duty, transfer and other similar taxes and governmental
fees ("TRANSFER TAXES") imposed or levied by reason of, in connection with or
attributable to this Agreement and the transactions contemplated hereby shall be
shared equally by Seller and Buyer. The parties shall cooperate with each other
to the extent reasonably requested and legally permitted to minimize any
Transfer Taxes. Buyer and Seller shall agree no later than five (5) days prior
to the Closing Date on the amount of any Transfer Taxes which shall be owed as a
result of this Agreement and the transactions
-17-
contemplated hereby. Buyer shall deliver to Seller at the Closing 50% of the
Transfer Taxes so determined.
3.5 CLOSING DATE DELIVERIES OF SELLER. At the Closing, Seller shall
deliver, or cause to be delivered, to Buyer:
(a) the Acquired Assets, including, (i) with respect to the
Transferred Contracts and Non-Transferred Contracts, a complete, accurate and
legible copy of each such Contract (including all amendments and supplements
thereto), and (ii) with respect to the Transferred Contracts that are Consent
Required Contracts, the Consents;
(b) duly executed Related Agreements to which Seller is a party;
(c) such executed deeds, third party consents, regulatory waivers and
approvals, bills of sale, assignments or other instruments of transfer and
assignment, and releases as are necessary to consummate the sale and transfer of
the Acquired Assets to Buyer contemplated by this Agreement such that Buyer has
all right, title and interest in the Acquired Assets, all in form and substance
reasonably satisfactory to Buyer, Seller and their respective counsel;
(d) the Seller Certificate of Secretary;
(e) the Seller Certificate of Officer; and
(f) evidence reasonably satisfactory to Buyer of the transfer to Buyer
of the Acquired Assets.
3.6 CLOSING DATE DELIVERIES OF BUYER. At the Closing (or in the case of
the Purchase Price, in accordance with the Escrow Agreement), Buyer shall
deliver, or caused to be delivered, to Seller the following:
(a) the Purchase Price (as adjusted pursuant to SECTION 3.2(b)), less
the Escrow Amount;
(b) the Buyer Certificate of Officer;
(c) the Buyer Certificate of Secretary;
(d) Buyer's portion of the Transfer Taxes determined in accordance
with Section 3.4;
(e) the duly executed Related Agreements to which Buyer is a party;
and
(f) such executed assignment and assumption instruments as are
reasonably necessary to consummate the assumption of the Assumed Liabilities
contemplated by this Agreement, all in form and substance reasonably
satisfactory to Seller and its counsel.
-18-
ARTICLE 4
LICENSE GRANTS
4.1 LICENSE OF LICENSED TECHNOLOGY. Effective as of the Closing, to the
extent permitted by such Licensed Technology, Seller hereby grants to Buyer and
its subsidiaries a non-exclusive, royalty-free, fully-paid, world-wide,
perpetual, irrevocable, non-terminable, transferable, with rights to sublicense,
right and license to use, disclose, copy, distribute, make, have made, make
derivative works from, sell, and otherwise fully exploit the Licensed Technology
and Transferred Technology pursuant to the terms and conditions of this
Agreement in any manner and without limitation.
4.2 BANKRUPTCY. All licenses granted to Buyer under or pursuant to this
Agreement are, and shall otherwise be deemed to be, for purposes of
Section 365(n) of the United States Bankruptcy Code, licenses to "INTELLECTUAL
PROPERTY RIGHTS" as defined thereunder. Notwithstanding any provision contained
herein to the contrary, if Seller is under any proceeding under the Bankruptcy
Code and the trustee in bankruptcy of Seller, or Seller, as a debtor in
possession, rightfully elects to reject the licenses granted to Buyer under this
Agreement, Buyer may, pursuant to 11 U.S.C. Section 365(n)(1) and (2), retain
any and all of Buyer's rights under such licenses, to the maximum extent
permitted by law, subject to the terms of this Agreement.
4.3 TRANSITION TRADEMARK LICENSE. Seller hereby grants to Buyer, effective
as of the Closing and ending on the date 60 days following the Closing, a
non-transferable, non-exclusive, royalty free transitional right and license
(the "TRANSITION TRADEMARK LICENSE"), in the Restricted Territory, to use the
"FairPoint" name, logo, trademark and/or service ▇▇▇▇ (the "TRANSITIONAL
LICENSED TRADEMARKS") in connection with the operation of Seller and related to
the Business solely as follows:
(a) to conduct and operate the Business in the manner conducted and
operated by Seller prior to the Closing; and
(b) to use the Transitional Licensed Trademarks on marketing and
related materials associated with the products or services of Seller existing
prior to the Closing.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as specifically disclosed in the disclosure schedule delivered by
Seller to Buyer which references the appropriate Section and paragraph numbers
(the "DISCLOSURE SCHEDULE"), Seller hereby represents and warrants to Buyer as
follows:
5.1 ORGANIZATION OF SELLER. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Seller has all requisite power and authority to own, operate and use the
Acquired Assets and conduct the Business as currently conducted.
-19-
Seller is duly qualified or licensed to do business and in good standing as a
foreign corporation in each jurisdiction in which it conducts the Business.
Seller has delivered a true and correct copy of its certificate of incorporation
and bylaws, each as amended to date and in full force and effect on the date
hereof, to Buyer. The operations of Seller relating to the Business have not now
and have never been conducted by Seller under any other name. The Books and
Records comprise all material papers and records (in paper or electronic format)
in Seller's care, custody, or control relating to the operation of the Business.
5.2 AUTHORITY. Seller has all requisite power and authority to enter into,
execute and deliver this Agreement and the Related Agreements to which it is a
party, to perform its obligations hereunder and thereunder, and to consummate
the transactions contemplated hereby and thereby. The execution and delivery of
this Agreement and the Related Agreements to which Seller is a party, the
performance of its obligations under this Agreement and the Related Agreements,
and the consummation of the transactions contemplated hereby and thereby have
been duly authorized by all necessary corporate action on the part of Seller,
and no further action is required on the part of Seller or its stockholder to
authorize this Agreement or the Related Agreements to which it is a party or the
transactions contemplated hereby and thereby. This Agreement and the Related
Agreements to which Seller is a party has been duly executed and delivered by
Seller and constitute the legal, valid and binding obligations of Seller,
enforceable against Seller in accordance with their respective terms, except as
such enforceability may be subject to the laws of general application relating
to bankruptcy, insolvency, and the relief of debtors and rules of law governing
specific performance, injunctive relief, or other equitable remedies.
5.3 NO CONFLICT.
(a) The execution and delivery by Seller of this Agreement and the
Related Agreements, and the consummation of the transactions contemplated hereby
and thereby, will not conflict with or result in any violation of, or default
under (with or without notice or lapse of time, or both), or give rise to a
right of termination, cancellation, modification or acceleration of any
obligation or loss of any benefit under (any such event, a "CONFLICT") (i) any
provision of the certificate of incorporation or bylaws of Seller, (ii) any
mortgage, indenture, lease, Contract or other agreement or instrument, permit,
concession, franchise or license to which Seller or any of its properties or
assets (including intangible assets) is subject, or (iii) any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to Seller or any
of its properties or assets (tangible and intangible).
(b) The execution and delivery of this Agreement by Seller and any
Related Agreement to which Seller is a party do not, and the consummation of the
transactions contemplated hereby and thereby, will not, require any notice under
any agreement, Contract, lease, license, instrument or other arrangement to
which Seller is a party or by which Seller is bound or to which any of the
Acquired Assets is subject (or result in the imposition of any Lien upon any of
the Acquired Assets).
-20-
5.4 TRANSFERRED CONTRACTS. The Transferred Contracts, Non-Transferred
Contracts and the Consent Required Contracts are all of the Contracts between
Seller and any third party related to, or necessary for, the operation of the
Business. True and complete copies of all Transferred Contracts, Non-Transferred
Contracts and Consent Required Contracts have been delivered to Buyer. Each
Transferred Contract, Non-Transferred Contract and Consent Required Contract is
in full force and effect, is valid and effective in accordance with its terms,
and Seller is not in default under any such Contract, nor, to Seller's
knowledge, is any party obligated to Seller pursuant to any such Contract in
default. Seller has not breached, violated or defaulted under, nor received
notice that Seller has breached, violated or defaulted under, any of the terms
or conditions of any Transferred Contract, Non-Transferred Contract or Consent
Required Contract. Seller has obtained, or will obtain prior to the Closing, all
necessary Consents for each Consent Required Contract.
5.5 CONSENTS. No consent, waiver, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity or any third
party, including a party to any agreement with Seller (so as not to trigger any
Conflict), is required by or with respect to Seller in connection with the
execution and delivery of this Agreement or the Related Agreements or the
consummation of the transactions contemplated hereby and thereby.
5.6 NO LIQUIDATION, INSOLVENCY, WINDING-UP.
(a) No order has been made or petition presented, or resolution passed
for the winding-up or liquidation of Seller and there is not outstanding:
(i) any petition or order for the winding-up of Seller;
(ii) any appointment of a receiver over the whole or part of the
assets of Seller;
(iii) any petition or order for administration of Seller under any
federal or state bankruptcy, insolvency or similar law;
(iv) any voluntary arrangement between Seller and any of its
creditors under any federal or state bankruptcy, insolvency or similar law;
(v) any distress or execution or other process levied in respect
of Seller which remains undischarged; nor
(vi) any unfulfilled or unsatisfied judgment or court order or
federal, state or local regulatory order against Seller relating to the Business
or the Acquired Assets.
(b) To Seller's knowledge, there are no circumstances which would
entitle any Person to present a petition for the winding-up or administration of
Seller or to appoint a receiver over the whole or any part of the undertaking or
assets of Seller.
-21-
(c) Seller is not deemed unable to pay its debts within the meaning of
applicable law.
(d) The operations of Seller have not been terminated.
5.7 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement (not to
compete or otherwise), commitment, judgment, injunction, order or decree to
which Seller is a party relating to the Business or otherwise binding upon
Seller or the Business which has or may have the effect of prohibiting or
impairing the transactions contemplated by this Agreement, any business practice
of the Business, any acquisition of property (tangible or intangible) relating
to the Business or the conduct of the Business or impairing the Acquired Assets.
Seller has not entered into any agreement under which the operations of the
Business as currently conducted are restricted or which places any restrictions
upon Seller with respect to providing services to, or selling, licensing or
otherwise distributing any of, the Transferred Technology or the Licensed
Technology to or providing services to, Customers or potential customers or any
class of customers, in the states of
Washington or Oregon during any period of
time.
5.8 TITLE TO PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES; CONDITION OF
EQUIPMENT; INVENTORY.
(a) Seller does not own any real property in connection with the
Business, nor has it ever owned any real property in connection with the
Business. SECTION 5.8(a) of the Disclosure Schedule sets forth a list of all
real property currently leased by Seller in connection with the Business, the
name of the lessor, the date of the lease and each amendment thereto and, with
respect to any current lease and the aggregate annual rental and/or other fees
payable under any such lease. Seller has delivered to Buyer true, correct and
complete copies of all agreements listed on SECTION 5.8(a) of the Disclosure
Schedule. Seller currently occupies or has the right to occupy all of the
Facilities and has not subleased, licensed or otherwise granted any occupancy
rights thereunder to any other Person.
(b) Seller has (i) good and valid title to all of the Acquired Assets
and (ii) the power to sell the Acquired Assets free and clear of any Liens
(other than the Permitted Liens).
(c) The Tangible Assets comprise all of the tangible assets owned or
leased by Seller for use in the Business (other than the Excluded Assets), and
such Tangible Assets are, in all material respects (i) adequate for the conduct
of the Business as currently conducted by Seller, and (ii) in good operating
condition, regularly and properly maintained, subject to normal wear and tear.
(d) Upon the consummation of the transactions contemplated by this
Agreement, at the Closing, Buyer will acquire good and marketable title to the
Acquired Assets, free and clear of all Liens (other than Permitted Liens and
Liens created by Buyer).
-22-
(e) Except as may be provided by any applicable federal or state
statute, law or regulation, (i) Seller has sole and exclusive ownership, free
and clear of any Lien (other than a Permitted Lien), of the Customer
Information, and (ii) no Person other than Seller possesses any claims or rights
with respect to use of the Customer Information.
(f) The Inventory is merchantable and fit for the purpose for which it
was procured, is not obsolete, damaged, or defective, subject only to the
reserve for inventory writedown set forth in the Financial Statements, and is
sufficient to satisfy all orders by Customers received as of the Signing Date.
5.9 CUSTOMERS AND SALES. SECTION 5.9 of the Disclosure Schedule contains a
correct and complete list of the Customer Information, a schedule of all
services provided to each Customer (i.e. billed transactions) and charges
therefor and all revenues with respect thereto since February 1, 2001. True and
correct copies of Contracts with such Customers have been delivered to Buyer.
SCHEDULE 1.1(llll) sets forth a true and complete list of all Sales Orders which
Seller is obligated to fulfill as of the Signing Date. No Customer has executed
a Contract with Seller in a form which contains substantive differences from a
form set forth on SECTION 5.9 of the Disclosure Schedule.
5.10 PERMITS. Seller owns or validly holds all material licenses,
franchises, permits, approvals, authorizations, exemptions, classifications,
registrations, and similar documents or instruments (collectively, "PERMITS")
that are required in connection with the conduct of the Business as now being
conducted. SECTION 5.10 of the Disclosure Schedule sets forth a true, correct
and complete list of all Permits required in connection with the conduct of the
Business as now being conducted. All such Permits held by Seller are valid and
in full force and effect. No proceeding is pending or, to Seller's knowledge,
threatened which could result in the revocation or termination of any such
Permits, and Seller knows of no such Basis on which any such proceeding could be
commenced. The execution and delivery by Seller of this Agreement and each of
the Related Agreements, the performance by Seller of its obligations hereunder
and thereunder, and the consummation of the transactions contemplated hereby and
thereby, will not affect the continued validity or effectiveness, or alter the
terms and conditions of any such Permits.
5.11 TECHNOLOGY.
(a) TRANSFERRED TECHNOLOGY. SCHEDULE 1.1(aaaaa), listing or describing
the Transferred Technology, is complete and accurate in all material respects.
(b) EXCLUSIVE OWNERSHIP. Seller owns exclusively, and has good title
to, all Transferred Technology, and no other Person has any other rights
thereto.
(c) NO CONSENTS. No licenses or other consents are required from any
third party to permit Buyer to fully exploit the Transferred Technology, and
exercise the rights granted to it with respect thereto.
-23-
(d) PERFECTION OF TRANSFERRED TECHNOLOGY. To the extent that any
Transferred Technology was originally owned or created by or for any third
party, including any predecessor of Seller: (i) Seller has a written agreement
with such third party or parties with respect thereto, pursuant to which Seller
has obtained complete, unencumbered and unrestricted ownership and is the
exclusive owner of, all such Transferred Technology by valid assignment or
otherwise; (ii) the transfers from Seller to Buyer hereunder do not violate such
third party agreements or trigger any penalties or damages provisions in such
third party agreements; (iii) such third parties have not retained and do not
have any rights or licenses with respect to the Transferred Technology; and
(iv) to Seller's knowledge, no Basis exists for such third party to challenge or
object to the transfer of such this Transferred Technology as a result of this
transaction or this Agreement.
(e) PERFECTION OF LICENSED TECHNOLOGY. To the extent that any Licensed
Technology was originally owned or created by or for any third party, including
any predecessor of Seller: (i) Seller has a written agreement with such third
party or parties with respect thereto, pursuant to which Seller, has the right
to grant to Buyer the rights and licenses granted hereunder; (ii) the license
from Seller to Buyer hereunder does not violate such third party agreements or
trigger any penalties or damages provisions in such third party agreements; and
(iii) to Seller's knowledge, no Basis exists for such third party to challenge
or object to the license of such Licensed Technology as a result of this
transaction or this Agreement.
(f) TECHNOLOGY COMPLETENESS. The Transferred Technology and the
Licensed Technology together constitute all of the Technology used in, necessary
to or related to the operation of the Business. Following the Closing, Buyer
will have all of the rights in the Transferred Technology and Licensed
Technology used in, necessary to or related to the operation of the Business.
(g) THIRD PARTY TECHNOLOGY. Other than the Third Party Technology
identified on SECTION 5.11(g) of the Disclosure Schedule, no Technology of any
third party was, or is, used in, incorporated into, integrated or bundled with,
or used in the development or compilation of, any Technology that is or was
Transferred Technology.
(h) NO RESTRICTIONS. Neither the Transferred Technology nor, to
Seller's knowledge, the Licensed Technology is subject to any proceeding or
outstanding decree, order, judgment, agreement or stipulation that restricts in
any material manner the use, transfer or licensing thereof or may affect the
validity, use or enforceability of the Transferred Technology or Licensed
Technology.
(i) NO PAYMENTS. Except as set forth in any Transferred Contract,
Seller is not required to make or accrue any royalty payment to any third party
in connection with the Transferred Technology.
(j) ADVERSE AFFECT. Neither this Agreement nor the transactions
contemplated hereby, including the assignment to Buyer, by operation of law or
otherwise, of any Contract to which Seller is a party, will result in (without
any action by Buyer): (i) Buyer granting to any third
-24-
party any right to or with respect to any Technology owned by, or licensed to,
Buyer; (ii) Buyer being bound by, or subject to, any non-compete or other
restriction on the operation or scope of its businesses; or (iii) Buyer being
obligated to pay any royalties or other amounts to any third party in excess of
those payable by Buyer or Seller prior to the Closing. The consummation of the
transactions contemplated by this Agreement will neither violate nor result in
the breach, modification, cancellation, termination or suspension of Licensed
Technology or the loss of, or any adverse effect on, any ownership of any
Transferred Technology.
(k) NO INFRINGEMENT BY TECHNOLOGY. To Seller's knowledge, neither
(i) the operation of the Business by Seller prior to the Control Date, nor
(ii) the Licensed Technology or the Acquired Assets (including the Transferred
Technology), did, do, or will: (A) infringe or misappropriate the intellectual
property rights of any Person; (B) violate the rights of any Person (including
rights to privacy or publicity); or (C) constitute unfair competition or trade
practices under the laws of the states of
Washington or Oregon. Seller has not
received notice from any Person (nor does Seller have knowledge of any Basis
therefor) claiming that the Business, the Acquired Assets (including the
Transferred Technology) or Licensed Technology (1) infringe or misappropriate
the intellectual property rights of any Person, (2) violate the rights of any
Person or (3) constitute unfair competition or trade practices under the laws of
the states of
Washington or Oregon.
(l) TRADE SECRET PROTECTION. Seller has taken reasonable measures to
maintain the secrecy of Seller's confidential information and trade secrets of
Seller associated with or related to the Acquired Assets (including the
Transferred Technology) and Licensed Technology.
5.12 LITIGATION. There is no action, suit or proceeding of any nature
pending, or, to Seller's knowledge, threatened, against Seller, its properties
or any of its officers or directors, or relating to the Business, the Acquired
Assets or the Continuing Employees, nor, to the knowledge of Seller, is there
any Basis therefor. There is no investigation pending or, to Seller's knowledge,
threatened, against Seller, its properties or any of its officers or directors,
relating to the Business, the Acquired Assets or the Continuing Employees (nor,
to Seller's knowledge, is there any Basis therefor) by or before any
Governmental Entity. No Governmental Entity has at any time challenged or
questioned the legal right of Seller to conduct the Business as presently or
previously conducted. There are no judgments, orders, decrees, citations, fines
or penalties heretofore assessed against Seller affecting the Business, the
Acquired Assets or the Continuing Employees under any foreign, federal, state or
local law.
5.13 TAX RETURNS AND AUDITS.
(a) Seller has prepared and filed all returns, estimates, information
statements and reports ("RETURNS") relating to any and all Taxes concerning or
attributable to the Business or the Acquired Assets which it is required to file
and such Returns were true and accurate in all material respects and were
completed in accordance with applicable law when filed.
-25-
(b) To the extent a failure to do so would adversely impact Buyer, the
Acquired Assets, Buyer's use of the Acquired Assets, or the Business, Seller has
paid or withheld all Taxes it is required to pay or withhold.
(c) To the extent a failure to do so would adversely impact Buyer, the
Acquired Assets, Buyer's use of the Acquired Assets, or the Business, Seller has
not been delinquent in the payment of any Tax nor is there any Tax deficiency
outstanding, proposed or assessed against Seller.
(d) To the extent relevant to the Acquired Assets, the Business or
Buyer's use of the Acquired Assets, no audit or other examination of any Return
of Seller is presently in progress, nor has Seller been notified in writing of
any request for such an audit or other examination.
(e) Except as specifically provided for herein, Seller does not have
any liabilities for unpaid Taxes related to the Acquired Assets or the Business
for which Buyer would become liable as a result of the transaction contemplated
herein.
(f) There are (and as of immediately following the Closing there will
be) no Liens on the Acquired Assets of Seller relating to or attributable to
Taxes. Seller has no knowledge of any Basis for the assertion of any claims
which, if adversely determined, would result in a Lien or other encumbrance on
the Acquired Assets or otherwise adversely effect Buyer or the Acquired Assets.
(g) Seller shall be responsible for and pay all Taxes of Seller, its
Affiliates, and the Acquired Assets arising at any time with respect to periods
ending on or prior to the Signing Date, including the portion of real, personal
or other property taxes attributable to such periods.
5.14 POWER OF ATTORNEY. There are no outstanding powers of attorney
executed on behalf of Seller in respect of the Business or the Acquired Assets
except as granted to Buyer hereunder.
5.15 AFFILIATED TRANSACTIONS. No Affiliates of Seller, including any
subsidiaries of Seller, own in whole or in any part any of the Acquired Assets.
5.16 COMPLIANCE WITH LAWS. Seller has complied with, is not in violation
of, and has not received any notices of violation with respect to, any foreign,
federal, state or local statute, law or regulation with respect to the Acquired
Assets or the conduct or operation of the Business, except where such violations
would not have a material adverse effect on the Business or the ability of Buyer
to fully utilize the Acquired Assets.
5.17 WARRANTIES. No service provided by Seller or product sold, leased,
distributed, licensed or delivered by Seller is subject to any guaranty,
warranty, or other indemnity beyond Seller's applicable standard terms and
conditions of sale or lease or provision of services or beyond that implied or
imposed by applicable law.
-26-
5.18 COMPLETE COPIES OF MATERIALS. Seller has delivered true and complete
copies of each existing document that has been requested in writing by Buyer or
its counsel.
5.19 BULK TRANSFER LAWS. Seller represents that there are no current or
past creditors of Seller to whom any law, rule or regulation requires the
delivery of notice or from whom any form of consent is required in conjunction
with undertaking the transactions contemplated by this Agreement.
5.20 EMPLOYEE MATTERS.
(a) SCHEDULE. SECTION 5.20(a) of the Disclosure Schedule contains an
accurate and complete list and summary of each Employee Plan relating to the
Continuing Employees. Seller does not have any plan or commitment to establish
any new Employee Plan, to modify any Employee Plan or to adopt or enter into any
Employee Plan or International Employee Plan.
(b) EFFECT OF TRANSACTION. The execution of this Agreement and the
consummation of the transactions contemplated hereby will not (either alone or
upon the occurrence of any additional or subsequent events) constitute an event
under any Employee Plan, trust or loan that will or may result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any Continuing Employee by Buyer.
(c) EMPLOYMENT MATTERS. Seller: (i) is in compliance in all material
respects with all applicable foreign, federal, state and local laws, rules and
regulations respecting employment, employment practices, terms and conditions of
employment and wages and hours, in each case, with respect to the Continuing
Employees; (ii) has withheld and reported all amounts required by law or by
agreement to be withheld and reported with respect to wages, salaries and other
payments to Continuing Employees; (iii) is not liable for any arrears of wages
or any taxes or any penalty for failure to comply with any of the foregoing; and
(iv) is not liable for any arrears in payment to any trust or other fund
governed by or maintained by or on behalf of any governmental authority, with
respect to unemployment compensation benefits, social security or other benefits
or obligations for Continuing Employees (other than routine payments to be made
in the normal course of business and consistent with past practice), in each
case, for which Buyer could become liable. There are no pending, or to Seller's
knowledge, threatened, or reasonably anticipated claims or actions against
Seller under any worker's compensation policy or long-term disability policy.
(d) LABOR. No work stoppage or labor strike against Seller is pending,
or to Seller's knowledge, threatened or reasonably anticipated. Seller does not
know of any activities or proceedings of any labor union to organize any of its
employees that may affect the Continuing Employees. There are no actions, suits,
claims, labor disputes or grievances pending, or, to Seller's knowledge,
threatened or reasonably anticipated relating to any labor, safety or
discrimination matters involving any Continuing Employee, including charges of
unfair labor practices or discrimination complaints, which, if adversely
determined, would, individually or in the aggregate, result in any material
Liability to Seller. Neither Seller nor any of its subsidiaries has engaged in
-27-
any unfair labor practices within the meaning of the National Labor Relations
Act. Except as set forth in SECTION 5.20(d) of the Disclosure Schedule, Seller
is not presently, nor has it been in the past, a party to, or bound by, any
collective bargaining agreement or union contract with respect to any of its
employees that may affect the Continuing Employees and no collective bargaining
agreement is being negotiated by Seller.
(e) PENSION PLAN. Seller nor any ERISA Affiliate have ever maintained,
established, sponsored, participated in, or contributed to, any Pension Plan
which is subject to Title IV of ERISA or Section 412 of the Code for which Buyer
could become liable.
(f) MULTIEMPLOYER AND MULTIPLE EMPLOYER PLANS. At no time has Seller
or any ERISA Affiliate contributed to or been obligated to contribute to any
Multiemployer Plan for which Buyer could become liable. Neither Seller, nor any
ERISA Affiliate have at any time ever maintained, established, sponsored,
participated in, or contributed to any multiple employer plan, or to any plan
described in Section 413 of the Code for which Buyer could become liable.
(g) NO POST-EMPLOYMENT OBLIGATIONS. Except as set forth on
SECTION 5.20(g) of the Disclosure Schedule, no Employee Plan provides, reflects
or represents any Liability to provide retiree health to any person for any
reason, except as may be required by COBRA or other applicable statute, and
Seller has no obligation to any Continuing Employee (either individually or to
Continuing Employees as a group) to provide any Continuing Employee retiree
health, except to the extent required by COBRA.
(h) INTERNATIONAL EMPLOYEE PLAN. Seller does not now, nor has it ever
had the obligation to, maintain, establish, sponsor, participate in, or
contribute to any International Employee Plan for which Buyer could become
liable.
(i) COMPLETE EMPLOYEE LIST. The employees listed on SECTION 5.20(i) of
the Disclosure Schedule, comprise all of the employees of Seller performing
services on behalf of the Business.
5.21 ENVIRONMENTAL MATTERS.
(a) HAZARDOUS MATERIAL. Seller has at no time: (i) operated any
underground storage tanks at any of the Facilities, or (ii) released any amount
of any substance at any of the Facilities that has been designated by any
Governmental Entity or by applicable federal, state or local law to be
radioactive, toxic, hazardous or otherwise a danger to health or the
environment, including PCBs, asbestos, petroleum, and urea-formaldehyde and all
substances listed as hazardous substances pursuant to the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended, or
defined as a hazardous waste pursuant to the United States Resource Conservation
and Recovery Act of 1976, as amended, and the regulations promulgated pursuant
to said laws (a "HAZARDOUS MATERIAL"). To Seller's knowledge, no Hazardous
Materials are present in, on or under any property, including the land and the
improvements, ground water and surface water
-28-
thereof, that Seller has at any time owned, operated, occupied or leased in
connection with the Business.
(b) PERMITS. Seller currently holds all environmental approvals,
permits, licenses, clearances and consents (the "ENVIRONMENTAL PERMITS")
necessary for the conduct of the Business.
(c) ENVIRONMENTAL LIABILITIES. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending or, to the
knowledge of Seller, threatened concerning any Environmental Permit or Hazardous
Material of Seller relating to the Business. Seller has no knowledge of any fact
or circumstance which could involve Seller in any environmental litigation or
impose upon Seller any environmental Liability relating to the Business.
(d) ENVIRONMENTAL REPORTS. Seller has not used any Hazardous Materials
in the Facilities other than those contained in office and janitorial supplies
used by Seller. Seller has delivered to Buyer or made available for inspection
by Buyer and its agents, representatives and employees all records in Seller's
possession of all environmental assessments of any Facility conducted at the
request of, or otherwise in the possession of Seller. Seller has complied with
all environmental disclosure obligations imposed by applicable law with respect
to this transaction.
5.22 SUFFICIENCY. Except as set forth in SECTION 5.22 of the Disclosure
Schedule, the Acquired Assets, the Excluded Assets and the Licensed Technology
comprise all of the assets, properties and rights of every type and description
(other than real property and the services provided to Buyer under the
Transitional Services Agreement) used or developed by Seller and related to the
Business and which are necessary to the operation of the Business by Buyer
following the Closing in substantially the same manner as currently operated by
Seller.
5.23 INSURANCE. Seller currently maintains, and as of the Closing Date will
maintain, valid insurance policies, which policies provide adequate coverage,
both in terms of scope and amount of coverage, for Seller and the Business and
the operations conducted by the Business. There are no pending material claims
against such insurance by Seller and the Business. In addition, there exist no
material claims under such insurance that have not been properly filed by Seller
and the Business. During the past 24 months, each of Seller and the Business has
not been refused any insurance coverage by any insurer from which Seller and the
Business has sought coverage.
5.24 FINANCIAL STATEMENTS. SECTION 5.24 of the Disclosure Schedule contains
a true, correct and complete copy of Seller's unaudited partial balance sheet
for the Business as of August 31, 2001 (the "BALANCE SHEET"), and the related
unaudited partial statement of income for the eight (8) month period ended
August 31, 2001 (the "INCOME STATEMENT"). The Balance Sheet includes the assets
and liabilities of the Business, which are complete and correct in all material
respects and have been prepared in accordance with GAAP (except for notes that
may be required by GAAP and subject to normal year-end audit adjustments
consistent with past practices). The Income Statement is complete and correct in
all material respects and has been prepared in accordance with GAAP,
consistently applied (except for notes that may be required by GAAP and subject
to normal year-end audit adjustments consistent with past practices). The
Financial Statements present fairly the
-29-
financial condition and operating results of Seller related to the Business as
of August 31, 2001 and for the eight (8) month period then ended.
5.25 NO UNDISCLOSED LIABILITIES. Except as set forth in SECTION 5.25 of
the Disclosure Schedule, neither Seller nor the Business has incurred any
Liability, indebtedness, expense, claim, deficiency, guaranty or endorsement of
any type, whether accrued, absolute, contingent, matured, unmatured or other
(whether or not required to be reflected in financial statements in accordance
with GAAP) relating to the Business (and to Seller's knowledge, there is no
Basis for any present or future action, suit or proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of them or the
Business giving rise to any Liability), which (i) has not been fully accrued or
reserved against in the Balance Sheet, or (ii) has arisen since the date of the
Balance Sheet in the ordinary course of business and consistent with past
practices that does not exceed $10,000 in any single case or $25,000 in the
aggregate.
5.26 ABSENCE OF CHANGES. Since the date of the Balance Sheet and through
the Signing Date, there has not been, occurred or arisen any:
(a) event, condition, change or state of facts of any character that,
individually or in the aggregate, has had or could reasonably be expected to
have a material adverse effect on the business, condition (financial or
otherwise) or results of operations of Seller relating to the Business;
(b) transaction by Seller with respect to the Business except in the
ordinary course of business and consistent with past practices;
(c) capital expenditure or capital commitment by Seller with respect
to the Business, in an amount in excess of $10,000 (in any one case) or $25,000
(in the aggregate);
(d) destruction of, damage to or loss of any material assets, business
or customer of Seller with respect to the Business (individually or in the
aggregate and whether or not covered by insurance);
(e) labor trouble or claim of wrongful discharge or other unlawful
labor practice or action relating to the Business;
(f) change in accounting methods or practices (including any change in
depreciation or amortization policies or rates) of Seller;
(g) revaluation by Seller of any of the assets related to the
Business;
(h) increase (whether in cash, stock or property) in the salary or
other compensation payable or to become payable by Seller to any Continuing
Employee, or (whether in cash, stock or property) the declaration, payment or
commitment or obligation of any kind for the payment by Seller of a bonus or
other additional salary or compensation to any such Continuing Employee;
-30-
(i) any agreement, contract, covenant, instrument, lease, license or
commitment related to the Business or by which Seller, the Business or any
Acquired Assets is bound or any termination, extension, amendment or
modification of the terms of any agreement, contract, covenant, instrument,
lease, license or commitment related to the Business or by which Seller, the
Business or any Acquired Assets is bound;
(j) any agreement with any Person, other than Buyer, providing for the
possible acquisition, transfer or disposition (whether by way of merger,
purchase of capital stock, purchase of assets or otherwise) of the Business;
(k) sale, lease or other disposition of any of the assets or
properties related to the Business, or any creation of any Lien in such assets
or properties other than in the ordinary course of business consistent with past
practice;
(l) waiver or release of any right or claim related to the Business,
including any write-off or other compromise of any account receivable related to
or the Business;
(m) the commencement or notice or, to Seller's knowledge, threat or
Basis therefor of commencement of any lawsuit or, to Seller's knowledge,
proceeding or investigation against Seller, any officer or director of Seller
(by reason of such Person's status as an officer or director of Seller) or their
affairs which relates to the Business;
(n) change in pricing charged by Seller to its Customers;
(o) hiring or firing of any employee performing services for Seller
primarily related to the Business; or
(p) negotiation or agreement by Seller or any officer or employee of
Seller to do any of the things described in the preceding clauses (a) through
(o) (other than negotiations with Buyer and its representatives regarding the
transactions contemplated by this Agreement).
5.27 ACCOUNTS RECEIVABLE.
(a) Seller has made available to Buyer a list of all accounts
receivable of Seller relating to the Business ("ACCOUNTS RECEIVABLE") as of
September 30, 2001 along with a range of days elapsed since invoice.
(b) All Accounts Receivable of Seller arose in the ordinary course of
business, are carried at values determined in accordance with GAAP consistently
applied and, to Seller's knowledge, are collectible except to the extent of
reserves therefor set forth in the Balance Sheet or as set forth on SECTION 5.27
of the Disclosure Schedule. No Person has any Lien on any of such Accounts
Receivable and no request or agreement for deduction or discount has been made
with respect to any of such Accounts Receivable.
-31-
5.28 ADEQUATE RESOURCES. Seller has adequate financial resources to
discharge its obligations set forth in this Agreement and the Related
Agreements.
5.29 BROKERS. There is no investment banker, broker, finder or other
intermediary which has been retained by Seller or is authorized to act on behalf
of Seller or any of its Affiliates who might be entitled to any fee or
commission in connection with the transactions contemplated by this Agreement
for which Buyer could become liable.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
6.1 ADEQUATE RESOURCES. Buyer has adequate financial resources to
discharge its obligations set forth in this Agreement and the Related
Agreements.
6.2 AUTHORITY. Buyer has all requisite power and authority to enter into,
execute and deliver this Agreement and the Related Agreements to which it is a
party and to perform its obligations hereunder and thereunder, and to consummate
the transactions contemplated hereby and thereby. The execution and delivery of
this Agreement, and the Related Agreements to which it is a party, the
performance of its obligations under this Agreement and such Related Agreements,
and the consummation of the transactions contemplated hereby and thereby have
been duly authorized by all necessary corporate action on the part of Buyer, and
no further action is required on the part of Buyer or any of its stockholders to
authorize this Agreement or the Related Agreements to which it is a party or the
transactions contemplated hereby or thereby. This Agreement and the Related
Agreement to which Buyer is a party have been duly executed and delivered by
Buyer and constitute the legal, valid and binding obligations of Buyer,
enforceable in accordance with their respective terms, except as such
enforceability may be subject to the laws of general application relating to
bankruptcy, insolvency, and the relief of debtors and rules of law governing
specific performance, injunctive relief, or other equitable remedies.
6.3 ORGANIZATION OF BUYER. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Buyer is
duly qualified or licensed to do business and in good standing as a foreign
corporation in each jurisdiction in which it would conduct the Business as of
the Control Date.
6.4 CONSENTS. No consent, waiver, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity or any third
party (other than the notice required by the Public Utilities Commission of the
State of Oregon, the waiver of the "slamming" rules required by the Public
Utilities Commission of the State of
Washington and the notice requirement to
the Customers in the States of
Washington and Oregon specified by the ▇▇▇, ▇▇
▇▇▇ 64.1120(e), with respect to interstate services), is required by or with
respect to Buyer in connection with the
-32-
execution and delivery of this Agreement or the Related Agreements or the
consummation of the transactions contemplated hereby and thereby.
6.5 NO CONFLICT.
(a) The execution and delivery by Buyer of this Agreement and the
Related Agreements to which it is a party, and the consummation of the
transactions contemplated hereby and thereby, will not create a Conflict with:
(i) any provision of the certificate of incorporation or bylaws of Buyer;
(ii) any mortgage, indenture, lease, Contract or other agreement or instrument,
permit, concession, franchise or license to which Buyer or any of its properties
or assets (including intangible assets) is subject; or (iii) any judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to Buyer
or any of its properties or assets (tangible and intangible).
(b) The execution and delivery of this Agreement by Buyer and any
Related Agreement to which Buyer is a party do not, and the consummation of the
transactions contemplated hereby and thereby, will not, require any notice under
any agreement, Contract, lease, license, instrument or other arrangement to
which Buyer is a party or by which Buyer is bound.
6.6 BUYER PARENT FINANCIAL STATEMENTS. Buyer has delivered to Seller a
true, correct and complete copy of the unaudited balance sheet as of August 31,
2001 (the "BUYER PARENT BALANCE SHEET"), and the related unaudited statement of
income for the eight (8) month period ended August 31, 2001 of Buyer Parent (the
"BUYER PARENT INCOME STATEMENT"). The Buyer Parent Balance Sheet includes the
assets and liabilities of Buyer Parent, which are complete and correct in all
material respects and have been prepared in accordance with GAAP (except for
notes that may be required by GAAP and subject to normal year-end audit
adjustments consistent with past practices). The Buyer Parent Income Statement
is complete and correct and has been prepared in accordance with GAAP,
consistently applied (except for notes that may be required by GAAP and subject
to normal year-end audit adjustments consistent with past practices). The Buyer
Parent Balance Sheet and Buyer Parent Income Statement present fairly the
financial condition and operating results of Buyer Parent as of August 31, 2001
and for the eight (8) month period then ended. Substantially all of the assets
reflected in the Buyer Parent Balance Sheet are owned by Buyer or its
subsidiaries. Since the Buyer Parent Balance Sheet and through the Signing Date,
there has not been any event, condition, change or state of facts of any
character that, individually or in the aggregate, has had or could be reasonably
expected to have a material adverse effect on the financial condition of Buyer.
6.7 NO LIQUIDATION, INSOLVENCY, WINDING-UP.
(a) No order has been made or petition presented, or resolution passed
for the winding-up or liquidation of Buyer and there is not outstanding:
(i) any petition or order for the winding-up of Buyer;
(ii) any appointment of a receiver over the whole or part of the
assets of Buyer;
-33-
(iii) any petition or order for administration of Buyer under any
federal or state bankruptcy, insolvency or similar law;
(iv) any voluntary arrangement between Buyer and any of its
creditors under any federal or state bankruptcy, insolvency or similar law; nor
(v) any distress or execution or other process levied in respect
of Buyer which remains undischarged.
(b) To Buyer's knowledge, there are no circumstances which would
entitle any Person to present a petition for the winding-up or administration of
Buyer or to appoint a receiver over the whole or any part of the undertaking or
assets of Buyer.
(c) Buyer is not deemed unable to pay its debts within the meaning of
applicable law.
(d) The operations of Buyer have not been terminated.
6.8 LITIGATION. There is no material action, suit or proceeding of any
nature pending, or, to Buyer's knowledge, threatened, against Buyer, its
properties or any of its officers or directors, nor, to the knowledge of Buyer,
is there any Basis therefor. There is no material investigation pending or, to
Buyer's knowledge, threatened, against Buyer, its properties or any of its
officers or directors (nor, to Buyer's knowledge, is there any Basis therefor)
by or before any Governmental Entity. No Governmental Entity has at any time
challenged or questioned the legal right of Buyer to conduct its business as
presently conducted. There are no material judgments, orders, decrees,
citations, fines or penalties heretofore assessed against Buyer affecting its
business under any foreign, federal, state or local law.
6.9 BROKERS. There is no investment banker, broker, finder or other
intermediary which has been retained by Buyer or is authorized to act on behalf
of Buyer or any of its Affiliates (including ▇▇▇▇▇▇▇ & Associates) who might be
entitled to any fee or commission in connection with the transactions
contemplated by this Agreement for which Seller could become liable.
ARTICLE 7
COVENANTS AND AGREEMENTS
7.1 ACCESS. During the period commencing on the Signing Date and
continuing through the Closing Date, Seller, upon reasonable prior notice from
Buyer to Seller, will (a) afford to Buyer and its representatives, at all
reasonable times during normal business hours, full and complete access to
Seller's personnel, professional advisors, properties, contracts, Books and
Records, and other documents and data, (b) furnish Buyer and its representatives
with copies of all such Contracts, Books and Records, and other existing
documents and data as Buyer may reasonably request, and (c) furnish Buyer and
its representatives, at Buyer's expense, with such additional financial
-34-
(including Returns and supporting documentation), operating, and other data and
information as Buyer may reasonably request, in each case under clauses (a)
through (c) above relating to the Business. No information or knowledge obtained
in any investigation pursuant to this SECTION 7.1 shall affect or be deemed to
modify any representation or warranty contained herein or the conditions to the
obligations of the parties hereto to consummate the transactions contemplated
hereby.
7.2 OPERATION OF THE BUSINESS OF SELLER. Between the Control Date and the
Closing Date (if the Control Date occurs prior to the Closing Date), unless
otherwise instructed in writing by Buyer, Seller will:
(a) operate and maintain the Acquired Assets at the sole direction of
Buyer's designated representative, who shall initially be ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, but
who may be changed by written notice delivered to Seller pursuant to
SECTION 11.1;
(b) provide a line item invoice to Buyer within ten (10) days
following the end of every calendar month setting forth in detail the Managed
Revenue, the Costs and the Cost of Goods Sold for such calendar month, which
invoice shall be delivered to the attention of Buyer's controller and (i) if the
Managed Revenue for such calendar month exceeds the sum of the Costs and Cost of
Goods Sold for such calendar month, shall be accompanied by payment for such
excess, or (ii) if the sum of the Costs and Cost of Goods Sold for such calendar
month exceeds the Managed Revenue for such calendar month, Buyer shall make
payment of such excess to Seller within 15 days from the date of such invoice,
subject to SECTION 7.17 (it being understood by the parties that this
SECTION 7.2(b) shall not be effective during the Term, as defined in the
Transitional Services Agreement, of the Transitional Services Agreement);
(c) pay the debts and Taxes of Seller related to the Business when
due;
(d) pay or perform all other obligations of Seller related to the
Business when due;
(e) not modify in any way, the compensation or benefits of any
Continuing Employee;
(f) use commercially reasonable efforts to maintain the relations and
goodwill with the suppliers, Customers, distributors, licensors, licensees,
landlords, trade creditors, agents, and others having business relationships
with Seller relating to the Business, with the goal of preserving unimpaired the
goodwill and ongoing business of Seller and related to the Business as of the
Closing; and
(g) deposit any payments from Customers or other third parties
received by Seller and its Affiliates related to the Acquired Assets or the
operation of the Business (to the extent such payments relate to periods on or
after the Control Date), together with any amounts received by Seller with
respect to carrier access ▇▇▇▇▇▇▇▇ earned after the Control Date (it being
understood for all purposes herein that if the amounts received with respect to
carrier access ▇▇▇▇▇▇▇▇ are earned in part
-35-
before the Control Date and on and after the Control Date, such amounts shall be
prorated based on the number of days in each such period) related to the
Business, into a separate bank account in the name of Seller held at Wachovia
Bank (such payments, and the interest thereon, the "MANAGED REVENUE");
PROVIDED, HOWEVER, that notwithstanding Seller's obligations in SECTION 7.2(a),
Seller shall not have to comply with Buyer's direction if such direction would
violate any applicable law, regulation or order of a Governmental Entity. In
addition, notwithstanding anything contained in this Agreement to the contrary,
any action taken by Seller pursuant to the direction of Buyer in accordance with
SECTION 7.2(a) shall not (i) cause there to be any breach by Seller of any of
its representations or warranties contained in this Agreement or (ii) be deemed
to cause a breach of any covenant of Seller contained in this Agreement,
including the provisions of SECTION 7.3.
7.3 CONDUCT PRIOR TO CLOSING. Except as otherwise expressly permitted by
this Agreement (including any action taken by Seller at the direction of Buyer
or its designee pursuant to SECTION 7.2(a)), between the Signing Date and the
Closing Date, Seller will not take any action, or fail to take any action within
its reasonable control, which action or inaction would cause any of the matters
or events set forth in SECTION 5.26(a) through 5.26(n) to occur. In addition,
except in accordance with SECTION 7.2(a), without the prior written consent of
Buyer, Seller will not:
(a) take any action which would impair, detract or otherwise harm the
Acquired Assets;
(b) buy, or enter into any inbound license agreement with respect to,
Third Party Technology or the intellectual property rights of any third party to
be incorporated in or used in connection with the Business or sell, lease or
otherwise transfer or dispose of, or enter into any outbound license agreement
with respect to, any of the Acquired Assets or Licensed Technology with any
third party;
(c) propose or enter into a Contract with any person, other than
Buyer, providing for the possible acquisition, transfer or disposition (whether
by way of merger, purchase of capital stock, purchase of assets or otherwise) of
any of the Acquired Assets, other than with respect to the period between the
Signing Date and the Control Date, in the ordinary course of business,
consistent with past practices;
(d) enter into any Contract relating to (i) the sale or distribution
of any product or the provision of any service by Seller related to the Business
or (ii) any of the Acquired Assets, other than with respect to the period
between the Signing Date and the Control Date, in the ordinary course of
business, consistent with past practices;
(e) change pricing charged to Customers;
(f) enter into any strategic arrangement or relationship, development
or joint marketing arrangement or agreement relating to the Business;
-36-
(g) enter into an Employment Agreement, fire without cause or give
notice of termination without cause to, or transfer or make any offer of
transfer to, any Continuing Employee;
(h) change, increase or amend the rate of remuneration or amount of
bonuses or other benefits (including any equity-based remuneration (whether
payable in cash, equity or otherwise), bonus or other benefit) or any other
terms of employment of any Continuing Employee;
(i) amend or modify, or violate the terms of, any of the Transferred
Contracts, Consent Required Contracts or Non-Transferred Contracts;
(j) revalue any of the Acquired Assets, including writing down the
value of Inventory;
(k) commence or settle any Actions or Proceedings or obtain any
releases of threatened Actions or Proceedings involving or relating to the
Business other than the Actions or Proceedings set forth on SCHEDULE 7.3(k);
(l) remove any tangible asset (that would otherwise constitute a
Tangible Asset but for the fact that it was removed) used in or necessary to the
Business permanently from the Facilities or from the possession or control of a
Continuing Employee;
(m) enter into Contracts with customers in the Restricted Territory,
except in accordance with SECTION 7.2(a);
(n) take any action, or fail to take any action, which would result in
any of the representations and warranties set forth in ARTICLE 5 not being true
and correct on and as of the Closing Date with the same force and effect as if
such representations and warranties had been made on and as of the Closing Date
or to be in breach of any covenant or agreement contained in this Agreement; or
(o) take, or agree in writing or otherwise to take, any of the actions
described in SECTIONS 7.3(a) through (n) above, or any other action that would
prevent Seller from performing or cause Seller not to perform its covenants
hereunder.
7.4 CONFIDENTIALITY. Each of the parties hereto hereby agrees that the
information obtained in any investigation pursuant to SECTION 7.1 hereof, or
pursuant to the negotiation and execution of this Agreement or the effectuation
of the transactions contemplated hereby, shall be governed by the terms of the
Non-Disclosure Agreement. Notwithstanding anything in the immediately preceding
sentence to the contrary, the parties agree that this Agreement shall supersede
the Non-Disclosure Agreement to the extent that the the terms of this Agreement
or the transactions contemplated hereby are inconsistent or conflict with the
terms of the Non-Disclosure Agreement.
7.5 OTHER AGREEMENTS. The parties hereto shall, on the Signing Date, enter
into each of the Related Agreements to which they are designated a party.
-37-
7.6 NOTIFICATION OF CERTAIN MATTERS. Each party shall give prompt notice
to the other party of (a) the occurrence or non-occurrence of any event, the
occurrence or non-occurrence of which is likely to cause any representation or
warranty of such party contained in this Agreement to be untrue or inaccurate at
or prior to the Closing, and (b) any failure of such party to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; PROVIDED, HOWEVER, that the delivery of any notice pursuant to
this SECTION 7.6 shall not (i) limit or otherwise affect any remedies available
to the party receiving such notice or (ii) constitute an acknowledgment or
admission of a breach of this Agreement. No disclosure by such party pursuant to
this SECTION 7.6, however, shall be deemed to amend or supplement the Disclosure
Schedule or prevent or cure any misrepresentations, breach of warranty or breach
of covenant.
7.7 ASSIGNMENT OF CONTRACTS AND FEES. Prior to the Closing, Seller shall
use its commercially reasonable efforts to obtain, at its sole cost and expense,
the consents, waivers and approvals required for the purpose of assigning,
conveying and transferring to Buyer all right, title and interest in and to, and
all obligations and liabilities under, each Transferred Contract. Buyer agrees
to use its commercially reasonable efforts to assist Seller in attempting to
obtain any such consents, waivers and approvals. In connection with obtaining
the consents, waivers and approvals contemplated in this SECTION 7.7, Seller
shall not consent to any modification of any Transferred Contract without the
prior written consent of Buyer, except pursuant to the instruction of Buyer in
accordance with SECTION 7.2(a).
7.8 LEASE ASSIGNMENT. Prior to the Closing, Seller shall use its
commercially reasonable efforts (including seeking declaratory relief, if
necessary, as specified in the Assigned Lease) to obtain all consents, waivers
and approvals required in connection with the Lease Assignment. Buyer agrees to
use its commercially reasonable efforts (which, for avoidance of doubt, will not
include the payment of any consent or other fees to obtain any consent, waiver
or approval required in connection with the Lease Assignment) to assist Seller
in attempting to obtain any such consents, waivers and approvals.
7.9 PUBLIC DISCLOSURE. Except as required by law, including the filing of
any reports required under applicable securities laws, no party shall issue any
statement or communication to any third party (other than their respective
agents) regarding the subject matter of this Agreement or the transactions
contemplated hereby, including, if applicable, the termination of this Agreement
and the reasons therefor, without the consent of the other party, which consent
shall not be unreasonably withheld.
7.10 USE OF CONFIDENTIAL INFORMATION. Notwithstanding anything to the
contrary contained herein or in any other agreement of Seller, including any
agreement between Seller and any employee of Seller, should the Closing occur,
Buyer shall have the unrestricted, sublicensable and transferable right, and
Seller hereby consents to such rights of Buyer, to use, disclose and exploit in
any manner and without restriction any and all confidential information related
to, used in or necessary for the operation of the Business disclosed to, or
learned by, Buyer in connection with the transactions contemplated hereby,
disclosed by or embodied in any of the Acquired Assets. To the
-38-
extent that any Continuing Employee hired by Buyer may be bound by any agreement
or policy of Seller that would in any way limit or restrict the rights of Buyer
to such confidential information hereunder, Seller shall not assert, enforce or
otherwise exercise its rights under such agreement or policy against any
Continuing Employee or Buyer; PROVIDED, HOWEVER, that Seller will not be
required to waive its rights under such agreements or policies with respect to
confidential information unrelated to the Business or the Acquired Assets,
except with respect to Residual Knowledge of such Continuing Employees.
7.11 REASONABLE EFFORTS. Subject to the terms and conditions provided in
this Agreement, each of the parties hereto shall use commercially reasonable
efforts to take promptly, or cause to be taken, all actions, and to do promptly,
or cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated hereby, to obtain all necessary waivers, consents and approvals and
to effect all necessary registrations and filings and to remove any injunctions
or other impediments or delays, legal or otherwise, in order to consummate and
make effective the transactions contemplated by this Agreement for the purpose
of securing to the parties hereto the benefits contemplated by this Agreement.
In furtherance of the foregoing, the parties agree to cooperate to provide all
notices required by all applicable regulatory authorities in connection with
this Agreement or the consummation of the transactions contemplated by this
Agreement, including all notices to Customers; PROVIDED that no party shall
deliver any such notice without the written consent of the other party.
7.12 ADDITIONAL DOCUMENTS AND FURTHER ASSURANCES. Each party hereto, at the
request of another party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be reasonably
necessary or desirable for effecting completely the consummation of this
Agreement and the transactions contemplated hereby.
7.13 CALEA COMPLIANCE AND LAW ENFORCEMENT TRAP AND TRACE, PEN REGISTER, AND
OTHER INFORMATION SUBPOENAS AND ORDERS. Seller shall be in compliance with
CALEA, subject to blanket and individual waivers, for all services provided to
Buyer and the Customers at all times following the Signing Date. Following the
Signing Date, Seller shall also provide and cooperate with Buyer in providing
all trap and trace, pen register and other information in response to subpoenas
and court and regulatory orders directing obtaining and disclosing information
to law enforcement agencies, where Seller's cooperation or participation is
reasonably necessary to comply.
7.14 TAX MATTERS. To the extent relevant to the Acquired Assets or the
Business, Seller shall (a) provide Buyer with such assistance as may reasonably
be required in connection with the preparation of any Return and the conduct of
any audit or other examination by any taxing authority or in connection with
judicial or administrative proceedings relating to any Liability for Taxes and
(b) retain and provide Buyer, at Buyer's expense, with all records or other
information that may be relevant to the preparation of any Returns, or the
conduct of any audit or examination, or other tax proceeding. Seller shall
retain for a period of six (6) years after the Closing all relevant documents,
including prior year's Returns, supporting work schedules and other records or
information that may
-39-
be relevant to such Returns and shall not destroy or otherwise dispose of any
such records without the prior written consent of Buyer.
7.15 BUSINESS FILINGS. Seller shall take all actions to comply with
applicable regulatory and tax reporting obligations and pay any applicable fees,
surcharges and taxes associated with the operation of the Acquired Assets up to
and including the Closing Date.
7.16 INSURANCE CLAIMS. Following the Signing Date, Seller will maintain,
and use its reasonable best efforts to pursue claims under any applicable,
insurance policies covering the Acquired Assets at the request and expense
(other than the cost of any applicable insurance premiums, which shall be paid
by Seller) of Buyer with respect to matters relating to the ownership, use or
operation of the Acquired Assets prior to the Closing Date and, at the Closing,
will remit to Buyer any amounts recovered with respect to such claims, as they
may relate to the Acquired Assets.
7.17 AUDIT RIGHTS. The parties shall reasonably agree on a process and
procedure for Buyer to conduct internal audits and to make adjustments to
charges as a result of the discovery of errors or omissions in charges made by
Seller pursuant to SECTION 7.2(b), as well as a true-up of amounts owed. In the
event of a billing dispute between the parties pursuant to SECTION 7.2(b), which
cannot be resolved by the parties after good faith negotiation, the parties
shall follow the dispute resolution procedures set forth in SECTION 9.5. So long
as a billing dispute is in dispute resolution a party shall not be declared in
default of its payment obligation with respect to such disputed amount so long
as such party has paid all amounts that are not in dispute.
7.18 NOTICE TO THE ESCROW AGENT. Buyer and Seller agree to deliver notice
of the Closing to the Escrow Agent at least one (1) business day prior to the
Closing.
7.19 CERTAIN CUSTOMERS. Notwithstanding anything contained herein to the
contrary, prior to the Closing, Buyer shall inform Seller whether or not Buyer
shall assume Seller's rights and obligations with respect to (i) those Contracts
for web-hosting, domain registration and e-mail services with the approximately
53 e-business Customers enrolled by Netlever, (ii) those Customers with billing
addresses outside of the Restricted Territory, and (iii) those Customers with
service locations outside of the Restricted Territory, and if Buyer so wishes to
assume Seller's rights and obligations with respect to clauses (i), (ii) and
(iii), it shall be deemed an Acquired Asset and Assumed Liability, and if Buyer
does not so wish to assume Seller's rights and obligations with respect to
clauses (i), (ii) and (iii) above, it shall be deemed an Excluded Asset and
Excluded Liability.
ARTICLE 8
CONDITIONS TO THE CLOSING
8.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective obligations of
Buyer and Seller to effect the transactions contemplated hereby shall be subject
to the satisfaction, at or prior to the Closing, of the following conditions:
-40-
(a) NO ORDER. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which has the effect of making the transactions
contemplated hereby illegal or otherwise prohibiting the consummation of the
transactions contemplated hereby.
(b) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the transactions contemplated hereby shall be in effect, nor
shall any proceeding brought by a Governmental Entity be seeking to restrain or
prohibit any of the foregoing be pending.
(c) THIRD PARTY CONSENTS. Seller shall have received the consents,
waivers and approvals identified on SCHEDULE 8.1(c)(i) and Buyer and Seller
shall have received the consents, waivers and approvals identified on
SCHEDULE 8.1(c)(ii).
8.2 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF BUYER. The obligation of
Buyer to effect the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Closing of each of the following conditions, any
of which may be waived, in writing, exclusively by Buyer:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS.
(i) The representations and warranties of Seller in this
Agreement shall have been true and correct on the Signing Date (other than
representations or warranties that are given or made as of another date, which
representations or warranties shall have been true and correct on such date) and
shall be true and correct on and as of the Closing Date as though such
representations and warranties were made on and as of such date, except where
the failure to be so true and correct on the Closing Date (either individually
or in the aggregate) would not have a material adverse effect (when compared
with the business, condition (financial or otherwise) or results of operations
as represented or warranted by Seller to Buyer hereunder on the Signing Date) on
the business, condition (financial or otherwise) or results of operations of
Seller related to the Business or the Acquired Assets; PROVIDED that, for
purposes of determining whether there shall be any such material adverse effect
on the business, condition (financial or otherwise) or results of operation of
Seller relating to the Business pursuant to this SECTION 8.2(a) and the Seller
Certificate of Officer delivered to Buyer pursuant to SECTION 8.2(b), there
shall be disregarded (A) any adverse change resulting from or relating to
general business or economic conditions that do not disproportionately affect
the Business, (B) any adverse change resulting from or relating to conditions
generally affecting the industry in which the Business competes that do not
disproportionately affect the Business, (C) any adverse change resulting from or
relating to the disclosure of the transactions contemplated by this Agreement to
any Customers or suppliers of Seller, (D) any adverse change resulting from the
operation of the Acquired Assets by Seller in accordance with SECTION 7.2(a) and
(E) any qualifications to the representations and warranties made or given by
Seller by words or phrases such as "material adverse effect", "material",
"materially" or similar words or phrases.
-41-
(ii) Seller shall have performed and complied in all material
respects with all covenants, obligations and other agreements under this
Agreement required to be performed and complied with by Seller as of or prior to
the Closing; PROVIDED that Seller shall not have failed to perform its
obligations set forth in SECTION 7.2(a) in any respect.
(b) SELLER CERTIFICATE OF OFFICER. Buyer shall have received a
certificate dated the Closing Date, validly executed by a duly authorized
officer of Seller for and on its behalf, to the effect that:
(i) all representations and warranties made by Seller in this
Agreement were true and correct as of the Signing Date (other than the
representations or warranties of Seller that were given or made as of another
date, which representations and warranties were true and correct as of such
date) and are true and correct on and as of the Closing Date as though such
representations and warranties were made on and as of the Closing Date, except
where the failure to be so true and correct on the Closing Date (either
individually or in the aggregate) would not have a material adverse effect (when
compared with the business, condition (financial or otherwise) or results of
operations of Seller related to the Business or the Acquired Assets as
represented or warranted by Seller to Buyer hereunder on the Signing Date) on
the business, condition (financial or otherwise) or results of operations of
Seller relating to the Business or the Acquired Assets;
(ii) all covenants, obligations and other agreements under this
Agreement required to be performed and complied with by Seller as of or prior to
the Closing have been so performed and complied with in all material respects,
provided that Seller shall not have failed to perform its obligations set forth
in SECTION 7.2(a); and
(iii) the conditions to the obligations of Seller set forth in
this SECTION 8.2 have been satisfied.
(c) GOVERNMENTAL APPROVAL. Approvals and/or waivers from any court,
administrative agency, commission, or other federal, state, county, local or
other foreign governmental authority, instrumentality, agency, or commission
required by law, regulator or otherwise deemed appropriate or necessary by Buyer
shall have been timely obtained.
(d) LITIGATION. There shall be no material Action or Proceeding of any
nature pending or threatened against (i) Seller, its properties or any of its
officers or directors arising out of, or in any way connected with, the
transactions contemplated hereby, or (ii) the Business, the Products, the
Acquired Assets or the Continuing Employees.
(e) THIRD PARTY CONSENTS. Buyer shall have received the Consents
identified on SCHEDULE 8.2(e).
(f) RELEASE OF LIENS. Buyer shall have received from Seller a duly and
validly executed copy of all agreements, instruments, certificates and other
documents, in form and
-42-
substance reasonably satisfactory to Buyer, that are necessary or appropriate to
evidence the release of all Liens identified on SCHEDULE 8.2(f).
(g) SELLER CERTIFICATE OF SECRETARY. Buyer shall have received a
certificate, validly executed by the Secretary of Seller, certifying to (i) the
effectiveness of the certificate of incorporation and the bylaws of Seller, and
(ii) the valid adoption of resolutions of the Board of Directors of Seller
approving this Agreement and the consummation of the transactions contemplated
hereby and setting forth therein true and complete copies of such certificate of
incorporation, bylaws and resolutions.
(h) COLLATERAL AGREEMENTS. Seller shall have delivered to Buyer
executed copies of the Collateral Agreements.
(i) DELIVERIES. Buyer shall have received the items set forth in
SECTION 3.5.
8.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF SELLER. The obligations of
Seller to consummate and effect the transactions contemplated hereby shall be
subject to the satisfaction at or prior to the Closing of each of the following
conditions, any of which may be waived, in writing, exclusively by Seller:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS.
(i) The representations and warranties of Buyer in this Agreement
shall have been true and correct on the Signing Date (other than representations
or warranties that are given or made as of another date, which representations
or warranties shall have been true and correct on such date) and shall be true
and correct on and as of the Closing Date as though such representations and
warranties were made on and as of such date, except where the failure to be so
true and correct on the Closing Date (either individually or in the aggregate)
would not have a material adverse effect (when compared with the business,
condition (financial or otherwise) or results of operations of Buyer as
represented or warranted to Seller by Buyer hereunder on the Signing Date) on
the business, condition (financial or otherwise) or results of operations of
Buyer; PROVIDED that, for purposes of determining whether there shall have been
any such material adverse effect on the business, condition (financial or
otherwise) or results of operation of Buyer pursuant to this SECTION 8.3(a) and
the Buyer Certificate of Officer delivered to Seller pursuant to SECTION 8.3(b),
there shall be disregarded (A) any adverse change resulting from or relating to
general business or economic conditions that do not disproportionately affect
Buyer, (B) any adverse change resulting from or relating to conditions generally
affecting the industry in which Buyer competes that do not disproportionately
affect Buyer, (C) any adverse change resulting from or relating to the
disclosure of the transactions contemplated by this Agreement to any Customers
or suppliers of Buyer and (D) any qualifications to the representations and
warranties made or given by Seller by words or phrases such as "material adverse
effect", "material", "materially" or similar words or phrases.
-43-
(ii) Buyer shall have performed and complied in all material
respects with all covenants, obligations and other agreements under this
Agreement required to be performed and complied with by Buyer as of or prior to
the Closing.
(b) BUYER CERTIFICATE OF OFFICER. Seller shall have received a
certificate dated the Closing Date, validly executed by a duly authorized
officer of Buyer for and on its behalf, to the effect that:
(i) all representations and warranties made by Buyer in this
Agreement were true and correct as of the Signing Date (other than the
representations or warranties of Buyer that were given or made as of another
date, which representations and warranties were true and correct as of such
date) and are true and correct on and as of the Closing Date as though such
representations and warranties were made on and as of the Closing Date, except
where the failure to be so true and correct on the Closing Date (either
individually or in the aggregate) would not have a material adverse effect (when
compared with the business, condition (financial or otherwise) or results of
operations of Buyer as represented or warranted by Buyer to Seller hereunder on
the Signing Date) on the business, condition (financial or otherwise) or results
of operations of Buyer;
(ii) all covenants and obligations under this Agreement to be
performed by Buyer on or before the Closing have been so performed in all
material respects; and
(iii) the conditions to the obligations of Buyer set forth in
this SECTION 8.3 have been satisfied.
(c) BUYER CERTIFICATE OF SECRETARY. Seller shall have received a
certificate, validly executed by the Secretary of Buyer, certifying to (i) the
effectiveness of the certificate of incorporation and the bylaws of Buyer, and
(ii) the valid adoption of resolutions of the Board of Directors of Buyer
approving this Agreement and the consummation of the transactions contemplated
hereby and setting forth therein true and complete copies of such certificate of
incorporation, bylaws and resolutions.
(d) DELIVERIES. Seller shall have received the items set forth in
SECTION 3.6.
(e) GOVERNMENTAL APPROVAL. Approvals and/or waivers from any court,
administrative agency, commission, or other federal, state, county, local or
other foreign governmental authority, instrumentality, agency, or commission
required by law, regulator or otherwise deemed appropriate or necessary by
Seller shall have been timely obtained.
(f) LITIGATION. There shall be no material Action or Proceeding of any
nature pending against Buyer, its properties or any of its officers or directors
arising out of, or in any way connected with, the transactions contemplated
hereby.
-44-
ARTICLE 9
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
9.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All of the
representations and warranties of Seller contained in this Agreement, or in any
certificate or other instrument delivered by Seller pursuant to this Agreement
(except for those representations and warranties of Seller contained in
SECTIONS 5.2, 5.8(b), 5.8(d), 5.13 and 5.29), shall survive the Closing Date and
continue in full force and effect until the date of the termination of the
Transitional Services Agreement (the "TERMINATION DATE"). The representations
and warranties of Seller contained in SECTIONS 5.2, 5.8(b), 5.8(d) and 5.29
shall survive the Closing Date and continue in full force and effect
indefinitely. The representations and warranties of Seller contained in
SECTION 5.13 shall survive until the expiration of the applicable statutory
period of limitations. The representations and warranties of Buyer contained in
this Agreement, or in any certificate or other instrument delivered by Buyer
pursuant to this Agreement (except for those representations and warranties of
Buyer contained in SECTIONS 6.2 and 6.9), shall survive the Closing Date and
continue in full force and effect until the Termination Date. The
representations and warranties of Buyer contained in SECTIONS 6.2 and 6.9 shall
survive the Closing Date and continue in full force and effect indefinitely.
9.2 SELLER INDEMNIFICATION. Seller shall indemnify and hold Buyer and its
officers, directors, and Affiliates (the "INDEMNIFIED BUYER PARTIES") harmless
against all claims, losses, liabilities, damages, deficiencies, costs and
expenses, including reasonable attorneys' fees and expenses of investigation and
defense (hereinafter individually a "LOSS" and collectively "LOSSES") incurred
or sustained by the Indemnified Buyer Parties, or any of them, directly or
indirectly, as a result of (a) any breach or inaccuracy of any certificate,
instrument, or other document delivered by Seller pursuant to this Agreement or
breach or inaccuracy of a representation or warranty of Seller contained in this
Agreement, (b) any failure by Seller to perform or comply with any covenant
applicable to it contained in this Agreement, (c) any brokerage or finders' fees
or agents' commission or similar charges owed by Seller, (d) Seller's failure to
pay or discharge any Excluded Liability, including any Liability (other than the
Assumed Liabilities) arising from or relating to Seller's operations prior to
the Control Date, (e) any breach by Seller of the Related Agreements or (f) any
termination of service by a Customer prior to the termination date in such
Customer's agreement with Seller as a result of an invalid LOA.
9.3 BUYER INDEMNIFICATION. Buyer agrees to indemnify and hold Seller and
its officers, directors, and Affiliates (the "INDEMNIFIED SELLER PARTIES" and,
together with the Indemnified Buyer Parties, the "INDEMNIFIED PARTIES"),
harmless against all Losses incurred or sustained by the Indemnified Seller
Parties, or any of them, directly or indirectly, as a result of (a) any breach
or inaccuracy of any certificate, instrument, or other document delivered by
Buyer pursuant to this Agreement or breach or inaccuracy of a representation or
warranty of Buyer contained in this Agreement, (b) any failure by Buyer to
perform or comply with any covenant applicable to it contained in this
Agreement, (c) any brokerage or finders' fees or agents' commission or similar
charges owed by Buyer, (d) Buyer's failure to pay or discharge any Assumed
Liability, (e) any
-45-
breach by Buyer of the Related Agreements, or (f) the ownership of the Acquired
Assets and operation of the Business by Seller on or after the Control Date
(other than those Losses arising from a breach of Seller's obligations under
SECTION 7.2(a), 7.2(b), 7.2(g) or 7.3).
9.4 INDEMNIFICATION PROCEDURE. An Indemnified Party seeking
indemnification shall deliver an Officer's Certificate to the party from whom
indemnification is sought (the "INDEMNIFYING PARTY"). An Indemnifying Party may
object to such claim by written notice to such Indemnified Party specifying the
Basis for the Indemnifying Party's objection, within 30 days following receipt
by the Indemnifying Party of notice from such Indemnified Party regarding such
claim. If no objection is made, the Indemnifying Party shall promptly pay the
claim.
9.5 RESOLUTION OF CONFLICTS; ARBITRATION.
(a) In case the Indemnifying Party shall object in writing to any
claim or claims made in any Officer's Certificate to recover Losses within 30
days after delivery of such Officer's Certificate, Seller and Buyer shall
attempt in good faith to agree upon the rights of the respective parties with
respect to each of such claims. If Seller and Buyer should so agree, a
memorandum setting forth such agreement shall be prepared and signed by both
parties and the Indemnifying Party shall promptly pay to the Indemnified Party
the amount of the claim agreed upon, if any.
(b) If no such agreement can be reached after good faith negotiation
and prior to 60 days after delivery of an Officer's Certificate, Buyer or Seller
may demand arbitration of the matter unless the amount of the Loss is at issue
in pending litigation with a third party, in which event arbitration shall not
be commenced until such amount is ascertained or both parties agree to
arbitration, and in either such event, the matter shall be settled by
arbitration conducted by one (1) arbitrator who shall initially be ▇▇▇▇ ▇▇▇▇▇
(the "PRIMARY ARBITRATOR"). The Primary Arbitrator may be changed at any time by
the mutual written agreement of the parties.
(c) Notwithstanding anything in SECTION 9.5(b) to the contrary, in the
event the disputed amount of claim or claims made in any Officer's Certificate
to recover Losses exceeds $75,000, a panel of three (3) arbitrators shall be
selected to resolve the dispute. The three (3) arbitrator panel (the "PANEL")
shall consist of the Primary Arbitrator and two (2) additional arbitrators to be
selected by the Parties in accordance with the selection procedures set forth
under the Commercial Arbitration rules then in effect of the American
Arbitration Association. Any additional arbitrator(s) selected by the Parties
shall be either (i) an attorney with commercial law experience who is a member
of the State Bar of
Washington or (ii) a person with significant operational
experience in the telecommunications industry.
(d) Any such arbitration shall be held in Seattle, Washington, under
the Commercial Arbitration rules then in effect of the American Arbitration
Association. Each party shall pay one-half (1/2) of the initial pre-arbitration
costs associated with the arbitration, including the fees of each arbitrator and
the administrative fee of the American Arbitration Association. No pre-hearing
discovery shall be permitted in any dispute handled in accordance with
SECTION 9.5(c), except to the extent permitted by the Expedited Procedures under
the Commercial Arbitration Rules
-46-
of the American Arbitration Association (the "EXPEDITED PROCEDURES"). The
Primary Arbitrator or the Panel, as the case may be, shall set a limited time
period and establish procedures designed to reduce the cost and time for
discovery while allowing the parties an opportunity, adequate in the sole
judgment of the Primary Arbitrator or the Panel, as the case may be, to discover
relevant information from the opposing parties about the subject matter of the
dispute. The Primary Arbitrator or the Panel, as the case may be, shall rule
upon motions to compel or limit discovery and shall have the authority to impose
sanctions, including attorneys' fees and costs, to the same extent as a
competent court of law or equity, should the Primary Arbitrator or the Panel, as
the case may be, determine that discovery was sought without substantial
justification or that discovery was refused or objected to without substantial
justification. The decision of the Primary Arbitrator or the Panel, as the case
may be, as to the validity and amount of any dispute shall be final, binding,
and conclusive upon the parties to this Agreement. Such decision shall be
written and, for disputes not subject to the Expedited Procedures, shall be
supported by written findings of fact and conclusions of law. Within 30 days of
a decision of the Primary Arbitrator or the Panel, as the case may be, requiring
payment by one party to another, such party shall make the payment to such other
party.
(e) Judgment upon any award rendered by the arbitrator(s) may be
entered in any court having jurisdiction.
(f) The parties have herein agreed to resolve all disputes arising out
of or relating to the matters set forth in ARTICLE 9 of this Agreement by final
and binding arbitration. In the event that legal action is necessary to compel
either party to arbitrate any such dispute or to stay any legal action filed by
a party pending arbitration, the prevailing party in such action shall be
entitled to an award of its reasonable costs and attorneys' fees thereof.
9.6 THIRD-PARTY CLAIMS.
(a) In the event Buyer becomes aware of a third-party claim which
Buyer reasonably believes may result in a demand for indemnification pursuant to
this ARTICLE 9, Buyer shall notify Seller of such claim, and Seller shall be
entitled, at its expense, to participate in, but not to determine or conduct,
the defense of such claim. Buyer shall have the right in its sole discretion to
conduct the defense of and settle any such claim; PROVIDED, HOWEVER, that except
with the consent of the Seller, no settlement of any such claim with third-party
claimants shall be determinative of the amount of Losses relating to such
matter. In the event that Seller has consented to any such settlement, Seller
shall have no power or authority to object under any provision of this ARTICLE 9
to the amount of any claim by Buyer against Seller with respect to such
settlement.
(b) In the event Seller becomes aware of a third-party claim which
Seller reasonably believes may result in a demand for indemnification pursuant
to this ARTICLE 9, Seller shall notify Buyer of such claim, and Buyer shall be
entitled, at its expense, to participate in, but not to determine or conduct,
the defense of such claim. Seller shall have the right in its sole discretion to
conduct the defense of and settle any such claim; PROVIDED, HOWEVER, that except
with the consent of the Buyer, no settlement of any such claim with third-party
claimants shall be determinative of the amount of Losses relating to such
matter. In the event that Buyer has consented to any such
-47-
settlement, Buyer shall have no power or authority to object under any provision
of this ARTICLE 9 to the amount of any claim by Seller against Buyer with
respect to such settlement.
9.7 LIMITATION ON INDEMNIFICATION; ESCROW.
(a) The indemnification obligations with respect to any breach of any
representation or warranty pursuant to SECTION 9.2 or SECTION 9.3 shall be
limited to claims for Losses made prior to the last date of survival thereof
referred to in SECTION 9.1 and any claim for Losses shall survive until its
final resolution. The indemnification obligations with respect to any other
matter for which the Buyer Indemnified Parties or Seller Indemnified Parties may
be entitled to pursuant to SECTIONS 9.2 or 9.3 respectively, shall survive
indefinitely subject to the terms of this Agreement.
(b) Notwithstanding any provision of this Agreement to the contrary,
no Indemnified Buyer Party may recover any Losses from the matters described in
SECTION 9.2 unless and until one or more Officer's Certificates identifying an
undisputed Loss or Losses (and/or a Loss or Losses resolved in accordance with
SECTION 9.5) in excess of $50,000 in the aggregate (the "BASKET AMOUNT") has or
have been delivered pursuant to SECTION 9.4, after which, the Indemnified Buyer
Parties may recover all Losses so identified in such Officer's Certificates;
PROVIDED, HOWEVER, that the Indemnified Buyer Parties shall be entitled to
recover for, and the Basket Amount shall not apply as a threshold to, any and
all claims for indemnification made with respect to fraud or an Intentional
Misrepresentation by Seller.
(c) Notwithstanding any provision of this Agreement to the contrary,
no Indemnified Seller Party may recover any Losses from the matters described in
SECTION 9.3 unless and until one or more Officer's Certificates identifying an
undisputed Loss or Losses (and/or a Loss or Losses resolved in accordance with
SECTION 9.5) in excess of the Basket Amount has or have been delivered pursuant
to SECTION 9.4, after which, the Indemnified Seller Parties may recover all
Losses so identified in such Officer's Certificates; PROVIDED, HOWEVER, that the
Indemnified Seller Parties shall be entitled to recover for, and the Basket
Amount shall not apply as a threshold to, any and all claims for indemnification
made with respect to fraud or an Intentional Misrepresentation by Buyer.
(d) The maximum amount of Losses for which Seller shall be liable
pursuant to SECTION 9.2 shall, subject to SECTION 9.7(f), be limited to
$1,000,000. The indemnification obligations of Seller shall be satisfied first
out of the escrow established pursuant to the Escrow Agreement from the Escrow
Amount to the extent available; PROVIDED, HOWEVER, that nothing contained herein
shall constitute a waiver by Buyer or as a limitation of any of its rights or
remedies against Seller with respect to fraud or an Intentional
Misrepresentation by Seller.
(e) The maximum amount of Losses for which Buyer shall be liable
pursuant to SECTION 9.3 shall, subject to SECTION 9.7(g), be limited to
$1,000,000. Nothing contained herein shall constitute a waiver by Seller or as a
limitation of any of its rights or remedies against Buyer with respect to fraud
or an Intentional Misrepresentation by Buyer.
-48-
(f) In addition to the indemnification obligations of the Indemnifying
Seller Parties pursuant to SECTION 9.2 and notwithstanding anything contained
herein to the contrary, Seller agrees to indemnify, hold harmless, pay and
reimburse Buyer for all Losses actually incurred by Buyer to the extent such
Losses were caused by fraud and/or Intentional Misrepresentation by Seller. The
Indemnification obligations of Seller under this SECTION 9.7(f) shall be
satisfied first from the funds held in escrow pursuant to the Escrow Agreement
from the Escrow Amount to the extent available. For purposes of this Agreement,
"INTENTIONAL MISREPRESENTATION" by a party shall mean a willful and intentional
misrepresentation of any of the matters contained herein by such party.
(g) In addition to the indemnification obligations of the Indemnifying
Buyer Parties pursuant to SECTION 9.3 and notwithstanding anything contained
herein to the contrary, Buyer agrees to indemnify, hold harmless, pay and
reimburse Seller for all Losses actually incurred by Seller to the extent such
Losses were caused by fraud and/or Intentional Misrepresentation by Buyer.
(h) The indemnification obligations of Buyer pursuant to SECTION 9.3
shall survive for as long as the applicable statute of limitations for the
claims that are brought thereunder.
(i) Neither (i) the termination of the representations or warranties
contained herein, nor (ii) the expiration of the indemnification obligations
described above, will affect the rights of a Person in respect of any claim for
Losses made by such Person received by the indemnifying party prior to the
expiration of the applicable survival period provided herein.
ARTICLE 10
TERMINATION, AMENDMENT AND WAIVER
10.1 TERMINATION.
(a) Except as provided in SECTION 10.2, this Agreement may be
terminated at any time prior to the Closing:
(i) by the mutual written agreement of the parties;
(ii) by either party at any time after the date which is 120 days
following the Signing Date;
(iii) by Buyer if the Control Date shall not have occurred by
November 15, 2001.
(iv) by either party in the event the other party shall be in
material breach or default under this Agreement and shall have failed to cure
such breach or default within 30 days after receiving written notice thereof
from the party seeking termination; provided that the party seeking termination
is not then in material breach of any representation, warranty, covenant or
other agreement contained herein; or
-49-
(v) by either party if there shall be any law or regulation that
makes the consummation of the transactions contemplated hereby illegal or
otherwise prohibited or if the consummation of the transactions contemplated
hereby would violate any nonappealable final order, decree or judgment of any
Governmental Entity.
(b) The party desiring to terminate this Agreement pursuant to clauses
(ii) or (iii) of SECTION 10.1(a) shall give written notice of such termination
to the other party in accordance with SECTION 11.1.
10.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement as provided in SECTION 10.1, this Agreement shall forthwith become
void and there shall be no Liability or obligation on the part of any party
hereto, or its Affiliates, officers, directors or stockholders, PROVIDED that
each party shall remain liable for any breaches of this Agreement prior to its
termination; and PROVIDED FURTHER that (a) the provisions of SECTIONS 7.4, 7.8,
ARTICLE 9, ARTICLE 11 and this SECTION 10.2 shall remain in full force and
effect and survive any termination of this Agreement, and (b) SECTIONS 7.2(a),
7.2(b) and 7.2(g) shall survive until the earlier to occur of (i) ten (10) years
from the Signing Date or (ii) the date on which Buyer gives written notice
expressly terminating SECTIONS 7.2(a), 7.2(b) and 7.2(g). In the event that this
Agreement is terminated for any reason whatsoever and Buyer shall not have
terminated its rights and obligations under SECTIONS 7.2(a), 7.2(b), and 7.2(g)
within seven (7) days of such termination, Buyer shall pay to Seller a fee equal
to the Purchase Price.
10.3 AMENDMENT. This Agreement may be amended by the parties hereto at any
time by execution of an instrument in writing signed on behalf of each of the
parties hereto.
10.4 EXTENSION; WAIVER. At any time prior to the Closing, Buyer, on the one
hand, and Seller, on the other hand, may, to the extent legally allowed,
(a) extend the time for the performance of any of the obligations of the other
party hereto, (b) waive any inaccuracies in the representations and warranties
made to such party contained herein or in any document delivered pursuant
hereto, and (c) waive compliance with any of the agreements or conditions for
the benefit of such party contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
ARTICLE 11
GENERAL
11.1 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
messenger or courier service, or mailed by registered or certified mail (return
receipt requested) or sent via facsimile (with acknowledgment of complete
transmission) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice); PROVIDED, HOWEVER,
that notices sent by mail will not be deemed given until received:
-50-
(a) if to Buyer, to:
Advanced Telcom, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇. Vice President,
Corporate Development & Strategic Planning
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to (which shall not constitute notice):
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
Professional Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to Seller, to:
FairPoint Communications Solutions Corp.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇, Esq., General Counsel
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to (which shall not constitute notice):
Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(c) if to the Primary Arbitrator, to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
-▇▇-
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
11.2 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement, the Disclosure Schedule,
the Non-Disclosure Agreement, the Related Agreements and the documents and
instruments and other agreements among the parties hereto referenced herein:
(a) constitute the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings both
written and oral, among the parties with respect to the subject matter hereof;
(b) are not intended to confer upon any other person any rights or remedies
hereunder (other than permitted assigns pursuant to (c) below); and (c) shall
not be assigned by operation of law or otherwise, except that Buyer may assign
or sell its rights and delegate its obligations hereunder, so long as Buyer
remains liable for its obligations hereunder in the event that an assignee or
other Person assuming Buyer's obligations hereunder fails to perform.
11.3 SEVERABILITY. In the event that any provision of this Agreement or the
application thereof, becomes or is declared by a court of competent jurisdiction
to be illegal, void or unenforceable, the remainder of this Agreement will
continue in full force and effect and the application of such provision to other
persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of such void or unenforceable provision.
11.4 OTHER REMEDIES. Any and all remedies herein expressly conferred upon a
party will be deemed cumulative with and not exclusive of any other remedy
conferred hereby, or by law or equity upon such party, and the exercise by a
party of any one remedy will not preclude the exercise of any other remedy.
11.5 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF WASHINGTON, REGARDLESS OF THE LAWS THAT
MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS THEREOF;
PROVIDED, HOWEVER, THAT ALL ISSUES OF ARBITRATION, INCLUDING THE ABITRABILITY OF
DISPUTES AND THE LEGAL SUFFICIENCY OF ARBITRATION PROCEDURES SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE FEDERAL ARBITRATION ACTION, 9 USC
SECTIONS 1-16.
11.6 JURISDICTION AND VENUE. Each of the parties hereto irrevocably
consents to the exclusive jurisdiction and venue of any court (or arbitration
proceeding, if applicable) within King County, State of Washington, in
connection with any matter (unless the method for such dispute is otherwise
provided herein) based upon or arising out of this Agreement or the matters
contemplated herein, agrees that process may be served upon them in any manner
authorized by the laws of the State of Washington for such persons and waives
and covenants not to assert or plead any objection which they might otherwise
have to such jurisdiction, venue and such process.
-52-
11.7 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO TRIAL BY JURY AND ANY ACTION, PROCEEDING OR COUNTERCLAIM
(WHETHER BASED ON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE ACTIONS OF ANY PARTY HERETO IN NEGOTIATION,
ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.
11.8 FEES AND EXPENSES. Whether or not the transactions contemplated herein
are consummated, all expenses, including all legal, accounting, financial
advisory, consulting and other fees, incurred in connection with the negotiation
or effectuation of this Agreement or consummation of such transactions, shall be
the obligation of the respective party incurring such expenses.
11.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
11.10 SPECIFIC PERFORMANCE. The parties each acknowledge that, in view of
the uniqueness of the Business and the transactions contemplated by this
Agreement, each party would not have an adequate remedy at law for money damages
in the event that this Agreement has not been performed in accordance with its
terms, and therefore agrees that the other party shall be entitled to specific
enforcement of the terms hereof in addition to any other remedy to which it may
be entitled, at law or in equity.
-53-
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
as of the date first above written.
ADVANCED TELCOM, INC.
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------
Name: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------
Title: Senior Vice President
----------------------
FAIRPOINT COMMUNICATIONS
SOLUTIONS CORP.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------
Title: Executive Vice President
-------------------------
[Signature Page to
Asset Purchase Agreement]
S-1
EXHIBIT A
TRANSITIONAL SERVICES AGREEMENT
EXHIBIT B
ESCROW AGREEMENT
EXHIBIT C
NON-SOLICITATION AGREEMENT AMENDMENT
EXHIBIT D
NON-COMPETITION AGREEMENT
EXHIBIT E
TELECOMMUNICATIONS FACILITIES AGREEMENT
EXHIBIT F
VOICEMAIL SERVICES AGREEMENT
EXHIBIT G
LEASE ASSIGNMENT
EXHIBIT H
GENERAL ASSIGNMENT AND ▇▇▇▇ OF SALE