Exhibit 10.6
ASSET PURCHASE AGREEMENT
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Agreement made as of September 26, 1998 by and between Voyager Information
Networks, Inc., a Michigan corporation ("Buyer"), NetLink Systems, L.L.C., a
Michigan limited liability company ("Seller"), and Xxxxx Xxxxxx, Xxxxxxxxxxx
Xxxxxxxx and Xxxxx Xxxxxxxx ("Principals").
WHEREAS, subject to the terms and conditions hereof, Seller desires to
sell, transfer and assign to Buyer, and Buyer desires to purchase from Seller,
all of the properties, rights and assets used or useful in connection with the
Internet service business of Seller (the "Business").
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
SECTION 1. PURCHASE AND SALE OF ASSETS.
1.1 Sale of Assets. Upon the terms and subject to the conditions set
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forth in this Agreement, and the performance by the parties hereto of their
respective obligations hereunder, Seller agrees to sell, assign, transfer and
deliver to Buyer, and Buyer agrees to purchase from Seller, all of Seller's
right, title and interest in and to all of the properties, assets and business
of the Business of every kind and description, tangible and intangible, real,
personal or mixed, and wherever located, but excluding the Excluded Assets (as
defined in Section 1.2 below), including without limitation, the following:
(a) Equipment. All free standing kiosks, servers, routers, modems, IP
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addresses, computers, electronic devices, test equipment and all other fixed
assets, equipment, furniture, fixtures, leasehold improvements, parts,
accessories, inventory, office materials, software, supplies and other tangible
personal property of every kind and description owned by Seller and used or held
for use in connection with the Business, in each case together with any
additions thereto between the date of this Agreement and the Closing Date (as
defined below), all as set forth on Schedule 1.1(a) attached hereto
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(collectively, "Equipment");
(b) Contracts. All of the rights of Seller under and interest of
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Seller in and to all contracts relating to the Business (other than the Excluded
Contracts (as defined below)), including, without limitation, original contracts
for the provision of Internet connectivity, dedicated service, web-hosting, web-
domain, dial-up services, web-development and Internet commerce, a true, correct
and complete list of which contracts is attached hereto as Schedule 1.1(b)
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(collectively, the "Contracts");
(c) Intellectual Property. All Intellectual Property (as defined in
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Section 2.20), all as set forth on Schedule 1.1(c) attached hereto;
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(d) Licenses and Authorizations. All rights associated with the
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licenses, permits, easements, registrations and authorizations issued or granted
to Seller by any governmental authority with respect to the operation of the
Business, including, without limitation, those licenses and authorizations
listed on Schedule 1.1(d) attached hereto, and all applications therefor,
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together with any renewals, extensions, or modifications thereof and additions
thereto;
(e) Current Assets; Accounts Receivable. All Current Assets of Seller
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(as such term is hereinafter defined) and all accounts receivable of Seller
incurred in the ordinary course of business and which are included on Seller's
balance sheet, as determined in accordance with generally accepted accounting
principles ("GAAP"), consistently applied, a complete list of which is attached
hereto as Schedule 1.1(e) ("Accounts Receivable");
(f) Goodwill. All of the goodwill of Seller in, and the going concern
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value of, the Business, and all of the business and customer lists, proprietary
information, and trade secrets related to the Business; and
(g) Records. All of Seller's customer logs, location files and
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records, employee records, and other business files and records, in each case
relating to the Business.
The assets, properties and business of Seller being sold to and purchased
by Buyer under this Section 1.1 are referred to herein collectively as the
"Assets."
1.2 Excluded Assets. There shall be excluded from the Assets and retained
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by Seller, to the extent in existence on the Closing Date, the following assets
(the "Excluded Assets"):
(a) Other Assets. All other assets of Seller which are not used or
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held for use in connection with the Business or otherwise necessary to the
operation of the Business now or after the Closing Date as set forth on Schedule
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1.2(a) attached hereto;
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(b) Excluded Contracts. All of Seller's right, title and interest in,
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to and under the Contracts listed on Schedule 1.2(b) attached hereto (the
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"Excluded Contracts");
(c) Insurance. All contracts of insurance (including any cash
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surrender value thereof) and all insurance proceeds of settlement and insurance
claims made by Seller on or before the Closing Date as set forth on Schedule
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1.2(c) attached hereto;
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(d) Tax Items. All claims, rights and interest in and to any refunds
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for federal, state or local Taxes (as defined below) for periods prior to the
Closing Date as set forth on Schedule 1.2(d) attached hereto; and
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(e) Corporate Records. All of Seller's corporate and other
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organizational records.
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1.3 Assumed Liabilities; Excluded Liabilities; Employees.
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(a) Assumed Liabilities. Buyer shall, on and as of the Closing Date,
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accept and assume, and shall become and be fully liable and responsible for, and
other than as expressly set forth herein Seller shall have no further liability
or responsibility for or with respect to, (a) liabilities and obligations
arising out of events occurring on and after the Closing Date related to Buyer's
ownership of the Assets and Buyer's operation of the Business after the Closing
Date; (b) all obligations and liabilities of Seller which are to be performed
after the Closing Date arising under the Contracts, including, without
limitation, Seller's obligations to Subscribers under such Contracts for (i)
Subscriber deposits held by Seller as of the Closing Date in the amount for
which Buyer receives a credit pursuant to Section 1.6, (ii) Subscriber advance
payments held by Seller as of the Closing Date for services to be rendered in
connection with the Business in the amount for which Buyer receives a credit
pursuant to Section 1.6, and (iii) the delivery of Internet connectivity service
to Subscribers (whether under the Contracts or otherwise) after the Closing
Date; (c) the Current Liabilities (as hereinafter defined) of Seller; and (d)
any Long-term Liabilities or other liabilities or claims specifically assumed by
Buyer in writing at the Closing and for which there is an adjustment to the
Purchase Price pursuant to Section 1.6(b) hereof ((a), (b), (c) and (d)
together, the "Assumed Liabilities"). The assumption of the Assumed Liabilities
by Buyer hereunder shall not enlarge any rights of third parties under contracts
or arrangements with Buyer or Seller or any of their respective affiliates or
subsidiaries. No parties other than Buyer and Seller shall have any rights
under this Agreement.
(b) Excluded Liabilities. It is expressly understood that, except for
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the Assumed Liabilities, Buyer shall not assume, pay or be liable for any
liability or obligation of Seller of any kind or nature at any time existing or
asserted, whether, known, unknown, fixed, contingent or otherwise, not
specifically assumed herein by Buyer, including, without limitation, any
liability or obligation relating to, resulting from or arising out of (i) the
Excluded Assets, including, without limitation, the Excluded Contracts, (ii) the
employees of the Business, including, without limitation, any obligation to
provide any amounts due to the employees under any pension, profit sharing or
similar plan, bonus or other compensation plan, or related to vacation or other
similar employee benefits, or (iii) any fact existing or event occurring prior
to the Closing Date or relating to the operation of the Business prior to the
Closing Date. The liabilities which are not assumed by Buyer under this
Agreement are hereinafter sometimes referred to as the "Excluded Liabilities."
(c) Employees, Wages and Benefits.
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(i) Seller shall terminate all of its employees effective as of
the Closing Date and Buyer shall not assume or have any obligations or
liabilities with respect to such employees or such terminations, including,
without limitation, any severance obligation. Seller acknowledges and
agrees that Buyer has the right to interview and discuss employment terms
and issues with such employees prior to and after the Closing.
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(ii) Buyer specifically reserves the right, on or after the
Closing Date, to employ or reject any of Seller's employees or other
applicants in its sole and absolute discretion; provided that Buyer shall
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provide to Seller a list of employees to whom Buyer intends to offer
employment as of the Closing Date. Nothing in this Agreement shall be
construed as a commitment or obligation of Buyer to accept for employment,
or otherwise continue the employment of, any of Seller's employees, and no
employee shall be a third-party beneficiary of this Agreement.
(iii) Seller shall pay all wages, salaries, commissions, and the
cost of all fringe benefits provided to its employees which shall have
become due for work performed as of and through the day preceding the
Closing Date, and Seller shall collect and pay all Taxes in respect of such
wages, salaries, commissions and benefits.
(iv) Seller acknowledges and agrees that Buyer shall not
acquire any rights or interests of Seller in, or assume or have any
obligations or liabilities of Seller under, any benefit plans maintained
by, or for the benefit of any employees of Seller prior to the Closing
Date, including, without limitation, obligations for severance or vacation
accrued but not taken as of the Closing Date.
1.4 The Closing. The transactions contemplated by this Agreement shall
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take place at a closing (the "Closing") to be held at 10:00 a.m., local time, at
the offices of Voyager Information Networks, Inc., on October 2, 1998, or at
such other time and place as shall be mutually agreed upon in writing by Buyer
and Seller (the "Closing Date").
1.5 Purchase Price. In consideration of the sale by Seller to Buyer of
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the Assets, and subject to the assumption by Buyer of the Assumed Liabilities
and satisfaction of the conditions contained herein, Buyer shall pay to Seller
at the Closing an amount (as adjusted in accordance with Section 1.6 below, the
"Purchase Price") equal to $3,600,000 as follows:
(a) Buyer shall deliver the sum of $3,240,000 to Seller by bank
cashier's check or bank wire transfer pursuant to payment instructions delivered
by Seller to Buyer at least two (2) business days prior to the Closing; and
(b) Buyer shall deposit the sum of $360,000 (the "Escrow Deposit")
with Boston Safe Deposit and Trust Company as Escrow Agent under the Escrow
Agreement in the form attached hereto as Exhibit A (the "Escrow Agreement").
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The Escrow Deposit shall be held, administered and distributed in accordance
with the terms of the Escrow Agreement, and shall be Buyer's remedy for any
Disconnects (as defined in the Escrow Agreement) post-Closing and for any
indemnification claims made pursuant to Section 10 hereof.
1.6 Adjustments to Purchase Price. The Purchase Price shall be adjusted
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at the Closing in the manner set forth below:
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(a) The Purchase Price will be increased or decreased, as the case
may be, on a dollar-for-dollar basis, by the Working Capital Excess or
Deficiency, as applicable, as of the opening of business on the Closing
Date.
For the purposes of this Agreement, the following terms shall
have the following meanings:
(i) "Working Capital" shall mean the difference between
Seller's Current Assets and Current Liabilities;
(ii) "Current Assets" shall mean and include all Accounts
Receivable of Seller outstanding on the Closing Date with balances of
forty-five (45) days or less, all prepaid expenses (including postal
deposits), and all other current assets which have value to the
business at the Closing and which are used in the operation of
Seller's Business, in each case as determined in accordance with GAAP,
consistently applied;
(iii) "Current Liabilities" shall mean and include accounts
payable, accrued expenses, all accrued but unpaid taxes, all deferred
revenues and all other current liabilities incurred in the operation
of Seller's Business and reflected on Seller's balance sheet, but
shall not include the current portion of any bank debt or line of
credit, in each case as determined in accordance with GAAP,
consistently applied;
(iv) "Deficiency" shall mean the amount by which the Current
Liabilities exceeds the Current Assets; and
(v) "Excess" shall mean the amount by which the Current Assets
exceeds the Current Liabilities.
(b) The Purchase Price shall be decreased, on a dollar-for-dollar
basis, by the amount of any Long-term Liabilities that are assumed by Buyer at
the Closing. For purposes hereof, "Long-term Liabilities" shall mean and
include any term loans (including, without limitation, bank debt, lines of
credit and the current portion of any other debt), capital leases, operating
leases not stated or reserved for on the Seller's balance sheet and the other
liabilities of Seller not listed on the Seller's balance sheet which are assumed
by Buyer at the Closing, as determined in accordance with GAAP, consistently
applied, and which are set forth on Schedule 1.6(b) attached hereto. In the
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event Seller elects to pay-off some of the Long-term Liabilities consisting of
bank debt at the Closing, then the calculation thereof shall be decreased by
such amount and Seller shall obtain a pay-off letter from the third-party lender
to evidence the discharge of such obligation at the Closing and such payoff
shall be made directly as part of the wire transfer of the Purchase Price.
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(c) The Purchase Price shall be decreased, on a dollar for dollar
basis, by the Revenues Adjustment Amount in the event total revenues for the
calender month ended immediately prior to the Closing Date are less than
$170,000, of which at least $165,000 shall be Recurring Revenues (the "Target
Revenues"). For purposes hereof, the term "Revenues Adjustment Amount" shall
equal the product obtained by multiplying (i) $1,818 by (ii) the quotient
obtained by dividing (X) the Annualized Recurring Revenues Deficiency, by (Y)
one thousand dollars ($1,000). For purposes hereof, the term "Recurring
Revenues" shall mean and include all of Seller's revenues derived from Dial-up
Subscribers (including e-mail only accounts), Dedicated Subscribers and Web-
hosting/Domain-hosting Subscribers (as each such term is defined in Section 2.16
hereof) of Seller's Business, including, without limitation, deferred revenues
(or earned income) and any other recurring revenue sources, but which shall
specifically exclude any revenues derived by Seller from sales taxes, one-time
sign-up fees, one-time contract revenues, and any other revenues which are the
result of extraordinary promotions sponsored by or extraordinary marketing
expenses incurred by Seller outside the ordinary course of Seller's Business and
not consistent with Seller's past business practices, in each case determined on
a monthly basis as of the end of the last completed calendar month prior to
Closing. For purposes hereof, the term "Annualized Recurring Revenues
Deficiency" shall equal the product of (i) the difference between (A) the Target
Revenues and (B) Recurring Revenues, multiplied by (ii) twelve (12).
(d) (i) No later than five (5) days prior to the Closing, Buyer
and Seller shall prepare a statement to be attached hereto as Schedule
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1.6(d) (the "Estimated Adjustment Statement") which sets forth (i) the
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Company's estimated Working Capital and the amount of any estimated
Deficiency or Excess, as the case may be, as of the Closing Date, (ii) the
Long-term Liabilities Adjustment and (iii) the Revenues Adjustment Amount
((i), (ii) and (iii) together, the "Estimated Adjustment"). The Purchase
Price payable at the Closing shall be increased on a dollar-for-dollar
basis to the extent of any positive Estimated Adjustment or decreased on a
dollar-for-dollar basis to the extent of any negative Estimated Adjustment,
as the case may be, set forth on such Estimated Adjustment Statement.
(ii) No later than sixty (60) days following the Closing, Buyer
shall prepare and deliver to Seller a statement (the "Final Adjustment
Statement") setting forth the actual Working Capital, and the amount of any
actual Deficiency or Excess, as the cash may be, as well as any other
changes to the Estimated Adjustment, as of the Closing Date. Subject to
Section 1.6(d)(iii) below, within ten (10) days following the delivery of
such Final Adjustment Statement to Seller, Buyer or Seller, as the case may
be, shall pay to the other party, by wire transfer of immediately available
funds, the difference between the Estimated Adjustment, as shown on the
Estimated Adjustment Statement, and the actual adjustment, as shown on the
Final Adjustment Statement.
(iii) In the event Seller objects to the Final Adjustment
Statement, Seller shall notify Buyer in writing of such objection within
the ten (10) day period following the delivery thereof, stating in such
written objection the reasons therefor and
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setting forth the Seller's calculation of Seller's actual Working Capital,
Long-term Liabilities or Recurring Revenues at the Closing. Upon receipt by
Buyer of such written objection, the parties shall attempt to resolve the
disagreement concerning the Final Adjustment Statement through negotiation.
Notwithstanding any other dispute resolution procedure provided for in this
Agreement, if Buyer and Seller cannot resolve such disagreement concerning
the Final Adjustment Statement within thirty (30) days following the end of
the foregoing 10-day period, the parties shall submit the matter for
resolution to a nationally recognized firm of independent certified public
accountants not affiliated with either party, with the costs thereof to be
shared equally by the parties. Such accounting firm shall deliver a
statement setting forth its own calculation of the final adjustment to the
parties within thirty (30) days of the submission of the matter to such
firm. Any payment shown to be due by a party on the statement of such
accounting firm shall be paid to the other party promptly but in no event
later than five (5) days following the delivery of such statement by such
according firm to the parties.
1.7 Purchase Price Allocation. At least ten (10) days prior to the
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Closing, Buyer and Seller shall agree on the allocation of the Purchase Price as
set forth on Schedule 1.7 attached hereto. Such allocation shall be binding
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upon Buyer and Seller for all purposes (including financial accounting purposes,
financial and regulatory reporting purposes and tax purposes). Buyer and Seller
each further agrees to file its Federal income tax returns and its other tax
returns reflecting such allocation, Form 8594 and any other reports required by
Section 1060 of the Code.
1.8 Records and Contracts. To the extent not previously provided to
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Buyer, at the Closing, Seller shall deliver to Buyer all of the Contracts, with
such assignments thereof and consents to assignments as are necessary to assure
Buyer of the full benefit of the same. Seller shall also deliver to Buyer at
the Closing all of Seller's files and records constituting Assets.
1.9 Further Assurances. Seller, from time to time after the Closing at
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the request of Buyer and without further consideration, shall execute and
deliver further instruments of transfer and assignment and take such other
action as Buyer may reasonably require to more effectively transfer and assign
to, and vest in, Buyer the Assets free and clear of all Liens (as defined in
Section 2.8).
1.01 Sales and Transfer Taxes. All sales, transfer, use, recordation,
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documentary, stamp, excise taxes, personal property taxes, fees and duties
(including any real estate transfer taxes) under applicable law incurred in
connection with this Agreement or the transactions contemplated thereby will be
borne and paid by Seller, and Seller shall promptly reimburse Buyer for the
payment of any such tax, fee or duty which Buyer is required to make under
applicable law.
1.11 Transfer of Subject Assets. At the Closing, Seller shall deliver or
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cause to be delivered to Buyer good and sufficient instruments of transfer
transferring to Buyer title to all of the Assets, together with all required
consents. Such instruments of transfer (a) shall
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contain appropriate warranties and covenants which are usual and customary for
transferring the type of property involved under the laws of the jurisdictions
applicable to such transfers, (b) shall be in form and substance reasonably
satisfactory to Buyer and its counsel, (c) shall effectively vest in Buyer good
and marketable title to all of the Assets free and clear of all Liens, and (d)
where applicable, shall be accompanied by evidence of the discharge of all Liens
against the Assets.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLER AND PRINCIPALS. In order to
induce Buyer to enter into this Agreement, Seller and Principals jointly and
severally hereby represent and warrant to Buyer as follows:
2.1 Organization; Subsidiaries.
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(a) Seller is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Michigan, with full
power and authority to own or lease its properties and to conduct its business
in the manner and in the places where such properties are owned or leased or
such business is currently conducted or proposed to be conducted. The copies of
Seller's Articles of Organization and Operating Agreement, each as amended to
date, heretofore delivered to Buyer's counsel are complete and correct. Seller
is not in violation of any terms of its Articles of Organization and Operating
Agreement. Seller is duly qualified to do business in the state of its
organization, and is not required to be licensed or qualified to conduct its
business or own its property in any other jurisdiction.
(b) Seller has no subsidiaries and does not own any securities issued
by any other business organization or governmental authority, except U.S.
Government securities, bank certificates of deposit and money market accounts
acquired as short-term investments in the ordinary course of its business.
Seller does not own or have any direct or indirect interest in or control over
any corporation, partnership, joint venture or entity of any kind.
2.2 Required Action. All actions and proceedings necessary to be taken by
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or on the part of Seller in connection with the transactions contemplated by
this Agreement have been duly and validly taken, and this Agreement and each
other agreement, document and instrument to be executed and delivered by or on
behalf of Seller pursuant to, or as contemplated by, this Agreement
(collectively, the "Seller Documents") has been duly and validly authorized,
executed and delivered by Seller and no other action on the part of Seller or
its members is required in connection therewith. Each of Seller and the
Principals have full right, authority, power and capacity to execute and deliver
this Agreement and each other Seller Document and to carry out the transactions
contemplated hereby and thereby. This Agreement and each other Seller Document
constitutes, or when executed and delivered will constitute, the legal, valid
and binding obligation of each of Seller and the Principals enforceable in
accordance with its respective terms.
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2.3 No Conflicts.
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(a) The execution, delivery and performance by Seller of this
Agreement and each other Seller Document does not and will not (i) violate any
provision of the Articles of Organization or Operating Agreement of Seller, in
each case as amended to date, (ii) constitute a violation of, or conflict with
or result in any breach of, acceleration of any obligation under, right of
termination under, or default under, any agreement or instrument to which Seller
is a party or by which Seller or the Assets is bound, (iii) violate any
judgment, decree, order, statute, rule or regulation applicable to Seller or the
Assets, (iv) require Seller to obtain any approval, consent or waiver of, or to
make any filing with, any person or entity (governmental or otherwise) that has
not been obtained or made or (v) result in the creation or imposition of any
Lien on any of the Assets.
(b) The execution, delivery and performance by the Principals of this
Agreement and each other Seller Document does not and will not (i) constitute a
violation of, or conflict with or result in any breach of, acceleration of any
obligation under, right of termination under, or default under, any agreement or
instrument to which any or all of the Principals are a party or by which any or
all of the Principals are bound, (ii) violate any judgment, decree, order,
statute, rule or regulation applicable to the Principals, (iii) require the
Principals to obtain any approval, consent or waiver of, or to make any filing
with, any person or entity (governmental or otherwise) that has not been
obtained or made, or (iv) result in the creation or imposition of any Lien on
any of the Assets.
2.4 Taxes.
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(a) Seller has paid or caused to be paid all federal, state, local,
foreign and other taxes, including, without limitation, income taxes, estimated
taxes, alternative minimum taxes, excise taxes, sales taxes, use taxes, value-
added taxes, gross receipts taxes, franchise taxes, capital stock taxes,
employment and payroll-related taxes, withholding taxes, stamp taxes, transfer
taxes, windfall profit taxes, environmental taxes and property taxes, whether or
not measured in whole or in part by net income, and all deficiencies, or other
additions to tax, interest, fines and penalties owed by it (collectively,
"Taxes"), required to be paid by it through the date hereof whether disputed or
not.
(b) Seller has in accordance with applicable law filed all federal,
state, local and foreign tax returns required to be filed by it through the date
hereof, and all such returns correctly and accurately set forth the amount of
any Taxes relating to the applicable period. A list of all federal, state,
local and foreign income tax returns filed with respect to Seller for taxable
periods ended on or after December 31, 1993, is set forth in Schedule 2.4
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attached hereto, and said schedule indicates those returns that have been
audited or currently are the subject of an audit. Seller has delivered to Buyer
correct and complete copies of all federal, state, local and foreign income tax
returns listed on said schedule, and of all examination reports and statements
of deficiencies assessed against or agreed to by Seller with respect to said
returns.
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(c) Neither the Internal Revenue Service nor any other governmental
authority is now asserting or, to the knowledge of Seller or the Principals,
threatening to assert against Seller any deficiency or claim for additional
Taxes. To the knowledge of Seller and the Principals, no claim has ever been
made by an authority in a jurisdiction where Seller does not file reports and
returns that Seller is or may be subject to taxation by that jurisdiction.
There are no security interests on any of the Assets of Seller that arose in
connection with any failure (or alleged failure) to pay any Taxes. Seller has
never entered into a closing agreement pursuant to Section 7121 of the Internal
Revenue Code of 1986, as amended (the "Code")
(d) Except as set forth in Schedule 2.4, there has not been any
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completed or current audit of any tax return filed by Seller, and Seller has not
been notified by any tax authority that any such audit is contemplated or
pending. Except as set forth in Schedule 2.4, no extension of time with respect
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to any date on which a tax return was or is to be filed by Seller is in force,
and no waiver or agreement by Seller is in force for the extension of time for
the assessment or payment of any Taxes.
(e) Seller has never been (and has never had any liability for unpaid
Taxes because it once was) a member of an "affiliated group" (as defined in
Section 1504(a) of the Code). Seller has never filed, and has never been
required to file, a consolidated, combined or unitary tax return with any other
entity. Seller does not own and has never owned a direct or indirect interest
in any trust, partnership, corporation or other entity and therefore Buyer is
not acquiring from Seller an interest in any entity. Except as set forth in
Schedule 2.4, Seller is not a party to any tax sharing agreement.
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(f) Seller is not a "foreign person" within the meaning of Section
1445 of the Code and Treasury Regulations Section 1.1445-2.
(g) For purposes of this Agreement, all references to Sections of the
Code shall include any predecessor provisions to such Sections and any similar
provisions of federal, state, local or foreign law.
2.5 Compliance with Laws. Seller's operation of the Business and the
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Assets is in compliance in all material respects with all applicable statutes,
ordinances, orders, rules and regulations promulgated by any federal, state,
municipal or other governmental authority (including the Federal Communications
Commission), and Seller has not received notice of a violation or alleged
violation of any such statute, ordinance, order, rule or regulation.
2.6 Insurance. The physical properties and tangible Assets are insured to
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the extent disclosed in Schedule 2.6, and all insurance policies and
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arrangements of Seller in effect as of the date hereof are disclosed in said
Schedule. Said insurance policies and arrangements are in full force and
effect, all premiums with respect thereto are currently paid, and Seller is in
compliance in all material respects with the terms thereof. Said insurance is
adequate and customary for the business engaged in by Seller and is sufficient
for compliance by Seller with all requirements of law and all agreements and
leases to which Seller is a party.
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2.7 Contracts. The Contracts constitute all leases, contracts and
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arrangements, whether oral or written, under which Seller is bound or to which
Seller is a party which relate to the Business or Assets. Schedule 1.1(b)
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attached hereto contains a true, correct and complete list of all Contracts.
Each Contract is valid, in full force and effect and binding upon Seller and the
other parties thereto in accordance with its terms. Neither Seller nor, to the
knowledge of Seller and the Principals, any other party is in default under or
in arrears in the performance, payment or satisfaction of any agreement or
condition on its part to be performed or satisfied under any Contract, nor does
any condition exist that with notice or lapse of time or both would constitute
such a default, and no waiver or indulgence has been granted by any party under
any Contract. Seller has not received notice of, and each of Seller and the
Principals have no knowledge of, any fact which would result in a termination,
repudiation or breach of any Contract. Seller has provided Buyer with true and
complete copies of all of such Contracts.
2.8 Title. Seller has good and marketable title to all of the Assets free
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and clear of all mortgages, pledges, security interests, charges, liens,
restrictions and encumbrances of any kind (collectively, "Liens") whatsoever,
except for the Liens set forth on Schedule 2.8. Upon the sale, assignment,
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transfer and delivery of the Assets to Buyer hereunder and under the Seller
Documents, there will be vested in Buyer good, marketable and indefeasible title
to the Assets, free and clear of all Liens. The Assets include all of the
assets and properties (i) held for use by Seller to conduct the Business as
presently conducted and (ii) necessary for Buyer to operate the Business in the
same manner as such business is currently operated by Seller. All of the
tangible Assets are in good repair, have been well maintained and are in good
operating condition, do not require any material modifications or repairs, and
comply in all material respects with applicable laws, ordinances and
regulations, ordinary wear and tear excepted. Seller has delivered complete and
true copies of all real property leases (the "Leases") set forth on Schedule
--------
1.1(b). Seller holds good, clear, marketable, valid and enforceable leasehold
------
interest in the real property subject to the Leases (the "Leased Real
Property"), subject only to the right of reversion of the landlord or lessor
under the Leases, free and clear of all other prior or subordinate interests,
including, without limitation, mortgages, deeds of trust, ground leases, leases,
subleases, assessments, tenancies, claims, covenants, conditions, restrictions,
easements, judgments or other encumbrances or matters affecting title, and free
of encroachments onto or off of the leased real property. There are no material
defects in the physical condition of any improvements constituting a part of the
Leased Real Property, including, without limitation, structural elements,
mechanical systems, roofs or parking and loading areas, and all of such
improvements are in good operating condition and repair, have been well
maintained. All water, sewer, gas, electric, telephone, drainage and other
utilities required by law or necessary for the current or planned operation of
the Leased Real Property have been installed and connected pursuant to valid
permits, and are sufficient to service the Leased Real Property.
2.9 Litigation. Except as set forth in Schedule 2.9, Seller is not now
---------- ------------
involved in nor, to the knowledge of Seller and the Principals, is Seller
threatened to be involved in any litigation or legal or other proceedings
related to or affecting the Business or any Asset or
11
which would prevent or hinder the consummation of the transactions contemplated
by this Agreement. Seller has not been operating the Business under, and the
Business is not subject to, any order, injunction or decree of any court of
federal, state, municipal or other governmental department, commission, board,
agency or instrumentality.
2.10 Employees; Labor Matters. Seller employs approximately twenty-one (21)
------------------------
full-time employees and four (4) part-time employees and generally enjoys good
employer-employee relationships. Seller shall provide to Buyer a list of the
employees of Seller in connection with the Business at least ten (10) days prior
to Closing, including the name, date of hire and wages of such employees.
Seller is not delinquent in payments to any of its employees for any wages,
salaries, commissions, bonuses or other direct compensation for any services
performed for it to the date hereof or amounts required to be reimbursed to such
employees. Upon termination of the employment of any of said employees, neither
Seller nor Buyer will by reason of the acquisition transaction or anything done
prior to the Closing be liable to any of said employees for so-called "severance
pay" or any other payments, except as set forth in Schedule 2.10. Seller does
-------------
not have any policy, practice, plan or program of paying severance pay or any
form of severance compensation in connection with the termination of employment,
except as set forth in said Schedule. Seller is in compliance in all material
respects with all applicable laws and regulations respecting labor, employment,
fair employment practices, work place safety and health, terms and conditions of
employment, and wages and hours. There are no charges of employment
discrimination or unfair labor practices, nor are there any strikes, slowdowns,
stoppages of work, or any other concerted interference with normal operations
existing, pending or, to the knowledge of Seller and the Principals, threatened
against or involving Seller. No question concerning representation exists
respecting any group of employees of Seller. There are no grievances,
complaints or charges that have been filed against Seller under any dispute
resolution procedure (including, but not limited to, any proceedings under any
dispute resolution procedure under any collective bargaining agreement) that
might have an adverse effect on Seller or the conduct of its business and no
arbitration or similar proceeding is pending and no claim therefor has been
asserted. No collective bargaining agreement is in effect or is currently being
or is about to be negotiated by Seller. Seller has received no information to
indicate that any of its employment policies or practices is currently being
audited or investigated by any federal, state or local government agency.
Seller is, and at all times since November 6, 1986 has been, in compliance with
the requirements of the Immigration Reform Control Act of 1986.
2.11 Financial Statements. Attached hereto as Schedule 2.11 are copies of
-------------------- -------------
the balance sheet of Seller as at August 31, 1998 (the "Base Balance Sheet") and
the statements of income and expense of Seller for August 31, 1998 (collectively
the "Financial Statements"). The Financial Statements have been prepared in
accordance with generally accepted accounting principles applied consistently
during the periods covered thereby (except for the absence of footnotes with
respect to unaudited financials), are complete and correct and present fairly
and accurately the financial condition of the Business at the dates of said
statements and the results of operations of the Business for the periods covered
thereby. As of the date of the Base Balance Sheet (the "Base Balance Sheet
Date"), Seller had no liabilities or obligations of any
12
kind with respect to the Business, whether accrued, contingent or otherwise,
that are not disclosed and adequately reserved against on the Base Balance
Sheet. As of the date hereof and at the Closing, Seller had and will have no
liabilities or obligations of any kind with respect to the Business, whether
accrued, contingent or otherwise, that are not disclosed and adequately reserved
against on the Base Balance Sheet.
2.12 Business Since the Base Balance Sheet Date. Since the Base Balance
------------------------------------------
Sheet Date:
(a) there has been no material adverse change in the Business or in
the Assets, operations or financial condition of the Business;
(b) the Business has, in all material respects, been conducted in the
ordinary course of business and in substantially the same manner as it was
conducted before the date of the Base Balance Sheet Date;
(c) there has not been any material obligation or liability
(contingent or other) incurred by Seller with respect to the Business, whether
or not incurred in the ordinary course of business;
(d) there has not been any purchase, sale or other disposition, or
any agreement or other arrangement, oral or written, for the purchase, sale or
other disposition, of any material properties or assets of the Business, whether
or not in the ordinary course of business;
(e) there has not been any mortgage, encumbrance or lien placed on
any of the Assets, nor any payment or discharge of a material lien or liability
of Seller which was not reflected on the Base Balance Sheet;
(f) there has not been any damage, destruction or loss, whether or
not covered by insurance, adversely affecting the Business or Assets;
(g) there has not been any change in the collection, payment and
accounting policies used by Seller in the Business; and
(h) there has not been any agreement or understanding, whether in
writing or otherwise, for Seller to take any of the actions specified above.
2.13 Licenses. As of the date of this Agreement, Seller is the holder of
--------
all licenses, permits and authorizations with respect to the Business (the
"Authorizations"). The Authorizations constitute all of the licenses, permits
and authorizations required for operation of the Business as now operated. All
of the Authorizations are in full force and effect and no licenses, permits or
authorizations of any governmental department or agency are required for the
operation of the Business which have not been duly obtained. As of the date
hereof, there
13
is not pending or, to the knowledge of Seller and the Principals, threatened any
action by or before any governmental agency to revoke, cancel, rescind or modify
any of the Authorizations, and there is not now issued or outstanding or, to the
knowledge of Seller and the Principals, pending or threatened any order to show
cause, notice of violation, notice of apparent liability, or notice of
forfeiture or complaint against Seller with respect to the Business.
2.14 Approvals; Consents. Except as set forth on Schedule 2.14 attached
------------------- -------------
hereto, no approval, consent, authorization or exemption from or filing with any
person or entity not a party to this Agreement is required to be obtained or
made by Seller in connection with the execution and delivery of this Agreement
and the Seller Documents and the consummation of the transactions contemplated
hereby and thereby. All of the approvals, consents and authorizations listed on
Schedule 2.14 shall be obtained by Seller at or prior to the Closing.
-------------
2.15 Customers and Suppliers. Seller's relations with its customers and
-----------------------
suppliers, including its Subscribers, are good and there are not pending or, to
Seller's knowledge, threatened claims or controversies with any customer or
suppliers that is material to the Assets or the Business.
2.16 Subscribers. Schedule 2.16(a) attached hereto sets forth, as of the
----------- ----------------
date hereof, the Subscribers of the Business as listed by class, type and
billing plan. As of the Closing Date, the Business will have no fewer than
7,100 Dial-up Subscribers, 67 Dedicated Subscribers and 400 Web-hosting and/or
Domain-hosting Subscribers, all as set forth on Schedule 2.16(a) attached
----------------
hereto. For purposes of this Agreement, the terms "Subscriber" shall mean any
active subscriber to Internet services offered by Seller in the Business who has
subscribed to a service for at least one month and has paid at least one xxxx,
including, without limitation, any person who receives dial-up Internet access
through the Business (a "Dial-up Subscriber"), any person who receives Internet
access from Seller offering higher data transmission rates than available from
dial-up access (a "Dedicated Subscriber") and any person with a web page or
domain name on Seller's server and to whom Seller provides Internet access (a
"Web-hosting Subscriber"); provided, however, that "Subscriber" shall not
-------- -------
include any person who is (i) more than forty-five (45) days delinquent in
payment of such person's xxxx for such services provided by the Business and
(ii) any person receiving complimentary Internet services or Internet services
at a promotional discounted rate. Set forth on Schedule 2.16(b) attached hereto
----------------
is a listing of all such accounts which receive complimentary Internet services
or Internet services at a promotional discounted rate.
2.17 Brokers. Except for Rampart Associates, Inc., whose fees shall be
-------
paid by Seller at or prior to the Closing, Seller has not incurred, and will not
incur, any liability for a commission or brokerage fee in connection with this
Agreement or the transactions contemplated hereby.
2.18 Collectibility of Accounts Receivable. All of the Accounts Receivable
-------------------------------------
of Seller are or will be as of the Closing Date bona fide, valid and enforceable
claims, subject to no
14
setoff or counterclaim and to Seller's knowledge are collectible in accordance
with their terms. Seller has no accounts or loans receivable from any person,
firm or corporation which is affiliated with Seller or from any member or
employee of Seller, or from any of their respective spouses or family members.
2.19 Banking Relations. All of the arrangements which Seller has with any
-----------------
banking institution are completely and accurately described in Schedule 2.19,
-------------
indicating with respect to each of such arrangements the type of arrangement
maintained (such as checking account, borrowing arrangements, safe deposit box,
etc.) and the person or persons authorized in respect thereof.
2.20 Intellectual Property.
---------------------
(a) Set forth on Schedule 2.20 hereto are all computer programs and
-------------
related documentation sold, marketed, licensed and distributed by Seller (the
"Products"). All of the Intellectual Property of Seller is set forth on
Schedule 2.20 attached hereto. For purposes hereof, the term "Intellectual
-------------
Property" includes: (i) all patents, patent applications, patent rights, and
inventions and discoveries and invention disclosures (whether or not patented)
(collectively, "Patents"); (ii) the name "NetLink Systems", all trade names
including "Net-Link", trade dress, logos, packaging design, slogans, Internet
domain names, registered and unregistered trademarks and service marks and
applications (collectively, "Marks"); (iii) all copyrights in both published and
unpublished works, including, without limitation, all compilations, databases
and computer programs, and all copyright registrations and applications, and all
derivatives, translations, adaptations and combinations of the above
(collectively, "Copyrights"); (iv) all know-how, trade secrets, confidential or
proprietary information, customer lists, IP addresses, research in progress,
algorithms, data, designs, processes, formulae, drawings, schematics,
blueprints, flow charts, models, prototypes, techniques, Beta testing procedures
and Beta testing results (collectively, "Trade Secrets"); (v) Seller's web-sites
(including the domain name "xxx.xxx-xxxx.xxx" and any other similar domain
names; (vi) all goodwill, franchises, licenses, permits, consents, approvals,
technical information, telephone numbers, and claims of infringement against
third parties (the "Rights"); and (vii) all contracts relating to the Products
and the Intellectual Property to which Seller is a party or is bound, including,
without limitation, all nondisclosure and/or confidentiality agreements entered
into by persons in connection with disclosures by Seller (collectively,"Assigned
Contracts").
(b) Except as described in Schedule 2.20, Seller has exclusive
-------------
ownership of, and has good, valid and marketable title to, all of the
Intellectual Property, free and clear of any Liens, and has the right to use all
of the Intellectual Property without payment to any third party. Seller's
rights in all of such Intellectual Property are freely transferable. There are
no claims or demands pending or, to the knowledge of Seller and the Principals,
threatened of any other person pertaining to any of such Intellectual Property
and no proceedings have been instituted, or are pending or, to the knowledge of
Seller and the Principals, threatened against Seller and/or its members,
employees and consultants which challenge the validity and
15
enforceability of Seller's rights in respect of the Intellectual Property. The
Intellectual Property constitutes all of the assets of Seller used in designing,
creating and developing the Products, and represent all of such Intellectual
Property necessary for the operation of Seller's Business as currently
conducted.
All current employees, consultants and contractors of Seller have executed
written instruments with Seller that assign to Seller all rights to any
inventions, improvements, discoveries, or information relating to the business
of Seller. No employee, consultant or contractor of Seller has entered into any
agreement that restricts or limits in any way the scope or type of work in which
the employee, consultant or contractor may be engaged or requires the employee,
consultant or contractor to transfer, assign, or disclose information concerning
his work to anyone other than Seller.
(c) Schedule 2.20 sets forth a complete and accurate list and summary
-------------
description of all of Seller's Patents. All of the issued Patents are currently
in compliance with formal legal requirements (including without limitation
payment of filing, examination and maintenance fees and proofs of working or
use), are valid and enforceable, and are not subject to any maintenance fees or
taxes or actions falling due within ninety (90) days after the Closing Date. In
each case where a Patent is held by Seller by assignment, the assignment has
been duly recorded with the U.S. Patent and Trademark Office and all other
jurisdictions of registration. No Patent has been or is now involved in any
interference, reissue, re-examination or opposition proceeding. To the
knowledge of Seller and the Principals, there is no potentially interfering
Patent of any third party. All products made, used or sold under the Patents
have been marked with the proper patent notice.
(d) Schedule 2.20 sets forth a complete and accurate list and summary
-------------
description of all of Seller's Marks. All Marks that have been registered with
the United States Patent and Trademark Office and/or any other jurisdiction are
currently in compliance with formal legal requirements (including, without
limitation, the timely post-registration filing of affidavits of use and
incontestability and renewal applications), are valid and enforceable, and are
not subject to any maintenance fees or taxes or actions falling due within
ninety (90) days after the Closing Date. In each case where a Trademark is held
by Seller by assignment, the assignment has been duly recorded with the U.S.
Patent and Trademark Office and all other jurisdictions of registration. No
Xxxx has been or is now involved in any opposition, invalidation or cancellation
proceeding and, to the knowledge of Seller and the Principals, no such action is
threatened with respect to any of the Marks. All products and materials
containing a Xxxx xxxx the proper notice where permitted by law.
(e) Schedule 2.20 sets forth a complete and accurate list and summary
-------------
description of all of Seller's Copyrights. All the Copyrights have been
registered with the United States Copyright Office and are currently in
compliance with formal legal requirements, are valid and enforceable, and are
not subject to any fees or taxes or actions falling due within ninety (90) days
after the Closing Date. In each case where a Copyright is held by Seller by
assignment, the assignment has been duly recorded with the U.S. Copyright Office
and all
16
other jurisdictions of registration. None of the source or object code,
algorithms, or structure included in the Products is copied from, based upon, or
derived from any other source or object code, algorithm or structure in
violation of the rights of any third party. Any substantial similarity of the
Products to any computer program owned by any third party did not result from
the Products being copied from, based upon, or derived from any such computer
software program in violation of the rights of any third party. All copies of
works encompassed by the Copyrights have been marked with the proper copyright
notice.
(f) Seller has taken all reasonable security measures (including,
without limitation, entering into appropriate confidentiality and non-disclosure
agreements with all members, employees, consultants and contractors of Seller
and any other persons with access to the Trade Secrets) to protect the secrecy,
confidentiality and value of all Trade Secrets. To the knowledge of Seller and
the Principals, there has not been any breach by any party to any such
confidentiality or non-disclosure agreement. The Trade Secrets have not been
disclosed by Seller to any person or entity other than employees or contractors
of Seller who had a need to know and use the Trade Secrets in the course of
their employment or contract performance. Except as set forth on Schedule 2.20,
-------------
(i) Seller has not directly or indirectly granted any rights or interests in the
source code of the Products, and (ii) since Seller developed the source code of
the Products, Seller has not provided, licensed or disclosed the source code of
the Products to any person or entity. Seller has the right to use, free and
clear of claims of third parties, all Trade Secrets. To the knowledge of Seller
and the Principals, there is not any assertion that the use by Seller of any
Trade Secret violates the rights of any third party.
(g) Seller has the exclusive right to use, license, distribute,
transfer and bring infringement actions with respect to the Intellectual
Property. Except as set forth on Schedule 2.20, Seller (i) has not licensed or
-------------
granted to anyone rights of any nature to use any of its Intellectual Property
and (ii) is not obligated to and does not pay royalties or other fees to anyone
for its ownership, use, license or transfer of any of its Intellectual Property.
(h) All licenses or other agreements under which Seller is granted
rights by others in Intellectual Property are listed in Schedule 2.20. All such
-------------
licenses or other agreements are in full force and effect, to the knowledge of
Seller and the Principals there is no material default by any party thereto, and
all of the rights of Seller thereunder are freely assignable. True and complete
copies of all such licenses or other agreements, and any amendments thereto,
have been provided to Buyer, and Seller has no reason to believe that the
licensors under the licenses and other agreements under which Seller is granted
rights and has granted rights to others do not have and did not have all
requisite power and authority to grant the rights purported to be conferred
thereby.
(i) All licenses or other agreements under which Seller has granted
rights to others in Intellectual Property are listed in Schedule 2.20. All such
-------------
licenses or other agreements are in full force and effect, and to the knowledge
of Seller and the Principals there is no material default by any party thereto.
True and complete copies of all such licenses or other agreements, and any
amendments thereto, have been provided to Buyer.
17
(j) Seller has no obligation to any other person to maintain, modify,
improve or upgrade the Products.
(k) None of the Products manufactured and sold, nor any process or
know-how used, by Seller infringes or is alleged to infringe any patent,
trademark, service xxxx, trade name, copyright or other proprietary right or is
a derivative work based on the work of any other person.
(l) There are no (i) actions, suits, claims, investigations or other
proceedings involving the Products, the Intellectual Property, or the Rights by
or before any governmental authority or arbitrator pending or, to the knowledge
of Seller and the Principals, threatened against Seller, or (ii) judgments,
decrees, injunctions, or orders involving the Products, the Intellectual
Property or the Rights of any governmental authority or arbitrator against
Seller. Seller is not in default under any such judgment, decree, injunction or
order.
(m) The Products perform in accordance with their published
specifications and documentation and as Seller has warranted to its customers.
Except for hardware devices and components purchased from various manufacturers
and vendors, Seller has reviewed the areas within its businesses and operations
which could be adversely affected by, and has developed a program to address on
a timely basis, the "Year 2000 Problem" (i.e., the risk that applications used
by Seller or its suppliers and/or providers may be unable to recognize and
properly perform date-sensitive functions involving certain dates prior to and
any date after December 31, 1999). Seller reasonably believes that the "Year
2000 Problem" will not have any material adverse effect on the business or
operations of Seller.
2.21 Absence of Restrictions. Seller has not entered into any other
-----------------------
agreement or arrangement with any other party with respect to the sale, transfer
or any other disposition or encumbrance of the Business or the Assets, in whole
or in part.
2.22 Permits; Burdensome Agreements. Schedule 2.22 lists all permits,
------------------------------ -------------
registrations, licenses, franchises, certifications and other approvals
(collectively, the "Approvals") required from federal, state or local
authorities in order for Seller to conduct its Business. Seller has obtained
all such Approvals, which are valid and in full force and effect, and is
operating in compliance therewith. Such Approvals include, but are not limited
to, those required under federal, state or local statutes, ordinances, orders,
requirements, rules, regulations, or laws pertaining to environmental
protection, public health and safety, worker health and safety, buildings,
highways or zoning. Except as disclosed in Schedule 2.22, all such Approvals
-------------
will be available and assigned to Buyer and remain in full force and effect upon
Buyer's purchase of the Assets, and no further Approvals will be required in
order for Buyer to conduct the business currently conducted by Seller subsequent
to the Closing. Except as disclosed in Schedule 2.22 or in any other schedule
-------------
hereto, Seller is not subject to or bound by any agreement, arrangement,
judgment, decree or order which may materially and adversely affect its business
or prospects, its condition, financial or otherwise, or any of its assets or
properties.
18
2.23 Transactions with Interested Persons. Except as set forth in Schedule
------------------------------------ --------
2.23 hereto, neither Seller, nor any member or supervisory employee of Seller
----
or, to the knowledge of Seller or the Principals, any of their respective
spouses or family members owns directly or indirectly on an individual or joint
basis any material interest in, or serves as an officer or director or in
another similar capacity of, any competitor or supplier of Seller, or any
organization which has a material contract or arrangement with Seller.
2.24 Employee Benefit Programs.
-------------------------
(a) Schedule 2.24 lists every Employee Program (as defined below)
-------------
that has been maintained (as defined below) by Seller at any time during the
three-year period ending on the Closing Date.
(b) Each Employee Program which has ever been maintained by Seller
and which has at any time been intended to qualify under Section 401(a) or
501(c)(9) of the Code has received a favorable determination or approval letter
from the Internal Revenue Service ("IRS") regarding its qualification under such
section and has, in fact, been continuously qualified under the applicable
section of the Code since the effective date of such Employee Program. No event
or omission has occurred which would cause any such Employee Program to lose its
qualification under the applicable Code section.
(c) Seller does not know, and has no reason to know, of any failure
of any party to comply with any laws applicable to the Employee Programs that
have been maintained by Seller. With respect to any Employee Program ever
maintained by Seller, there has occurred no "prohibited transaction," as defined
in Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") or Section 4975 of the Code, or breach of any duty under ERISA
or other applicable law (including, without limitation, any health care
continuation requirements or any other tax law requirements, or conditions to
favorable tax treatment, applicable to such plan), which could result, directly
or indirectly, in any taxes, penalties or other liability to Buyer. To the
knowledge of Seller, no litigation, arbitration, or governmental administrative
proceeding (or investigation) or other proceeding (other than those relating to
routine claims for benefits) is pending or threatened with respect to any such
Employee Program.
(d) Neither Seller nor any Affiliate (as defined below) (i) has ever
maintained any Employee Program which has been subject to Title IV of ERISA
(including, but not limited to, any Multiemployer Plan (as defined below)) or
(ii) has ever provided health care or any other non-pension benefits to any
employees after their employment is terminated (other than as required by part 6
of subtitle B of title I of ERISA) or has ever promised to provide such post-
termination benefits.
(e) With respect to each Employee Program maintained by Seller within
the three (3) years preceding the Closing, complete and correct copies of the
following documents (if applicable to such Employee Program) have previously
been delivered to Buyer: (i) all
19
documents embodying or governing such Employee Program, and any funding medium
for the Employee Program (including, without limitation, trust agreements) as
they may have been amended; (ii) the most recent IRS determination or approval
letter with respect to such Employee Program under Code Section 401 or
501(c)(9), and any applications for determination or approval subsequently filed
with the IRS; (iii) the three most recently filed IRS Forms 5500, with all
applicable schedules and accountants' opinions attached thereto; (iv) the
summary plan description for such Employee Program (or other descriptions of
such Employee Program provided to employees) and all modifications thereto; (v)
any insurance policy (including any fiduciary liability insurance policy)
related to such Employee Program; (vi) any documents evidencing any loan to an
Employee Program that is a leveraged employee stock ownership plan; and (vii)
all other materials reasonably necessary for Buyer to perform any of its
responsibilities with respect to any Employee Program subsequent to the Closing
(including, without limitation, health care continuation requirements).
(f) For purposes of this section:
(i) "Employee Program" means (A) all employee benefit plans
within the meaning of ERISA Section 3(3), including, but not limited to,
multiple employer welfare arrangements (within the meaning of ERISA Section
3(4)), plans to which more than one unaffiliated employer contributes and
employee benefit plans (such as foreign or excess benefit plans) which are
not subject to ERISA; and (B) all stock or cash option plans, restricted
stock plans, bonus or incentive award plans, severance pay policies or
agreements, deferred compensation agreements, supplemental income
arrangements, vacation plans, and all other employee benefit plans,
agreements, and arrangements not described in (A) above. In the case of an
Employee Program funded through an organization described in Code Section
501(c)(9), each reference to such Employee Program shall include a
reference to such organization.
(ii) An entity "maintains" an Employee Program if such entity
sponsors, contributes to, or provides (or has promised to provide) benefits
under such Employee Program, or has any obligation (by agreement or under
applicable law) to contribute to or provide benefits under such Employee
Program, or if such Employee Program provides benefits to or otherwise
covers employees of such entity, or their spouses, dependents, or
beneficiaries.
(iii) An entity is an "Affiliate" of Seller if it would have
ever been considered a single employer with Seller under ERISA Section
4001(b) or part of the same "controlled group" as Seller for purposes of
ERISA Section 302(d)(8)(C).
(iv) "Multiemployer Plan" means a (pension or non-pension)
employee benefit plan to which more than one employer contributes and which
is maintained pursuant to one or more collective bargaining agreements.
20
2.25 Environmental Matters.
---------------------
(a) Except as set forth in Schedule 2.25, (i) Seller has never
-------------
generated, transported, used, stored, treated, disposed of, or managed any
Hazardous Waste (as defined below); (ii) to Seller's knowledge, no Hazardous
Material (as defined below) has ever been or is threatened to be spilled,
released, or disposed of at any site presently or formerly owned, operated,
leased, or used by Seller, or has ever been located in the soil or groundwater
at any such site; (iii) to Seller's knowledge, no Hazardous Material has ever
been transported from any site presently or formerly owned, operated, leased, or
used by Seller for treatment, storage, or disposal at any other place; (iv)
Seller does not presently own, operate, lease, or use, nor has it previously
owned, operated, leased, or used any site on which underground storage tanks are
or were located; and (v) no lien has ever been imposed by any governmental
agency on any property, facility, machinery, or equipment owned, operated,
leased, or used by Seller in connection with the presence of any Hazardous
Material.
(b) Except as set forth in Schedule 2.25, (i) To Seller's knowledge,
-------------
Seller has no liability under, nor has it ever violated, any Environmental Law
(as defined below); (ii) to Seller's knowledge, Seller, any property owned,
operated, leased, or used by Seller, and any facilities and operations thereon
are presently in compliance with all applicable Environmental Laws; (iii) Seller
has never entered into or been subject to any judgment, consent decree,
compliance order, or administrative order with respect to any environmental or
health and safety matter or received any request for information, notice, demand
letter, administrative inquiry, or formal or informal complaint or claim with
respect to any environmental or health and safety matter or the enforcement of
any Environmental Law; and (iv) Seller has no knowledge or reason to know that
any of the items enumerated in clause (iii) of this subsection will be
forthcoming.
(c) Except as set forth in Schedule 2.25 hereto, to the knowledge of
-------------
Seller and the Principals, no site owned, operated, leased, or used by Seller
contains any asbestos or asbestos-containing material, any polychlorinated
biphenyls (PCBs) or equipment containing PCBs, or any urea formaldehyde foam
insulation.
(d) Seller has, to the knowledge of Seller and the Principals,
provided to Buyer copies of all documents, records, and information available to
Seller concerning any environmental or health and safety matter relevant to
Seller, whether generated by Seller or others, including, without limitation,
environmental audits, environmental risk assessments, site assessments,
documentation regarding off-site disposal of Hazardous Materials, spill control
plans, and reports, correspondence, permits, licenses, approvals, consents, and
other authorizations related to environmental or health and safety matters
issued by any governmental agency.
(e) For purposes of this Section 2.25, (i) "Hazardous Material" shall
mean and include any hazardous waste, hazardous material, hazardous substance,
petroleum product, oil, toxic substance, pollutant, contaminant, or other
substance which may pose a threat to the
21
environment or to human health or safety, as defined or regulated under any
Environmental Law; (ii) "Hazardous Waste" shall mean and include any hazardous
waste as defined or regulated under any Environmental Law; (iii) "Environmental
Law" shall mean any environmental or health and safety-related law, regulation,
rule, ordinance, or by-law at the foreign, federal, state, or local level,
whether existing as of the date hereof, previously enforced, or subsequently
enacted; and (iv) "Seller" shall mean and include Seller and all other entities
for whose conduct Seller is or may be held responsible under any Environmental
Law.
2.26 Disclosure. The representations, warranties and statements contained
----------
in this Agreement and in the certificates, exhibits and schedules delivered by
Seller and the Principals to Buyer pursuant to this Agreement do not contain any
untrue statement of a material fact, and, when taken together, do not omit to
state a material fact required to be stated therein or necessary in order to
make such representations, warranties or statements not misleading in light of
the circumstances under which they were made. There are no facts known to
Seller or the Principals which presently or may in the future have a material
adverse affect on the Business, properties, Assets, prospects, operations or
(financial or other) condition of Seller which has not been specifically
disclosed herein or in a Schedule furnished herewith, other than general
economic conditions affecting the Internet services industry generally.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF BUYER. As a material inducement to
Seller entering into this Agreement, Buyer hereby represents and warrants to
Seller as follows:
3.1 Organization. Buyer is a corporation duly organized, validly existing
------------
and in good standing under the laws of the State of Michigan. Buyer has all
requisite power and authority to conduct its business as it is now conducted and
to own, lease and operate its properties and assets.
3.2 Required Action. All actions and proceedings necessary to be taken by
---------------
or on the part of Buyer in connection with the transactions contemplated by this
Agreement have been duly and validly taken, and this Agreement and each other
agreement, document and instrument to be executed and delivered by or on behalf
of Buyer pursuant to, or as contemplated by, this Agreement (collectively, the
"Buyer Documents") has been duly and validly authorized, executed and delivered
by Buyer and no other action on the part of Buyer or its shareholders is
required in connection therewith. Buyer has full right, authority, power and
capacity to execute and deliver this Agreement and each other Buyer Document and
to carry out the transactions contemplated hereby and thereby. This Agreement
and each other Buyer Document constitutes, or when executed and delivered will
constitute, the legal, valid and binding obligations of Buyer enforceable in
accordance with its respective terms.
3.3 No Conflicts. The execution, delivery and performance by Buyer of
------------
this Agreement and each other Buyer Document does not and will not (a) violate
any provision of the Articles of Incorporation or by-laws of Buyer, as amended
to date, (b) constitute a violation of, or conflict with or result in any breach
of, acceleration of any obligation under, right of
22
termination under, or default under, any agreement or instrument to which Buyer
is a party or by which it is bound, (c) violate any judgment, decree, order,
statute, rule or regulation applicable to Buyer, (d) require Buyer to obtain any
approval, consent or waiver of, or to make any filing with, any person or entity
(governmental or otherwise) that has not been obtained or made. The officers who
execute this Agreement and the other Buyer Documents contemplated hereby on
behalf of Buyer have and shall have all requisite power to do so in the name of
and on behalf of Buyer.
3.4 Brokers. Buyer has not retained any broker or finder or other person
-------
who would have any valid claim against any of the parties to this Agreement for
a commission or brokerage fee in connection with this Agreement or the
transactions contemplated hereby.
SECTION 4. COVENANTS OF SELLER. Seller covenants and agrees that, from the date
hereof until consummation of the transactions contemplated hereby at the
Closing, Seller shall:
4.1 Access to Premises and Records. Seller shall give Buyer and its
------------------------------
representatives, at reasonable times and with reasonable prior notice, free
access to the properties, books and records of the Business and to the Assets
and will furnish to Buyer and its representatives such information regarding the
Business and the Assets as Buyer or its representatives may from time to time
reasonably request in order that Buyer may have full opportunity to make a
diligent investigation consistent with this Agreement. In addition to, and not
in limitation of the foregoing, Seller shall provide Buyer with access to and
copies of the records of all: (a) Accounts Receivable, (b) Subscriber billing,
(c) pre-paid accounts, (d) accounts for which no remuneration is received by
Seller and (e) general reports with respect to each category of service provided
by the Business.
4.2 Continuity and Maintenance of Operations of the Business. Except as
--------------------------------------------------------
to actions which Buyer has been advised and to which Buyer has consented to in
writing, and except as specifically permitted or required by this Agreement,
Seller shall:
(a) Operate the Business in the ordinary course consistent with past
practices, use its commercially reasonable efforts to keep available the
services of the employees who are involved in the operation of the Business, and
use reasonable best efforts to preserve any beneficial business relationships
with Subscribers, customers, suppliers and others having business dealings with
Seller relating to the Business;
(b) Use and operate the Assets in a manner consistent with past
practice and maintain the Assets in good operating condition, ordinary wear and
tear excepted;
(c) Maintain adequate inventories of spare Equipment consistent with
past practices;
(d) Maintain insurance upon the Assets in such amounts and types as
in effect on the date of this Agreement as set forth in Schedule 2.6 attached
------------
hereto;
23
(e) Keep all of its business books, records and files in the ordinary
course of business in accordance with past practices, and provide Buyer with
access thereto upon its reasonable request;
(f) Continue to implement its procedures for disconnection and
discontinuance of service to subscribers whose accounts are delinquent in
accordance with those in effect on the date of this Agreement;
(g) Perform and comply in all material respects with the terms of the
Contracts and keep such Contracts in full force and effect; and
(h) Preserve the goodwill of the Business.
4.3 Negative Covenants. Seller shall not, without the prior written
------------------
consent of Buyer:
(a) Sell, transfer, lease, assign or otherwise dispose of, or agree
to sell, transfer, lease, assign or otherwise dispose of, any Assets;
(b) Enter into any contract or commitment for the acquisition of
goods or services relating to the Business (other than in the ordinary course of
business) or which otherwise obligates Seller to perform in full or in part
beyond the Closing Date;
(c) Hire any new employees or enter into any employment arrangements
or otherwise increase the salary or compensation of any existing employees;
(d) Renegotiate, modify, amend or terminate any Contract;
(e) Create, assume, or permit to exist, or agree to incur, assume or
acquire, any Lien, claim or liability on the Assets;
(f) Make any modifications or changes to the existing rate schedules
or product offerings in effect with respect to the Business;
(g) Offer or employ any sales discounts, free services or other
extraordinary marketing practices or extraordinary promotions outside the
ordinary course of business and not consistent with Seller's past practices;
(h) Take any actions or permit its employees and agents to take any
actions which would materially interfere with or preclude the transactions
contemplated by this Agreement; and
(i) Cause or permit the provision for any new and material pension,
retirement or other employment benefits for employees who perform services in
connection
24
with the conduct of the Business or any material increase in any existing
benefits (other than as required by law).
4.4 Consents. Seller will use its reasonable best efforts to obtain, as
--------
soon as practicable and at its expense, the consent of all third parties under
the Contracts for which the prior approval of such third party is required
pursuant to the terms of the Contract, in form and substance reasonably
satisfactory to Buyer; provided, however, that "reasonable best efforts" for
-------- -------
this purpose shall not require Seller to undertake extraordinary or unreasonable
measures to obtain such approvals and consents, including, without limitation,
the initiation or prosecution of legal proceedings or the payment of fees in
excess of customary filing and processing fees.
4.5 Notification of Certain Matters. Seller shall promptly notify Buyer
-------------------------------
of (i) any fact, event, circumstances or action the existence or occurrence of
which would cause any of Seller's representations or warranties under this
Agreement, or the disclosures in any schedules or exhibits attached hereto, not
to be true in any material respect and (ii) any failure on its part to comply
with or satisfy in any material respect any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement. Seller shall promptly
notify buyer in writing of the assertion, commencement or threat of any claim,
litigation, proceeding or investigation in which Seller is a party or in which
the Assets or Business may be affected and which could reasonably be expected to
be material or which relates to the transactions contemplated hereby.
4.6 Adverse Change. Seller shall promptly notify Buyer in writing of any
--------------
materially adverse developments affecting the Assets or the Business which
become known to Seller, including, without limitation, (i) any damage,
destruction or loss (whether or not covered by insurance) materially and
adversely affecting any of the Assets or the Business, (ii) any material notice
of violation, forfeiture or complaint under any material Contract, or (iii)
anything which, if not corrected prior to the Closing Date, would prevent Seller
from fulfilling any condition to Closing described in Section 6 hereof.
4.7 No Solicitation. Seller shall not, and Seller shall cause its
---------------
members, employees, agents and representatives (including, without limitation,
any investment banker, attorney or accountant retained by Seller) and all other
employees who perform services with respect to the operation of the Business not
to, initiate, solicit or encourage, directly or indirectly, any inquiries or the
making of any proposal with respect to the Assets or the Business, or engage in
any negotiations concerning, or provide to any other person any information or
data relating to, the Business, the Assets or Seller for the purpose of, or have
any discussions with, any person relating to, or otherwise cooperate in any way
with or assist or participate in, facilitate or encourage, any inquiries or the
making of any proposal which constitutes, or may reasonably be expected to lead
to, any effort or attempt by any other person to seek or effect a transaction,
or enter into a transaction with any person or persons, other than Buyer,
concerning the possible sale of the Assets or Business, or the capital stock of
Seller. Seller
25
shall promptly inform Buyer of any such inquiries or proposals and provide all
pertinent documentation related thereto.
4.8 Cooperation. Seller shall use its reasonable best efforts to take all
-----------
steps within its power and will cooperate with Buyer to cause to be fulfilled
those of the conditions to Buyer's obligations to consummate the transactions
contemplated by this Agreement that are dependent upon its actions, and to
execute and deliver such instruments and take such other reasonable actions as
may be necessary or appropriate in order to carry out the intent of this
Agreement and consummate the transactions contemplated hereby. Without limiting
the foregoing, Seller shall cooperate with all reasonable requests of Buyer and
its counsel in connection with Buyer's due diligence investigation of the
Business and Assets.
4.9 Expenses. Seller shall bear its own expenses incurred in connection
--------
with the negotiation and preparation of this Agreement and in connection with
all obligations required to be performed by it under this Agreement.
4.10 Financial Information. Seller shall, as promptly as practical after
---------------------
such information become available, deliver to Buyer copies of Seller's monthly
unaudited financial statements, prepared in accordance with GAAP, consistently
applied, and in form and presentation as is reasonably acceptable to Buyer.
4.11 Consummation of Agreement. Subject to the provisions of Section 8 of
-------------------------
this Agreement: (a) Seller shall use its reasonable best efforts to fulfill and
perform all conditions and obligations on its part to be fulfilled and performed
under this Agreement, and to cause the transactions contemplated by this
Agreement to be fully carried out on or before October 15, 1998 and (b) Seller
shall not take any action or omit to take any action that would or could
reasonably be expected to (i) result in any of the representations and
warranties of Seller being or becoming untrue in any respect that would cause
Section 6.1 of this Agreement not to be satisfied, (ii) result in any conditions
to Closing set forth in Section 6 of this Agreement not to be satisfied, or
(iii) result in a material violation of any provision of this Agreement.
4.12 Confidentiality. Seller agrees that it and its representatives will
---------------
hold in strict confidence, and will not use, any confidential or proprietary
data or information obtained from Buyer with respect to its business or
financial condition except for the purpose of evaluating, negotiating and
completing the transactions contemplated hereby. Information generally known in
Buyer's industry or which has been disclosed to Seller by third parties which
have a right to do so shall not be deemed confidential or proprietary
information for purposes of this Agreement. If the transactions contemplated by
this Agreement are not consummated, Seller will return, and cause its respective
officers, members, agents and representatives to return, to Buyer (or certify
that they have destroyed) all copies of such data and information made available
to Seller (and its officers, members, agents and representatives) in connection
with the transaction.
26
SECTION 5. COVENANTS OF BUYER. Buyer covenants and agrees that, from the date
hereof until consummation of the transactions contemplated hereby at the
Closing, Buyer shall:
5.1 Cooperation. Buyer shall use its reasonable best efforts to take all
-----------
steps within its power and will cooperate with Seller, to cause to be fulfilled
those of the conditions to Seller's obligations to consummate the transactions
contemplated by this Agreement that are dependent upon its actions and to
execute and deliver such instruments and take such other reasonable actions as
may be necessary or appropriate in order to carry out the intent of this
Agreement and consummate the transactions contemplated hereby.
5.2 Notification of Certain Matters. Buyer shall promptly notify Seller
-------------------------------
of any fact, event, circumstances or action the existence or occurrence of which
would cause (i) any of Buyer's representations or warranties under this
Agreement not to be true in any material respect and (ii) any failure on its
part to comply with or satisfy in any material respect any covenant, condition,
or agreement to be complied with or satisfied by it under this Agreement.
5.3 Expenses. Buyer shall bear its own expenses incurred in connection
--------
with the negotiation and preparation of this Agreement and in connection with
all obligations required to be performed by it under this Agreement.
5.4 Consummation of Agreement. Subject to the provisions of Section 8 of
-------------------------
this Agreement: (a) Buyer shall use its reasonable best efforts to fulfill and
perform all conditions and obligations on its part to be fulfilled and performed
under this Agreement, and to cause the transactions contemplated by this
Agreement to be fully carried out on or before October 15, 1998; and (b) Buyer
shall not take any action or omit to take any action that would or could
reasonably be expected to (i) result in any of the representations and
warranties of Buyer set forth in this Agreement being or becoming untrue in any
respect that would cause Section 7.1 of this Agreement not to be satisfied, (ii)
result in any condition to the Closing set forth in Section 7 of this Agreement
not being satisfied, or (iii) result in a material violation of any provision of
this Agreement.
5.5 Confidentiality. Buyer agrees that it and its representatives will
---------------
hold in strict confidence, and will not use, any confidential or proprietary
data or information obtained from Seller with respect to its business or
financial condition except for the purpose of evaluating, negotiating and
completing the transactions contemplated hereby. Information generally known in
Seller's industry or which has been disclosed to Buyer by third parties which
have a right to do so shall not be deemed confidential or proprietary
information for purposes of this Agreement. If the transactions contemplated by
this Agreement are not consummated, Buyer will return, and cause its respective
officers, members, agents and representatives to return, to Seller (or certify
that they have destroyed) all copies of such data and information made available
to Buyer (and its officers, members, agents and representatives) in connection
with the transaction.
27
5.6 Full Disclosure. Buyer shall, upon request, provide Seller, its
---------------
counsel, accountants and other authorized representatives with such information
concerning Buyer as may be reasonably necessary for Seller to verify performance
of and compliance with Buyer's respective representations, warranties,
covenants, and conditions herein contained.
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATION OF BUYER. Buyer's obligation to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions, unless otherwise waived by Buyer in writing:
6.1 Accuracy of Representations and Warranties. The representations and
------------------------------------------
warranties of Seller contained in this Agreement shall be true and correct in
all material respects at the Closing Date with the same effect as though made at
such time and the representations and warranties of Seller contained in this
Agreement which are qualified by materiality shall be true and correct in all
respects as of the Closing Date with the same effect as though made at such
time.
6.2 Performance of Agreements and Deliveries. Seller shall have performed
----------------------------------------
in all material respects all of its covenants, agreements and obligations under
this Agreement which are to be performed or complied with by Seller prior to or
upon the Closing Date and shall have delivered all documents and items required
to be delivered at or prior to the Closing, including, without limitation:
(a) A certificate, dated the Closing Date, from one of the members to
the effect that the conditions set forth in Sections 6.1 and 6.2 have been
satisfied;
(b) A certificate, dated the Closing Date, from one of the members of
Seller as to the charter, Operating Agreement, authority and the incumbency
of all members executing the Seller Documents on behalf of Seller;
(c) A certified copy of Seller's Articles of Organization from the
Secretary of State of the State of Michigan;
(d) An Amendment to the Articles of Organization and any other
required documentation, which effect a change of Seller's name;
(e) A certificate of good standing from the Secretary of State of the
State of Michigan; and
(f) Such other certificates and instruments reasonably requested by
Buyer.
6.3 No Material Adverse Effect. None of the schedules, documents or other
--------------------------
information to be furnished by Seller to Buyer pursuant to this Agreement, shall
disclose any fact, circumstance or matter, or any change in or development in
connection with any matter
28
disclosed in the original schedules or documents previously delivered by Seller
to Buyer, which has, or could reasonably be expected to have, a material adverse
effect on the Assets or on the Business; and there shall have been no other
changes or developments affecting either the Assets or the Business since the
Base Balance Sheet Date which have, or could reasonably be expected to have, a
material adverse effect on the Assets or Business.
6.4 Asset Transfer. Seller shall have delivered to Buyer the following
--------------
instruments of transfer and assignment in accordance with the provisions hereof,
transferring to Buyer all of Seller's right, title and interest in and to the
Assets, free and clear of all Liens:
(a) A Xxxx of Sale in the form attached hereto as Exhibit B;
---------
(b) An Assignment and Assumption Agreement in the form attached
hereto as Exhibit C (the "Assignment and Assumption Agreement");
---------
(c) An Assignment of Patents and Trademarks in the form attached
hereto as Exhibit D;
---------
(d) An Assignment of Internet Domain Name in the form attached hereto
as Exhibit E (the "Assignment of Internet Domain Name"); and
(e) Such other instruments of transfer reasonably requested by Buyer.
6.5 Assignment of Contracts and Authorizations; Approvals. All Contracts
-----------------------------------------------------
shall have been duly and validly assigned to Buyer by Seller, and all consents
and approvals required in connection with the consummation of the transactions
contemplated hereby under any Contract or Authorization or otherwise shall have
been obtained in form and substance satisfactory to Buyer and without conditions
materially and adversely affecting Buyer and which do not require Buyer to pay
money to any party to any such Contract or Authorization in excess of amounts
required to be so paid pursuant to the terms and conditions thereof. All such
Contracts and Authorizations shall remain in full force and effect and shall not
have been amended, modified or repudiated in any material respect by either
party thereto. Neither Seller nor, to the knowledge of Seller and the
Principals, the other party thereto, shall have breached or defaulted under any
Contract or Authorization. Seller shall not have received notice of or have
knowledge of any fact which could result in the termination, repudiation or
breach of any Contract or Authorization.
6.6 Escrow Agreement. Seller shall have executed and delivered to Buyer
----------------
the Escrow Agreement and such Escrow Agreement shall be in full force and
effect.
6.7 Non-competition Agreement. Seller and Xxxxx Xxxxxxxx shall have
-------------------------
executed and delivered to Buyer a Non-competition Agreement in substantially the
form attached hereto as Exhibit F (the "Non-competition Agreement"), and such
---------
Non-competition Agreement shall be in full force and effect.
29
6.8 Employment and Non-competition Agreement. Xxxxx Xxxxxx and
----------------------------------------
Xxxxxxxxxxx Xxxxxxxx each shall have executed and delivered to Buyer an
Employment Agreement (the "Employment Agreement") on terms and conditions which
are reasonably satisfactory to Buyer, and a Non-competition Agreement (the
"Employee Non-competition Agreement") in substantially the form attached hereto
as Exhibit G, and such Employment Agreement and Employee Non-competition
---------
Agreement shall be in full force and effect.
6.9 Release of Liens. Seller shall have obtained and delivered to Buyer
----------------
at or prior to the Closing instruments (including UCC-3 termination statements)
releasing any and all Liens on the Assets.
6.10 Revenues; Subscribers. Seller shall have delivered to Buyer (i) total
---------------------
monthly revenues resulting in not less than $170,000 as of the Closing Date, of
which at least $165,000 shall be from Recurring Revenues, and (ii) at least
7,100 Dial-up Subscribers, 67 Dedicated Subscribers and 400 Web-hosting/Domain-
hosting Subscribers, and Seller shall have furnished Buyer with a certificate,
dated as of the Closing Date, to that effect.
6.11 Opinion of Seller's Counsel. Buyer shall have received the opinion or
---------------------------
opinions of Kreis, Enderle, Callander & Xxxxxxx, P.C., counsel for Seller, dated
the Closing Date, substantially in the form of Exhibit H attached hereto.
---------
6.12 MESA Notice. Seller shall have disclosed to Buyer, at least two (2)
-----------
business days prior to the date of this Agreement, on forms provided by the
Michigan Employment Security Agency ("MESA"), the amount of Seller's outstanding
MESA tax liability, unreported MESA tax liability, MESA tax payments, MESA tax
rates, five (5) years of cumulative unemployment benefit charges, a list of all
current employees of Seller, and a listing of employees of Seller separated from
employment in the most recent twelve (12) months immediately preceding the
Closing.
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATION OF SELLER. The obligation of
Seller to consummate the transactions contemplated by this Agreement is subject
to the satisfaction, on or prior to the Closing Date, of the following
conditions, unless waived by Seller in writing:
7.1 Accuracy of Representations and Warranties. The representations and
------------------------------------------
warranties of Buyer contained in this Agreement shall be true and correct in all
material respects at the Closing Date with the same effect as though made at
such time, and the representations and warranties of Buyer contained in this
Agreement which are qualified by materiality shall be true and correct in all
respects as of the Closing Date with the same effect as though made at such
time.
7.2 Performance of Agreement and Deliveries. Buyer shall have performed
---------------------------------------
in all material respects all of its covenants, agreements and obligations under
this Agreement which are to be performed or complied with by Buyer prior to or
upon the Closing Date and shall
30
have delivered all documents and items required to be delivered at or prior to
the Closing, including, without limitation:
(a) A certificate, dated the Closing Date, from the President of
Buyer to the effect that the conditions set forth in Sections 7.1 and 7.2 have
been satisfied;
(b) A certificate, dated the Closing Date, from Buyer's Secretary as
to the charter, by-laws, authority and the incumbency of all officers executing
the Buyer Documents on behalf of Buyer;
(c) A certified copy of Buyer's charter from the Secretary of State
of the State of Michigan;
(d) A certificate of good standing from the Secretary of State of the
State of Michigan; and
(e) Such other certificates and instruments reasonably requested by
Seller.
7.3 Executed Agreements. Buyer shall have delivered to Seller the
-------------------
following agreements and instruments of transfer and assignment in accordance
with the provisions hereof, and all of such agreements and instruments of
transfer and assignment shall be in full force and effect:
(a) The Escrow Agreement;
(b) The Non-competition Agreement;
(c) The Assignment and Assumption Agreement; and
(d) The Assignment of Internet Domain Name.
7.4 Opinion of Buyer's Counsel. Seller shall have received the opinion or
--------------------------
opinions of Xxxxxxx, Procter & Xxxx LLP, counsel for Buyer, dated the Closing
Date, substantially in the form of Exhibit I attached hereto.
---------
SECTION 8. DEFAULTS, REMEDIES, AND TERMINATION.
8.1 Seller's Default; Buyer's Remedies.
----------------------------------
(a) Seller's Default. Seller shall be deemed to be in default
----------------
hereunder upon the occurrence of (i) any warranties or representations of Seller
set forth herein shall be untrue in any material respect at Closing or (ii)
Seller shall fail to meet, comply with, or perform in any material respect any
covenant, agreement, condition or obligation on its part required within the
time limits and in the manner required in this Agreement. Seller shall have a
period
31
not to exceed thirty (30) days from the Closing Date within which to cure any
state of facts constituting a misrepresentation or breach of warranty.
(b) Buyer's Remedies. In the event that Seller shall be deemed to be
----------------
in default hereunder, Buyer may, at Buyer's sole option, (i) terminate this
Agreement, (ii) enforce specific performance of this Agreement against Seller,
or (iii) exercise any other right or remedy Buyer may have at law or in equity
by reason of such default including, but not limited to, the recovery of
attorney's fees incurred by Buyer in connection herewith.
8.2 Buyer's Defaults; Seller's Remedies.
-----------------------------------
(a) Buyer's Default. Buyer shall be deemed to be in default hereunder
---------------
upon the occurrence of (i) any warranties or representations of Buyer set forth
herein shall be untrue in any material respect at Closing or (ii) Buyer shall
fail to deliver, at Closing, any of the items specified in Section 7 of the
Agreement for any reason other than a default by Seller. Buyer shall have a
period not to exceed thirty (30) days from the Closing Date within which to cure
any state of facts constituting a misrepresentation or breach of warranty.
(b) Seller's Remedies. In the event that Buyer shall be deemed to be
-----------------
in default hereunder, Seller may, at Seller's sole option (i) terminate this
agreement, (ii) enforce specific performance of this Agreement against Buyer, or
(iii) exercise any other right or remedy Seller may have at law or in equity by
reason of such default including, but not limited to, the recovery of attorney's
fees incurred by Buyer in connection herewith.
8.3 Termination. This Agreement may be terminated at any time prior to
-----------
the Closing by the mutual written consent of Buyer and Seller.
8.4 Manner of Exercise. In the event of the termination of this Agreement
------------------
by either Buyer or Seller pursuant to Sections 8.1, 8.2, or 8.3, notice thereof
shall forthwith be given to the other party in accordance with the provisions
set forth in Section 11 hereto and this Agreement shall terminate and the
transactions contemplated hereunder shall be abandoned without further action by
Buyer or Seller.
8.5 Effect of Termination; Liabilities. In the event of the termination
----------------------------------
of this Agreement pursuant to Sections 8.1, 8.2, or 8.3, and prior to the
Closing, all obligations of the parties hereunder (other than pursuant to
Sections 4.12 and 5.5 hereof) shall terminate, and neither Seller nor Buyer
shall have any further liability hereunder, including for losses, liabilities,
obligations, damages, deficiencies, actions, suits, proceedings, demands,
assessments, orders, judgments, costs and expenses (including attorneys' fees)
of any kind whatsoever.
32
SECTION 9. POST-CLOSING COVENANTS; SURVIVAL.
9.1 Use of Trade Names. After the Closing Date, neither Seller, nor any
------------------
person controlling, controlled by or under common control with Seller will for
any reason, directly or indirectly, for itself or any other person, (a) use the
name "NetLink Systems, L.L.C." or (b) use or disclose any trade secrets,
confidential information, know-how, proprietary information or other
intellectual property of Seller transferred pursuant to this Agreement.
9.2 Post-Closing Transitional Matters. For a period of ninety (90) days
---------------------------------
following the Closing, Seller shall provide, without additional cost to Buyer,
such assistance as is reasonably requested by Buyer in order to effect an
orderly transition in the ownership and operation of the Assets.
9.3 Survival. All representations, warranties, covenants, agreements
--------
and indemnities contained in this Agreement, or in any schedule, exhibit,
certificate, agreement, document or statement delivered pursuant hereto, are
material, shall be deemed to have been relied upon by the parties and, shall
survive the Closing for a period of one (1) year (the "Expiration Date")
regardless of any investigation conducted by or knowledge of any party hereto;
provided, however, that no party shall be entitled to indemnification from the
-------- -------
other party pursuant to Section 10 hereof with respect to any liability or loss
disclosed to such party in this Agreement or in any schedule, exhibit,
certificate, agreement or document delivered pursuant hereto, it being
understood that such liabilities are and shall be either an Assumed Liability or
an Excluded Liability for purposes hereof.
SECTION 10. INDEMNIFICATION.
10.1 Indemnification by Seller.
-------------------------
(a) Seller hereby agrees to indemnify and hold harmless Buyer, its
affiliates and its and their respective directors, officers, stockholders,
partners, members, employees, and agents (individually, a "Buyer Indemnified
Party" and collectively, "Buyer Indemnified Parties"), against and in respect of
all losses, liabilities, obligations, damages, deficiencies, actions, suits,
proceedings, demands, assessments, orders, judgments, costs and expenses
(including the reasonable fees, disbursements and expenses of attorneys and
consultants) of any kind or nature whatsoever, but net of the proceeds from any
insurance policies or other third party reimbursement for such loss, to the
extent sustained, suffered or incurred by or made against any Buyer Indemnified
Party, to the extent based upon, arising out of or in connection with: (i) any
breach of any representation or warranty made by Seller in this Agreement or in
any schedule, exhibit, certificate, agreement or other instrument delivered
pursuant to this Agreement; (ii) any breach of any covenant or agreement made by
Seller in this Agreement or in any schedule, exhibit, certificate, financial
statement, agreement or other instrument delivered pursuant to this Agreement;
(iii) any claim made by any person or entity which relates to the operation of
the Assets or the Business which arises in connection with or on the basis of
events, acts, omissions, conditions or any other state of facts occurring on or
existing
33
before the Closing Date; and (iv) any claim which arises in connection with any
liability or obligation of Seller other than the Assumed Liabilities.
10.2 Indemnification by Buyer. Buyer agrees to indemnify and hold harmless
------------------------
Seller and its members, employees and agents (individually, a "Seller
Indemnified Party" and collectively, "Seller Indemnified Parties") at all times
against and in respect of all losses, liabilities, obligations, damages,
deficiencies, actions, suits, proceedings, demands, assessments, orders,
judgments, costs and expenses (including the reasonable fees, disbursements and
expenses of attorneys and consultants), of any kind or nature whatsoever, to the
extent sustained, suffered or incurred by or made against any Seller Indemnified
Party, to the extent based upon, arising out of or in connection with: (A) any
breach of any representation or warranty made by Buyer in this Agreement or in
any schedule, exhibit, certificate, agreement or other instrument delivered
pursuant to this Agreement; (B) any breach of any covenant or agreement made by
Buyer in this Agreement or in any schedule, exhibit, certificate, agreement or
other instrument delivered pursuant to this Agreement; (C) any claim made
against Seller which relates to, results from or arises out of Buyer's operation
of the Assets or the Business from and after the Closing Date; and (D) the
Assumed Liabilities.
10.3 Notice; Defense of Claims.
-------------------------
(a) Notice of Claims. Promptly after receipt by an indemnified party
----------------
of notice of any claim, liability or expense to which the indemnification
obligations hereunder would apply, the indemnified party shall give notice
thereof in writing to the indemnifying party, but the omission to so notify the
indemnifying party promptly will not relieve the indemnifying party from any
liability except to the extent that the indemnifying party shall have been
prejudiced as a result of the failure or delay in giving such notice. Such
notice shall state the information then available regarding the amount and
nature of such claim, liability or expense and shall specify the provision or
provisions of this Agreement under which the liability or obligation is
asserted.
(b) Third Party Claims. With respect to third party claims, if within
------------------
twenty (20) days after receiving the notice described in clause (a) above the
indemnifying party gives (i) written notice to the indemnified party stating
that (A) it would be liable under the provisions hereof for indemnity in the
amount of such claim if such claim were successful and (B) that it disputes and
intends to defend against such claim, liability or expense at its own cost and
expense and (ii) provides reasonable assurance, in writing, to the indemnified
party that such claim will be promptly paid in full if required, then counsel
for the defense shall be selected by the indemnifying party (subject to the
consent of the indemnified party which consent shall not be unreasonably
withheld) and the indemnified party shall not be required to make any payment
with respect to such claim, liability or expense as long as the indemnifying
party is conducting a good faith and diligent defense at its own expense;
provided, however, that the assumption of defense of any such matters by the
indemnifying party shall relate solely to the claim, liability or expense that
is subject or potentially subject to indemnification. The indemnifying party
shall have the right, with the consent of the indemnified party, which
34
consent shall not be unreasonably withheld, to settle all indemnifiable matters
related to claims by third parties which are susceptible to being settled
provided the indemnifying parties' obligation to indemnify the indemnified party
therefor will be fully satisfied. The indemnifying party shall keep the
indemnified party apprised of the status of the claim, liability or expense and
any resulting suit, proceeding or enforcement action, shall furnish the
indemnified party with all documents and information that the indemnified party
shall reasonably request and shall consult with the indemnified party prior to
acting on major matters, including settlement discussions. Notwithstanding
anything herein stated, the indemnified party shall at all times have the right
to fully participate in such defense at its own expense directly or through
counsel; provided, however, if the named parties to the action or proceeding
include both the indemnifying party and the indemnified party and representation
of both parties by the same counsel would be inappropriate under applicable
standards of professional conduct, the expense of separate counsel for the
indemnified party shall be paid by the indemnifying party. If no such notice of
intent to dispute and defend is given by the indemnifying party, or if such
diligent good faith defense is not being or ceases to be conducted, the
indemnified party shall, at the expense of the indemnifying party, undertake the
defense of (with counsel selected by the indemnified party), and shall have the
right to compromise or settle (exercising reasonable business judgment), such
claim, liability or expense. If such claim, liability or expense is one that by
its nature cannot be defended solely by the indemnifying party, then the
indemnified party shall make available all information and assistance that the
indemnifying party may reasonably request and shall cooperate with the
indemnifying party in such defense.
(c) Non-Third Party Claims. With respect to non-third party claims,
----------------------
if within twenty (20) days after receiving the notice described in clause (a)
above the indemnifying party does not give written notice to the indemnified
party that it contests to such indemnity, the amount of indemnity payable for
such claim shall be as set forth in the indemnified party's notice. If the
indemnifying party provides written notice to the indemnified party within such
20-day period that it contests such indemnity, the parties shall attempt in good
faith to reach an agreement with regard thereto within thirty (30) days of
delivery of the indemnifying party's notice. If the parties cannot reach
agreement within such 30-day period, the matter may be submitted by either party
for binding arbitration in accordance with the provisions of Section 12.10
hereof.
SECTION 11. NOTICES. All notices and other communications required to be given
hereunder, or which may be given pursuant or relative to the provisions hereof,
shall be in writing and shall be deemed to have been given when delivered in
hand or mailed, postage prepaid, by first class United States mail, certified
return receipt requested as follows:
If to Seller: NetLink Systems, L.L.C.
------------
000 Xxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx Xxxxxx
35
With a copy to: Kreis, Enderle, Callander & Xxxxxxx, P.C.
One Moorsbridge
P. O. Xxx 0000
Xxxxxxxxx, XX 00000
Attn: Xxxxxxx XxXxxxx, Esq.
If to Buyer: Voyager Information Networks, Inc.
-----------
0000 X. Xxxxxxxx Xxxx
Xxxx Xxxxxxx, XX 00000
Attn: Xxxxxxxxxxx Xxxxx
With a copy to: Xxxxxxx, Procter & Xxxx XXX
Xxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxx, P.C.
SECTIOn 12. MISCELLANEOUS.
12.1 Assignability; Binding Effect. This Agreement shall not be assignable
-----------------------------
by Buyer or Seller except with the written consent of the other, except that
Buyer may assign its rights hereunder either (i) to any affiliate of Buyer,
provided, however, that no assignment by Buyer shall in any way affect Buyer's
obligations or liabilities under this Agreement and Buyer acknowledges that it
shall remain primarily liable under this Agreement in the event of such an
assignment, (ii) as a result of any merger, reorganization or other
consolidation, or (iii) in connection with the granting of a security interest
to its senior lender. This Agreement shall be binding upon and shall inure to
the benefit of, the parties hereto and their respective successors, and assigns.
12.2 Headings. The subject headings used in this Agreement are included
--------
for purposes of convenience only and shall not affect the construction or
interpretation of any of its provisions.
12.3 Amendments; Waivers. This Agreement may not be amended or modified,
-------------------
nor may compliance with any condition or covenant set forth herein be waived,
except by a writing duly and validly executed by Buyer and Seller or, in the
case of a waiver, the party waiving compliance. No delay on the part of any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any waiver on the part of any party of any such right,
power or privilege, or any single or partial exercise of any such right, power
or privilege, preclude any further exercise thereof or the exercise of any other
such right, power or privilege.
12.4 Bulk Sales Law. Buyer hereby waives compliance by Seller of any
--------------
applicable bulk sales law and Seller agrees, to make full and timely payment
when due of all amounts owed by such Seller to its creditors. Seller agrees to
indemnify and hold Buyer harmless from,
36
and reimburse Buyer for, any loss, cost, expense, liability or damage (including
reasonable counsel fees and disbursements and expenses) which Buyer may suffer
or incur by virtue of the non-compliance by Seller with such laws.
12.5 Entire Agreement. This Agreement, together with the schedules and
----------------
exhibits hereto, constitutes the entire agreement between the parties with
respect to the subject matter hereof and supersedes and cancels any and all
prior or contemporaneous arrangements, understandings and agreements between
them relating to the subject matter hereof.
12.6 Severability. In the event that any provision or any portion of any
------------
provision of this Agreement shall be held to be void or unenforceable, then the
remaining provisions of this Agreement (and the remaining portion of any
provision held to be void or unenforceable in part only) shall continue in full
force and effect.
12.7 Governing Law. This Agreement and the transactions contemplated
-------------
hereby shall be governed and construed by and enforced in accordance with the
laws of the State of Michigan, without regard to conflict of laws principles.
12.8 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which shall
constitute the same instrument.
12.9 Expenses. Each party shall pay its own expenses incident to the
--------
negotiation, preparation and performance of this Agreement and the transactions
contemplated hereby, including all fees and expenses of its counsel,
accountants, and consultants for all activities of such counsel, accountants,
and consultants undertaken pursuant to this Agreement, whether or not the
transactions contemplated hereby are consummated.
12.10 Dispute Resolution. Any dispute arising out of or relating to this
------------------
Agreement or the breach, termination or validity hereof shall be finally settled
by arbitration conducted expeditiously in accordance with the CPR Institute for
Dispute Resolution Rules for Nonadministered Arbitration of Business Disputes
(the "CPR Rules"). The CPR Institute for Dispute Resolution shall appoint a
neutral advisor from its National CPR Panel. The arbitration shall be governed
by the United States Arbitration Act, 9 U.S.C. (S)(S)1-16, and judgment upon the
award rendered by the arbitrators may be entered by any court having
jurisdiction thereof. The place of arbitration shall be Detroit, Michigan.
Such proceedings shall be administered by the neutral advisor in accordance
with the CPR Rules as he/she deems appropriate, however, such proceedings shall
be guided by the following agreed upon procedures:
(a) Mandatory exchange of all relevant documents, to be
accomplished within forty-five (45) days of the initiation of the procedure;
37
(b) No other discovery;
(c) Hearings before the neutral advisor which shall consist of a
summary presentation by each side of not more than three hours; such hearings to
take place in one or two days at a maximum; and
(d) Decision to be rendered not later than ten (10) days following
such hearings.
Each of the parties hereto (a) hereby unconditionally and irrevocably
submits to the jurisdiction of any United States District Court of competent
jurisdiction located in the State of Michigan for the purpose of enforcing the
award or decision in any such proceeding and (b) hereby waives, and agrees not
to assert in any civil action to enforce the award, any claim that it is not
subject personally to the jurisdiction of the above-named court, that its
property is exempt or immune from attachment or execution, that the civil action
is brought in an inconvenient forum, that the venue of the civil action is
improper or that this Agreement or the subject matter hereof may not be enforced
in or by such court, and (c) hereby waives and agrees not to seek any review by
any court of any other jurisdiction which may be called upon to grant an
enforcement of the judgment of any such court. Each of the parties hereto
hereby consents to service of process by registered mail at the address to which
notices are to be given. Each of the parties hereto agrees that its submission
to jurisdiction and its consent to service of process by mail is made for the
express benefit of the other parties hereto. Final judgment against any party
hereto in any such action, suit or proceeding may be enforced in other
jurisdictions by suit, action or proceeding on the judgment, or in any other
manner provided by or pursuant to the laws of such other jurisdiction; provided,
--------
however, that any party may at its option bring suit, or institute other
-------
judicial proceedings, in any state or federal court of the United States or of
any country or place where the other parties or their assets, may be found.
Notwithstanding the foregoing, it is specifically understood and agreed
that certain breaches of this Agreement will result in irreparable injury to the
parties hereto, that the remedies available to the parties at law alone will be
an inadequate remedy for such breach, and that, in addition to any other legal
or equitable remedies which the parties may have, a party may enforce its rights
by an action for specific performance and the parties expressly waive the
defense that a remedy in damages will be adequate.
12.11 Third Party Rights. This Agreement is for the benefit of the parties
------------------
hereto and is not entered into for the benefit of, and shall not be construed to
confer any benefit upon, any other party or entity.
12.12 Exhibits and Schedules. All exhibits and schedules referred to in
----------------------
this Agreement shall be deemed to be attached to and made a part of this
Agreement. Buyer shall not be deemed to have actual or constructive notice of
any fact, matter or item set forth in an exhibit or schedule for the purposes of
any other representation, warranty, exhibit, or schedule
38
unless the appropriate facts, matters, or items set forth in such exhibit or
schedule are specifically cross-referenced in such other representation,
warranty, exhibit or schedule.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, Seller, Principals and Buyer have caused this Asset
Purchase Agreement to be executed as of the date first above written.
SELLER:
NETLINK SYSTEMS, L.L.C.
By: /s/ Xxxxx Xxxxxx
------------------------------
Name: Xxxxx Xxxxxx
Title: Member
PRINCIPALS:
/s/ Xxxxx Xxxxxx
---------------------------------
Xxxxx Xxxxxx
/s/ Xxxxxxxxxxx Xxxxxxxx
---------------------------------
Xxxxxxxxxxx Xxxxxxxx
/s/ Xxxxx Xxxxxxxx
---------------------------------
Xxxxx Xxxxxxxx
BUYER:
VOYAGER INFORMATION NETWORKS, INC.
By: /s/ Xxxxxxxxxxx Xxxxx
-----------------------------
Name: Xxxxxxxxxxx Xxxxx
Title: Chief Executive Officer
40
