1
EXHIBIT 1
Conformed Copy
ASSET PURCHASE AGREEMENT
Among
EMI COMMUNICATIONS CORP.,
EASTERN MESSAGE, INC.,
EASTERN MESSAGE OF NEW JERSEY, INC.,
EASTERN MESSAGE OF PENNSYLVANIA, INC.,
EASTERN MESSAGE OF MASSACHUSETTS, INC.,
EASTERN MESSAGE OF MARYLAND, INC.,
XXXXXXXX BROADCASTING CORPORATION
and
INTERMEDIA COMMUNICATIONS OF FLORIDA, INC.,
Dated as of February 20, 1996
1
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . 1
SECTION 1.1 Certain Defined Terms . . . . . . . . . . 1
ARTICLE II PURCHASE AND SALE OF ASSETS . . . . . . . . .12
SECTION 2.1 Purchase and Sale of Assets . . . . . . .12
(a) Real Property . . . . . . . . . . . . . .12
(b) Furniture and Fixtures. . . . . . . . . .12
(c) Supplies. . . . . . . . . . . . . . . . .12
(d) Records . . . . . . . . . . . . . . . . .12
(e) Intellectual Property . . . . . . . . . .12
(f) Assigned Contracts. . . . . . . . . . . .12
(g) Licenses. . . . . . . . . . . . . . . . .13
(h) Names . . . . . . . . . . . . . . . . . .13
(i) EMI Newco and Message Newco Stock . . . .13
SECTION 2.2 Excluded Assets . . . . . . . . . . . . .13
(a) Cash. . . . . . . . . . . . . . . . . . .13
(b) Corporate Documents and Accounting
Systems . . . . . . . . . . . . . . . . .13
(c) Taxes . . . . . . . . . . . . . . . . . .13
(d) Accounts Receivable . . . . . . . . . . .14
(e) Claims. . . . . . . . . . . . . . . . . .14
(f) Retained Division . . . . . . . . . . . .14
(g) This Agreement. . . . . . . . . . . . . .14
(h) Miscellaneous . . . . . . . . . . . . . .14
SECTION 2.3 Assumption of Liabilities . . . . . . . .14
SECTION 2.4 Excluded Liabilities. . . . . . . . . . .15
SECTION 2.5 Purchase Price. . . . . . . . . . . . . .15
SECTION 2.6 Allocation of Purchase Price. . . . . . .15
SECTION 2.7 Closing . . . . . . . . . . . . . . . . .16
SECTION 2.8 Apportionment . . . . . . . . . . . . . .16
ARTICLE III REPRESENTATIONS AND WARRANTIES
OF PARENT AND SELLER . . . . . . . . . . . .17
SECTION 3.1 Authority of Seller . . . . . . . . . . .17
SECTION 3.2 Organization and Qualification of
Sellers . . . . . . . . . . . . . . . . .17
SECTION 3.3 Capital Stock of Seller . . . . . . . . .18
SECTION 3.4 Subsidiaries. . . . . . . . . . . . . . .18
SECTION 3.5 No Conflict . . . . . . . . . . . . . . .19
SECTION 3.6 Governmental Consents and Approvals . . .19
SECTION 3.7 Financial Information, Books and
Records and Operating Data. . . . . . . .20
SECTION 3.8 Title . . . . . . . . . . . . . . . . . .20
SECTION 3.9 Solvency and Payment of Liabilities . . .21
SECTION 3.10 Inventories . . . . . . . . . . . . . . .21
SECTION 3.11 Sales and Purchase Order Backlog. . . . .21
2
SECTION 3.12 Conduct in the Ordinary Course;
Absence of Certain Changes,
Events and Conditions. . . . . .. . . . .22
SECTION 3.13 Litigation. . . . . . . . . . . . . . . .25
SECTION 3.14 Certain Interests . . . . . . . . . . . .25
SECTION 3.15 Compliance with Laws. . . . . . . . . . .25
SECTION 3.16 Licenses. . . . . . . . . . . . . . . . .25
SECTION 3.17 Environmental and Other Permits and
Licenses; Related Matters . . . . . . . .26
SECTION 3.18 Material Contracts. . . . . . . . . . . .27
SECTION 3.19 Intellectual Property . . . . . . . . . .29
SECTION 3.20 Real Property . . . . . . . . . . . . . .31
SECTION 3.21 Tangible Personal Property. . . . . . . .34
SECTION 3.22 Purchased Assets. . . . . . . . . . . . .35
SECTION 3.23 Customers . . . . . . . . . . . . . . . .35
SECTION 3.24 Suppliers . . . . . . . . . . . . . . . .35
SECTION 3.25 Employee Benefit Matters. . . . . . . . .36
(a) Plans and Documents . . . . . . . . . . .36
(b) Americans With Disability Act . . . . . .36
(c) WARN Act. . . . . . . . . . . . . . . . .37
SECTION 3.26 Labor Matters . . . . . . . . . . . . . .37
SECTION 3.27 Key Employees . . . . . . . . . . . . . .38
SECTION 3.28 Taxes . . . . . . . . . . . . . . . . . .38
SECTION 3.29 Insurance . . . . . . . . . . . . . . . .38
SECTION 3.30 Certain Consents. . . . . . . . . . . . .39
SECTION 3.31 Brokers . . . . . . . . . . . . . . . . .39
ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF PURCHASER . . . . . . . . . . . . . . . .40
SECTION 4.1 Organization and Authority of Purchaser .40
SECTION 4.2 No Conflict . . . . . . . . . . . . . . .40
SECTION 4.3 Capital Stock of Purchaser. . . . . . . .41
SECTION 4.4 SEC Reports . . . . . . . . . . . . . . .41
SECTION 4.5 Governmental Consents and Approvals . . .41
SECTION 4.6 Litigation. . . . . . . . . . . . . . . .42
SECTION 4.7 Brokers . . . . . . . . . . . . . . . . .42
ARTICLE V COVENANTS PRIOR TO CLOSING . . . . . . . . .42
SECTION 5.1 Regulatory and Other Authorizations;
Notices and Consents. . . . . . . . . . .42
SECTION 5.2 Notice of Developments. . . . . . . . . .43
SECTION 5.3 Boards of Directors.. . . . . . . . . . .43
SECTION 5.4 Access to Information . . . . . . . . . .44
SECTION 5.5 Conduct of Business and Capital
Improvements. . . . . . . . . . . . . . .44
SECTION 5.6 Regulatory Compliance . . . . . . . . . .45
SECTION 5.7 Environmental Study . . . . . . . . . . .45
SECTION 5.8 Creation of Historical Financial
Statements. . . . . . . . . . . . . . . .46
3
SECTION 5.9 Further Action. . . . . . . . . . . . . .46
SECTION 5.10 Preservation of Business. . . . . . . . .46
(a) Covenants Regarding Operations. . . . . .46
(b) Negative Covenants Regarding Operations .47
SECTION 5.11 Maintenance of Insurance. . . . . . . . .49
SECTION 5.12 Failure to Obtain Consents and Approvals.49
SECTION 5.13 Creation of the New Companies and
Conveyance of Personal Property . . . . .49
SECTION 5.14 Delivery of Schedules and Exhibits. . . .50
SECTION 5.15 Syracuse Office . . . . . . . . . . . . .50
ARTICLE VI COVENANTS SUBSEQUENT TO CLOSING . . . . . . .50
SECTION 6.1 Further Assurances. . . . . . . . . . . .50
SECTION 6.2 Change of Name. . . . . . . . . . . . . .51
SECTION 6.3 Closing Accounts Receivable
and Accounts Payable. . . . . . . . . . .51
SECTION 6.4 Tax Records . . . . . . . . . . . . . . .52
SECTION 6.5 Tax Reporting . . . . . . . . . . . . . .52
SECTION 6.6 Satisfaction of Liabilities . . . . . . .52
SECTION 6.7 Employee Benefit Plans. . . . . . . . . .53
SECTION 6.8 Non-Compete . . . . . . . . . . . . . . .53
SECTION 6.9 Stand Still . . . . . . . . . . . . . . .53
SECTION 6.10 Gains, Transfer and Sales Taxes . . . . .54
SECTION 6.11 No Shop . . . . . . . . . . . . . . . . .54
SECTION 6.12 Employees . . . . . . . . . . . . . . . .55
SECTION 6.13 Accounting Systems. . . . . . . . . . . .55
ARTICLE VII CONDITIONS TO CLOSING . . . . . . . . . . .56
SECTION 7.1 Conditions to Obligations
of Purchaser. . . . . . . . . . . . . . .56
(a) Representations, Warranties
and Obligations . . . . . . . . . . . . . .56
(b) Consents. . . . . . . . . . . . . . . . . .56
(c) License Transfer Approvals. . . . . . . . .56
(d) No Material Adverse Effect. . . . . . . . .56
(e) Deliveries. . . . . . . . . . . . . . . . .56
(f) Encumbrances. . . . . . . . . . . . . . . .56
(g) No Proceeding or Litigation . . . . . . . .56
(h) Filings . . . . . . . . . . . . . . . . . .57
(i) HSR Act . . . . . . . . . . . . . . . . . .57
(j) Creation of EMI Newco and
Message Newco . . . . . . . . . . . . . . .57
(k) Delivery of Schedules . . . . . . . . . . .57
(l) Exhibits. . . . . . . . . . . . . . . . . .57
(m) Syracuse Office Agreement . . . . . . . . .57
SECTION 7.2 Conditions to Obligations of
Parent and Seller . . . . . . . . . . . . .57
(a) Representations, Warranties
and Obligations . . . . . . . . . . . . . .57
(b) Consents. . . . . . . . . . . . . . . . . .58
(c) License Transfer Approvals. . . . . . . . .58
4
(d) No Material Adverse Effect. . . . . . . . .58
(e) Deliveries. . . . . . . . . . . . . . . . .58
(f) No Proceeding or Litigation . . . . . . . .58
(g) Filings . . . . . . . . . . . . . . . . . .58
(h) HSR Act . . . . . . . . . . . . . . . . . .59
(i) Exhibits. . . . . . . . . . . . . . . . . .59
(j) Syracuse Office Agreement . . . . . . . . .59
ARTICLE VIII DELIVERIES. . . . . . . . . . . . . . . . .59
SECTION 8.1 Parent's and Sellers' Deliveries. . . . . .59
(a) Xxxx of Sale. . . . . . . . . . . . . . . .59
(b) Assignment of Contracts . . . . . . . . . .59
(c) Assigment of Licenses . . . . . . . . . . .59
(d) Deeds . . . . . . . . . . . . . . . . . . .59
(e) Corporate and Stockholder
Authorization . . . . . . . . . . . . . . .60
(f) EMI Newco and Message Newco Stock . . . . .60
(g) Change of Name. . . . . . . . . . . . . . .60
(h) Organizational Documents. . . . . . . . . .60
(i) Legal Opinions. . . . . . . . . . . . . . .60
(j) Business Documents. . . . . . . . . . . . .61
(k) Good Standing; Qualification
to Do Business. . . . . . . . . . . . . . .61
(l) Consents and Approvals. . . . . . . . . . .61
(m) Encumbrance Release . . . . . . . . . . . .61
(n) Miscellaneous . . . . . . . . . . . . . . .61
SECTION 8.2 Purchaser's Deliveries. . . . . . . . . . .61
(a) Purchase Price. . . . . . . . . . . . . . .61
(b) Corporate Authorization . . . . . . . . . .61
(c) Consents and Approvals. . . . . . . . . . .61
(d) Bring-Down Certificate. . . . . . . . . . .62
(e) Corporate Documents . . . . . . . . . . . .62
(f) Corporate Certificate . . . . . . . . . . .62
(g) Legal Opinion . . . . . . . . . . . . . . .62
(h) Miscellaneous . . . . . . . . . . . . . . .62
ARTICLE IX TERMINATION AND WAIVER . . . . . . . . . . . . .62
SECTION 9.1 Termination . . . . . . . . . . . . . . .62
SECTION 9.2 Effect of Termination . . . . . . . . . .63
SECTION 9.3 Waiver. . . . . . . . . . . . . . . . . .63
ARTICLE X SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION. . . . . . . . . . . . . . . . .64
SECTION 10.1 Survival of Representations, Warranties
and Agreements. . . . . . . . . . . . . .64
SECTION 10.2 Indemnification by Parent and Seller. . .64
SECTION 10.3 Indemnification by Purchaser. . . . . . .64
SECTION 10.4 Procedure for Indemnification . . . . . .65
SECTION 10.5 Limitation on Liability . . . . . . . . .65
5
ARTICLE XI PURCHASER COMMON STOCK . . . . . . . . . . . . .66
SECTION 11.1 Representations and
Warranties of Seller. . . . . . . . . . .66
SECTION 11.2 Registration under the Securities
Act of 1933 . . . . . . . . . . . . . . .67
ARTICLE XII GENERAL PROVISIONS. . . . . . . . . . . . . . .73
SECTION 12.1 Expenses. . . . . . . . . . . . . . . . .74
SECTION 12.2 Notices . . . . . . . . . . . . . . . . .75
SECTION 12.3 Public Announcements. . . . . . . . . . .75
SECTION 12.4 Headings. . . . . . . . . . . . . . . . .75
SECTION 12.5 Severability. . . . . . . . . . . . . . .75
SECTION 12.6 Entire Agreement. . . . . . . . . . . . .76
SECTION 12.7 Assignment. . . . . . . . . . . . . . . .76
SECTION 12.8 No Third Party Beneficiaries. . . . . . .76
SECTION 12.9 Amendment . . . . . . . . . . . . . . . .76
SECTION 12.10 Governing Law . . . . . . . . . . . . . .76
SECTION 12.11 Counterparts. . . . . . . . . . . . . . .76
SECTION 12.12 Specific Performance. . . . . . . . . . .76
SECTION 12.13 Waiver of Jury Trial. . . . . . . . . . .76
1
ASSET PURCHASE AGREEMENT, dated as of February 20, 1996, by and
among EMI COMMUNICATIONS CORP., a New York corporation ("EMI" or a
"Seller"), EASTERN MESSAGE, INC., a New York corporation ("Message" or a
"Seller"), EASTERN MESSAGE OF NEW JERSEY, INC., a New Jersey corporation
(a "Seller"), EASTERN MESSAGE OF PENNSYLVANIA, INC., a Pennsylvania
corporation (a "Seller"), EASTERN MESSAGE OF MASSACHUSETTS, INC., a
Massachusetts corporation (a "Seller"), and EASTERN MESSAGE OF MARYLAND,
INC., a Maryland corporation (a "Seller", and together with the other
Sellers, "Sellers"), XXXXXXXX BROADCASTING CORPORATION, a New York
corporation ("Parent"), and INTERMEDIA COMMUNICATIONS OF FLORIDA, INC.,
a Delaware corporation ("Purchaser").
W I T N E S S E T H
WHEREAS, Sellers own and operate the telecommunications services
business described in Section 1.1 hereof (the "Business); and
WHEREAS, Sellers desires to sell and transfer to Purchaser, and
Purchaser desires to purchase and acquire from Sellers, all of Sellers'
right, title and interest in and to certain of the tangible and
intangible assets of Sellers relating to the Business, or used or held
for use in connection with the Business, all as set forth more fully
below; and
WHEREAS, Parent is the owner of all the issued and outstanding
capital stock of EMI and is entering into this Agreement to further
induce Purchaser to acquire the Purchased Business (as hereinafter
defined); and
WHEREAS, following the consummation of the transactions
contemplated by this Agreement, it is intended that Purchaser operate
the Purchased Business as part of Purchaser's business; and
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements and covenants hereinafter set forth, Purchaser and Sellers
hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Certain Defined Terms. As used in this Agreement,
the following terms shall have the following meanings:
"Action" means any claim, action, suit, arbitration,
inquiry, proceeding or investigation by or before any Governmental
Authority.
2
"Affiliate" means, with respect to any specified Person, any
other Person that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control
with, such specified Person.
"Agreement" or "this Agreement" means this Asset Purchase
Agreement, dated as of February 20, 1996, among Sellers, Parent and
Purchaser (including the Exhibits hereto and the Disclosure Schedule)
and all amendments hereto made in accordance with the provisions of
Section 12.9.
"Assigned Contracts" shall have the meaning set forth in
Section 2.1(f).
"Assumed Liabilities" has the meaning specified in
Section 2.3.
"Xxxx of Sale" has the meaning specified in Section 8.1(a).
"Business" means the business of providing those common
carrier and private line telecommunications services which, prior to the
date hereof, have been conducted by Sellers.
"Business Day" means any day that is not a Saturday, a
Sunday or other day on which banks are required or authorized by law to
be closed in the City of New York.
"Capital Loans" has the meaning specified in Section 5.5.
"CERCLA" means the Comprehensive Environmental Response
Compensation and Liability Act of 1980, as amended through the date
hereof.
"CERCLIS" means the Comprehensive Environmental Response,
Compensation and Liability Information System, as updated through the
date hereof.
"Closing" has the meaning specified in Section 2.7.
"Closing Accounts Receivable" has the meaning specified in
Section 2.2(d).
"Closing Date" has the meaning specified in Section 2.7.
"Code" means the Internal Revenue Code of 1986, as amended
through the date hereof.
3
"Collections Period" has the meaning specified in Section
6.3.
"Contract Assignment Agreement" has the meaning specified in
Section 8.1(b).
"control" (including the terms "controlled by" and "under
common control with"), with respect to the relationship between or among
two or more Persons, means the possession, directly or indirectly or as
trustee or executor, of the power to direct or cause the direction of
the affairs or management of a Person, whether through the ownership of
voting securities, as trustee or executor, by contract or otherwise,
including, without limitation, the ownership, directly or indirectly, of
securities having the power to elect a majority of the board of
directors or similar body governing the affairs of such Person.
"Cut-off Date" has the meaning specified in Section 6.3(b).
"Deeds" has the meaning specified in Section 8.1(d).
"Delaware Law" means the General Corporation Law of the
State of Delaware.
"Disclosure Schedule" means the Disclosure Schedule
exchanged and initialled for identification purposes by the parties,
dated as of the date hereof, and forming a part of this Agreement.
"EMI Newco" means a wholly-owned Subsidiary that shall be
formed after the date hereof and prior to the Closing Date and to which,
prior to the Closing Date, EMI shall convey all (or such lesser amount
to which Sellers and Purchaser shall reasonably agree) of EMI's right,
title and interest in Personal Property owned or leased by EMI in
exchange for all of the outstanding capital stock of EMI Newco.
"Encumbrance" means any security interest, pledge, mortgage,
lien (including, without limitation, environmental and tax liens),
charge, encumbrance, adverse claim, preferential arrangement or
restriction of any kind, including, without limitation, any restriction
on the use, voting, transfer, receipt of income or other exercise of any
attributes of ownership.
"Environment" means surface waters, groundwaters, soil,
subsurface strata and ambient air.
4
"Environmental Claims" means any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims,
liens, notices of non-compliance or violation, investigations,
proceedings, consent orders or consent agreements relating in any way to
any Environmental Law or any Environmental Permit including, without
limitation, (a) those by Governmental enforcement, cleanup, removal,
response, remedial or other actions or damages pursuant to any
applicable Environmental Law and (b) those by any Person seeking
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Materials or arising from
alleged injury or threat of injury to health, safety or the Environment.
"Environmental Condition" means a condition relating to or
arising or resulting from a failure to comply with any applicable
Environmental Law or Environmental Permit or a Release of Hazardous
Materials into the Environment.
"Environmental Laws" means any Law and any judicial or
administrative interpretation thereof, including any judicial or
administrative order, consent decree or judgment, relating to the
environment, health, safety or Hazardous Materials, including without
limitation, the CERCLA; the Resource Conservation and Recovery Act, 42
U.S.C. sec.sec. 6901 et seq.; the Hazardous Materials Transportation
Act, 49 U.S.C. sec.sec. 6901 et seq.; the Clean Water Act, 33 U.S.C.
sec.sec. 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C.
sec.sec. 2601 et seq.; the Clean Air Act, 42 U.S.C. sec.sec. 7401 et
seq; the Safe Drinking Water Act, 42 U.S.C. sec.sec. 300f et seq.; the
Atomic Energy Act, 42 U.S.C. sec.sec. 2011 et seq.; the Federal
Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. sec.sec. 136 et
seq.; and the Federal Food, Drug and Cosmetic Act, 21 U.S.C.
sec.sec. 301 et seq.
"Environmental Permits" means all permits, approvals,
identification numbers, licenses and other authorizations required under
any applicable Environmental Law.
"Environmental Study" has the meaning specified in Section
5.7(a).
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" means an organization which is a member of
a controlled group of organizations within the meaning of Sections
414(b), (c), (m) or (o) of the Code which includes the Seller.
5
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Excluded Assets" has the meaning specified in Section 2.2.
"Excluded Liabilities" has the meaning specified in
Section 2.4.
"FCC" shall mean the Federal Communications Commission.
"FCC Licenses" shall mean licenses or authorizations issued
by the FCC.
"Financial Schedules" has the meaning specified in Section
3.7(a).
"Governmental Authority" means any United States federal,
state or local or any foreign government, governmental, regulatory or
administrative authority, agency or commission or any court, tribunal or
judicial or arbitral body.
"Governmental Order" means any order, writ, judgment,
injunction, decree, stipulation, determination or award entered by or
with any Governmental Authority.
"Hazardous Materials" means (a) petroleum and petroleum
products, radioactive materials, asbestos in any form that is or could
become friable, transformers or other equipment that contains
polychlorinated biphenyls, and radon gas, (b) any other chemicals,
materials or substances defined as or included in the definition of
"hazardous substances", "hazardous wastes", "hazardous materials",
"extremely hazardous wastes", "restricted hazardous wastes", "toxic
substances", "toxic pollutants", "contaminants" or "pollutants" or words
of similar import, under any applicable Environmental Law, and (c) any
other chemical, material or substance exposure to which is regulated by
any Governmental Authority.
"Historical GAAP Financial Statements" has the meaning
specified in Section 5.8.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended, and the rules and regulations promulgated
thereunder.
"Indebtedness" means, with respect to any Person, (a) all
indebtedness of such Person, whether or not contingent, for borrowed
money, (b) all obligations of such
6
Person for the deferred purchase price of property or services, (c) all
obligations of such Person evidenced by notes, bonds, debentures or
other similar instruments, (d) all indebtedness created or arising under
any conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies of
the seller or lender under such agreement in the event of default are
limited to repossession or sale of such property), (e) all obligations
of such Person as lessee under leases that have been or should be, in
accordance with U.S. GAAP, recorded as capital leases, (f) all
obligations, contingent or otherwise, of such Person under acceptance,
letter of credit or similar facilities, (g) all obligations of such
Person to purchase, redeem, retire, defease or otherwise acquire for
value any capital stock of such Person or any warrants, rights or
options to acquire such capital stock, valued, in the case of redeemable
preferred stock, at the greater of its voluntary or involuntary
liquidation preference plus accrued and unpaid dividends, (h) all
Indebtedness of others referred to in clauses (a) through (f) above
guaranteed directly or indirectly in any manner by such Person, or in
effect guaranteed directly or indirectly by such Person through an
agreement (i) to pay or purchase such Indebtedness or to advance or
supply funds for the payment or purchase of such Indebtedness, (ii) to
purchase, sell or lease (as lessee or lessor) property, or to purchase
or sell services, primarily for the purpose of enabling the debtor to
make payment of such Indebtedness or to assure the holder of such
Indebtedness against loss, (iii) to supply funds to or in any other
manner invest in the debtor (including any agreement to pay for property
or services irrespective of whether such property is received or such
services are rendered) or (iv) otherwise to assure a creditor against
loss, and (i) all Indebtedness referred to in clauses (a) through (f)
above secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any
Encumbrance on property (including, without limitation, accounts and
contract rights) owned by such Person, even though such Person has not
assumed or become liable for the payment of such Indebtedness.
"Intellectual Property" means (a) inventions, whether or not
patentable, whether or not reduced to practice, and whether or not yet
made the subject of a pending patent application or applications, (b)
ideas and conceptions of potentially patentable subject matter,
including, without limitation, any patent disclosures, whether or not
reduced to practice and whether or not yet made the subject of a pending
patent application or applications, (c) national (including the United
States) and multinational statutory invention registrations, patents,
7
patent registrations and patent applications (including all reissues,
divisions, continuations, continuations-in-part, extensions and
reexaminations) and all rights therein provided by international
treaties or conventions and all improvements to the inventions disclosed
in each such registration, patent or application, (d) trademarks,
service marks, trade dress, logos, trade names and corporate names,
whether or not registered, including all common law rights, and
registrations and applications for registration thereof, including, but
not limited to, all marks registered in the United States Patent and
Trademark Office, the trademark offices of the states and territories of
the United States of America, and the trademark offices of other nations
throughout the world, and all rights therein provided by international
treaties or conventions, (e) copyrights (registered or otherwise) and
registrations and applications for registration thereof, and all rights
therein provided by international treaties or conventions, (f) computer
software including, without limitation, source code, operating systems
and specifications, data, data bases, files, documentation and other
materials related thereto, data and documentation, (g) trade secrets and
confidential, technical and business information (including ideas,
formulas, compositions, inventions, and conceptions of inventions
whether patentable or unpatentable and whether or not reduced to
practice), (h) whether or not confidential, technology (including know-
how and show-how), manufacturing and production processes and
techniques, research and development information, drawings,
specifications, designs, plans, proposals, technical data, copyrightable
works, financial, marketing and business data, pricing and cost
information, business and marketing plans and customer and supplier
lists and information, (i) copies and tangible embodiments of all the
foregoing, in whatever form or medium, (j) all rights to obtain and
rights to apply for patents, and to register trademarks and copyrights,
and (k) all rights to xxx or recover and retain damages and costs and
attorneys fees for present and past infringement of any of the
foregoing.
"Interim Financial Schedules" has the meaning specified in
Section 3.7(a).
"Interim GAAP Financial Statements" has the meaning
specified in Section 5.8.
"Inventories" means all inventory, merchandise, finished
goods, and raw materials, packaging, supplies and other personal
property related to the Purchased Business maintained, held or stored by
or for any Seller as of the Effective Time and any prepaid deposits for
any of the same.
8
"IRS" means the Internal Revenue Service of the United
States.
"Law" means any federal, state, local or foreign statute,
law, ordinance, regulation, rule, code, order, other requirement or rule
of law in effect as of the date of this Agreement or as of the Closing
Date.
"Leased Real Property" means the real property leased by any
Seller, as tenant, and used in connection with the Purchased Business,
together with, to the extent leased by any such Seller, all buildings
and other structures, facilities or improvements currently or hereafter
located thereon, all fixtures, systems, equipment and items of personal
property of any Seller attached or appurtenant thereto and used in
connection with the Purchased Business, and all easements, licenses,
rights and appurtenances relating to the foregoing.
"Liabilities" means any and all debts, liabilities and
obligations, whether accrued or fixed, absolute or contingent, matured
or unmatured or determined or determinable, including, without
limitation, those arising under any Law (including, without limitation,
any Environmental Law), Action or Governmental Order and those arising
under any contract, agreement, arrangement, commitment or undertaking.
"License Assignment Agreement" has the meaning specified in
Section 8.1(c).
"Licensed Intellectual Property" means all Intellectual
Property licensed or sublicensed to any Seller from a third party and
used in connection with the Purchased Business, other than Intellectual
Property provided in connection with the rental or ownership of
equipment.
"Licenses" has the meaning specified in Section 2.1(g).
"Material Adverse Effect" means any circumstance, change in,
or effect on the Purchased Business or the Purchased Assets that,
individually or in the aggregate with any other circumstances, changes
or effects is, or could be, materially adverse to the Purchased Business
or the Purchased Assets or the prospects, results of operations or the
financial condition of the Purchased Business.
"Material Contracts" has the meaning specified in Section
3.18(a).
9
"Message" has the meaning specified in the preamble to this
Agreement.
"Message Newco" means a wholly-owned subsidiary of Message
that shall be formed after the date hereof and prior to the Closing Date
and to which, prior to the Closing Date, Message shall convey all (or
such lesser amount to which Sellers and Purchaser shall reasonably
agree) of Message's right, title and interest in Personal Property owned
or leased by Message in exchange for all of the outstanding capital
stock of Message Newco.
"Other Licenses" has the meaning specified in Section
2.1(g).
"Owned Intellectual Property" means all Intellectual
Property in and to which any Seller holds, or has a right to hold,
right, title and interest and used in connection with the Purchased
Business.
"Owned Real Property" means the real property owned by any
Seller and used in connection with the Purchased Business, together with
all buildings and other structures, facilities or improvements currently
or hereafter located thereon, all fixtures, systems, equipment and items
of personal property of any Seller attached or appurtenant thereto and
used in connection with the Purchased Business, and all easements,
licenses, rights and appurtenances relating to the foregoing.
"Parent" has the meaning specified in the preamble to this
Agreement.
"Permits" has the meaning specified in Section 3.17(a).
"Permitted Encumbrances" means such of the following as to
which no enforcement, collection, execution, levy or foreclosure
proceeding shall have been commenced: (a) liens for taxes, assessments
and governmental charges or levies not yet due and payable which are not
in excess of the amount accrued therefor on the balance sheet included
in the Interim Financial Schedules; (b) Encumbrances imposed by law,
such as materialmen's, mechanics', carriers', workmen's and repairmen's
liens and other similar liens arising in the ordinary course of business
securing obligations that (i) are not overdue for a period of more than
30 days and (ii) are not in excess of $5,000 in the case of a single
property or $50,000 in the aggregate at any time; (c) pledges or
deposits to secure obligations under workers' compensation laws or
similar legislation or to secure public or statutory obligations; and
(d) minor survey exceptions, reciprocal
10
easement agreements and other customary encumbrances on title to real
property that (i) were not incurred in connection with any Indebtedness,
(ii) do not render title to the property encumbered thereby unmarketable
and (iii) do not, individually or in the aggregate, materially adversely
affect the value or use of such property for its current purposes.
"Person" means any individual, partnership, firm,
corporation, association, trust, unincorporated organization or other
entity, as well as any syndicate or group that would be deemed to be a
person under Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended.
"Personal Property" shall mean all tangible personal
property used in connection with the Purchased Business.
"Purchase Price" has the meaning specified in Section 2.5.
"Purchased Assets" has the meaning specified in Section 2.1.
"Purchased Business" shall mean the Purchased Assets and all
the business conducted with the Purchased Assets by Sellers prior to the
date hereof.
"Purchaser" has the meaning specified in the preamble to
this Agreement.
"Purchaser Common Stock" means the Common Stock of
Purchaser, par value $.01 per share.
"Purchaser Directed Improvements" has the meaning specified
in Section 5.5.
"Purchaser's Accountants" means Ernst & Young LLP,
independent accountants of Purchaser.
"Real Property" means the Leased Real Property and the Owned
Real Property.
"Receivables" means any and all accounts receivable, notes
and other amounts receivable by any Seller from third parties,
including, without limitation, customers, arising from the conduct of
the Purchased Business or otherwise before the Closing Date, whether or
not in the ordinary course, together with all unpaid financing charges
accrued thereon.
11
"Regulations" means the Treasury Regulations (including
proposed or Temporary Regulations) promulgated by the United States
Department of Treasury with respect to the Code or other federal tax
statutes.
"Related Agreements" means the agreements to be executed by
Sellers and Parent in connection with and pursuant to this Agreement,
including, without limitation, the Xxxx of Sale and the Assignment
Agreement.
"Retained Division" means EMI's satellite division and the
assets and liabilities relating to the operation thereof.
"Release" means disposing, discharging, injecting, spilling,
leaking, leaching, dumping, emitting, escaping, emptying, seeping,
placing and the like into or upon any land or water or air or otherwise
entering into the Environment.
"Securities Act" means the Securities Act of 1933, as
amended.
"Seller" and "Sellers" have the meanings specified in the
preamble to this Agreement.
"Seller Plans" has the meaning specified in Section 3.25.
"Sellers' Accountants" means Xxxx Xxxxxxx & Company, LLP,
independent accountants of Sellers.
"Subsidiaries" means any and all corporations, partnerships,
joint ventures, associations and other entities controlled by EMI
directly or indirectly through one or more intermediaries and shall be
deemed to include EMI Newco and Message Newco upon their respective
formations.
"Switches" means frame relay and voice switches.
"Syracuse Office" shall have the meaning specified in
Section 5.15.
"Tangible Personal Property" means machinery, equipment,
tools, supplies, furniture, fixtures, personalty, vehicles, rolling
stock and other tangible personal property used in the Purchased
Business or owned or leased by any Seller for use in the Purchased
Business.
"Tax" or "Taxes" means any and all taxes, fees, levies,
duties, tariffs, imposts, and other charges of any
12
kind (together with any and all interest, penalties, additions to tax
and additional amounts imposed with respect thereto) imposed by any
government or taxing authority, including, without limitation: taxes or
other charges on or with respect to income, franchises, windfall or
other profits, gross receipts, property, sales, use, capital stock,
payroll, employment, social security, workers' compensation,
unemployment compensation, or net worth; taxes or other charges in the
nature of excise, withholding, ad valorem, stamp, transfer, value added,
or gains taxes; license, registration and documentation fees; and
customs duties, tariffs, and similar charges.
"U.S. GAAP" means United States generally accepted accounting
principles and practices as in effect during the relevant period and
applied consistently throughout the periods involved.
"USTs" means underground storage tanks, as such term is
defined in the Resource Conservation and Recovery Act, as amended, and
the regulations promulgated thereunder.
ARTICLE II
PURCHASE AND SALE OF ASSETS
SECTION 2.1 Purchase and Sale of Assets. Subject to the
terms and conditions hereof, on the Closing Date, Sellers agree to and
shall assign, transfer, sell, convey and deliver to Purchaser, and
Purchaser agrees to and shall acquire from Sellers, free and clear of
all Encumbrances (except for Permitted Encumbrances), all of Sellers'
right, title and interest in and to the properties, assets and rights
comprising or used in the Purchased Business, other than the Excluded
Assets (collectively, the "Purchased Assets"), including, without
limitation:
(a) Real Property. All Owned Real Property and all
Leased Real Property including, without limitation, that listed on
Schedule 2.1(a) hereto.
(b) Furniture and Fixtures. All tangible personal
property, furniture, equipment (including Sellers' interests in their
respective corporate telephone systems and numbers including, without
limitation, the telephone system that EMI shares with Time Warner
Entertainment - Advance/Xxxxxxxx), fixtures, leasehold improvements,
equipment under capital leases and other fixed assets used in the
Purchased Business, including, without limitation,
13
the assets that are listed and described on Schedule 2.1(b) hereto.
(c) Supplies. All inventories and office and other
supplies used in the Purchased Business, wherever located.
(d) Records. All books, records and files or other
documentation relating to the Purchased Assets or the Purchased Business
(other than as set forth in Section 2.2(d) hereof), including without
limitation, (i) inventory, maintenance and asset history records, (ii)
sales promotion materials, (iii) all client lists and telephone numbers
with respect to past, present or prospective clients and customers of
the Purchased Business and all related sales and credit records, and
(iv) all employee lists and telephone numbers used in the Purchased
Business.
(e) Intellectual Property. All Owned Intellectual
Property and Sellers' interest in all Licensed Intellectual Property,
including, without limitation, that listed on Schedule 2.1(e) hereto.
(f) Assigned Contracts. All leases for real and
personal property, employee contracts, customer contracts, franchise
agreements, technology, license and know-how agreements and, to the
extent permitted by applicable law, all rights under any written or oral
contract, agreement, lease, plan, instrument, registration, license,
certificate of occupancy, other permit or approval of any nature, or
other document, commitment, arrangement, practice or authorization
relating to the Purchased Business including, without limitation, those
listed on Schedule 2.1(f) hereto (all of which contracts, orders,
agreements, permits and leases are hereinafter collectively referred to
as the "Assigned Contracts").
(g) Licenses. (i) All FCC Licenses and pending FCC
applications used or to be used in the Purchased Business, including,
without limitation, the FCC Licenses and pending applications listed in
Schedule 2.1(g) hereto, and (ii) all other licenses, certificates,
permits and similar authorizations (the "Other Licenses", and together
with the FCC Licenses, the "Licenses") and pending applications relating
to the Purchased Business which were issued by other Governmental
Authorities to any Seller, including, without limitation, the Other
Licenses and pending applications listed in Schedule 2.1(g) hereto.
(h) Names. The names "EMI Communications Corp.",
"Eastern Message, Inc.", "Eastern Message of New Jersey, Inc.", "Eastern
Message of Pennsylvania, Inc.",
14
"Eastern Message of Massachusetts, Inc.", "Eastern Message of Maryland,
Inc." and the names of EMI Newco and Message Newco, and all goodwill
associated therewith.
(i) EMI Newco and Message Newco Stock. All of the
outstanding capital stock of EMI Newco and of Message Newco.
SECTION 2.2 Excluded Assets. The Purchased Assets shall
exclude, and Sellers shall retain all of their respective rights, title
and interests in and to all of, and shall not transfer to Purchaser, the
following (the "Excluded Assets"):
(a) Cash. All investment securities, all cash on
hand or in transit and in the bank accounts of Sellers, and all cash
equivalents.
(b) Corporate Documents and Accounting Systems. Any
interest in and to the capital stock of Sellers and all minute books,
stock books, income tax records, and similar corporate records of
Sellers, and Sellers' accounting systems hardware and software.
(c) Taxes. Sellers' right to any refund of any
Taxes paid by Sellers or to be paid by Sellers on account of the
Purchased Business through the Closing Date, except to the extent any
portion thereof was paid or is attributable to amounts paid by
Purchaser.
(d) Accounts Receivable. All billed or unbilled
costs and accounts, notes, fees, commissions and all other billed or
unbilled receivables payable to any Seller in respect of the Purchased
Business prior to the Closing Date and all billed or unbilled costs and
accounts, notes, fees, commissions and all other billed or unbilled
receivables payable to any Seller with respect to services rendered by
the Purchased Business prior to the Closing Date, a list of which
accounts receivable will be provided by Sellers on Schedule 2.2(d)
hereto within thirty (30) days after Closing (the "Closing Accounts
Receivable").
(e) Claims. All claims, causes of action, choses in
action, rights of recovery and rights of set-off of any kind, whether
made before or after the date of this Agreement, or any litigation or
proceeding, whether commenced before or after the date of this
Agreement, arising out of the Purchased Business prior to the Closing,
or otherwise arising out of any act or occurrence prior to, or any state
or facts existing as of, the Closing that is related to the Purchased
Business.
15
(f) Retained Division. The assets and liabilities
of the Retained Division.
(g) This Agreement. All rights of Sellers or Parent
under this Agreement or any Related Agreements to which any Seller or
Parent is a party.
(h) Miscellaneous. Those assets listed on Schedule
2.2(h).
SECTION 2.3 Assumption of Liabilities. Purchaser shall not
assume or agree to pay, perform or discharge any liability or obligation
of any Seller relating to the Purchased Business or the Purchased Assets
except as expressly provided herein. At the Closing and upon and
subject to the terms, conditions, representations and warranties
contained herein, Purchaser shall be responsible for the liabilities
Purchaser incurs by reason of its operation of the Purchased Business
and its ownership of the Purchased Assets and shall assume and agree to
pay, perform and discharge when due the liabilities and obligations of
Sellers relating to the Purchased Business to the extent the same arise
by reason of acts or events occurring from and after the Closing Date
under (i) the Assigned Contracts and the Licenses assigned to Purchaser
and (ii) the obligation, if any, of any Seller to file payroll and
employment tax returns pursuant to Section 6.5 hereof, but not the
liability, if any, of any Seller arising from any failure on such
Seller's part to pay payroll or employment taxes or to file such forms
as required by law, and no other liabilities or obligations of Sellers
(the "Assumed Liabilities").
SECTION 2.4 Excluded Liabilities. Except with respect to
the Assumed Liabilities specified in Section 2.3 hereof, and regardless
of whether any of the following may be disclosed to Purchaser pursuant
to Section 2.1 hereof or otherwise, or whether Purchaser may have
knowledge of the same, Purchaser shall not assume, and shall have no
liability or responsibility for, any debts, liabilities, obligations,
claims, expenses, Taxes, contracts, accounts payable or commitments of
any Seller of any kind, character or description, whether accrued,
absolute, contingent or otherwise, arising out of any act or omission
occurring or state of facts existing prior to, on or after the Closing
Date (the "Excluded Liabilities"), including, without limitation, any
liability of any Seller relating to or arising from (i) the breach by
any Seller of its obligations under the Assigned Contracts, (ii) any
infringement by any Seller of the rights of others with respect to the
Purchased Business or the Purchased Assets, (iii) any liability of any
Seller for Taxes, including specifically, without limitation, any social
security taxes or other Taxes
16
relating to such Seller's current or former employees, any employment or
withholding Taxes upon employees collected by such Seller, any income,
capital gains, sales, conveyance, transfer, franchise or capital Taxes
that may be due in connection with the consummation of the transactions
contemplated hereby; (iv) any accrued and unpaid payroll, severance,
bonus, holiday and/or vacation obligations to employees of any Seller
existing at the Closing Date; and (v) any liability or obligation of any
Seller for current or long-term indebtedness or payables or amounts
owing to any of any Seller's officers, directors, shareholders or any of
its or their affiliates or any other third party.
SECTION 2.5 Purchase Price. In consideration of the
Purchased Assets, Purchaser shall issue to Sellers 937,500 newly and
validly issued, fully paid and nonassessable shares of Purchaser Common
Stock (the aggregate value of such shares on the Closing Date, in
addition to any amount payable pursuant to the last sentence of Section
5.5(c) hereof, the "Purchase Price").
SECTION 2.6 Allocation of Purchase Price. Purchaser and
Sellers agree that the fair market value of the Purchased Assets that
constitute Class I, II and III Assets (as such terms are defined in
Treasury Regulation Section 1.1060-1T(d) of the Code) shall be as set
forth on Schedule 2.6, which shall be prepared by Purchaser and signed
by Purchaser and Sellers on or before the Closing Date. Purchaser and
Sellers further agree that (i) the Purchase Price shall be allocated
among the Purchased Assets in the manner required by Treasury Regulation
Section 1.1060-1T based on the fair market values set forth on such
Schedule; (ii) such allocation shall be prepared by Purchaser and
submitted to Sellers for Sellers' approval (which approval shall not be
unreasonably withheld or delayed) and, if approved, shall be binding on
Purchaser and Sellers for all federal, state and local tax purposes;
(iii) Purchaser and Sellers shall file with their respective federal
income tax returns consistent IRS Forms 8594: Asset Acquisition
Statement Under Section 1060, including any required amendments or
supplements thereto ("Form 8594"), which shall reflect such allocation;
and (iv) Purchaser shall prepare such Forms 8594 and shall deliver a
Seller's copy to each Seller so that each Seller may review and approve
(which approval shall not be unreasonably withheld or delayed) and, if
approved, file such Form or any amendments or supplements thereto with
its federal income tax returns. Sellers also agree to assist Purchaser
and provide Purchaser with any information necessary for the completion
of such Forms 8594.
17
SECTION 2.7 Closing. The closing (the "Closing") of the
transactions provided for herein shall take place at the offices of
Kronish, Lieb, Weiner & Xxxxxxx LLP, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx
Xxxx, Xxx Xxxx 00000-0000, at 10:00 A.M. local time on such date as
shall be agreed to by the parties hereto upon satisfaction of the
conditions specified in Sections 7.1(b), 7.1(c), 7.1(i), 7.2(b), 7.2(c)
and 7.2(h) hereof, which date shall occur within five (5) business days
after such satisfaction, (the "Closing Date"), or on such later date and
other time and place as may be mutually agreed upon by the parties
hereto, to be effective as of 12:01 A.M. local time on the Closing Date.
SECTION 2.8 Apportionment. All income and expenses
pertaining to the Purchased Business, including without limitation all
prepaid sums and fees, service charges, advertising and rental charges,
prepaid rentals and advertising, utility charges, payments under the
Assigned Contracts, and accrued and prepaid expenses, shall be prorated
between Purchaser and Sellers as of the Closing Date so that Sellers
shall receive all revenues and shall be responsible for all expenses and
liabilities allocable to the period prior to the Closing Date and
Purchaser shall receive all revenues and shall be responsible for all
expenses and liabilities allocable to the period beginning on and
continuing after the Closing Date, with Purchaser and Sellers to
cooperate with one another in calculating all such prorated items, and
to make a payment or payments one to the other, as appropriate, within
sixty (60) days of the Closing Date for the net amount of such prorated
items to reflect the foregoing, or on such other schedule of payments as
may be mutually agreed by Purchaser and Sellers.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF PARENT AND SELLER
As an inducement to Purchaser to enter into this
Agreement, Parent and Sellers, jointly and severally, hereby represent
and warrant to Purchaser as follows:
SECTION 3.1 Authority of Seller. Each of Parent and each
Seller has all necessary power and authority to enter into this
Agreement and the Related Agreements to which it is a party, to carry
out its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement and the Related Agreements by Parent and Sellers, the
performance by Parent and Sellers of their respective
18
obligations hereunder and thereunder and the consummation by Parent and
Sellers of the transactions contemplated hereby have been duly
authorized by all requisite action on the part of Parent and Sellers,
respectively. This Agreement has been duly executed and delivered by
Parent and Sellers, and assuming due authorization, execution and
delivery by Purchaser of this Agreement, this Agreement constitutes a
legal, valid and binding obligation of Parent and Sellers enforceable
against each of them in accordance with its terms, except as such
enforcement may be subject to (a) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (b) general
principles of equity (regardless of whether such enforcement is
considered in a proceeding in equity or at law).
SECTION 3.2 Organization and Qualification of Sellers.
Each Seller is a corporation duly organized, validly existing and in
good standing under the Laws of the state of its incorporation and has
all necessary power and authority to own, operate or lease the
properties and assets now owned, operated or leased by it and to carry
on the Business as it has been and is currently conducted. Each Seller
is duly licensed or qualified to do business and is in good standing in
each jurisdiction in which the properties owned or leased by it or the
operation of the Business makes such licensing or qualification
necessary and all such jurisdictions are set forth in Section 3.2 of the
Disclosure Schedule. Each Seller is duly licensed or permitted as a
"public utility" or similar regulated entity by state Governmental
Authority in all states where such licensing or permitting is necessary
and each such state and license or permit is set forth in Section 3.2 of
the Disclosure Schedule. True and correct copies of the Certificate of
Incorporation and By-laws of each Seller, each as in effect on the date
hereof, have been delivered by Sellers to Purchaser.
SECTION 3.3 Capital Stock of Seller. All of the shares of
capital stock of EMI are owned of record and beneficially by Parent.
None of the issued and outstanding shares of capital stock of EMI was
issued in violation of any preemptive rights.
SECTION 3.4 Subsidiaries. (a) Section 3.4(a) of the
Disclosure Schedule sets forth a true and correct list of all
Subsidiaries, listing for each Subsidiary its name, type of entity, the
jurisdiction of incorporation or organization, its authorized capital
stock, partnership capital or equivalent, the number and type of its
issued and outstanding shares of capital stock, partnership interests or
similar ownership interests and the current ownership of
19
such shares, partnership interests or similar ownership interests.
(b) Other than as set forth in Section 3.4(b) of the
Disclosure Schedule, there are no other corporations, partnerships,
joint ventures, associations or other entities in which EMI owns, of
record or beneficially, any direct or indirect equity or other interest
or any right (contingent or otherwise) to acquire the same. Other than
as set forth in Section 3.4(b) of the Disclosure Schedule, EMI is not a
member of (nor is any part of the Purchased Business conducted through)
any partnership. Except as set forth in Section 3.4(b) of the
Disclosure Schedule, EMI is not a participant in any joint venture or
similar arrangement.
(c) All the outstanding shares of capital stock of
each Subsidiary are validly issued, fully paid, nonassessable and,
except with respect to wholly owned Subsidiaries, free of preemptive
rights and are owned by EMI, whether directly or indirectly, free and
clear of all Encumbrances.
(d) Except as set forth in Section 3.4(d) of the
Disclosure Schedule, there are no options, warrants, convertible
securities, or other rights, agreements, arrangements or commitments of
any character relating to the capital stock of any Subsidiary or
obligating Sellers or any Subsidiary to issue or sell any shares of
capital stock of, or any other interest in, any Subsidiary.
(e) All corporate actions taken by each Subsidiary
have been duly authorized and no Subsidiary has taken any action that in
any respect conflicts with, constitutes a default under or results in a
violation of any provision of its charter or by-laws (or similar
organizational documents).
(f) Except as set forth in Section 3.4(f) of the
Disclosure Schedule, no Subsidiary is a member of (nor is any part of
its business conducted through) any partnership nor is any Subsidiary a
participant in any joint venture or similar arrangement.
(g) Except as set forth in Section 3.4(g) of the
Disclosure Schedule, there are no voting trusts, stockholder agreements,
proxies or other agreements or understandings in effect with respect to
the voting or transfer of any shares of capital stock of or any other
interests in any Subsidiary.
20
(h) On the Closing Date, (i) EMI Newco and Message
Newco shall be newly-created, wholly-owned subsidiaries of EMI and
Message, respectively; (ii) all the outstanding shares of capital stock
of EMI Newco and Message Newco shall be validly issued, fully paid,
nonassessable and free of preemptive rights; (iii) all the outstanding
shares of capital stock of EMI Newco shall be owned directly by EMI,
free and clear of all Encumbrances; (iv) all the outstanding shares of
capital stock of Message Newco shall be owned directly by Message and
indirectly by EMI, free and clear of all Encumbrances. Neither EMI
Newco nor Message Newco shall have incurred any Liability (other than a
Liability arising out of its ownership of the Personal Property), or
conducted any business, on or prior to the Closing Date.
SECTION 3.5 No Conflict. Assuming that all consents,
approvals, authorizations and other actions described in Section 3.6
have been obtained and all filings and notifications listed in Section
3.6 of the Disclosure Schedule have been made, the execution, delivery
and performance of this Agreement and the Related Agreements by Parent
and Sellers do not and will not (a) violate, conflict with or result in
the breach of any provision of the charter or by-laws (or similar
organizational documents) of Parent or any Seller, (b) conflict with or
violate (or cause an event which could have a Material Adverse Effect as
a result of) any Law or Governmental Order applicable to Parent or any
Seller, or any of their respective assets, properties or businesses,
including, without limitation, the Purchased Business or (c) except as
set forth in Section 3.5(c) of the Disclosure Schedule, conflict with,
result in any breach of, constitute a default (or event which with the
giving of notice or lapse of time, or both, would become a default)
under, require any consent under, or give to others any rights of
termination, amendment, acceleration, suspension, revocation or
cancellation of, or result in the creation of any Encumbrance on any of
the assets or properties of Parent or any Seller pursuant to, any note,
bond, mortgage or indenture, contract, agreement, lease, sublease,
license, permit, franchise or other instrument or arrangement to which
Parent or any Seller is a party or by which any of such assets or
properties is bound or affected.
SECTION 3.6 Governmental Consents and Approvals. The
execution, delivery and performance of this Agreement and the Related
Agreements by, Parent and Sellers do not and will not require any
consent, approval, authorization or other order of, action by, filing
with or notification to any Governmental Authority, except (a) as
described in Section 3.6 of the Disclosure Schedule and (b) the
notification requirements of the HSR Act.
21
SECTION 3.7 Financial Information, Books and Records and
Operating Data. (a) True and complete copies of (i) the unaudited
schedule of assets and liabilities of the Purchased Business as of July
31, 1995, and the related unaudited schedules of direct revenues and
direct expenses of the Purchased Business for the fiscal years ended
July 31, 1995, July 31, 1994 and July 31, 1993 (collectively, the
"Financial Schedules"), and (ii) the unaudited schedule of assets and
liabilities of the Purchased Business as of December 31, 1995, and the
related unaudited schedules of direct revenues and direct expenses of
the Purchased Business for the five months then ended (collectively, the
"Interim Financial Schedules"), have been delivered by Sellers to
Purchaser. The Financial Schedules and the Interim Financial Schedules
(i) were prepared in accordance with the books of account and other
financial records of the Purchased Business, (ii) reflect the values of
the Assets and Liabilities of the Purchased Business as of the date
thereof, as included in the internal books and records of Sellers, (iii)
accurately reflect in all material respects the direct revenues and the
direct expenses of the Purchased Business for the periods covered
thereby, and (iv) direct revenues, direct expenses and assets and
liabilities are reflected on an accrual basis as required by generally
accepted accounting principles ("GAAP") except that: (A) the Federal
Transfer Surcharge, which is disclosed in the Financial Schedules, may
not be recorded in the appropriate periods, (B) the Financial Schedules
and Interim Financial Schedules may not include all of the allocated
corporate expenses, (C) the amount of allocated corporate expenses may
not be determined in accordance with GAAP or on a consistent basis, (D)
the Financial Schedules and Interim Financial Schedules do not include
the amounts or disclosures required by Statements No. 87, 106 and 109 of
the Financial Accounting Standards Board.
(b) The books of account and other financial records
of the Purchased Business (i) are in all material respects complete and
correct, and do not contain or reflect any material inaccuracies or
discrepancies and (ii) have been maintained in accordance with good
business and accounting practices.
SECTION 3.8 Title. Except as otherwise identified on
Schedule 3.8 hereto, Sellers have, and pursuant to this Agreement will
convey, sell, transfer, assign and deliver to Purchaser, good, valid,
marketable, legal and beneficial title to all of the Purchased Assets,
free and clear of all Encumbrances. There are no outstanding options,
warrants, commitments, agreements or any other rights of any character,
entitling any person or entity other than Purchaser to acquire any
interest in all,
22
or any part of, the Purchased Assets. All Sellers' leasehold or other
executory interests in and to the Purchased Assets are fully and freely
assignable, except as set forth in Schedule 3.8 hereto.
SECTION 3.9 Solvency and Payment of Liabilities. No Seller
is on the date hereof, or will it be on the Closing Date, either as a
result of the transactions contemplated by this Agreement or otherwise,
insolvent, as such term is defined in the Title 11 Bankruptcy of the
United States Code or any state statute relating to insolvency; the sum
of any Seller's debts is not greater than all of its property on the
date hereof nor will it be on the Closing Date either as a result of the
transactions contemplated hereby or otherwise; and each Seller is on the
date hereof, and will be after the Closing Date, able to pay its debts
as they mature.
SECTION 3.10 Inventories. (a) Subject to amounts reserved
therefor on the balance sheet included in the Interim Financial
Schedules, the values at which all Inventories are carried on the
balance sheet included in the Interim Financial Schedules reflect the
historical inventory valuation policy of the Purchased Business of
stating such Inventories at the lower of cost (determined on the last-
in, first-out method) or market value. Except as set forth in Section
3.10 of the Disclosure Schedule, Sellers have good and marketable title
to the Inventories free and clear of all Encumbrances. The Inventories
do not consist of, in any material amount, items that are obsolete or
damaged.
(b) The Inventories are in good and merchantable
condition in all material respects are suitable and usable for the
purposes for which they are intended.
SECTION 3.11 Sales and Purchase Order Backlog. (a) As of
the date of the Interim Financial Schedules, open sales orders relating
to the Purchased Business accepted by Sellers, as measured by the total
revenues expected to be received over the term of such sales orders,
and, as of the date immediately preceding the date hereof, open sales
orders relating to the Purchased Business accepted by Sellers, as
measured by the total revenues expected to be received over the term of
such sales orders, totalled the amounts respectively set forth on
Section 3.11(a) of the Disclosure Schedule.
(b) As of the date of the Interim Financial
Schedules, open purchase orders relating to the Purchased Business
issued by Sellers, and, as of the date immediately preceding the date
hereof, open purchase orders relating to the Purchased Business issued
by Sellers, totalled the
23
amounts respectively set forth on Section 3.11(b) of the Disclosure
Schedule.
SECTION 3.12 Conduct in the Ordinary Course; Absence of
Certain Changes, Events and Conditions. Since the date of the Interim
Financial Schedules, except as disclosed in Section 3.12 of the
Disclosure Schedule, the Purchased Business has been conducted in the
ordinary course and consistent with past practice. As amplification and
not limitation of the foregoing, except as disclosed in Section 3.12 of
the Disclosure Schedule, since the date of the Interim Financial
Schedules, no Seller has, in connection with the Purchased Business:
(i) permitted or allowed any of the assets or
properties (whether tangible or intangible) of the Purchased
Business to be subjected to any Encumbrance, other than
Permitted Encumbrances and Encumbrances that will be
released at or prior to the Closing Date;
(ii) except in the ordinary course of the Purchased
Business consistent with past practice, discharged or
otherwise obtained the release of any Encumbrance or paid or
otherwise discharged any Liability other than current
liabilities reflected on the balance sheet included in the
Interim Financial Schedules and current liabilities incurred
in the ordinary course of the Purchased Business consistent
with past practice since the date of the Interim Financial
Schedules;
(iii) failed to pay any creditor any amount owed to
such creditor when due;
(iv) made any material changes in the customary
methods of operations of the Purchased Business, including,
without limitation, practices and policies relating to
manufacturing, purchasing, Inventories, marketing, selling
and pricing;
(v) merged with, entered into a consolidation with or
acquired any interest in any Person or acquired any
operating assets or business of any Person or any division
or line of business thereof, or otherwise acquired any
material assets other than in the ordinary course of the
Purchased Business consistent with past practice;
24
(vi) made, in connection with the Purchased Business,
any capital expenditure or commitment for any capital
expenditure in excess of $250,000 individually;
(vii) issued, in connection with the Purchased
Business, any sales orders or otherwise agreed to make any
purchases involving exchanges in value in excess of $250,000
individually;
(viii) sold, transferred, leased, subleased, licensed
or otherwise disposed of any properties or assets, real,
personal or mixed (including, without limitation, leasehold
interests and intangible assets), other than the sale of
Inventories, and leases, subleases, licenses or sublicenses
of tower space, in the ordinary course of the Purchased
Business consistent with past practice;
(ix) entered into any agreement, arrangement or
transaction with any of its directors, officers, employees
or shareholders (or with any relative, beneficiary, spouse
or Affiliate of such Person) in connection with or relating
to the Purchased Business;
(x) (A) granted any increase, or announced any
increase, in the wages, salaries, compensation, bonuses,
incentives, pension or other benefits payable by any Seller
to any of its employees in connection with or relating to
the Purchased Business, including, without limitation, any
increase or change pursuant to any Plan or (B) established
or increased or promised to increase any benefits under any
Plan, in either case except (i) as required by Law or any
collective bargaining agreement or (ii) for increases, not
in excess of 5% on average, or 10% for any individual
increase, in wages or salaries in the ordinary course of
business and in a manner consistent with the past practices
of the Purchased Business;
(xi) amended, terminated, cancelled or compromised
any material claims of any Seller relating to the Purchased
Business;
(xii) made any change in any method of accounting or
accounting practice or policy used by any Seller relating to
the Purchased Business, other than such changes required by
U.S. GAAP or
25
disclosed in Section 3.14 of the Disclosure Schedule;
(xiii) failed to maintain the Purchased Assets in
accordance with good business practice and in good operating
condition and repair, ordinary wear and tear excepted;
(xiv) allowed any Permit or Environmental Permit that
was issued or relates to the Purchased Business to lapse or
terminate or failed to renew any such Permit or
Environmental Permit or any insurance policy issued or
relating to the Purchased Business that is scheduled to
terminate or expire within 45 calendar days of the Closing
Date;
(xv) amended, modified or consented to the
termination of any Material Contract or any Seller's rights
thereunder;
(xvi) terminated, discontinued, closed or disposed of
any plant, facility or other business operation, or laid off
any employees (other than layoffs of less than 50 employees
in any six-month period in the ordinary course of business
consistent with past practice) or implemented any early
retirement, separation or program providing early retirement
window benefits within the meaning of Section 1.401(a)-4 of
the Regulations or announced or planned any such action or
program for the future, in connection with the Purchased
Business;
(xvii) disclosed any secret or confidential
Intellectual Property relating to the Purchased Business
(except by way of issuance of a patent) or permitted to
lapse or go abandoned any Intellectual Property relating to
the Purchased Business (or any registration or grant thereof
or any application relating thereto) to which, or under
which, any Seller has any right, title, interest or license;
(xviii) suffered any casualty loss or damage with
respect to any of the Purchased Assets which in the
aggregate have a replacement cost of more than $100,000,
whether or not such loss or damage shall have been covered
by insurance;
(xix) suffered any Material Adverse Effect relating
to the Purchased Business; or
26
(xx) agreed, whether in writing or otherwise, to take
any of the actions specified in this Section 3.12 or granted
any options to purchase, rights of first refusal, rights of
first offer or any other similar rights or commitments with
respect to any of the actions specified in this Section
3.12, except as expressly contemplated by this Agreement.
SECTION 3.13 Litigation. Except as set forth in Section
3.13 of the Disclosure Schedule (which, with respect to each Action
disclosed therein, sets forth: the parties, nature of the proceeding,
date and method commenced, amount of damages or other relief sought and,
if applicable, paid or granted) or for any Action fully covered by
insurance, there are no Actions by or against any Seller, or affecting
any of the Purchased Assets or the Purchased Business, pending (or, to
any Seller's knowledge), threatened. None of the matters disclosed in
Section 3.13 of the Disclosure Schedule will have or has had a Material
Adverse Effect or could affect the legality, validity or enforceability
of this Agreement or the Related Agreements or the consummation of the
transactions contemplated hereby or thereby. Except as set forth in
Section 3.13 of the Disclosure Schedule, none of any Seller, the
Purchased Business, nor any of the Purchased Assets is subject to any
Governmental Order (nor, to the best knowledge of Sellers after due
inquiry, are there any such Governmental Orders threatened to be imposed
by any Governmental Authority) which has or has had a Material Adverse
Effect.
SECTION 3.14 Certain Interests. Except as disclosed in
Section 3.14 of the Disclosure Schedule, no officer or director of any
Seller and no relative or spouse (or relative of such spouse) who
resides with, or is a dependent of, any such officer or director:
(a) owns, directly or indirectly, in whole or
in part, or has any other interest in any tangible or intangible
property which any Seller uses in the conduct of the Purchased Business
or otherwise; or
(b) has outstanding any Indebtedness to any
Seller relating to the Purchased Business.
SECTION 3.15 Compliance with Laws. Except as set forth in
Section 3.15 of the Disclosure Schedule, each Seller has conducted and
continues to conduct the Purchased Business in accordance with all Laws
and Governmental Orders applicable to such Seller, any of the Purchased
Assets or the Purchased Business, and no Seller is in violation of any
such Law or Governmental Order.
27
SECTION 3.16 Licenses. (a) The Licenses were duly issued
to Sellers and were properly and validly obtained by Sellers in
compliance with the rules of the FCC or the other Governmental Authority
issuing them. All of the Licenses are in full force and effect and they
have not been sold, conveyed, pledged, assigned or transferred to any
other party and no other party has any present or future right to
acquire or use them.
(b) Except as disclosed in Section 3.16(b) of the
Disclosure Schedule, Sellers have complied with and are in compliance
with all regulations and laws applicable to their operations under the
Licenses. Sellers have filed all tariffs required to be filed in
connection with the Purchased Business or the Purchased Assets with the
FCC and all other Governmental Authorities, each of which is identified
in Section 3.16 of the Disclosure Schedule, and have complied with the
terms of each such tariff. There is no action, suit, investigation or
other proceeding pending or threatened against any Seller which might
affect the Licenses, or the assignment of the Licenses to Purchaser.
No event has occurred with respect to the Licenses which permits or,
after notice or lapse of time, or both, would permit revocation or
termination thereof, or would result in any impairment of the rights of
the holder of the Licenses or the imposition of a forfeiture against any
Seller or any subsequent holder of the Licenses with respect to the
operation of the facilities authorized thereby.
(c) Sellers have delivered to Purchaser, correct and
complete copies of all of (a) Sellers' FCC Licenses and the applications
related thereto together with any pending applications filed by any
Seller for new or modified facilities related to the Purchased Business,
and (b) the Other Licenses and any tariffs filed by any Seller relating
to the Purchased Business, and any applications for additional or
modified licenses, authorizations, certificates or permits related to
the Purchased Business.
SECTION 3.17 Environmental and Other Permits and Licenses;
Related Matters. (a) Except as disclosed in Section 3.17(a)(i) of the
Disclosure Schedule, Sellers currently hold all the health and safety
and other permits, licenses, authorizations, certificates, exemptions
and approvals of Governmental Authorities (collectively, "Permits"),
including, without limitation, Environmental Permits, necessary for the
current use, occupancy and operation of each Purchased Asset and the
conduct of the Purchased Business, and all such Permits are in full
force and effect. Except as disclosed in Section 3.17(a)(ii) of the
Disclosure Schedule, no Seller has any knowledge of any existing
practice, action or activity of Sellers and or of
28
any existing condition of the Purchased Assets or the Purchased Business
which will give rise to any civil or criminal Liability under, or
violate or prevent compliance with, any health or occupational safety or
other applicable Law. No Seller has received any notice from any
Governmental Authority revoking, cancelling, rescinding, materially
modifying or refusing to renew any Permit or providing written notice of
violations under any Law. Except as disclosed in Section 3.17(a) (iii)
of the Disclosure Schedule, Sellers are in all respects in compliance
with the Permits and the requirements of the Permits. Section
3.17(a)(iv) of the Disclosure Schedule identifies all Permits that are
nontransferable or which will require the consent of any Governmental
Authority in the event of the consummation of the transactions
contemplated by this Agreement.
(b) Except as disclosed in Section 3.17(b) of the
Disclosure Schedule, (i) Hazardous Materials have not been treated,
stored in excess of 90 days on, or Released on any Real Property; (ii)
in conducting the Purchased Business, Sellers have disposed of all
wastes, including those wastes containing Hazardous Materials, in
compliance with all applicable Environmental Laws and Environmental
Permits; (iii) there are no past, pending or threatened Environmental
Claims against any Seller, relating to the Purchased Business or the
Purchased Assets, or any Real Property; (iv) no Real Property is listed
or proposed for listing on the National Priorities List under CERCLA or
on the CERCLIS or any analogous state list of sites requiring
investigation or cleanup; and (v) no Seller has transported or arranged
for the transportation of any Hazardous Materials from the Purchased
Assets to any location that is listed or proposed for listing on the
National Priorities List under CERCLA or on the CERCLIS or any analogous
state list or which is the subject of any Environmental Claim.
(c) Except as disclosed in Section 3.17(c) of the
Disclosure Schedule, there are no circumstances with respect to any Real
Property or other Purchased Asset or the operation of the Purchased
Business which, to Sellers' knowledge, could reasonably be anticipated
(i) to form the basis of an Environmental Claim against any Seller,
relating to the Purchased Business or any Real Property or Purchased
Asset or (ii) to cause such Real Property or Purchased Asset to be
subject to any restrictions on ownership, occupancy, use or
transferability under any applicable Environmental Law.
(d) Except as disclosed in Section 3.17(d) of the
Disclosure Schedule, there are not now and never have
29
been any USTs located on any Real Property to the best knowledge of
Sellers.
SECTION 3.18 Material Contracts. (a) Sellers have, or
have caused to be, delivered to the Purchaser, correct and complete
copies (or in the case of oral contracts, summaries thereof) of all of
the following contracts and agreements (including, without limitation,
oral and informal arrangements) of Sellers relating to the Purchased
Business (such contracts and agreements, together with all material
contracts, agreements, leases and subleases concerning the management or
operation of any Real Property (including, without limitation, brokerage
contracts) to which any Seller is a party and all material agreements
relating to Intellectual Property, being "Material Contracts"):
(i) each contract and agreement for the purchase of
Inventory, spare parts, other materials or personal property
with any supplier or for the furnishing of services to any
Seller, or otherwise related to the Purchased Business under
the terms of which any Seller: (A) is obligated to pay or
otherwise give consideration of more than $100,000 in the
aggregate during the calendar year ending December 31, 1996,
(B) is obligated to pay or otherwise give consideration of
more than $200,000 in the aggregate over the remaining term
of such contract and (C) cannot be cancelled by such Seller
without penalty or further payment and without more than 30
days' notice;
(ii) each contract and agreement for the sale of
Inventory or other personal property or for the furnishing
of services by any Seller which: (A) will involve
consideration of more than $100,000 in the aggregate during
the calendar year ending December 31, 1996, or (B) will
involve consideration of more than $200,000 in the aggregate
over the remaining term of the contract;
(iii) all broker, distributor, dealer, manufacturer's
representative, franchise, agency, sales promotion, market
research, marketing consulting and advertising contracts and
agreements to which any Seller is a party;
(iv) all management contracts and contracts with
independent contractors or consultants (or similar
arrangements) to which any Seller is a party and which are
not cancelable without penalty
30
or further payment and without more than 30 days' notice;
(v) all contracts and agreements relating to
Indebtedness of any Seller;
(vi) all contracts, agreements, permits and tariffs
with any Governmental Authority filed by any Seller or to
which any Seller is a party;
(vii) all contracts and agreements that limit or
purport to limit the ability of any Seller to compete in any
line of business or with any Person or in any geographic
area or during any period of time;
(viii) all contracts and agreements between or among
any Seller or Sellers and any Affiliate or Affiliates of any
Seller;
(ix) all other contracts and agreements whether or
not made in the ordinary course of business, which are
material to any Seller or the conduct of the Purchased
Business, or the absence of which would have a Material
Adverse Effect.
For purposes of this Section 3.18 and Sections 3.20,
3.21, and 3.22 the term "lease" shall include any and all leases,
subleases, sale/leaseback agreements or similar arrangements.
(b) Except as disclosed in Section 3.18(b) of the
Disclosure Schedule, each Material Contract: (i) is valid and binding
on the respective parties thereto and is in full force and effect and
(ii) upon consummation of the transactions contemplated by this
Agreement, except to the extent that any consents set forth in Section
3.6 of the Disclosure Schedule are not obtained, shall continue in full
force and effect without penalty or other adverse consequence. No
Seller is in breach of, or in default under, any Material Contract.
(c) Except as disclosed in Section 3.18(c) of the
Disclosure Schedule, no other party to any Material Contract is in
breach thereof or in default thereunder.
(d) Except as disclosed in Section 3.18(d) of the
Disclosure Schedule, there is no contract, agreement or other
arrangement granting any Person any preferential right to purchase,
other than in the ordinary course of the Purchased Business consistent
with past practice, any of the properties or assets of any Seller.
31
SECTION 3.19 Intellectual Property. (a) Section
3.19(a)(i) of the Disclosure Schedule sets forth a true and complete
list and a brief description, including complete identification of each
patent and patent application and each registration or application for
registration thereof, of all Owned Intellectual Property and Section
3.19(a)(ii) of the Disclosure Schedule sets forth a true and complete
list and a brief description, including a description of any license or
sublicense of all Licensed Intellectual Property. Except as otherwise
described in Section 3.19(a)(i) of the Disclosure Schedule, in each case
where a registration or patent or application for registration or patent
is held by any Seller by assignment, the assignment has been duly
recorded with the State or national Trademark Office from which the
original registration issued or before which the application for
registration is pending. Except as disclosed in Section 3.19(a)(ii) of
the Disclosure Schedule, the rights of Sellers in or to the Owned
Intellectual Property and the Licensed Intellectual Property do not
conflict with or infringe on the rights of any other Person, and no
Seller has received any claim or written notice from any Person to such
effect.
(b) Except as disclosed in Section 3.19(b) of the
Disclosure Schedule: (i) all the Owned Intellectual Property is owned by
Sellers free and clear of any Encumbrance and (ii) no Actions have been
made or asserted or are pending (nor, to the best knowledge of Sellers
after due inquiry, has any such Action been threatened) against any
Seller either (A) based upon or challenging or seeking to deny or
restrict the use by such Seller of any of the Owned Intellectual
Property or (B) alleging that any services provided, or products
manufactured or sold by such Seller are being provided, manufactured or
sold in violation of any patents or trademarks, or any other rights of
any Person. Except as disclosed in Section 3.19(b) of the Disclosure
Schedule, no Seller has granted any license or other right to any other
Person with respect to the Owned Intellectual Property. The
consummation of the transactions contemplated by this Agreement will not
result in the termination or impairment of any of the Owned Intellectual
Property.
(c) Sellers have, or have caused to be, delivered to
the Purchaser correct and complete copies of all the licenses and
sublicenses for Licensed Intellectual Property listed in Section
3.19(a)(ii) of the Disclosure Schedule (including, but not limited to,
all amendments). With respect to each of such licenses and sublicenses:
(i) such license or sublicense is valid and binding
and in full force and effect and
32
represents the entire agreement between the respective licensor
and licensee with respect to the subject matter of such license
or sublicense;
(ii) except as otherwise set forth in Section
3.19(c)(ii) of the Disclosure Schedule, such license or
sublicense will not cease to be valid and binding and in
full force and effect on terms identical to those currently
in effect as a result of the consummation of the
transactions contemplated by this Agreement, nor will the
consummation of the transactions contemplated by this
Agreement constitute a breach or default under such license
or sublicense or otherwise give the licensor or sublicensor
a right to terminate such license or sublicense;
(iii) except as otherwise disclosed in Section
3.19(c)(iii) of the Disclosure Schedule, with respect to
each such license or sublicense: (A) no Seller has received
any notice of termination or cancellation under such license
or sublicense and no licensor or sublicensor has any right
of termination or cancellation under such license or
sublicense except in connection with the default thereunder
of the Seller that is a party to such license or sublicense,
(B) no Seller has received any notice of a breach or default
under such license or sublicense, which breach or default
has not been cured, and (C) no Seller has granted to any
other Person any rights, adverse or otherwise, under such
license or sublicense;
(iv) neither the Seller that is a party to such
license or sublicense nor any other party to such license or
sublicense is in breach or default in any material respect,
and, to the best knowledge of Sellers after due inquiry, no
event has occurred that, with notice or lapse of time would
constitute such a breach or default or permit termination,
modification or acceleration under such license or
sublicense which would have a Material Adverse Effect;
(v) no Actions have been made or asserted or are
pending (nor, to the best knowledge of Sellers after due
inquiry, has any such Action been threatened) against any
Seller either (A) based upon or challenging or seeking to
deny or restrict the use by any Seller of any of the
Licensed Intellectual Property or (B) alleging that any
Licensed Intellectual Property is being licensed,
33
sublicensed or used in violation of any patents or trademarks,
or any other rights of any Person; and
(vi) to the best knowledge of Sellers, no Person is
using any patents, copyrights, trademarks, service marks,
trade names, trade secrets or similar property that are
confusingly similar to the Licensed Intellectual Property or
that infringe upon the Licensed Intellectual Property or
upon the rights of Sellers therein.
SECTION 3.20 Real Property. (a) Except as described in
Section 3.20(a) or 3.18(a) of the Disclosure Schedule, there is no
material violation of any Law (including, without limitation, any
building, planning or zoning law) relating to any of the Real Property.
Each Seller is in peaceful and undisturbed possession of each parcel of
Real Property owned or leased by it and there are no contractual or
legal restrictions that preclude or restrict the ability to use the
premises in the manner in which they are currently being used. There
are no material defects or material adverse physical conditions
affecting the Real Property or any of the facilities, buildings,
structures, erections, improvements, fixtures, fixed assets and
personalty of a permanent nature annexed, affixed or attached to,
located on or forming part of the Real Property. Except as set forth in
Section 3.21(a) of the Disclosure Schedule, no Seller is leasing or
subleasing any parcel or any portion of any parcel of Real Property to
any other Person, nor has any Seller assigned its interest under any
lease or sublease for any Leased Real Property to any third party.
(b) Sellers have or have caused to be, delivered to
the Purchaser true and complete copies of all leases and subleases for
any Leased Real Property and all amendments thereto. With respect to
each of such leases and subleases:
(i) except as otherwise set forth in Section
3.20(b)(i) of the Disclosure Schedule, such lease or
sublease is legal, valid, binding, enforceable and in full
force and effect and represents the entire agreement between
the respective landlord and tenant with respect to such
property;
(ii) except as otherwise set forth in Section
3.20(b)(ii) of the Disclosure Schedule, such lease or
sublease will not cease to be legal, valid, binding,
enforceable and in full force and effect on terms identical
to those currently in effect as a result of the consummation
of the
34
transactions contemplated by this Agreement, nor will the
consummation of the transactions contemplated by this Agreement
constitute a breach or default under such lease or sublease or
otherwise give the landlord a right to terminate such lease or
sublease;
(iii) except as otherwise disclosed in Section
3.20(b) (iii) of the Disclosure Schedule, with respect to
each such lease or sublease: (A) no Seller has received any
notice of cancellation or termination under such lease or
sublease and no lessor has any right of termination or
cancellation under such lease or sublease except upon a
breach or default thereunder by the Seller that is a party
thereto, (B) no Seller has received any notice of a breach
or default under such lease or sublease, which breach or
default has not been cured, and (C) no Seller has granted to
any other Person any rights, adverse or otherwise, under
such lease or sublease; and
(iv) except as otherwise set forth in Section
3.20(b)(iv) of the Disclosure Schedule, no Seller, nor to
Sellers' knowledge, any other party to such lease or
sublease, is in breach or default in any material respect,
and, to the best knowledge of Sellers after due inquiry, no
event has occurred that, with notice or lapse of time would
constitute such a breach or default or permit termination,
modification or acceleration under such lease or sublease.
(c) There are no condemnation proceedings or eminent
domain proceedings of any kind pending or, to the best knowledge of
Sellers, threatened against the Real Property.
(d) Except as otherwise set forth in Section 3.20(d)
of the Disclosure Statement, all the Real Property is occupied under a
valid and current certificate of occupancy or similar permit and, to the
best knowledge of Sellers, there are no facts that would prevent the
Real Property from being occupied by Purchaser after the Closing Date in
the same manner as occupied by Sellers immediately prior to the Closing
Date.
(e) Except as otherwise set forth in Section 3.20(e)
of the Disclosure Schedule, no improvements erected by any Seller on the
Real Property and none of the current uses and conditions thereof
violate any applicable deed restrictions or other applicable covenants,
restrictions,
35
agreements, existing site plan approvals, zoning or subdivision
regulations or urban redevelopment plans as modified by any duly issued
variances, and no permits, licenses or certificates pertaining to the
ownership or operation of all improvements erected by any Seller on the
Real Property, other than those which are transferable with the Real
Property, are required by any Governmental Authority having jurisdiction
over the Real Property.
(f) All improvements erected by any Seller on any
Real Property are wholly within the lot limits of such Real Property and
do not encroach on any adjoining premises, and there are no
encroachments on any Owned Real Property by any improvements located on
an adjoining premises.
(g) The rental set forth in each lease or sublease of
the Leased Real Property is the actual rental being paid, and there are
no separate agreements or understandings with respect to the same.
(h) Each Seller has the full right to exercise any
renewal options contained in the leases and subleases pertaining to the
Leased Real Property to which it is a party on the terms and conditions
contained therein and upon due exercise would be entitled to enjoy the
use of each Leased Real Property for the full term of such renewal
options.
SECTION 3.21 Tangible Personal Property. (a) Sellers
have, or have caused to be, delivered to the Purchaser true and complete
copies of all leases and subleases for Tangible Personal Property having
a value in excess of $50,000 and all amendments thereto. With respect
to each of such leases and subleases:
(i) except as set forth in Section 3.21(a)(i) of the
Disclosure Schedule, such lease or sublease is legal, valid,
binding, enforceable and in full force and effect and
represents the entire agreement between the respective
lessor and lessee with respect to such property;
(ii) except as set forth in Section 3.21(a)(ii) of
the Disclosure Schedule, such lease or sublease will not
cease to be legal, valid, binding, enforceable and in full
force and effect on terms identical to those currently in
effect as a result of the consummation of the transactions
contemplated by this Agreement, nor will the consummation of
the transactions contemplated by this Agreement constitute a
breach or default
36
under such lease or sublease or otherwise give the lessor a right
to terminate such lease or sublease;
(iii) except as otherwise disclosed in Section
3.21(a)(iii) of the Disclosure Schedule, with respect to
each such lease or sublease: (A) no Seller has received any
notice of cancellation or termination under such lease or
sublease and no lessor has any right of termination or
cancellation under such lease or sublease except upon a
breach or default thereunder by the Seller that is a party
thereto, (B) no Seller has received any notice of a breach
or default under such lease or sublease, which breach or
default has not been cured, and (C) no Seller has granted to
any other Person any rights, adverse or otherwise, under
such lease or sublease; and
(iv) except as set forth in Section 3.21(a)(iv) of the
Disclosure Schedule, no Seller, nor (to the best knowledge
of Sellers after due inquiry) any other party to such lease
or sublease, is in breach or default in any material
respect, and, to the knowledge of Sellers, no event has
occurred that, with notice or lapse of time would constitute
such a breach or default or permit termination, modification
or acceleration under such lease or sublease.
(b) Each Seller has the full right to exercise any
renewal options contained in the leases and subleases pertaining to the
Tangible Personal Property to which it is a party on the terms and
conditions contained therein and upon due exercise would be entitled to
enjoy the use of each item of leased Tangible Personal Property for the
full term of such renewal options.
SECTION 3.22 Purchased Assets. (a) Except as disclosed in
Section 3.22 of the Disclosure Schedule, Sellers own, lease or have the
legal right to use all the Purchased Assets, including, without
limitation, the Owned Intellectual Property, the Licensed Intellectual
Property, the Real Property and the Tangible Personal Property, and,
with respect to contract rights, are parties to and enjoy the right to
the benefits of all contracts, agreements and other arrangements used or
intended to be used by Sellers or in or relating to the conduct of the
Purchased Business. Sellers have good title to, or, in the case of
leased or subleased Purchased Assets, and subsisting leasehold interests
in, all the Purchased Assets, free and clear of
37
all Encumbrances, except (i) as disclosed in the Disclosure Schedule and
(ii) for Permitted Encumbrances.
(b) The Purchased Assets constitute all the
properties, assets and rights forming a part of, used or held in, and
all such properties, assets and rights as are necessary for use in the
conduct of, the Purchased Business. At all times since the date of the
Interim Financial Schedules, Sellers have caused the Purchased Assets to
be maintained in accordance with good business practice, and all the
Purchased Assets material to the Purchased Business are in good
operating condition and repair, ordinary wear and tear excepted, and are
suitable for the purposes for which they are used and intended.
SECTION 3.23 Customers. Section 3.23 of the Disclosure
Schedule sets forth a list of each customer of Sellers relating to the
Purchased Business, the revenues from whom averaged over $5,000 per
month during the six-month period ended December 31, 1995. Except as
disclosed in Section 3.23 of the Disclosure Schedule, no Seller received
any notice, nor is any Seller aware, that any customer of any Seller
relating to the Purchased Business, for whom sales during the past six
months averaged over $5,000 per month, has ceased, or will cease, to use
the products, equipment, goods or services of any Seller related to the
Purchased Business, or has substantially reduced, or will substantially
reduce, the use of such products, equipment, goods or services at any
time.
SECTION 3.24 Suppliers. Section 3.24 of the Disclosure
Schedule sets forth a list of the ten largest suppliers of Sellers
relating to the Purchased Business in terms of purchases during such
period. Except as disclosed in Section 3.24 of the Disclosure Schedule,
no Seller has received any notice, nor is any Seller aware, that any
supplier will not sell raw materials, supplies, merchandise and other
goods to any Seller relating to the Purchased Business at any time after
the Closing Date on terms and conditions substantially similar to those
used in its current sales to any Seller relating to the Purchased
Business, subject only to general and customary price increases.
SECTION 3.25 Employee Benefit Matters. (a) Plans and
Documents. (i) Section 3.25(a) of the Disclosure Schedule contains a
true and complete list of all bonus, deferred compensation, pension,
profit-sharing, retirement, insurance, stock purchase, stock option,
welfare, severance, hospitalization, insurance or other employee benefit
plan (as defined in section 3(3) of ERISA), whether formal or informal,
as to which any Seller or any
38
ERISA Affiliate maintains, contributes to or has any obligation to
contribute to on behalf of persons employed by any Seller (collectively,
the "Seller Plans").
(ii) For each of the Seller Plans, Sellers
have delivered or made available to Purchaser true and
complete copies of the summary plan descriptions.
(iii) Except as disclosed on Section 3.25(a) of
the Disclosure Schedule, no reportable event (as defined in
section 4043(e) of ERISA), prohibited transaction (as
defined in section 406 of ERISA or section 4975 of the
Code), accumulated funding deficiency (as defined in section
302 of ERISA) or plan termination (as defined in Title IV of
ERISA or section 411(d) of the Code) has occurred with
respect to any of the Seller Plans or with respect to any
employee benefit plan (as defined in section 3(3) of ERISA)
of an ERISA Affiliate (the Seller Plans and the employee
benefit plans of ERISA Affiliates are collectively referred
to as the "Group Plans"). Since 1991, no proceeding has
been or is expected to be initiated to terminate any Group
Plan subject to Title IV of ERISA.
(iv) None of the Seller Plans is a
multiemployer plan (as defined in section 3(37) of ERISA)
and, to the best of Sellers' knowledge, Sellers do not have
any actual or potential liability with respect to any
multiemployer plan of an ERISA Affiliate or a past or
present withdrawal therefrom.
(v) Each Seller Plan which constitutes a
welfare benefit plan within the meaning of section 3(1) of
ERISA has complied and continues to comply with the health
care continuation coverage requirements of section 4980B of
the Code and Part 6 of Subtitle B of Title I of ERISA.
(vi) No action, suit or proceeding, hearing,
or investigation with respect to the administration or
investment of the assets of any Group Plan is pending or
threatened. None of the shareholders, directors or officers
of any Seller has any knowledge of any basis for any such
action, suit, proceeding, hearing or investigation or of any
outstanding or threatened liens against any Seller which
arose or will arise from the
39
administration or investment of assets of any Group Plan.
(b) Americans With Disability Act. Except as set
forth in Section 3.25(b) of the Disclosure Schedule, no Seller has
received any notice of violation of requirements of the Americans With
Disabilities Act.
(c) WARN Act. Each Seller is in compliance with the
requirements of the Workers Adjustment and Retraining Notification Act
("WARN") and have no liabilities pursuant to WARN.
SECTION 3.26 Labor Matters. Except as set forth in Section
3.26 of the Disclosure Schedule, (a) no Seller is a party to any
collective bargaining agreement or other labor union contract applicable
to persons employed by such Seller in connection with the Purchased
Business and, to the best knowledge of Sellers, currently there are no
organizational campaigns, petitions or other unionization activities
seeking recognition of a collective bargaining unit which could affect
the Purchased Business; (b) there are no strikes, slowdowns or work
stoppages pending or, to the best knowledge of Sellers, threatened
between Sellers and any of their respective employees related to the
Purchased Business, and no Seller has experienced any such strike,
slowdown or work stoppage within the past three years in connection with
the Purchased Business; (c) there are no unfair labor practice
complaints pending against any Seller relating to the Purchased Business
before the National Labor Relations Board or any other Governmental
Authority or any current union representation questions involving
employees of any Seller related to the Purchased Business which could
have a Material Adverse Effect; (d) there is no claim with respect to
payment of wages, salary or overtime pay that has been asserted or is
now pending or threatened before any Governmental Authority with respect
to any Persons currently or formerly employed by any Seller in
connection with the Purchased Business; (e) no Seller is a party to, or
otherwise bound by any consent decree with, or citation by any
Governmental Authority relating to employees or employment practices in
connection with the Purchased Business; (f) there is no charge or
proceeding with respect to a violation of any occupational safety or
health standards that has been asserted or is now pending or threatened
with respect to any Seller in connection with the Purchased Business;
and (g) there is no charge of discrimination in employment or employment
practices, for any reason, including, without limitation, age, gender,
race, religion or other legally protected category, which has been
asserted or is now pending or threatened before the United States Equal
Employment Opportunity Commission, or
40
any other Governmental Authority in any jurisdiction in any Seller has
employed or currently employs any Person in connection with the
Purchased Business.
SECTION 3.27 Key Employees. Section 3.27 of the Disclosure
Schedule lists the name, place of employment, the current annual salary
rates, bonuses, deferred or contingent compensation, pension, accrued
vacation, "golden parachute" and other like benefits paid or payable (in
cash or otherwise) in 1994 and 1995, the date of employment and a
description of position and job function of each current salaried
employee, officer, director, consultant or agent of Sellers employed in
connection with the Purchased Business and whose annual compensation
exceeded (or, in 1996, is expected to exceed) $75,000.
SECTION 3.28 Taxes. (a) Except as otherwise set forth on
Schedule 3.28(a), there is no tax deficiency outstanding, proposed or
assessed against any Seller.
(b) There are no Taxes that are or could
constitute an Encumbrance on the Purchased Assets or the Purchased
Business or that could have a Material Adverse Effect on the Purchased
Assets, the Purchased Business or Purchaser (a "Tax Lien").
SECTION 3.29 Insurance. (a) All material assets,
properties and risks of the Purchased Business are, and for the past
five years have been, covered by valid and, except for policies that
have expired under their terms in the ordinary course, currently
effective insurance policies or binders of insurance (including, without
limitation, general liability insurance, property insurance and workers
compensation insurance) issued in favor of the relevant Seller in each
case with responsible insurance companies, in such types and amounts and
covering such risks as are consistent with customary practices and
standards of companies engaged in businesses and operations similar to
those of the Purchased Business.
(b) With respect to each insurance policy held by
Sellers in connection with the Purchased Business: (i) the policy is
legal, valid, binding and enforceable in accordance with its terms and,
except for policies that have expired under their terms in the ordinary
course, is in full force and effect; (ii) no Seller that is a party to a
policy is in breach or default (including any breach or default with
respect to the payment of premiums or the giving of notice), and no
event has occurred which, with notice or the lapse of time, would
constitute such a breach or default or permit termination or
modification, under such policy; (iii) no party to the policy has
repudiated, or given notice of a
41
intent to repudiate, any provision thereof; and (iv) to the best
knowledge of Sellers after due inquiry, no insurer on the policy has
been declared insolvent or placed in receivership, conservatorship or
liquidation.
(c) Section 3.29(c) of the Disclosure Schedule sets
forth all risks relating to the Purchased Business against which any
Seller is self-insured or which are covered under any risk retention
program in which any Seller participates, together with details for the
last five years of such Seller's loss experience with respect to such
risks.
(d) Since January 1, 1995, no insurance carrier has
cancelled, failed to renew or materially reduced any insurance coverage
for any Seller in connection with the Purchased Business or given any
notice or other indication of its intention to cancel, not renew or
reduce any such coverage.
(e) At the Closing Date, all insurance policies
relating to the Purchased Business currently in effect will be
outstanding and duly in force.
(f) No insurance policy held by or on behalf of any
Seller in connection with the Purchased Business will cease to be legal,
valid, binding, enforceable in accordance with its terms and in full
force and effect on terms identical to those in effect as of the date
hereof as a result of the consummation of the transactions contemplated
by this Agreement; provided, however, that each Seller may be eliminated
as a named insured under each such policy as a result of the transfer of
the Purchased Business to Purchaser.
SECTION 3.30 Certain Consents. Except as set forth in
Section 3.30 of the Disclosure Schedule, Sellers have all consents,
rights-of-way and franchises necessary to conduct the Purchased
Business.
SECTION 3.31 Brokers. No broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission
in connection with the transactions contemplated by this Agreement based
upon arrangements made by or on behalf of Parent or any Seller.
42
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PURCHASER
As an inducement to Parent and Sellers to enter into
this Agreement, Purchaser hereby represents and warrants to Parent and
Sellers as follows:
SECTION 4.1 Organization and Authority of Purchaser.
Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all necessary
power and authority to enter into this Agreement, to carry out its
obligations hereunder and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by Purchaser, the
performance by Purchaser of its obligations hereunder and the
consummation by Purchaser of the transactions contemplated hereby have
been duly authorized by all requisite action on the part of Purchaser.
This Agreement has been duly executed and delivered by Purchaser, and
(assuming due authorization, execution and delivery by Parent and
Seller) this Agreement constitutes a legal, valid and binding obligation
of Purchaser enforceable against Purchaser in accordance with its terms
except as such enforcement may be subject to (a) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (b) general
principles of equity (regardless of whether such enforcement is
considered in a proceeding in equity or at law).
SECTION 4.2 No Conflict. Assuming compliance with the
notification requirements of the HSR Act and the making and obtaining of
all filings, notifications, consents, approvals, authorizations and
other actions referred to in Section 4.5, except as may result from any
facts or circumstances relating solely to Seller, the execution,
delivery and performance of this Agreement by of Purchaser does not and
will not (a) violate, conflict with or result in the breach of any
provision of Purchaser's Certificate of Incorporation or By-laws, (b)
conflict with or violate any Law or Governmental Order applicable to
Purchaser, or (c) conflict with, or result in any breach of, constitute
a default (or event which with the giving of notice or lapse or time, or
both, would become a default) under, require any consent under, or give
to others any rights of termination, amendment, acceleration,
suspension, revocation, or cancellation of, or result in the creation of
any Encumbrance on any of the assets or properties of Purchaser pursuant
to, any note, bond, mortgage or indenture, contract, agreement, lease,
sublease, license,
43
permit, franchise or other instrument or arrangement to which Purchaser
is a party or by which any of such assets or properties are bound or
affected which would have a material adverse effect on the ability of
Purchaser to consummate the transactions contemplated by this Agreement.
SECTION 4.3 Capital Stock of Purchaser. (a) The
authorized capital stock of Purchaser consists of 20,000,000 shares of
common stock and 500,000 shares of preferred stock, $1.00 par value. As
of February 14, 1996, 10,382,918 shares of Purchaser Common Stock and no
shares of preferred stock, $1.00 par value, were issued and outstanding,
all of which outstanding shares are validly issued, fully paid and
nonassessable. None of the issued and outstanding shares of Purchaser
Common Stock was issued in violation of any preemptive rights. Except
for options and warrants to purchase an aggregate of 1,168,544 shares of
Purchaser Common Stock and a restricted stock grant covering 200,000
shares of Purchaser Common Stock, Purchaser does not have, as of
February 14, 1996, outstanding any stock or securities convertible into
or exchangeable for any shares of its capital stock and is not subject
to any obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any shares of its capital stock.
(b) The shares of Purchaser Common Stock to be
issued pursuant to this Agreement will be duly authorized, validly
issued, fully paid and non-assessable.
SECTION 4.4 SEC Reports. Purchaser has delivered to
Sellers copies of its Annual Reports on Form 10-K for the years ended
December 31, 1992, 1993 and 1994, and its Quarterly Reports on Form 10-Q
for the quarters ended March 31, 1995, June 30, 1995 and September 30,
1995, any and all Current Reports on Form 8-K filed during 1995,
Purchaser's most recent proxy statement and Amendment No. 1 to
Purchaser's Registration Statement on Form S-3, in each case as filed
with the Securities and Exchange Commission. Such reports, proxy
statement and registration statement, comply with the applicable
requirements of the Securities Act and the Exchange Act, and the rules
and regulations thereunder, and do not, as of their respective dates,
contain a misstatement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein not misleading.
SECTION 4.5 Governmental Consents and Approvals. The
execution, delivery and performance of this Agreement by Purchaser do
not and will not require any consent, approval, authorization or other
order of, action by, filing with, or notification to, any Governmental
Authority, except for (a) consent and approval of the FCC with respect
to the
44
assignment of the FCC Licenses to Purchaser and consent and approval of
various state public utility commissions with respect to the assignment
of the Other Licenses to Purchaser and (b) the notification requirements
of the HSR Act.
SECTION 4.6 Litigation. Except as disclosed in a writing
given to Seller by Purchaser on the date of this Agreement, no claim,
action, proceeding or investigation is pending or, to the knowledge of
Purchaser, threatened, which seeks to delay or prevent the consummation
of, or which would be reasonably likely to materially adversely affect
Purchaser's ability to consummate, the transactions contemplated by this
Agreement.
SECTION 4.7 Brokers. Except for Bear, Xxxxxxx & Co., Inc.,
the fees and expenses of which shall be paid by Purchaser, no broker,
finder or investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated
by this Agreement based upon arrangements made by or on behalf of
Purchaser.
ARTICLE V
COVENANTS PRIOR TO CLOSING
SECTION 5.1 Regulatory and Other Authorizations; Notices
and Consents. (a) Each party hereto shall use all reasonable efforts
to obtain all authorizations, consents, orders and approvals of all
Governmental Authorities and officials that may be or become necessary
for its execution and delivery of, and the performance of its
obligations pursuant to, this Agreement and will cooperate fully with
each other in promptly seeking to obtain all such authorizations,
consents, orders and approvals. Each party shall within 60 days of the
date hereof make any appropriate filings pursuant to the HSR Act with
respect the transactions contemplated by this Agreement and shall supply
as promptly as practicable to the appropriate Governmental Authorities
any additional information and documentary material that may be
requested pursuant to the HSR Act so as not to delay the Closing.
(b) The consent and approval of the FCC is
required for the assignment of the FCC Licenses to Purchaser. Any other
Governmental Authority whose consent or approval is required in
connection with the transfer or assignment of the Other Licenses is
listed in Schedule 5.1(b) hereto. Such consents or approvals are
referred to herein collectively as the "License Approvals." Within ten
(10) business days after Purchaser's approval of the
45
Disclosure Schedule and both parties' agreement upon the form of the
Exhibits to this Agreement pursuant to Section 5.14 hereof, the parties
shall file with the FCC an application for its consent to the assignment
of the FCC Licenses from Sellers to Purchaser. Any other application or
request for consent required from an entity listed on Schedule 5.1(b)
hereto shall be filed as promptly as possible, but in no event more than
twenty (20) days after Purchaser's approval of the Disclosure Schedule
and both parties' agreement upon the form approval of the Exhibits to
this Agreement pursuant to Section 5.14 hereof. Sellers and Purchaser
shall cooperate in the preparation and the prosecution of all such
applications and shall use all reasonable efforts to obtain the required
License Approvals. Sellers and Purchaser further agree to execute any
other applications, petitions or documents required by the FCC or any
other Governmental Authority listed on Schedule 5.1(b) to carry out this
transaction. Sellers and Purchaser shall each pay fifty percent (50%)
of the filing and assignment fees payable in connection with the License
Approvals and the assignment of the Licenses.
(c) Sellers and Purchaser shall use all reasonable
efforts to give such notices to third parties and use all reasonable
efforts to obtain such third party consents as may be necessary in
connection with the transactions contemplated by this Agreement;
provided, however, that Purchaser shall not have any obligation to
consent to any change in the terms of any agreement or arrangement which
Purchaser may reasonably deem adverse to the interests of Purchaser,
Sellers or the Purchased Business.
SECTION 5.2 Notice of Developments. Prior to the Closing
Date, Parent or Sellers on the one hand, and Purchaser on the other,
shall promptly notify the other party in writing of all events,
circumstances, facts and occurrences arising subsequent to the date of
this Agreement which could result in any breach of a representation or
warranty or covenant of such notifying party in this Agreement or which
could have the effect of making any representation or warranty of such
notifying party in this Agreement materially untrue or incorrect in any
respect.
SECTION 5.3 Boards of Directors. Between the date of this
Agreement and the earlier of the (i) termination of this Agreement in
accordance with the provisions of Section 9.1 thereof or (ii) Closing
Date, Parent shall cause (a) copies of all reports and other documents
given to the members of the Boards of Directors (or any committees
thereof) of Sellers relating to the
46
Purchased Business to be delivered to Purchaser at the same time and (b)
copies of the minutes of all meetings of, and actions taken without a
meeting by, the Boards of Directors (or any committees thereof) of
Sellers relating to the Purchased Business to be delivered to Purchaser
promptly after the preparation thereof.
SECTION 5.4 Access to Information. To the extent Purchaser
reasonably deems necessary for purposes of this Agreement and the
transactions contemplated hereby, Sellers shall permit Purchaser, its
counsel, accountants and other representatives to have full access, upon
reasonable notice and during regular business hours, throughout the
period prior to Closing, to the Purchased Assets and the Purchased
Business, specifically including, without limitation, the books and
records, equipment, properties and facilities of Sellers, and will cause
to be furnished to Purchaser and its representatives during such period
all information concerning the foregoing as Purchaser or its
representatives may reasonably request.
SECTION 5.5 Conduct of Business and Capital Improvements.
(a) In order to ensure an efficient, integrated system following the
Closing, between the date of this Agreement and the Closing Date, (i)
Sellers shall keep Purchaser apprised of all material developments
regarding the operation of, and capital improvements to, the Purchased
Business, (ii) except for replacement of equipment, Sellers will
purchase and install only equipment that is approved by Purchaser as
compatible with that used by Purchaser, (iii) Sellers shall not install
any additional Switches relating to the Purchased Business without
Purchaser's prior written approval as to location and (iv) Sellers in
the continued conduct of the Purchased Business in the ordinary course
will continue to fund Sellers' budgeted capital expenditures as
reasonably required or desirable for the purposes of network maintenance
and improvement and servicing of previously projected new business, but
shall not be required to expend funds in excess of such budgeted amounts
for such purposes. In addition, at the request of Purchaser, Sellers
will purchase and install up to ten Switches in locations requested by
Purchaser and will make other capital improvements (in addition to those
referred to in the preceding sentence) to service additional new
business or for other purposes at the request of Purchaser or as
proposed by Sellers with the approval of the Purchaser (collectively,
"Purchaser Directed Improvements"). For purposes of this Section 5.5
the determination of whether an expenditure is capital in nature shall
be made in accordance with the section entitled "Capital" appearing in
the "Statement of Operations and Cash Flows Projected for 1996-
47
1999" submitted by Xxxxxx Xxxxxx of EMI to Xxxxxx Xxxxxxxx of Purchaser
under cover letter dated October 26, 1995.
(b) All Purchaser Directed Improvements will be
financed by loans made by Purchaser to Sellers bearing interest at a
rate equal to 10% per year (the "Capital Loans"). Interest on the
Capital Loans will be payable monthly in arrears with a final payment of
accrued but unpaid interest being made on the Closing Date or, if the
Closing Date does not occur, on the final payment of principal of the
Capital Loans. If the Closing occurs, the principal of the Capital
Loans will constitute an Assumed Liability. If the Closing does not
occur, the Capital Loans shall be due and payable in full on the
termination date of this Agreement, except that with respect to any
Purchaser Directed Improvements that were installed at the request of
Purchaser notwithstanding the written objection by Sellers, Sellers
shall have the option of conveying to Purchaser title to such Purchaser
Directed Improvements in cancellation of the amount of principal of the
Capital Loans attributable to the purchase and installation of such
Purchaser Directed Improvements.
(c) On the Closing Date, provided that Sellers
have completed the network extension contemplated by the letter
agreement dated December 14, 1995 between Eastern Message, Inc. and the
State of New York in accordance with such letter agreement, Purchaser
shall pay Sellers an amount, as additional purchase price, equal to
$594,000.
SECTION 5.6 Regulatory Compliance. Purchaser, with the
assistance and cooperation of Sellers, shall have the right to undertake
a review of Sellers' licensed facilities or a sampling of them selected
by Purchaser, to verify that each such facility has been constructed and
is operating in compliance with the Licenses related thereto and the
rules and policies of the Governmental Authorities issuing the Licenses.
This review shall include, but not limited to, requirements as to
location (by coordinates), power, antenna height, radiation azimuth (if
applicable), frequency, FAA approval and compliance with any specific
licensed conditions. Purchaser shall promptly disclose to Sellers each
incident of non-compliance discovered during this review and Sellers
shall promptly initiate action either to modify the facility to bring it
into compliance or obtain the approval of the FCC (and from any other
Governmental Authority if needed) to a change in the facility's license
to conform to its current operations. Sellers shall notify Purchaser
promptly of any remedial action taken and provide copies of any filings
with the FCC or with other Governmental Authorities and any modified
licenses issued as a result of such filings.
48
SECTION 5.7 Environmental Study. (a) Sellers agree that
Purchaser may perform or have performed on behalf of Purchaser an
environmental audit survey of the Real Property (the "Environmental
Study") and Purchaser shall provide Sellers with a copy of such
Environmental Study.
(b) Purchaser shall be responsible for all costs,
charges and expenses of any nature whatsoever associated with the
Environmental Study.
SECTION 5.8 Creation of Historical Financial Statements.
Sellers shall cooperate with, and will cause Sellers' Accountants to
cooperate with, Purchaser and Purchaser's Accountants for purposes of
enabling Purchaser's Accountants to prepare, and report upon, in
accordance with U.S. GAAP, historical balance sheets and related
statements of income and cash flows for the Purchased Business for the
fiscal year ended as of July 31, 1995, and for such other periods as may
be required by the Securities and Exchange Commission, and prepare
unaudited financial statements as of January 31, 1996 and for the six
month periods ended January 31, 1996 and January 31, 1995. ("Interim
GAAP Financial Statements") and such other Interim GAAP Financial
Statements as may be required (collectively, the "Historical GAAP
Financial Statements") that will comply with the requirements of
Regulation S-X under the Securities Act of 1933 and with the
requirements of all regulations, announcements and explanatory materials
issued by the Securities and Exchange Commission with respect thereto,
including, without limitation, Staff Accountancy Bulletins. Purchaser
shall be responsible for all the fees and expenses of Purchaser's
Accountants in connection with the preparation by Purchaser's
Accountants of the Historical GAAP Financial Statements. Sellers shall
deliver to Purchaser's Accountants such management representation
letters, and shall cause its law firm to deliver such counsel's letters,
as Purchaser's Accountants shall reasonably request.
SECTION 5.9 Further Action. Each of the parties hereto
shall use all reasonable efforts to take, or cause to be taken, all
appropriate action, do or cause to be done, all things reasonably
necessary, proper or advisable under applicable Law, and execute and
deliver such documents and other papers, as may be required to carry out
the provisions of this Agreement and consummate and make effective the
transactions contemplated by this Agreement.
SECTION 5.10 Preservation of Business. Sellers agree
to use all reasonable efforts to preserve the Purchased Business
pursuant to this Section 5.10.
49
(a) Covenants Regarding Operations. From the date
of this Agreement until the Closing Date, Sellers shall maintain and
preserve the Purchased Business and shall operate the Purchased Business
in a reasonable and prudent manner, only in the ordinary and usual
course of business consistent with past practice, and shall:
(i) preserve intact the present charters and
By-laws of Sellers and the business organization of Sellers,
as they relate to the Purchased Business;
(ii) use reasonable efforts to preserve the
goodwill and advantageous relationships of Sellers with
customers, suppliers, independent contractors, employees and
other persons material to the operation of the Purchased
Business, or the Purchased Assets;
(iii) use reasonable efforts to not permit any action
or omission which would cause any of the representations or
warranties of any Seller contained herein to become
inaccurate or any of the covenants of any Seller to be
breached;
(iv) maintain the books and records relating to
the Purchased Business in the usual and ordinary manner and
in a manner that fairly and correctly reflects the income,
expenses, assets and liabilities of the Purchased Business
on a basis consistent with prior years; and
(v) record and effect sales in the usual and
ordinary manner consistent with past practice and not
accelerate or otherwise record or effect sales in a manner
designed to increase, out of the usual and ordinary manner,
accounts receivable of any Seller relating to the Purchased
Business at the Closing Date.
(b) Negative Covenants Regarding Operations.
Without limiting the generality of the obligation to use all reasonable
efforts to preserve the Purchased Business, prior to the Closing, no
Seller will, in connection with the Purchased Business, without the
prior written consent of Purchaser:
(i) incur any obligation or enter into any
contract which either requires a payment by any Seller in
excess of, or a series of payments which in the aggregate
exceed, One Hundred Thousand Dollars ($100,000) or provides
for the
50
delivery of goods or performance of services, or any combination
thereof, having a value in excess of One Hundred Thousand Dollars
($100,000);
(ii) take any action, or enter into or
authorize any contract or transaction in connection with the
Purchased Business other than in the ordinary course of
business and consistent with past practice;
(iii) sell, transfer, convey, assign or otherwise
dispose of any assets comprising the Purchased Business
other than in the ordinary course of business and other than
the conveyance of Personal Property to EMI Newco and Message
Newco in accordance with Section 5.13 hereof;
(iv) waive, release or cancel any claims
against third parties or debts owing to it, relating to the
Purchased Business, or any rights relating to the Purchased
Business that have any value;
(v) make any changes in its accounting
systems, policies, principles or practices relating to the
Purchased Business;
(vi) authorize for issuance, issue, sell,
deliver or agree or commit to issue, sell or deliver
(whether through the issuance or granting of options,
warrants, convertible or exchangeable securities,
commitments, subscriptions, rights to purchase or otherwise)
any shares of its capital stock or any other securities, or
amend any of the terms of any such securities;
(vii) make any borrowings, incur any debt (other than
trade payables in the ordinary course of business), or
assume, guarantee, endorse or otherwise become liable
(whether directly, contingently or otherwise) for the
obligations of any other person, except for endorsements of
negotiable instruments in the ordinary course and for
transactions between Parent and any Seller or between any
Sellers;
(viii) make any loans, advances or capital
contributions to, or investments in, any other person except
for the conveyance of Personal Property to EMI Newco and
Message Newco in accordance with Section 15.3 hereof and for
transactions between Parent and any Seller;
51
(ix) except for any severance arrangements in
connection with this transaction, enter into, adopt, amend
or terminate any bonus, profit-sharing, compensation,
termination, stock option, stock appreciation right,
restricted stock, performance unit, pension, retirement,
employment, severance or other employee benefit agreements,
trusts, plans, funds or other arrangements for the benefit
or welfare of any director, officer or employee, or increase
in any manner the compensation or fringe benefits of any
director, officer or employee, or pay any benefit not
required by any existing plan and arrangement or enter into
any contract, agreement, commitment or arrangement to do any
of the foregoing;
(x) except for capital expenditures
contemplated by (xi) below, acquire, lease or encumber any
assets outside the ordinary course of business or any assets
which are material to any Seller;
(xi) authorize or make any capital expenditures
which individually are in excess of Twenty-Five Thousand
Dollars ($25,000);
(xii) terminate, modify, amend or otherwise alter or
change any of the terms or provisions of any Material
Contract, or breach the terms of any Material Contract, or
pay any amount not required by law or by any contract; or
(xiii) take any other action that would have a
material adverse effect on the Purchased Business, the
Purchased Assets, or any Seller or any of their assets,
including, without limitation, the value or condition
thereof.
Nothing contained in this Section 5.10 shall be deemed
to restrict or limit in any way Sellers' or Parent's conduct of the
business of the Retained Division.
SECTION 5.11 Maintenance of Insurance. Sellers shall
continue to carry all existing insurance applicable to the Purchased
Business and the Purchased Assets, and shall not allow any breach,
default, termination or cancellation of such insurance policies or
agreements to occur or exist prior to the Closing Date.
SECTION 5.12 Failure to Obtain Consents and Approvals. In
the event that any consent required with respect to any contract or
agreement to be assigned to
52
Purchaser cannot be obtained prior to the Closing Date, the Seller that
is a party thereto will subcontract, or otherwise enter into such
agreements as may be appropriate, so that all of its obligations to
perform under such contract will be the responsibility of Purchaser.
The cost of performing each such subcontract shall be borne by Purchaser
and the Seller that is a party thereto will deliver to Purchaser all
revenues earned under each such contract. Upon the receipt of the
necessary third party consent, the Seller that is a party thereto shall
assign the relevant contract to Purchaser. No additional consideration
shall be paid for such assignment.
SECTION 5.13 Creation of the New Companies and
Conveyance of Personal Property. On or before the Closing Date, (a) EMI
shall contribute to EMI Newco all of EMI's right, title and interest in
Personal Property owned or leased by EMI in exchange for all of the
outstanding capital stock of EMI Newco and (b) Message shall contribute
to Message Newco all of Message's right, title and interest in Personal
Property owned or leased by Message in exchange for all of the
outstanding capital stock of Message Newco.
SECTION 5.14 Delivery of Schedules and Exhibits. (a)
Within ten (10) days after the date hereof, Sellers shall deliver to
Purchaser, in accordance with Section 12.2 hereof, all schedules
referred to in this Agreement. Within seven (7) days after receipt of
such schedules, Purchaser shall inform Sellers if such schedules are
acceptable to Purchaser.
(b) Within ten (10) days after the date hereof,
Sellers and Purchaser shall agree upon the form of all Exhibits referred
to in this Agreement.
SECTION 5.15 Syracuse Office. Within ninety (90) days
after the date hereof, Sellers and Purchaser shall enter into a separate
agreement providing for (a) a sublease of office space located at 0000
Xxxxxxxxxx Xxxxx, Xxxxxx, Xxx Xxxx (the "Syracuse Office") to the
Retained Division for the premises occupied by the Retained Division on
the date hereof, for a term equal to the length of EMI's term less one
day and at a per square foot rent (including all escalations and other
additional rent) equal to the per square foot rent payable by EMI, (b)
cost sharing arrangements for common costs (including costs of the
telephone system) incurred in connection with the Syracuse Office, (c)
elimination of Parent's right to terminate its sublease, or to increase
or decrease the size of its subleased premises, upon 30 days notice, (d)
the terms of the sublease to Parent to be equal to the length of EMI's
term less one day, (e) the per square foot rent payable
53
under the sublease to Parent to be equal to EMI's per square foot rent
at such location (including all escalations and other additional rent),
and (e) such other matters related to the Syracuse Office as the parties
shall reasonably deem necessary.
ARTICLE VI
COVENANTS SUBSEQUENT TO CLOSING
SECTION 6.1 Further Assurances. Purchaser and Sellers
jointly and severally agree, without further consideration, to execute
and deliver following the Closing such other instruments of transfer and
take such other action as Purchaser may reasonably request in order to
put Purchaser in possession of, and to vest in Purchaser, good and valid
title to the Purchased Assets free and clear of any Encumbrances in
accordance with this Agreement and to consummate the transactions
contemplated by this Agreement.
SECTION 6.2 Change of Name. From and after the Closing
Date, and other than in connection with the preparation and filing of
tax returns and amendments, Sellers shall discontinue all further use,
directly or indirectly, of the names "EMI Communications Corp.",
"Eastern Message, Inc.", "Eastern Message of New Jersey, Inc.", "Eastern
Message of Pennsylvania, Inc.", "Eastern Message of Massachusetts,
Inc.", "Eastern Message of Maryland, Inc." and the names of EMI Newco
and Message Newco, or any variation of any such name, and of any
trademark, trade name, service xxxx or name, or logo used by Sellers or
any word or logo that is similar in sound or appearance. Immediately
following the Closing, Sellers will take all actions necessary to change
their names to names unrelated and not confusing with "EMI
Communications Corp.", "Eastern Message, Inc.", "Eastern Message of New
Jersey, Inc.", "Eastern Message of Pennsylvania, Inc.", "Eastern Message
of Massachusetts, Inc.", "Eastern Message of Maryland, Inc." and the
names of EMI Newco and Message Newco, and shall provide thereafter to
Purchaser copies of duly executed documents effecting the change in such
names.
SECTION 6.3 Closing Accounts Receivable and Accounts
Payable. (a) For a period of one year from and after the Closing Date
or such shorter period of which Sellers shall notify Purchaser in
writing (the "Collections Period"), in accordance with Purchaser's
customary collection practices and procedures, Purchaser shall assist
Sellers in collection of the Closing Accounts Receivable.
54
For each account receivable that has an outstanding balance attributable
in part to the operation of the Purchased Business prior to the Closing
Date and in part to the operation of the Purchased Business after the
Closing Date, amounts collected by Purchaser, or on Sellers' behalf by
Purchaser, during the Collections Period shall be applied first to the
oldest outstanding invoice(s) of such account receivable (with Purchaser
reserving the right to contact the customer where the underlying facts
indicate that there may be a dispute relating to a Closing Account
Receivable), unless the customer otherwise designates in writing that
the amount being paid is to be applied to the balance of such account
accruing from and after the Closing Date because of a dispute relating
to the Closing Accounts Receivable. Within ten (10) days after each
month during the Collection Period, Purchaser shall deliver to Sellers a
monthly statement of Closing Accounts Receivable collected during such
month and shall remit to Sellers, without deduction, all such amounts of
Closing Accounts Receivable collected by Purchaser. Each such monthly
statement shall include the total amount of collections made from
customers, any portion of whose outstanding accounts receivable balance
arose prior to the Closing Date. Upon the expiration of the Collections
Period, Sellers shall be responsible for collecting the Closing Accounts
Receivable, if any, and Purchaser shall give Sellers access to all
relevant records.
(b) Sellers shall pay all due and owing
accounts payable of Sellers identified on a computer run of accounts
payable prepared as close as reasonably possible to the Closing Date but
not earlier than thirty (30) days prior to the Closing Date (the "Cut-
off Date"). Purchaser shall act as agent of Seller for the purpose of
paying accounts payable of Sellers recorded subsequent to the Cut-off
Date but only out of funds provided to Purchaser by Sellers or from
proceeds of Account Receivable of Sellers collected by Purchaser. In
the event that Sellers notify Purchaser in writing that Sellers are
disputing an account payable, Purchaser shall not pay such account
payable unless and until Sellers direct Purchaser to pay such account
payable. Purchaser shall have no liability to Sellers for acting as
Sellers' agent pursuant to this Section 6.3(b) except for liability
arising out of Purchaser's gross negligence or willful misconduct.
SECTION 6.4 Tax Records. Purchaser shall allow Sellers
access from the Closing Date, for as long as Sellers require, to
existing records of the Purchased Business for income tax purposes that
are in Purchaser's possession and that relate to the period before the
Closing Date, and shall transfer such records to Sellers, if requested,
prior to disposing of same.
55
SECTION 6.5 Tax Reporting. The parties hereby promise and
agree to adopt the alternative procedure provided in Section 5 of
Revenue Procedure 84-77 for preparing and filing all payroll and
employment tax returns for the employees of Sellers that are engaged by
Purchaser, pursuant to which Purchaser will assume Sellers' obligation
to furnish Forms W-2 to the employees of Sellers who will continue their
employment in the Purchased Business with Purchaser. Sellers and
Purchaser will each perform the duties imposed on them as predecessor
and successor, respectively, in such Section 5, and Sellers will furnish
all relevant information with respect to such employees. The failure or
refusal of Sellers to timely furnish complete and accurate information
with respect to any such employee shall be deemed an assumption by
Sellers to comply with the standard procedure provided in Section 4 of
Revenue Procedure 84-77 for preparing and filing all payroll and
employment tax returns for the employees of Sellers.
SECTION 6.6 Satisfaction of Liabilities. Sellers covenant
and agree that, on, prior to, or as soon as practicable after the
Closing Date, all outstanding obligations, liabilities, costs and
expenses of Sellers will be paid, performed or otherwise discharged or
provided for by Sellers, including, without limitation, the Excluded
Liabilities, liabilities and obligations incurred by Sellers in
connection with this Agreement and the transactions provided for herein
or contemplated hereby, fees and expenses of Sellers' counsel,
accountants and other experts, and all other expenses incurred by
Sellers incident to the negotiation, preparation and execution of this
Agreement or any of the transactions contemplated hereby, including
Taxes, if any, payable by Sellers with respect to and resulting from the
transactions contemplated by this Agreement.
SECTION 6.7 Employee Benefit Plans. (a) Each Seller (or
any plan maintained by such Seller, at such Seller's cost) will provide
continued health and medical coverage as required under Section 4980B of
the Code, Part 6 of Title I of ERISA or any other applicable federal,
state or local law or ordinance to all employees (and independent
contractors) of such Seller (and their spouses, dependents and
beneficiaries) with respect to whom a "qualifying event" (as such term
is defined under Sections 4980B(f)(3) of the Code or 603 of ERISA) or
other triggering event described under the applicable federal, state or
local laws or ordinances occurred on or before the Closing Date.
(b) Sellers shall retain all liabilities, obligations
and assets with respect to all active or former
56
employees, retirees (or their beneficiaries) of Sellers or of any ERISA
Affiliate in connection with all Seller Plans.
SECTION 6.8 Non-Compete. Parent and Sellers agree that for
a period of three (3) years from the Closing Date, neither Parent nor
Sellers shall directly or through any Person in which they hold a
majority interest engage in the business of providing common carrier or
private line telecommunications (including voice, video and data)
transmission services via wireline or microwave delivery technology
within the geographical territory of the Purchased Business.
Notwithstanding anything to the contrary contained in this Agreement,
the foregoing shall not apply to (i) Parent's continued ownership of an
interest in, or any additional interest by Parent in, its existing joint
venture with Time Warner, or to the ownership or operation of any
business Parent may receive upon the termination or dissolution of such
joint venture; (ii) any service provided by the Retained Division via
satellite; (iii) any Persons in which Parent does not hold a controlling
interest; or (iv) Advance Publications, Inc. and its subsidiaries.
SECTION 6.9 Stand Still. For a period ending with the
earlier of a sale of the shares of Purchaser Common Stock by Sellers or
three years from the date of this Agreement, Parent, Sellers and any
Affiliate, director, officer or agent of Parent, or any Seller shall
not, directly or indirectly, and shall not cause any Affiliate to,
without the prior written consent of the Board of Directors of
Purchaser, (i) in any manner acquire, agree to acquire or make any
proposal to acquire, directly or indirectly, any securities or property
of Purchaser or any of its Affiliates (except pursuant to this
Agreement), (ii) propose to enter into, directly or indirectly, any
merger, consolidation, recapitalization, business combination or similar
transaction involving Purchaser or any of its Affiliates, (iii) make, or
in any way participate in any "solicitation" of "proxies" (as such terms
are used in the proxy rules of the Securities and Exchange Commission)
to vote, or seek to advise or influence any person with respect to the
voting of any voting securities of Purchaser or any of its Affiliates,
(iv) form, join or in any way participate in a "group" (within the
meaning of Section 13(d)(3) of the Exchange Act with respect to any
voting securities of Purchaser or any of its Affiliates (except pursuant
to this Agreement), (v) otherwise act, alone or in concert with others,
to seek to control or influence the management, Board of Directors or
policies of Purchaser, (vi) disclose any intention, plan or arrangement
inconsistent with the foregoing or (vii) advise, assist or encourage any
other Person in connection with any of the foregoing. In
57
addition, for a period ending with the earlier of a sale of the shares
of Purchaser Common Stock by Sellers or three years from the date of
this Agreement, Parent, Sellers and any Affiliate, director, officer or
agent of Parent or Sellers shall not, directly or indirectly, (x)
request Purchaser or any Affiliate, director, officer, employee, advisor
or agent of Purchaser to amend or waive the provisions of this Section
(including this sentence), (y) take any action which might require
Purchaser or any of its Affiliates to make a public announcement
regarding the understandings set forth in this Section 6.9, or (z)
communicate with Purchaser's security holders regarding the subject
matter of this Section 6.9.
SECTION 6.10 Gains, Transfer and Sales Taxes. Sellers
shall pay all transfer, gains and similar taxes and fees payable in
connection with the transactions contemplated by this Agreement, and
shall indemnify and hold harmless Purchaser from and against any
liability with respect to such taxes (including any penalties, interest
and professional fees). Sellers and Purchaser shall cooperate in the
preparation and filing of any required returns with respect to such
taxes. Sellers and Purchaser shall each pay fifty percent (50%) of any
sales taxes due in connection with this Agreement, if any, and shall
cooperate in connection with any audit of sales taxes payable.
SECTION 6.11 No Shop. Until the Closing Date or the
termination of this Agreement in accordance with the provisions of
Section 9.1, neither Parent nor Sellers shall, directly or indirectly,
deal or negotiate with any other party looking toward a sale of any
Seller or sale of any part of the Purchased Business, other than the
sale of equipment in the ordinary course of business. Without limiting
any other remedies available to Purchaser for a breach of this Section,
Parent and Sellers agree that Purchaser shall be entitled to injunctive
relief and monetary damages which shall in no event be less than the
expenses incurred by Purchaser in connection with the negotiation of
this Agreement, performance of due diligence activities, including the
reasonable fees and disbursements of Purchaser's counsel, accountants
and investment banker.
SECTION 6.12 Employees. Purchaser shall offer employment
to a number of Sellers' employees equal to at least eighty percent (80%)
of the number of Sellers' employees on the date hereof. Purchaser shall
offer such employment on salary terms comparable to those existing as of
the date hereof, with the exception of severance. In the event that
during the period commencing on the Closing Date and ending on the day
prior to the first anniversary of the Closing Date, the number of
Sellers' employees employed by
58
Purchaser is less than eighty percent (80%) of the number of Sellers'
employees on the date hereof for reasons other than voluntary separation
from service (which shall not be deemed to include an employee's refusal
to relocate) and termination for cause (which shall include, without
limitation, termination for poor performance), Purchaser shall indemnify
Sellers for Sellers' severance payments to the number of employees who
represent the difference between (a) the 80% employment less the
percentage represented by employees who have (i) voluntarily separated
from service and (ii) been terminated for cause and (b) the actual
percentage of employment by Purchaser. The salaries of the employees
whose terminations cause the level of employment to fall below 80% shall
be used to calculate the indemnification due to Sellers pursuant to this
Section 6.12.
SECTION 6.13 Accounting Systems. For a period of up to one
year after the Closing Date, Sellers shall provide Purchaser with access
to Sellers' accounting systems hardware and software to enable Purchaser
to coordinate a transfer of Sellers' accounting records to the Purchased
Business. Purchaser shall not have access to any records relating to
the Retained Division. In the event such access is inadvertently
obtained, Purchaser shall promptly notify Sellers and shall keep
confidential any information relating to the Retained Division to which
Purchaser obtained access.
ARTICLE VII
CONDITIONS TO CLOSING
SECTION 7.1 Conditions to Obligations of Purchaser. This
Agreement and the obligations of Purchaser to perform hereunder are
subject to the fulfillment by Sellers (to the satisfaction of
Purchaser), or waiver in writing by Purchaser, of the following
conditions, each of which is individually hereby deemed material, at or
prior to Closing:
(a) Representations, Warranties and Obligations.
All representations and warranties of Sellers and Parent contained in
this Agreement and in the Schedules hereto shall be true and correct in
all material respects as of the date hereof and on the Closing Date as
though made on and as of the Closing Date, and Purchaser shall have
received a certificate to such effect signed by a duly authorized
officer of Parent and of each Seller, respectively. Sellers and Parent
shall have performed and complied with all of their respective covenants
and
59
obligations, including without limitation those under Article V hereof,
under this Agreement in all material respects.
(b) Consents. Purchaser and Sellers shall have
received, each in form and substance satisfactory to Purchaser, each of
the authorizations, consents, orders and approvals of Governmental
Authorities and officials and each of the third party consents set forth
on Exhibit 7.1(b).
(c) License Transfer Approvals. All Approvals of
the FCC or any other Governmental Authority required for the transfer of
the Licenses to Purchaser shall have been obtained without adverse
conditions.
(d) No Material Adverse Effect. No event or events
shall have occurred, or be reasonably likely to occur, which
individually or in the aggregate, have, or could reasonably be expected
to have, a Material Adverse Effect.
(e) Deliveries. Parent and Sellers shall have
delivered to Purchaser each of the documents specified in Section 8.1
hereof.
(f) Encumbrances. All Encumbrances with respect to
the Purchased Assets shall have been released.
(g) No Proceeding or Litigation. No Action shall
have been commenced or threatened by or before any Governmental
Authority against Parent, Sellers or Purchaser seeking to restrain or
materially and adversely alter the transactions contemplated by this
Agreement which, in the reasonable, good faith determination of
Purchaser, is likely to render it impossible or unlawful to consummate
such transactions or which could render inadvisable, in the reasonable,
good faith determination of Purchaser, the consummation of the
transactions contemplated by this Agreement; provided, however, that the
provisions of this Section 7.1(g) shall not apply if Purchaser has
directly or indirectly solicited or encouraged any such Action.
(h) Filings. Sellers shall have made all
registrations, qualifications, declarations, or filings with, or notices
to, any federal, state or local Governmental Authority or other third
party required on the part of Sellers in connection with the execution
of this Agreement and the Related Agreements or the consummation of the
transactions contemplated hereby and thereby.
(i) HSR Act. Sellers shall have satisfied all
requests for additional information pursuant to the HSR
60
Act, if any, and the applicable waiting periods thereunder (and any
extensions thereof) applicable to the transactions contemplated by this
Agreement shall have expired or been terminated.
(j) Creation of EMI Newco and Message Newco.
Sellers shall have satisfied the requirements of Section 5.13.
(k) Delivery of Schedules. Sellers and Parent shall
have delivered the schedules referred to in this Agreement to Purchaser
in accordance with Section 5.14 hereof and such schedules and the
information contained therein shall be satisfactory to Purchaser in all
respects.
(l) Exhibits. Sellers and Purchaser shall have
agreed upon the form of Exhibits as provided in Section 5.14 hereof.
(m) Syracuse Office Agreement. Sellers and
Purchaser shall have executed the agreement regarding the Syracuse
office as provided in Section 5.15 hereof.
SECTION 7.2 Conditions to Obligations of Parent and Seller.
This Agreement and the obligations of Parent and Sellers to perform
hereunder are subject to the fulfillment by Purchaser (to the
satisfaction of Parent and Sellers), or waiver in writing by Parent and
Sellers, of the following conditions, each of which is individually
hereby deemed material, at or prior to Closing:
(a) Representations, Warranties and Obligations.
All representations and warranties of Purchaser contained in this
Agreement shall be true and correct in all material respects as of the
date hereof and on the Closing Date as though made on and as of the
Closing Date, and Parent and Sellers shall have received a certificate
to such effect signed by a duly authorized officer of Purchaser.
Purchaser shall have performed and complied with all of its covenants
and obligations under this Agreement in all material respects.
(b) Consents. Purchaser and Sellers shall have
received, each in form and substance satisfactory to Purchaser, each of
the authorizations, consents, orders and approvals of Governmental
Authorities and officials and each of the third party consents set forth
on Exhibit 7.1(b).
(c) License Transfer Approvals. All Approvals of
the FCC or any other Governmental Authority required for the transfer of
the Licenses to Purchaser shall have been obtained without adverse
conditions.
61
(d) No Material Adverse Effect. No event or events
shall have occurred, or be reasonably likely to occur, which
individually or in the aggregate, materially adversely affect, or could
reasonably be expected to materially adversely affect, the prospects,
results of operations or the financial condition of Purchaser's
business; provided, however, that no change in the market price of
Purchaser Common Stock shall be taken into account in determining
whether a material adverse effect on Purchaser has occurred under this
Section 7.2(d).
(e) Deliveries. Purchaser shall have delivered to
Sellers each of the documents specified in Section 8.2 hereof.
(f) No Proceeding or Litigation. No Action shall
have been commenced or threatened by or before any Governmental
Authority against Parent, Sellers or Purchaser seeking to restrain or
materially and adversely alter the transactions contemplated by this
Agreement which, in the reasonable, good faith determination of Sellers,
is likely to render it impossible or unlawful to consummate such
transactions or which could render inadvisable, in the reasonable, good
faith determination of Sellers, the consummation of the transactions
contemplated by this Agreement; provided, however, that the provisions
of this Section 7.2(f) shall not apply if either Parent or any Seller
has directly or indirectly solicited or encouraged any such Action.
(g) Filings. Purchaser shall have made all
registrations, qualifications, declarations, or filings with, or notices
to, any federal, state or local Governmental Authority or other third
party required on the part of Sellers in connection with the execution
of this Agreement and the Related Agreements or the consummation of the
transactions contemplated hereby and thereby.
(h) HSR Act. Purchaser shall have satisfied all
requests for additional information pursuant to the HSR Act, if any, and
the applicable waiting periods thereunder (and any extensions thereof)
applicable to the transactions contemplated by this Agreement shall have
expired or been terminated.
(i) Exhibits. Sellers and Purchaser shall have
agreed upon the form of Exhibits as provided in Section 5.14 hereof.
(j) Syracuse Office Agreement. Sellers and
Purchaser shall have executed the agreement regarding the Syracuse
office as provided in Section 5.15 hereof.
62
ARTICLE VIII
DELIVERIES
SECTION 8.1 Parent's and Sellers' Deliveries. At the
Closing, in addition to any other documents or agreements required under
this Agreement, Parent and Sellers shall deliver or cause to be
delivered to Purchaser the following:
(a) Xxxx of Sale. A xxxx of sale ("Xxxx of Sale"),
substantially in the form agreed to by Sellers and Purchasers in
accordance with Section 5.14 hereof conveying to Purchaser all of the
Purchased Assets to be acquired hereunder, free and clear of any and all
Encumbrances, except for Permitted Encumbrances.
(b) Assignment of Contracts. Written instruments of
the assignment by Sellers to Purchaser of the Assigned Contracts
pursuant to an Assignment of Contracts Agreement (the "Contract
Assignment Agreement"), substantially in the form agreed to by Sellers
and Purchasers in accordance with Section 5.14, together with originals
of all Assigned Contracts, if available.
(c) Assignment of Licenses. Written instruments of
the assignment by Sellers to Purchaser of the Licenses pursuant to an
Assignment of Licenses Agreement (the "License Assignment Agreement"),
substantially in the form agreed to by Sellers and Purchasers in
accordance with Section 5.14, together with originals of all Licenses.
(d) Deeds. Bargain and sale deeds with covenants
against grantor's acts substantially in the form agreed to by Sellers
and Purchasers in accordance with Section 5.14, in proper form for
recording so as to transfer to Purchaser good, marketable and insurable
title for all Owned Real Property free from all Encumbrances except for
Permitted Encumbrances (collectively, the "Deeds").
(e) Corporate and Stockholder Authorization. A
certificate, dated the Closing Date, executed by the Secretary or
Assistant Secretary of each of Parent and each Seller, as the case may
be, certifying resolutions of the Board of Directors and of the
shareholders of Parent or the relevant Seller, as the case may be,
approving and authorizing the execution, delivery and performance by
Parent or the relevant Seller, as the case may be, of this Agreement and
of each of the Related Agreements to which Parent or such Seller, as the
case may be, is a party and the consummation of the transactions
contemplated hereby and
63
thereby (together with an incumbency and signature certificate regarding
the officer(s) signing any document or instrument on behalf of Parent or
such Seller, as the case may be).
(f) EMI Newco and Message Newco Stock. Stock
certificates evidencing all of the outstanding capital stock of EMI
Newco and of Message Newco.
(g) Change of Name. The documents contemplated by
Section 6.2 hereof, in form and substance sufficient to change Sellers'
names as therein required and in the appropriate form for filing with
the Governmental Authority with whom such documents must be filed to
become effective.
(h) Organizational Documents. A copy of (i) the
Certificates of Incorporation, as amended (or similar organizational
documents), of Parent and each Seller, certified by the secretary of
state of the jurisdiction in which each such entity is incorporated or
organized, as of a date not earlier than twenty Business Days prior to
the date hereof and accompanied by a certificate of the Secretary or
Assistant Secretary of each such entity, dated as of the date hereof,
stating that no amendments have been made to such Certificate of
Incorporation (or similar organizational documents) since such date, and
(ii) the By-laws (or similar organizational documents) of Parent and
each Seller certified by the Secretary or Assistant Secretary of each
such entity.
(i) Legal Opinions. The legal opinions of (i)
Xxxxx, Bermant & Xxxxx LLP, Parent's and Sellers' counsel, addressed to
Purchaser and dated the date hereof, substantially in the form agreed to
by Sellers and Purchaser in accordance with Section 5.14 hereof and (ii)
Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, P.C., Parent's and Sellers'
regulatory counsel, substantially in the form agreed to by Sellers and
Purchaser in accordance with Section 5.14 hereof.
(j) Business Documents. All manuals, including
employee manuals, customer lists, books and other records and files,
computer programs, computer software and master disk of source codes
relating to, or associated with, the Purchased Business, the Purchased
Assets or Sellers.
(k) Good Standing; Qualification to Do Business.
Good standing certificates for Parent and each Seller from the secretary
of state of the jurisdictions listed on Section 7.1(i) of the Disclosure
Schedule in each case dated as of a date not earlier than twenty
Business
64
Days prior to the date hereof and accompanied by bring-down telegrams,
if customarily provided by the jurisdiction in question, dated the date
hereof.
(l) Consents and Approvals. Copies of all consents
and approvals obtained pursuant to Section 3.6 hereof, and all
registrations, qualifications, declarations, filings and notices made by
Sellers pursuant to Section 5.1 hereof.
(m) Encumbrance Release. Evidence reasonably
satisfactory to Purchaser that any Encumbrances, other than Permitted
Encumbrances, of record on the date hereof have been removed or
released.
(n) Miscellaneous. Such other documents and
certificates of officers as reasonably may be required by Purchaser to
consummate this Agreement and the transactions contemplated hereby.
SECTION 8.2 Purchaser's Deliveries. At the Closing, in
addition to any other documents or agreements required under this
Agreement, Purchaser shall deliver to Sellers the following:
(a) Purchase Price. Stock certificates evidencing
937,500 shares of Purchaser Common Stock and the payment pursuant to
Section 5.5(c) hereof.
(b) Corporate Authorization. A certificate, dated
the Closing Date, executed by the secretary or assistant secretary of
Purchaser, certifying resolutions of the Board of Directors of Purchaser
approving and authorizing the execution, delivery and performance by
Purchaser of this Agreement and each of the Related Agreements to which
Purchaser is a party and the consummation of the transactions
contemplated hereby and thereby (together with an incumbency and
signature certificate regarding the officer(s) signing any document or
instrument on behalf of Purchaser).
(c) Consents and Approvals. All necessary consents
and approvals of third parties or Governmental Authorities required to
be obtained by Purchaser to permit Purchaser to perform this Agreement
or any other agreement to which Purchaser is a party.
(d) Bring-Down Certificate. A certificate dated as
of the Closing Date, executed by Purchaser, to the effect that each
representation and warranty made by Purchaser in this Agreement is true
and correct on and as of the Closing Date, with the same effect as
though each such
65
representation or warranty had been made or given on and as of such date
and that Purchaser has performed and complied with all of the terms,
covenants and conditions set forth herein that are to be performed or
complied with by it before or as of the Closing Date.
(e) Corporate Documents. A copy of the Certificate
of Incorporation of Purchaser, certified by the Secretary of State for
the State of Delaware, and a copy of the By-laws of Purchaser, certified
by the Secretary or Assistant Secretary of Purchaser.
(f) Corporate Certificate. A Certificate of Good
Standing for Purchaser from the State of Delaware.
(g) Legal Opinion. The legal opinion of Kronish,
Lieb, Weiner & Xxxxxxx LLP, addressed to Parent and Sellers and dated
the Closing Date, substantially in the form agreed to by Sellers and
Purchaser in accordance with Section 5.14 hereof.
(h) Miscellaneous. Such other documents,
assignments, instruments of conveyance, and certificates of officers as
reasonably may be required by Sellers to consummate this Agreement and
the transactions contemplated hereby.
ARTICLE IX
TERMINATION AND WAIVER
SECTION 9.1 Termination. This Agreement may be terminated
at any time prior to the Closing Date:
(a) by any party to this Agreement if the Closing
shall not have occurred by September 30, 1996; provided, however, that
the right to terminate this Agreement under this Section 9.1(a) shall
not be available to any party whose willful failure to fulfill any
obligation under this Agreement shall have been the cause of, or shall
have resulted in, the failure of the Closing to occur on or prior to
such date; or
(b) by any party to this Agreement in the event that
any Governmental Authority shall have issued an order, decree or ruling
or taken any other Action restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement and such
order, decree, ruling or other action shall have become final and
nonappealable; or
66
(c) by the mutual written consent of the parties to
this Agreement; or
(d) by Purchaser in the event that (i) Seller fails
to deliver the schedules to this Agreement in accordance with Section
5.14 hereof or (ii) the information contained in such schedules is not
satisfactory to Purchaser in all respects; or
(e) by any party to this Agreement, in the event that
Sellers and Purchaser fail to agree upon the form of all Exhibits
referred to in this Agreement in accordance with Section 5.14 hereof.
SECTION 9.2 Effect of Termination. In the event of
termination of this Agreement as provided in Section 9.1, this Agreement
(except for provisions which by their terms survive any such
termination) shall forthwith become void and there shall be no liability
on the part of either party hereto except that nothing herein shall
relieve either party from liability for any breach of this Agreement.
SECTION 9.3 Waiver. Either party to this Agreement may (a)
extend the time for the performance of any of the obligations or other
acts of the other party, (b) waive any inaccuracies in the
representations and warranties of the other party contained herein or in
any document delivered by the other party pursuant hereto or (c) waive
compliance with any of the agreements or conditions of the other party
contained herein. Any such extension or waiver shall be valid only if
set forth in an instrument in writing signed by the party to be bound
thereby. Any waiver of any term or condition shall not be construed as
a waiver of any subsequent breach or a subsequent waiver of the same
term or condition, or a waiver of any other term or condition, of this
Agreement. The failure of any party to assert any of its rights
hereunder shall not constitute a waiver of any of such rights.
ARTICLE X
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
SECTION 10.1 Survival of Representations, Warranties and
Agreements. The representations, warranties and agreements in this
Agreement shall terminate one year after the Closing or the termination
of this Agreement pursuant to Section 9.1, as the case may be.
Notwithstanding the foregoing, (i) the covenants of Purchaser contained
in Section 11.2 shall survive as long as
67
any Seller holds any of the Purchaser Common Stock, (ii) the
representations, warranties and covenants set forth in Section 6.8
hereof (Non-Compete) shall survive the Closing for a period of three
years and (iii) the covenants, representations and warranties set forth
in Sections 3.28 (Taxes) and 3.17 (Environmental) and the liability of
any party for fraud shall survive the Closing until the statute of
limitations with respect thereto have run.
SECTION 10.2 Indemnification by Parent and Seller.
(a) Parent and Sellers agree jointly and
severally to indemnify and hold harmless Purchaser and shall reimburse
Purchaser for, any loss, liability, claim, damage (including diminution
in value) or expense suffered or incurred by Purchaser (including,
without limitation the costs of investigation and defense and reasonable
attorneys' fees) (collectively, "Damages") arising from or in connection
with (a) any breach of any of the representations and warranties of
Parent or Sellers contained in Article 3 of this Agreement or in any
certificate delivered by any of them pursuant to this Agreement or (b)
any failure by Parent or any Seller to perform or comply with any of its
obligations contained in this Agreement.
(b) Sellers and Parent shall jointly and
severally indemnify and hold harmless Purchaser and its officers,
directors, shareholders and agents against any and all losses,
liabilities, obligations, claims damages and expenses (including
reasonable fees and expenses of counsel) that arise under or relate to
any liability or obligation of an ERISA Affiliate (including
predecessors) with regard to any "employee benefit plan" (within the
meaning of section 3(3) of ERISA) including without limitation: (i)
liabilities under any Multiemployer Plan (including without limitation
liabilities for complete and partial withdrawals under section 4203 and
4205 of ERISA); (ii) liabilities to the PBGC; (iii) liabilities under
section 4980B of the Code or Part 6 of subtitle I of ERISA; and (iv)
liabilities under section 412 of the Code or section 302(a)(2) of ERISA.
SECTION 10.3 Indemnification by Purchaser. Purchaser
shall indemnify and hold harmless Parent and Sellers and shall reimburse
Parent and Sellers for any Damages arising from or in connection with
(a) any inaccuracy in any of the representations and warranties of
Purchaser contained in Article 4 of this Agreement or in any certificate
delivered by Purchaser pursuant to this Agreement, (b) any failure by
Purchaser to perform or comply with any of its obligations contained in
this Agreement, or (c) Purchaser's operation of the Purchased Business,
or
68
ownership of the Purchased Assets, subsequent to the Closing Date,
provided that such Damages do not arise out of Seller's breach of its
covenants hereunder or the inaccuracy of Sellers representations and
warranties contained herein.
SECTION 10.4 Procedure for Indemnification. Promptly
after receipt by an indemnified party under Section 10.2 or 10.3 of
notice of the commencement of any action by a third party, such
indemnified party shall, if a claim in respect thereof is to be made
against an indemnifying party under such Section, give prompt notice to
the indemnifying party of the commencement thereof, but the failure to
so notify the indemnifying party shall not relieve it of any liability
that it may have to any indemnified party except to the extent the
indemnifying party demonstrates that the defense of such action is
materially prejudiced thereby. If any such action shall be brought
against an indemnified party, it shall give notice to the indemnifying
party of the commencement thereof within five days of the receipt of
such notice and the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, to assume, at its
expense, the defense thereof (utilizing counsel satisfactory to the
indemnified party), in which case the indemnifying party shall not be
liable to such indemnified party under such Section for any fees of
other counsel or any other expenses, in each case subsequently incurred
by such indemnified party in connection with the defense thereof. If
notice is given to an indemnifying party of the commencement of any
action and it does not, within five days after the indemnified party's
notice is given, give notice to the indemnified party of its election to
assume the defense thereof, the indemnified party shall be entitled to
select counsel of its own choice and the indemnifying party shall pay
the reasonable fees and expenses of one counsel in each relevant
jurisdiction. An indemnifying party shall not be responsible for any
settlement or compromise of any action, claim or proceeding effected
without its consent (which consent shall not be unreasonably withheld).
SECTION 10.5 Limitation on Liability. (a) Purchaser shall
not be entitled to indemnification pursuant to this Article 10 for
Damages suffered or incurred by Purchaser except to the extent that
Damages exceed $375,000 (the "Basket Amount"). In the event that
Damages exceed the Basket Amount, Parent and Seller shall be precluded
from asserting that any such Damages are immaterial or not adverse to
Purchaser. If Damages aggregate more than the Basket Amount, Parent and
Sellers shall be liable for the amount of such Damages in excess of the
Basket Amount up to the Purchase Price.
69
(b) Neither Parent nor any Seller shall be entitled
to indemnification pursuant to this Article 10 for Damages suffered or
incurred by Parent or Sellers except to the extent that Damages exceed
the Basket Amount. In the event that Damages exceed the Basket Amount,
Purchaser shall be precluded from asserting that any such Damages are
immaterial or not adverse to Parent or Sellers. If Damages aggregate
more than the Basket Amount, Purchaser shall be liable for the entire
amount of such Damages in excess of the Basket Amount up to the Purchase
Price.
ARTICLE XI
PURCHASER COMMON STOCK
SECTION 11.1 Representations and Warranties of Seller.
(a) Sellers represent and warrant to Purchaser that
Sellers understand that the shares of Purchaser Common Stock to be
acquired by Sellers have not been registered for sale under any federal
or state securities laws and that Purchaser Common Stock is being or
will be offered and sold to Sellers pursuant to the exemption from
registration provided for under Section 4(2) of the Securities Act of
1933, as amended (the "Act"), and Sellers are acquiring Purchaser Common
Stock for Sellers' own account for investment and without any view to
any distribution thereof; that the representations and warranties set
forth in this Section 11.1(a) are given with the intention that
Purchaser rely on them for purposes of claiming such exemption; and that
Sellers understand that they must bear the economic risk of their
investment in Purchaser Common Stock for an indefinite period of time as
Purchaser Common Stock cannot be sold unless subsequently registered
under such laws or unless an exemption from such registration is
available.
(b) Sellers agree that Purchaser Common Stock
acquired by Sellers will not be sold or otherwise transferred for value
unless (i) a registration statement with respect thereto has become
effective under the Act (which shall not be required for transfers of
Purchaser Common Stock to Parent), or (ii) there is presented to
Purchaser an opinion of counsel reasonably satisfactory to Purchaser
that such registration is not required, and Sellers consent that any
transfer agent of Purchaser may be instructed not to transfer any
Purchaser Common Stock unless it receives satisfactory evidence of
compliance with the foregoing provisions, and that there may be endorsed
upon any certificate or instrument representing Purchaser Common
70
Stock an appropriate legend calling attention to the foregoing
restrictions on transferability of such shares.
(c) Sellers agree that during the period commencing
on the Closing Date and ending on the date that is thirty (30) months
after the Closing Date, Sellers will vote all shares of Purchaser Common
Stock that Sellers acquire as a result of the transactions contemplated
by this Agreement in accordance with the recommendations of the Board of
Directors of Purchaser; provided, however, that in the event that the
average market price of Purchaser Common Stock over the ninety day
period preceding the record date for any meeting of shareholders or
consent solicitation of shareholders shall be less than $14.00 per
share, Sellers shall have no obligation to vote such shares in
accordance with the Board of Directors of Purchaser.
(d) Sellers are aware of Purchaser's business affairs
and financial condition and has acquired sufficient information about
Purchaser to reach an informed and knowledgeable decision to acquire
Purchaser Common Stock hereunder. Sellers further represent and warrant
that they have discussed Purchaser and its plans, operations and
financial condition with Purchaser's officers, have received all such
information as it deems necessary and appropriate to enable it to
evaluate the financial risk inherent in making an investment in
Purchaser Common Stock and have received satisfactory and complete
information concerning the business and financial condition of Purchaser
in response to all inquiries in respect thereof. Nothing contained in
this Section 11.1(d) shall limit Sellers' reliance upon the
representations and warranties made by Purchaser in this Agreement.
SECTION 11.2 Registration under the Securities Act of 1933.
(a) Purchaser shall file as soon as practicable after the Closing (but
in no event later than ten Business Days thereafter) a "shelf"
registration statement covering Purchaser Common Stock on any
appropriate form pursuant to Rule 415 under the Act. Purchaser shall
use its reasonable efforts to have such "shelf" registration statement
declared effective as soon as practicable after its filing and to keep
such registration statement continuously effective until the earlier of
(i) the sale of all of Purchaser Common Stock covered by the
registration statement or (ii) three years following the date on which
it is declared effective (or, except as otherwise provided herein, to
immediately file a new shelf registration statement in the event such
effectiveness lapses at any time during said period). The three-year
period provided for in clause (ii) above shall be extended by the number
of days equal to the number of days there was a suspension pursuant
71
to Section 11.2(b) hereof. If necessary, Purchaser shall cause to be
filed, and shall use its reasonable efforts to have declared effective
as soon as practicable following filing, additional "shelf" registration
statements or amendments as necessary to maintain such effectiveness for
such period. Purchaser shall perform such other procedures, from time
to time, as may be necessary to permit Sellers to effect a "draw-down"
of any securities registered on such shelf registration statement,
provided that in no event may Sellers draw-down for the purpose of sale
more than 1/12th of the shares of Purchaser Common Stock during each of
the 12 months following the Closing (calculated on a cumulative basis);
provided further, however, that (i) the provisions of this
Section 11.2(a) shall not limit the ability of any bona fide pledgee to
foreclose upon such pledge and thereafter freely sell Purchaser Common
Stock so pledged and (ii) upon the announcement by Purchaser of a change
in control, the foregoing limitation in respect of draw-downs shall
immediately cease to apply.
(b) In the event that Purchaser, for its own account,
proposes to register shares of Purchaser Common Stock or securities
convertible or exchangeable for Purchaser Common Stock, prior to the
third anniversary of the Closing on any registration statement on Form
X-0, X-0 or S-3, their successor forms or any other appropriate form
under the Act for a primary public offering by Purchaser (other than for
the purpose of making an acquisition or in connection with option
plans), Purchaser may suspend the effectiveness of any "shelf"
registration statement for a period commencing thirty days prior to the
effectiveness of such registration statement and ending 180 days after
the effective date thereof by providing Parent with written notice of
such suspension.
(c) Purchaser shall advise Sellers by written notice at
least ten days prior to the commencement of any such suspension and/or
the filing of any registration statement involving an underwritten
offering of the Common Stock being registered by Purchaser, whether for
the account of Purchaser or any other Person, and will, upon request of
any Seller made by written notice to Purchaser within fifteen days
following receipt of Purchaser's notice of intention to file such
registration statement, include in any such registration statement all
or any portion of Sellers' Purchaser Common Stock prior to the third
anniversary of the Closing, subject to the limitation in the number of
shares contained in Section 11.2(a), and such information as may be
required to permit a public offering of Purchaser Common Stock;
provided, however, that if the managing underwriter of such underwritten
offering shall inform Purchaser of its belief that the number of
securities
72
requested to be included in such registration by all persons exercising
registration rights exceeds the number which can be sold in (or during
the time of) such offering or that the inclusion would materially
adversely affect the marketing of the securities to be sold by Purchaser
therein, then Purchaser may include all securities proposed by Purchaser
to be sold for its own account and may decrease the number of shares of
Purchaser Common Stock so proposed to be sold and so requested to be
included in such registration (pro rata on the basis of the number of
shares of Purchaser Common Stock requested to be sold by Seller and each
other person exercising registration rights) to the extent necessary to
reduce the number of securities to be included in the registration to
the level recommended by the managing underwriter.
(d) The following provisions of this Section 11.2 shall
also be applicable:
(i) Purchaser will use its reasonable efforts to
cause any registration statement covering all or any portion of
Purchaser Common Stock to become effective, including registration or
qualification for offer and sale under applicable "blue sky" laws, as
promptly as possible and, if any stop order shall be issued by the
Securities and Exchange Commission in connection therewith, to use its
reasonable efforts to obtain the removal of such order. Sellers agree
to cooperate in all respects with Purchaser in effectuating the
foregoing. Following the effective date of any post-effective amendment
or registration, Purchaser shall, upon the request of Sellers, forthwith
supply such number of registration statements, preliminary prospectuses
and prospectuses meeting the requirements of the Act and other documents
deemed necessary by Sellers to permit Sellers to make a public
distribution of all shares of Purchaser Common Stock from time to time
offered or sold by it. The obligations of Purchaser hereunder with
respect to Purchaser Common Stock are expressly conditioned on Sellers
furnishing to Purchaser such appropriate information concerning the
intentions of Sellers and the terms of Sellers' offering of such
Purchaser Common Stock as Purchaser may reasonably request.
(ii) Purchaser agrees to bear and to pay, or cause to
be paid, promptly upon request being made therefor all expenses incident
to the registration, offering and/or sale of the Purchaser Common Stock
by Sellers, including, without limitation: (a) any National Association
of Securities Dealers registration and filing fees and expenses, (b) all
fees payable to the Securities & Exchange Commission, (c) all fees and
expenses in connection with the qualification of the Purchaser Common
Stock for offering and
73
sale under state securities or "blue sky" laws, including reasonable
fees and disbursements of counsel for any placement or sales agent or
underwriter in connection with such qualifications, (d) all expenses
relating to the preparation, printing, distribution and reproduction of
the registration, each prospectus included therein or prepared for
distribution pursuant hereto, each amendment or supplement to the
foregoing, the certificates representing the Purchaser Common Stock and
all other documents relating hereto, (e) Purchaser's internal expenses
(including, without limitation, all salaries and expenses of Purchaser's
officers and employees performing legal or accounting duties, and (f)
fees, disbursements and expenses of counsel and other advisors and
experts, including, the independent certified public accountants of
Purchaser (including the expenses of any opinions or "comfort" letters
required by or incident to such performance and compliance),
(collectively, the "Registration Expenses"). To the extent that any
Registration Expenses are incurred, assumed or paid by Sellers,
Purchaser shall reimburse such person for the full amount of the
Registration Expenses so incurred, assumed or paid promptly after
receipt of a request therefor and evidence thereof.
(iii) Purchaser shall indemnify and hold harmless
Parent and each underwriter, within the meaning of the Act, who may
purchase from or sell for Sellers any Purchaser Common Stock, from and
against any and all losses, claims, damages and liabilities caused by
any untrue statement of a material fact contained in any registration
statement under the Act or any post-effective amendment to such
registration statement, or any prospectus included therein required to
be filed or furnished by reason of this Section 11.2 or caused by any
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims damages or liabilities
are caused by any such untrue statement or alleged untrue statement or
omission or alleged omission based upon information furnished or
required to be furnished in writing to Purchaser by Sellers or such
underwriter expressly for use therein, which indemnification shall
include each person, if any, who controls any Seller or any such
underwriter within the meaning of the Act and each officer, director,
employee and agent of Parent or such underwriter; provided, however,
that Purchaser shall not be obliged so to indemnify any Seller or
underwriter or other person referred to above unless such Seller or
underwriter or other person, as the case may be, shall at the same time
indemnify Purchaser, its directors, each officer signing the
registration statement and each person, if any, who controls Purchaser
within the meaning of the Act, from and against
74
any and all losses, claims, damages and liabilities caused by any untrue
statement or alleged untrue statement of a material fact contained in
any registration statement or any prospectus required to be filed or
furnished by reason of this Section 11.2 or caused by any omission to
state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, insofar as such losses,
claims, damages or liabilities are caused by any untrue statement or
alleged untrue statement or omission based upon information furnished in
writing to Purchaser by any Seller or underwriter expressly for use
therein.
(iv) Purchaser agrees that if, for any reason, the
indemnification provisions contemplated hereby are unavailable to or are
insufficient to hold harmless an indemnified party in respect of any
losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) referred to therein, then Purchaser shall contribute to
the amount paid or payable by such indemnified party as a result of such
losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) in such proportion as is appropriate to reflect the
relative fault of, and benefits derived by, Purchaser and the
indemnified party, as well as any other relevant equitable
considerations. The relative fault of Purchaser and the indemnified
party shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information
supplied by such indemnifying party or by such indemnified party, and
the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The
relative benefit derived by the parties shall be determined by reference
to the fact that Purchaser entered in this obligation to induce Sellers
to engage in the transactions contemplated by this Agreement. The
parties hereto agree that it would not be just and equitable if
contribution pursuant to this section were determined (a) by pro rata
allocation (even if Sellers or any agents for, or underwriters of, the
Purchaser Common Stock, or all of them, were treated as one entity for
such purpose), or (b) by any other method of allocation which does not
take account of the equitable considerations referred to in this
section. The amount paid or payable by an indemnified party as a result
of the losses, claims, damages or liabilities (or actions or proceedings
in respect thereof) referred to above shall be deemed to include any
legal or other fees or expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action,
proceeding or claim.
(v) Purchaser shall use reasonable efforts in good
faith to register or qualify all Purchaser Common
75
Stock covered by any registration statement under such other securities
or blue sky laws of such jurisdictions as Sellers shall reasonably
request, to keep such registration or qualification in effect for so
long as such registration statement remains in effect, and take any
other action which may be reasonably necessary or advisable to enable
Parent to consummate the disposition in such jurisdictions of their
Purchaser Common Stock covered by such registration statement, except
that Purchaser shall not for any such purpose be required to qualify
generally to do business as a foreign corporation in any jurisdiction
wherein it would not but for the requirements of this Section 11.2(d)(v)
be obligated to be so qualified or to consent to general service of
process or to the imposition of taxes on, or measured by, all or any
part of the income of Purchaser, in any such jurisdiction.
(vi) Purchaser shall immediately notify Sellers at any
time when a prospectus relating thereto is required to be delivered
under the Act, upon discovery that, or upon the happening of any event
as a result of which, the prospectus included in any registration
statement covering all or any part of Purchaser Common Stock, as then in
effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances
under which they were made, and, promptly following disclosure of such
material information to the public by Purchaser, at the request of
Sellers promptly prepare and furnish to Sellers a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such
securities, such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in
the light of the circumstances then existing.
(vii) Purchaser shall qualify Purchaser Common Stock
issued in connection with this Agreement on the principal national
securities exchange on which Purchaser Common Stock is admitted to
trading or listed, or if not listed or admitted to trading on such
exchange, on The NASDAQ Stock Market.
(viii) Purchaser shall enter into such agreements
(including, if the offering is an underwritten offering, an underwriting
agreement) as are customary in transactions of such kind and take such
other actions as are reasonably necessary in connection therewith in
order to expedite or facilitate the disposition of the Purchaser
76
Common Stock; and (a) make such representations and warranties with
respect to the registration or post-effective amendment or supplement
thereto, prospectus or any amendment or supplement thereto, and
documents incorporated by reference, if any, to Seller and the managing
underwriter or underwriters, if any, of the Purchaser Common Stock in
form, substance and scope as are customarily made by companies in
connection with offerings of equity securities in transactions of such
kind, (b) obtain an opinion of counsel to Purchaser (which counsel may
be internal counsel for Purchaser unless the managing underwriter or
underwriters shall otherwise reasonably request) in customary form and
covering matters of the type customarily covered by such an opinion,
addressed to such managing underwriter or underwriters, if any, and to
Sellers and dated the date of the closing of the sale of Purchaser
Common Stock relating thereto, (c) obtain a "comfort" letter or letters
from the independent certified public accountants who have certified
Purchaser's most recently audited financial statements that are
incorporated by reference in the registration which is addressed to
Sellers and the managing underwriter or underwriters, if any, and is
dated the date of the prospectus used in connection with the offering of
such Purchaser Common Stock and/or the date of the closing of the sale
of such Purchaser Common Stock relating thereto, such letter or letters
to be in customary form and covering such matters of the type
customarily covered by "comfort" letters of such type, (d) deliver such
documents and certificates as may be reasonably requested by Sellers and
the managing underwriter or underwriters, if any, of the Purchaser
Common Stock to evidence compliance with any customary conditions
contained in the underwriting agreement or other agreement entered into
by Purchaser, and (e) undertake all obligations relating to expense
reimbursement, indemnification and contribution.
(ix) Purchaser shall comply with all applicable rules
and regulations of the SEC and make available to its security holders an
earnings statement, as soon as reasonably practicable but in no event
later than 90 days after the end of the period of twelve months
commencing on the first day of any fiscal quarter next succeeding each
sale by the Stockholder of Registered Shares after the date hereof,
which earnings statement shall cover such twelve month period and shall
satisfy the provisions of Section 11(a) of the Securities Act and may be
prepared in accordance with Rule 158 under the Securities Act.
(Purchaser covenants to make available "adequate current public
information" concerning Purchaser within the meaning of Rule 144(c)
under the Securities Act.)
77
(e) Purchaser's covenants contained in this Section 11.2
shall survive as long as Sellers hold any of the Purchaser Common Stock.
ARTICLE XII
GENERAL PROVISIONS
SECTION 12.1 Expenses. Except as otherwise specified in
this Agreement, all costs and expenses, including, without limitation,
fees and disbursements of counsel, financial advisors and accountants,
incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid (i) by Parent and Sellers with respect
to all such costs and expenses incurred by Parent or any Seller and (ii)
by Purchaser with respect to all such costs and expenses incurred by
Purchaser, whether or not the Closing shall have occurred.
SECTION 12.2 Notices. All notices, requests, claims,
demands and other communications hereunder shall be in writing and shall
be given or made (and shall be deemed to have been duly given or made
upon receipt) by delivery in person, by courier service, by cable, by
telecopy, by telegram, by telex or by registered or certified mail
(postage prepaid, return receipt requested) to the respective parties at
the following addresses (or at such other address for a party as shall
be specified in a notice given in accordance with this Section 12.2):
(a) if to any Seller:
EMI Communications Corp.
0000 Xxxxxxxxxx Xxxxx
Xxxx Xxxxxxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx
with a copy to:
Xxxxx, Bermant & Xxxxx LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: Art Xxxxxxxxxx, Esq.
78
(b) if to Parent:
Xxxxxxxx Broadcasting Corporation
0000 Xxxxxxxxxx Xxxxx
Xxxx Xxxxxxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxx
with a copy to:
Xxxxx, Xxxxxxx & Xxxxx LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: Art Xxxxxxxxxx, Esq.
(c) if to Purchaser:
Intermedia Communications of Florida, Inc.
0000 Xxx Xxxxx Xxxxxxxxx, Xxxxx 000
Xxxxx, Xxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxx
with a copy to:
Kronish, Lieb, Weiner & Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxxx, Esq.
SECTION 12.3 Public Announcements. Except as required by
law, no party to this Agreement shall make, or cause to be made, any
press release or public announcement in respect of this Agreement or the
transactions contemplated hereby or otherwise communicate with any news
media without the prior written consent of the other party. The parties
shall cooperate as to the timing and contents of any such press release
or public announcement.
SECTION 12.4 Headings. The descriptive headings contained
in this Agreement are for convenience of reference only and shall not
affect in any way the meaning or interpretation of this Agreement.
SECTION 12.5 Severability. If any term or other provision
of this Agreement is invalid, illegal or incapable of being enforced by
any Law or public policy, all other terms and provisions of this
Agreement shall nevertheless remain in full force and effect so long as
the economic or legal substance of the transactions contemplated hereby
is
79
not affected in any manner materially adverse to any party. Upon such
determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good
faith to modify this Agreement so as to effect the original intent of
the parties as closely as possible in an acceptable manner in order that
the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
SECTION 12.6 Entire Agreement. This Agreement constitutes
the entire agreement of the parties hereto with respect to the subject
matter hereof and thereof and supersedes all prior agreements and
undertakings, both written and oral, among Parent, Sellers and Purchaser
with respect to the subject matter hereof and thereof.
SECTION 12.7 Assignment. This Agreement may not be
assigned by operation of law or otherwise without the express written
consent of Parent, Sellers and Purchaser (which consent may be granted
or withheld in the sole discretion of Parent, Seller or Purchaser).
SECTION 12.8 No Third Party Beneficiaries. This Agreement
shall be binding upon and inure solely to the benefit of the parties
hereto and their permitted assigns and nothing herein, express or
implied, is intended to or shall confer upon any other Person any legal
or equitable right, benefit or remedy of any nature whatsoever under or
by reason of this Agreement.
SECTION 12.9 Amendment. This Agreement may not be amended
or modified except (a) by an instrument in writing signed by, or on
behalf of, Parent, Sellers and Purchaser or (b) by a waiver in
accordance with Section 9.3.
SECTION 12.10 Governing Law. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of
New York, applicable to contracts executed in and to be performed
entirely within that state. All actions and proceedings arising out of
or relating to this Agreement shall be heard and determined in any New
York state or federal court sitting in the City of New York.
SECTION 12.11 Counterparts. This Agreement may be executed
in one or more counterparts, and by the different parties hereto in
separate counterparts, each of which when executed shall be deemed to be
an original but all of which taken together shall constitute one and the
same agreement.
SECTION 12.12 Specific Performance. The parties agree that
due to the unique subject matter of this
80
transaction, monetary damages will be insufficient to compensate the
non-breaching party in the event of a breach of any part of this
Agreement. Accordingly, the parties agree that the non-breaching party
shall be entitled (without prejudice to any other right or remedy to
which it may be entitled) to an appropriate decree of specific
performance, or an injunction restraining any violation of this
Agreement or other equitable remedies to enforce this Agreement (without
establishing the likelihood of irreparable injury or posting bond or
other security), and the breaching party waives in any action or
proceeding brought to enforce this Agreement the defense that there
exists an adequate remedy at law.
SECTION 12.13 WAIVER OF JURY TRIAL. EACH OF THE PARTIES
HERETO HEREBY WAIVES TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM BROUGHT BY OR AGAINST IT ON ANY MATTERS WHATSOEVER, IN
CONTRACT OR IN TORT, ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS
AGREEMENT.
[Signature Page Follows]
81
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
EMI COMMUNICATIONS CORP.
By /s/ Xxxxxx X. Xxxxx
Name: Xxxxxx X. Xxxxx
Title: Vice President
EASTERN MESSAGE, INC.
By /s/ Xxxxxx X. Xxxxx
Name: Xxxxxx X. Xxxxx
Title: Vice President
EASTERN MESSAGE OF NEW JERSEY, INC.
By /s/ Xxxxxx X. Xxxxx
Name: Xxxxxx X. Xxxxx
Title: Vice President
EASTERN MESSAGE OF PENNSYLVANIA,
INC.
By /s/ Xxxxxx X. Xxxxx
Name: Xxxxxx X. Xxxxx
Title: Vice President
EASTERN MESSAGE OF MASSACHUSETTS,
INC.
By /s/ Xxxxxx X. Xxxxx
Name: Xxxxxx X. Xxxxx
Title: Vice President
82
EASTERN MESSAGE OF MARYLAND, INC.
By /s/ Xxxxxx X. Xxxxx
Name: Xxxxxx X. Xxxxx
Title: Vice President
XXXXXXXX BROADCASTING CORPORATION
By /s/ Xxxxxx X. Xxxxx
Name: Xxxxxx X. Xxxxx
Title: Vice President
INTERMEDIA COMMUNICATIONS OF
FLORIDA, INC.
By /s/ Xxxxx X. Xxxxxx
Name: Xxxxx X. Xxxxxx
Title: Chairman, President and
Chief Executive Officer
