Exhibit 2.14
ASSET PURCHASE AGREEMENT
Agreement made as of December 10, 1999 by and between DURO Communications,
Inc., a Delaware corporation ("Buyer"), The Nashville Exchange, Inc., a
Tennessee corporation ("Seller"), and Xxx X. Xxxxxxxxxx as the principal
shareholder of the Seller (the "Principal Shareholder").
WHEREAS, subject to the terms and conditions hereof, Seller desires to
sell, transfer and assign to Buyer, and Buyer desires to purchase from Seller,
all of the properties, rights and assets used or useful in connection with
Seller's Internet service business (the "Business"),
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
SECTION 1. PURCHASE AND SALE OF ASSETS.
1.1 Sale of Assets. Upon the terms and subject to the conditions set forth
in this Agreement, and the performance by the parties hereto of their respective
obligations hereunder, Seller agrees to sell, assign, transfer and deliver to
Buyer, and Buyer agrees to purchase from Seller, all of Seller's right, title
and interest in and to all of the properties, assets and business of the
Business of every kind and description, tangible and intangible, real, personal
or mixed, and wherever located, but excluding the Excluded Assets (as defined in
Section 1.2 below), including, without limitation, the following:
(a) Equipment. All free standing kiosks, servers, routers, modems,
computers, electronic devices, test equipment and all other fixed assets,
equipment, furniture, fixtures, leasehold improvements, parts, accessories,
inventory, office materials, software, supplies and other tangible personal
property of every kind and description owned by Seller and used or held for use
in connection with the Business, all as set forth on Schedule 1.1(a) attached
hereto (collectively, "Equipment"), including a brief description of each and
the current location thereof;
(b) Contracts. All of the rights of Seller under and interest of
Seller in and to all contracts relating to the Business (other than the Excluded
Contracts (as defined in Section 1.2(b) below)), including, without limitation,
original contracts for the provision of Internet connectivity, dedicated
service, web-hosting, web-domain, dial-up services, web-development and Internet
commerce, all leases with respect to real property and all co-location
agreements, a true, correct and complete list of which contracts is attached
hereto as Schedule 1.1(b) (collectively, the "Contracts");
(c) Intellectual Property. All of Seller's Intellectual Property (as
defined in Section 2.20), as set forth on Schedule 1.1(c) attached hereto;
(d) Licenses and Authorizations. All rights associated with the
licenses, licensing agreements, permits, easements, registrations, domains, IP
addresses and authorizations issued or granted to Seller by any governmental
authority with respect to the operation of the Business, including, without
limitation, those licenses and authorizations listed on Schedule 1.1(d) attached
hereto, and all applications therefor, together with any renewals, extensions,
or modifications thereof and additions thereto;
(e) Current Assets; Accounts Receivable. All current assets of
Seller (the "Current Assets"), including cash, inventory, prepaid expenses,
security deposits, advance payments and all accounts receivable of Seller
incurred in the ordinary course of business and included on Seller's balance
sheet as of the Closing Date, as determined in accordance with generally
accepted accounting principles ("GAAP"), consistently applied; a complete list
of such accounts receivable is attached hereto as Schedule 1.1(e) ("Accounts
Receivable");
(f) Goodwill. All of the goodwill of Seller in, and the going
concern value of, the Business, and all of the business and customer lists,
proprietary information, and trade secrets related to the Business; and
(g) Records. All of Seller's customer logs, location files and
records, employee records, and other business files and records, in each case
relating to the Business.
The assets, properties and business of Seller being sold to and purchased
by Buyer under this Section 1.1 are referred to herein collectively as the
"Assets."
1.2 Excluded Assets. There shall be excluded from the Assets and retained
by Seller, to the extent in existence on the Closing Date, the following assets
(the "Excluded Assets"):
(a) Other Assets. All other assets of Seller which are not used or
held for use in connection with the Business or otherwise necessary to the
operation of the Business now or after the Closing Date and which are set forth
on Schedule 1.2(a) attached hereto;
(b) Excluded Contracts. All of Seller's right, title and interest
in, to and under the Contracts listed on Schedule 1.2(b) attached hereto (the
"Excluded Contracts");
(c) Insurance. All of Seller's insurance contracts and all insurance
proceeds of settlement and insurance claims made by Seller on or before the
Closing Date as set forth on Schedule 1.2(c) attached hereto;
(d) Tax Items. All claims, rights and interest in and to any refunds
for federal, state or local Taxes (as defined in Section 2.4(a) below) for
periods prior to the Closing Date as set forth on Schedule 1.2(d) attached
hereto;
2
(e) Corporate Records. All of Seller's corporate and other
organizational records; and
1.3 Assumed Liabilities; Excluded Liabilities; Employees.
(a) Assumed Liabilities. Buyer shall, on and as of the Closing Date,
accept and assume, and shall become and be fully liable and responsible for, and
other than as expressly set forth herein Seller shall have no further liability
or responsibility for or with respect to, (i) liabilities and obligations
arising out of events occurring on and after the Closing Date related to Buyer's
ownership of the Assets and Buyer's operation of the Business after the Closing
Date; (ii) accounts payable, advance payments by Subscribers, accrued expenses,
all deferred revenues and any other current liability of Seller as of the
Closing Date (except the current portion of any bank debt or line of credit to
be paid pursuant to Section 1.5) included on Seller's balance sheet, as
determined in accordance with GAAP consistently applied (the "Assumed Current
Liabilities"); and (iii) all obligations and liabilities of Seller which are to
be performed after the Closing Date arising under the Contracts, including,
without limitation, Seller's obligations to Subscribers (as defined in Section
2.16) under such Contracts for (A) Subscriber deposits held by Seller as of the
Closing Date in the amount for which Buyer receives a credit pursuant to Section
1.6(a) below, (B) Subscriber advance payments held by Seller as of the Closing
Date for services to be rendered in connection with the Business in the amount
for which Buyer receives a credit pursuant to Section 1.6(a) below, and (C) the
delivery of Internet connectivity service to Subscribers (whether pursuant to a
Contract or otherwise) after the Closing Date ((i), (ii) and (iii) together, the
"Assumed Liabilities"). The assumption of the Assumed Liabilities by Buyer
hereunder shall not enlarge any rights of third parties under contracts or
arrangements with Buyer or Seller or any of their respective affiliates or
subsidiaries. No parties other than Buyer, Seller and the Principal Shareholder
shall have any rights under this Agreement.
(b) Excluded Liabilities. It is expressly understood that, except
for the Assumed Liabilities, Buyer shall not assume, pay or be liable for any
liability or obligation of Seller of any kind or nature at any time existing or
asserted, whether, known, unknown, fixed, contingent or otherwise, not
specifically assumed herein by Buyer, including, without limitation, any
liability or obligation relating to, resulting from or arising out of (i) the
Excluded Assets, including, without limitation, the Excluded Contracts, (ii) the
employees of the Business, including, without limitation, any obligation to
provide any amounts due to the employees under any pension, profit sharing or
similar plan, any bonus or other compensation plan, or related to vacation or
other similar employee benefits, or arising as a result of the transactions
contemplated hereby or (iii) any fact existing or event occurring prior to the
Closing Date or relating to the operation of the Business prior to the Closing
Date. The liabilities which are not assumed by Buyer under this Agreement are
hereinafter sometimes referred to as the "Excluded Liabilities."
3
(c) Employees, Wages and Benefits.
(i) Seller shall terminate all of its employees relating to
the Business effective as of the Closing Date and Buyer shall not assume
or have any obligations or liabilities with respect to such employees or
such terminations, including, without limitation, any severance
obligation. Seller acknowledges and agrees that Buyer has the right to
interview and discuss employment terms and issues with such employees
prior to and after the Closing.
(ii) Buyer specifically reserves the right, on or after the
Closing Date, to employ or reject any of Seller's employees who are
employed in connection with the Business or other applicants in its sole
and absolute discretion; provided that Buyer shall provide to Seller a
list of employees to whom Buyer intends to offer employment at the
Closing. Nothing in this Agreement shall be construed as a commitment or
obligation of Buyer to accept for employment, or otherwise continue the
employment of, any of Seller's employees who are employed in connection
with the Business, and no employee shall be a third-party beneficiary of
this Agreement.
(iii) Seller shall pay all wages, salaries, commissions, and
the cost of all fringe benefits provided to its employees which shall have
become due for work performed as of and through the day preceding the
Closing Date, and Seller shall collect and pay all Taxes in respect of
such wages, salaries, commissions and benefits. Seller shall retain
liability for benefits to all individuals entitled to benefits required to
be provided by the continuation health care coverage requirements of
Section 4980B of the Code and Sections 601 through 607 of ERISA or similar
state law as of the Closing including, without limitation, with respect to
any individual entitled to such coverage prior to the Closing and any
individual who loses health care coverage as a result of the transactions
contemplated by this Agreement.
(iv) Seller acknowledges and agrees that Buyer shall not
acquire any rights or interests of Seller in, or assume or have any
obligations or liabilities of Seller under, any Employee Program (as
defined in Section 2.23 below) maintained by, or for the benefit of any
employees of Seller prior to the Closing Date, including, without
limitation, obligations for severance or vacation accrued but not taken as
of the Closing Date.
1.4 The Closing. The transactions contemplated by this Agreement shall
take place at a closing (the "Closing") to be held at 10:00 a.m., local time, at
the offices of Xxxxxxx, Procter & Xxxx LLP, on the date on which all of the
conditions to closing set forth in Sections 6 and 7 of this Agreement have been
satisfied or waived, or at such other time and place as shall be mutually agreed
upon in writing by Buyer and Seller (the "Closing Date").
1.5 Purchase Price. In consideration of the sale by Seller to Buyer of the
Assets, and subject to the assumption by Buyer of the Assumed Liabilities and
satisfaction of the
4
conditions contained herein, at the Closing, Buyer shall deliver to Seller an
amount (as adjusted in accordance with Section 1.6 below, the "Purchase Price")
equal to $1,600,000 as follows:
(a) Buyer shall deliver to Seller by bank cashier's check or bank
wire transfer pursuant to payment instructions delivered by Seller to
Buyer at the Closing $1,440,000 plus or minus, as applicable, the
Estimated Adjustment (as defined in Section 1.6(c) below) (the "Adjusted
Purchase Price"); and
(b) Buyer shall deposit the sum of $160,000 (the "Escrow Deposit")
with Boston Safe Deposit and Trust Company as Escrow Agent under the
Escrow Agreement in the form attached hereto as Exhibit A (the "Escrow
Agreement"). The Escrow Deposit shall be held, administered and
distributed in accordance with the terms of the Escrow Agreement, and
shall be a remedy of Buyer for any indemnification claims made pursuant to
Section 10 hereof.
1.6 Adjustments to Purchase Price.
(a) Net Working Capital. The Purchase Price shall be decreased, on a
dollar-for-dollar basis, by the amount of Seller's Net Working Capital (as
defined herein) if such amount is negative, or increased dollar for dollar by
the amount of Seller's Net Working Capital if such amount is positive. "Net
Working Capital" means an amount equal to Current Assets minus Assumed Current
Liabilities as of the Closing Date.
(b) Revenues Adjustment Amount. The Purchase Price shall be
decreased, on a dollar-for-dollar basis, by the Revenues Adjustment Amount (as
defined herein) in the event Revenues (as defined herein) for the 31 calendar
days prior to the Closing are less than $74,000 (annualized at $888,000) (the
"Target Revenues"). For purposes hereof, the term "Revenues Adjustment Amount"
shall equal the product obtained by multiplying (i) $1,780 by (ii) the quotient
obtained by dividing (X) the Annualized Revenues Deficiency (as defined herein),
by (Y) one thousand dollars ($1,000). For purposes hereof, "Revenues" shall mean
the sum of (i) the total recurring revenues of Seller, and (ii) the average
non-recurring revenues for the prior four (4) months of Seller, as set forth on
Schedule 1.6(b). For purposes hereof, the term "Annualized Revenues Deficiency"
shall equal the product of (i) the difference between (A) the Target Revenues
and (B) Revenues, multiplied by (ii) twelve (12).
(c) Estimated Adjustment Statement. Prior to the Closing, Buyer and
Seller shall prepare a statement to be attached hereto as Schedule 1.6(c) (the
"Estimated Adjustment Statement") which sets forth (x) the estimated amount of
the Net Working Capital as of the Closing Date (the "Estimated Net Working
Capital") and (y) the estimated Revenues Adjustment Amount (the "Estimated
Revenues Adjustment Amount"). The Purchase Price payable at the Closing Date
shall be decreased on a dollar-for-dollar basis by the amount of the Estimated
Revenues Adjustment Amount. The Purchase Price payable at Closing shall be
further reduced on a dollar-for-dollar basis by the amount of the Estimated Net
Working
5
Capital if such number is negative. The Purchase Price payable at Closing shall
be increased on a dollar-for-dollar basis by the amount of the Estimated Net
Working Capital if such number is positive. The net adjustment to the Purchase
Price calculated under this subsection (c) shall be referred to as the
"Estimated Adjustment."
(d) Final Adjustment Statement.
(i) No later than seventy (70) days following the Closing
Date, Buyer shall prepare and deliver to Seller a statement (the "Final
Adjustment Statement") setting forth the actual Net Working Capital and
the actual Revenues Adjustment Amount. Subject to Section 1.6(d)(ii)
below, within ten (10) days following the delivery of such Final
Adjustment Statement to Seller, Buyer or Seller, as the case may be, shall
pay to the other party, by wire transfer of immediately available funds,
the net difference between (x) the Estimated Net Working Capital, as shown
on the Estimated Adjustment Statement, and the actual Net Working Capital,
as shown on the Final Adjustment Statement and (y) the Estimated Revenues
Adjustment Amount, as shown on the Estimated Adjustment Statement, and the
actual Revenues Adjustment Amount, as shown on the Final Adjustment
Statement.
(ii) In the event Seller objects to the Final Adjustment
Statement, Seller shall notify Buyer in writing of such objection within
the ten (10) day period following the delivery thereof, stating in such
written objection the reasons therefor and setting forth the Seller's
calculation of Seller's actual Net Working Capital at the Closing Date.
Upon receipt by Buyer of such written objection, the parties shall attempt
to resolve the disagreement concerning the Final Adjustment Statement
through negotiation. Notwithstanding any other dispute resolution
procedure provided for in this Agreement, if Buyer and Seller cannot
resolve such disagreement concerning the Final Adjustment Statement within
thirty (30) days following the end of the foregoing 10-day period, the
parties shall submit the matter for resolution to a nationally recognized
firm of independent certified public accountants not affiliated with
either party, with the costs thereof to be shared equally by the parties.
Such accounting firm shall deliver a statement setting forth its own
calculation of the final adjustment to the parties within thirty (30) days
of the submission of the matter to such firm. Any payment shown to be due
by a party on the statement of such accounting firm shall be paid to the
other party promptly but in no event later than five (5) days following
the delivery of such statement by such accounting firm to the parties.
1.7 Purchase Price Allocation. At or prior to the Closing, Seller shall
determine the allocation of the Purchase Price, as set forth on Schedule 1.7,
subject to Buyer's prior approval. Such allocation shall be binding upon Buyer
and Seller for all purposes (including financial accounting purposes, financial
and regulatory reporting purposes and tax purposes). Buyer and Seller each
further agrees to file its Federal income tax returns and its other tax returns
reflecting such allocation, Form 8594 and any other reports required by Section
1060 of the Internal Revenue Code of 1986, as amended (the "Code").
6
1.8 Records and Contracts. To the extent not previously provided to Buyer,
at the Closing, Seller shall deliver to Buyer all of the Contracts, with such
assignments thereof and consents to assignments as are necessary to assure Buyer
of the full benefit of the same. Seller shall also deliver to Buyer at the
Closing all of Seller's files and records constituting Assets.
1.9 Sales and Transfer Taxes. All sales, transfer, use, recordation,
documentary, stamp, excise, personal property taxes, fees and duties under
applicable law incurred in connection with this Agreement or the transactions
contemplated hereby will be borne and paid by Seller, and Seller shall promptly
reimburse Buyer for the payment of any such tax, fee or duty which Buyer is
required to make under applicable law.
1.10 Transfer of Assets. At the Closing, Seller shall deliver or cause to
be delivered to Buyer good and sufficient instruments of transfer transferring
to Buyer title to all of the Assets, together with all required consents. Such
instruments of transfer (a) shall contain appropriate warranties and covenants
which are usual and customary for transferring the type of property involved
under the laws of the jurisdictions applicable to such transfers, (b) shall be
in form and substance reasonably satisfactory to Buyer and its counsel, (c)
shall effectively vest in Buyer good and marketable title to all of the Assets
free and clear of all Liens (as defined in Section 2.8 below), and (d) where
applicable, shall be accompanied by evidence of the discharge of all Liens
against the Assets.
1.11 Post-Closing Audits. The Seller and the Principal Shareholder hereby
agree to provide such assistance as Buyer reasonably requests to enable Buyer
and its accountant to complete an audit of the pre-Closing financial statement
of the Business, including, without limitation, providing access to books and
records and executing management representation letters.
1.12 Credit Card Transactions. During the 90-day period following the
Closing Date, Seller agrees to allow Buyer to deposit credit card payments from
Subscribers that are made to Seller's account at First American National Bank.
Seller covenants and agrees to transfer such payments to Buyer on a weekly basis
or at such other time as reasonably requested by Buyer. At the end of such
90-day period, Buyer shall provide to Seller a statement of all such payments
that were made. Buyer agrees to indemnify Seller for all losses, damages,
chargebacks and claims arising from the arrangements described in this Section
1.12.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLER AND PRINCIPAL SHAREHOLDER.
In order to induce Buyer to enter into this Agreement, Seller and each of
the Principal Shareholder, jointly and severally, hereby represent and warrant
to Buyer as follows:
7
2.1 Organization; Subsidiaries.
(a) Seller is a corporation duly organized, validly existing and in
good standing under the laws of the State of Tennessee. Seller has all requisite
power and authority to conduct its business as it is now conducted and to own,
lease and operate its properties and assets. The copies of Seller's Certificate
of Incorporation and By-Laws each as amended to date, heretofore delivered to
Buyer's counsel are complete and correct. Seller is not in violation of any term
of the Certificate of Incorporation and/or By-Laws. Seller is duly qualified to
do business in the state of its incorporation, and is not required to be
licensed or qualified to conduct its business or own its property in any other
jurisdiction.
(b) Seller has no subsidiaries and does not own any securities
issued by any other business organization or governmental authority, except U.S.
Government securities, bank certificates of deposit and money market accounts
acquired as short-term investments in the ordinary course of its business.
Seller does not own or have any direct or indirect interest in or control over
any corporation, partnership, joint venture or entity of any kind.
2.2 Required Action. All actions and proceedings necessary to be taken by
or on the part of Seller in connection with the transactions contemplated by
this Agreement have been duly and validly taken or will have been duly and
validly taken prior to Closing, and this Agreement and each other agreement,
document and instrument to be executed and delivered by or on behalf of Seller
pursuant to, or as contemplated by, this Agreement (collectively, the "Seller
Documents") has been or shall be duly and validly authorized, executed and
delivered by Seller and no other action on the part of Seller or its officers,
directors or shareholders shall be required in connection therewith. Each of
Seller and the Principal Shareholder have full right, authority, power and
capacity to execute and deliver this Agreement and each other Seller Document
and to carry out the transactions contemplated hereby and thereby. This
Agreement and each other Seller Document constitutes, or when executed and
delivered will constitute, the legal, valid and binding obligation of each of
Seller and the Principal Shareholder enforceable in accordance with its
respective terms.
2.3 No Conflicts.
(a) The execution, delivery and performance by Seller of this
Agreement and each other Seller Document does not and will not (i) violate any
provision of the Certificate of Incorporation and By-Laws of Seller, in each
case as amended to date, (ii) constitute a violation of, or conflict with or
result in any breach of, acceleration of any obligation under, right of
termination under, or default under, any agreement or instrument to which Seller
is a party or by which Seller or the Assets is bound, (iii) violate any
judgment, decree, order, statute, rule or regulation applicable to Seller or the
Assets, (iv) require Seller to obtain any approval, consent or waiver of, or to
make any filing with, any person or entity (governmental or otherwise) that has
not been obtained or made or (v) result in the creation or imposition of any
Lien (as defined in Section 2.8 below) on any of the Assets.
8
(b) The execution, delivery and performance by the Principal
Shareholder of this Agreement and each other Seller Document does not and will
not (i) constitute a violation of, or conflict with or result in any breach of,
acceleration of any obligation under, right of termination under, or default
under, any agreement or instrument to which the Principal Shareholder is a party
or by which the Principal Shareholder is bound, (ii) violate any judgment,
decree, order, statute, rule or regulation applicable to the Principal
Shareholder, (iii) require the Principal Shareholder to obtain any approval,
consent or waiver of, or to make any filing with, any person or entity
(governmental or otherwise) that has not been obtained or made or (iv) result in
the creation or imposition of any Lien (as defined in Section 2.8 below) on any
of the Assets.
2.4 Taxes.
(a) Seller has paid or caused to be paid all federal, state, local,
foreign and other taxes, including, without limitation, income taxes, estimated
taxes, alternative minimum taxes, excise taxes, sales taxes, use taxes,
value-added taxes, gross receipts taxes, franchise taxes, capital stock taxes,
employment and payroll-related taxes, withholding taxes, stamp taxes, transfer
taxes, windfall profit taxes, environmental taxes and property taxes, whether or
not measured in whole or in part by net income, and all deficiencies, or other
additions to tax, interest, fines and penalties owed by it (collectively,
"Taxes"), required to be paid by it through the date hereof whether disputed or
not.
(b) Seller has in accordance with applicable law filed all federal,
state, local and foreign tax returns required to be filed by it through the date
hereof, and all such returns correctly and accurately set forth the amount of
any Taxes relating to the applicable period. A list of all federal, state, local
and foreign income tax returns filed with respect to Seller for taxable periods
ended on or after December 31, 1993, is set forth on Schedule 2.4 attached
hereto. Seller has delivered to Buyer correct and complete copies of all
federal, state, local and foreign income tax returns listed on said schedule,
and of all examination reports and statements of deficiencies assessed against
or agreed to by Seller with respect to said returns.
(c) Neither the Internal Revenue Service nor any other governmental
authority is now asserting or, to the knowledge of Seller or the Principal
Shareholder, threatening to assert against Seller any deficiency or claim for
additional Taxes. No claim has ever been made by an authority in a jurisdiction
where Seller does not file reports and returns that Seller is or may be subject
to taxation by that jurisdiction. There are no security interests on any of the
Assets of Seller that arose in connection with any failure (or alleged failure)
to pay any Taxes. Seller has never entered into a closing agreement pursuant to
Section 7121 of the Code.
(d) There has not been any audit of any tax return filed by Seller,
no audit of any tax return of Seller is in progress, and Seller has not been
notified by any tax authority that any such audit is contemplated or pending. No
extension of time with respect to any date
9
on which a tax return was or is to be filed by Seller is in force, and no waiver
or agreement by Seller is in force for the extension of time for the assessment
or payment of any Taxes.
(e) Seller has never been (and has never had any liability for
unpaid Taxes because it once was) a member of an "affiliated group" (as defined
in Section 1504(a) of the Code). Seller has never filed, and has never been
required to file, a consolidated, combined or unitary tax return with any other
entity. Seller does not own and has never owned a direct or indirect interest in
any trust, partnership, corporation or other entity and therefore Buyer is not
acquiring from Seller an interest in any entity. Seller is not a party to any
tax sharing agreement.
(f) Seller is not a "foreign person" within the meaning of Section
1445 of the Code and Treasury Regulations Section 1.1445-2.
(g) For purposes of this Agreement, all references to Sections of
the Code shall include any predecessor provisions to such Sections and any
similar provisions of federal, state, local or foreign law.
2.5 Compliance with Laws. To the best of Seller's and the Principal
Shareholder's knowledge, Seller's operation of the Business and the Assets is in
compliance in all material respects with all applicable statutes, ordinances,
orders, rules and regulations promulgated by any federal, state, municipal or
other governmental authority (including the Federal Communications Commission),
and Seller has not received notice of a violation or alleged violation of any
such statute, ordinance, order, rule or regulation.
2.6 Insurance. The physical properties and tangible Assets of Seller are
insured to the extent disclosed on Schedule 2.6 attached hereto, and all
insurance policies and arrangements of Seller in effect as of the date hereof
are disclosed on said Schedule. Said insurance policies and arrangements are in
full force and effect, all premiums with respect thereto are currently paid, and
Seller is in compliance in all material respects with the terms thereof. Said
insurance is adequate and customary for the business engaged in by Seller and is
sufficient for compliance by Seller with all requirements of law and all
agreements and leases to which Seller is a party.
2.7 Contracts. The Contracts constitute all leases, contracts and
arrangements, whether oral or written, under which Seller is bound or to which
Seller is a party which relate to the Business or Assets. Schedule 1.1(b)
attached hereto contains a true, correct and complete list of all Contracts.
With respect to each oral agreement or understanding involving the Business,
Seller has provided a written summary of the material terms of each such
agreement or understanding on Schedule 1.1(b). Each Contract is valid, in full
force and effect and binding upon Seller and the other parties thereto in
accordance with its terms. Neither Seller nor, to the knowledge of Seller and
the Principal Shareholder, any other party is in default under or in arrears in
the performance, payment or satisfaction of any agreement or condition on its
part to be performed or satisfied under any Contract, nor does any condition
10
exist that with notice or lapse of time or both would constitute such a default,
and no waiver or indulgence has been granted by any party under any Contract.
Seller has not received notice of, and each of Seller and the Principal
Shareholder have no knowledge of, any fact which would result in a termination,
repudiation or breach of any Contract. Seller has provided Buyer with true and
complete copies of all of such Contracts, other than with respect to the oral
agreements or understandings described on Schedule 1.1(b).
2.8 Title. Seller has good and marketable title to all of the Assets free
and clear of all mortgages, pledges, security interests, charges, liens,
restrictions and encumbrances of any kind (collectively, "Liens"). Upon the
sale, assignment, transfer and delivery of the Assets to Buyer hereunder and
under the Seller Documents, there will be vested in Buyer good, marketable and
indefeasible title to the Assets, free and clear of all Liens. The Assets
include all of the assets and properties (i) held for use or used by Seller to
conduct the Business as presently conducted and (ii) necessary for Buyer to
operate the Business in the same manner as such business is currently operated
by Seller. All of the tangible Assets are in good repair, have been well
maintained and are in good operating condition, ordinary wear and tear excepted,
do not require any material modifications or repairs, and comply in all material
respects with applicable laws, ordinances and regulations. Seller has delivered
complete and true copies of all real property leases (the "Leases") set forth on
Schedule 1.1(b). Seller holds good, clear, marketable, valid and enforceable
leasehold interest in the real property subject to the Leases (the "Leased Real
Property"), subject only to the right of reversion of the landlord or lessor
under the Leases, free and clear of all other prior or subordinate interests,
including, without limitation, mortgages, deeds of trust, ground leases, leases,
subleases, assessments, tenancies, claims, covenants, conditions, restrictions,
easements, judgments or other encumbrances or matters affecting title, and free
of encroachments onto or off of the leased real property. To the best of
Seller's and the Principal Shareholder's knowledge, there are no material
defects in the physical condition of any improvements constituting a part of the
Leased Real Property, including, without limitation, structural elements,
mechanical systems, roofs or parking and loading areas, and all of such
improvements are in good operating condition and repair, have been well
maintained. All water, sewer, gas, electric, telephone, drainage and other
utilities required by law or necessary for the current operation of the Leased
Real Property have been installed and connected pursuant to valid permits, and
are sufficient to service the Leased Real Property. Seller does not hold or own
a fee interest in any real property.
2.9 No Litigation. Seller is not now involved in nor, to the knowledge of
Seller and the Principal Shareholder, is Seller threatened to be involved in any
litigation or legal or other proceedings related to or affecting the Business or
any Asset (including any Intellectual Property) or which would prevent or hinder
the consummation of the transactions contemplated by this Agreement. Seller has
not been operating the Business under, and the Business is not subject to, any
order, injunction or decree of any court of federal, state, municipal or other
governmental department, commission, board, agency or instrumentality.
11
2.10 Employees; Labor Matters. Seller employs approximately eleven (11)
full-time employees and no part-time employees. Seller shall provide to Buyer a
list of the employees of Seller in connection with the Business at or prior to
the Closing, including the name, date of hire and wages of such employees.
Seller is not delinquent in payments to any of its employees for any wages,
salaries, commissions, bonuses or other direct compensation for any services
performed for it to the date hereof or amounts required to be reimbursed to such
employees. Upon termination of the employment of any of said employees, neither
Seller nor Buyer will by reason of the transactions contemplated hereby or
anything done prior to the Closing be liable to any of said employees for
so-called "severance pay" or any other payments, except as set forth on Schedule
2.10 attached hereto. Seller does not have any policy, practice, plan or program
of paying severance pay or any form of severance compensation in connection with
the termination of employment, except as set forth on said Schedule. To the best
of Seller's and the Principal Shareholder's knowledge, Seller is in compliance
in all material respects with all applicable laws and regulations respecting
labor, employment, fair employment practices, work place safety and health,
terms and conditions of employment, and wages and hours. There are no charges of
employment discrimination or unfair labor practices, nor are there any strikes,
slowdowns, stoppages of work, or any other concerted interference with normal
operations existing, pending or, to the knowledge of Seller and the Principal
Shareholder, threatened against or involving Seller. No question concerning
representation exists respecting any group of employees of Seller. No collective
bargaining agreement is in effect or is currently being or is about to be
negotiated by Seller. Seller has received no information to indicate that any of
its employment policies or practices is currently being audited or investigated
by any federal, state or local government agency. Seller is, and at all times
since November 6, 1986 has been, in compliance with the requirements of the
Immigration Reform Control Act of 1986.
2.11 Financial Statements. Attached hereto as Schedule 2.11 are copies of
the balance sheet of Seller as of November 30, 1999 (the "Base Balance Sheet")
and the statements of income and expense of Seller for the eleven (11) months
ended November 30, 1999 (collectively the "Financial Statements"). The Financial
Statements have been prepared in accordance with GAAP applied consistently
during the periods covered thereby (except for the absence of footnotes with
respect to unaudited financial statements), are complete and correct and present
fairly and accurately the financial condition of the Business at the dates of
said statements and the results of operations of the Business for the periods
covered thereby. As of the date of the Base Balance Sheet (the "Base Balance
Sheet Date"), Seller had no material liabilities or obligations of any kind with
respect to the Business, whether accrued, contingent or otherwise, that are not
disclosed and adequately reserved against on the Base Balance Sheet. As of the
date hereof and at the Closing, Seller had and will have no liabilities or
obligations of any kind with respect to the Business, whether accrued,
contingent or otherwise, that are not disclosed and adequately reserved against
on the Base Balance Sheet.
12
2.12 Business Since the Base Balance Sheet Date. Since the Base Balance
Sheet Date:
(a) there has been no material adverse change in the Business or in
the Assets, operations or financial condition of the Business;
(b) the Business has, in all material respects, been conducted in
the ordinary course of business and in substantially the same manner as it was
conducted before the date of the Base Balance Sheet Date;
(c) there has not been any material obligation or liability
(contingent or other) incurred by Seller with respect to the Business, whether
or not incurred in the ordinary course of business;
(d) there has not been any purchase, sale or other disposition, or
any agreement or other arrangement, oral or written, for the purchase, sale or
other disposition, of any material properties or assets of the Business, whether
or not in the ordinary course of business;
(e) there has not been any mortgage, encumbrance or lien placed on
any of the Assets, nor any payment or discharge of a material lien or liability
of Seller which was not reflected on the Base Balance Sheet;
(f) there has not been any damage, destruction or loss, whether or
not covered by insurance, materially adversely affecting the Business or Assets;
(g) there has not been any change in Seller's pricing, marketing,
customer service, billing, operational or promotional activities in any material
way from that which Seller was providing these activities directly prior to the
Base Balance Sheet Date; and
(h) there has not been any agreement or understanding, whether in
writing or otherwise, for Seller to take any of the actions specified above.
2.13 Licenses. As of the date of this Agreement, Seller is the holder of
all licenses, permits and authorizations with respect to the Business (the
"Authorizations"). The Authorizations constitute all of the licenses, permits
and authorizations required for operation of the Business as now operated. All
of the Authorizations are in full force and effect and no licenses, permits or
authorizations of any governmental department or agency are required for the
operation of the Business which have not been duly obtained. As of the date
hereof, there is not pending or, to the knowledge of Seller and the Principal
Shareholder, threatened any action by or before any governmental agency to
revoke, cancel, rescind or modify any of the Authorizations, and there is not
now issued, outstanding, pending or, to the knowledge of Seller and the
Principal Shareholder, threatened any order to show cause, notice of violation,
13
notice of apparent liability, or notice of forfeiture or complaint against
Seller with respect to the Business.
2.14 Approvals; Consents. Except as set forth on Schedule 2.14 attached
hereto, no approval, consent, authorization or exemption from or filing with any
person or entity not a party to this Agreement is required to be obtained or
made by Seller in connection with the execution and delivery of this Agreement
and the Seller Documents and the consummation of the transactions contemplated
hereby and thereby. All of the approvals, consents and authorizations listed on
Schedule 2.14 shall be obtained by Seller at or prior to the Closing.
2.15 Customers and Suppliers. Seller's relations with its customers and
suppliers, including its Subscribers (as defined in Section 2.16 below), are
standard for the industry and there are not pending or, to Seller's knowledge,
threatened claims or controversies with any customer, supplier or Subscriber
that is material to the Assets or the Business.
2.16 Subscribers. Schedule 2.16(a) attached hereto sets forth, as of the
date hereof, the Subscribers (as defined herein) of the Business as listed by
class, type and billing plan. For purposes of this Agreement, the terms
"Subscriber" shall mean any active subscriber to Internet services offered by
Seller in the Business who has subscribed to a service for at least two months
and has paid at least one xxxx covering at least a sixty (60) day period,
including, without limitation, any person or corporation who receives dial-up
Internet access through the Business (a "Dial-up Subscriber"), any person who
receives dedicated Internet access from Seller offering higher data transmission
rates than available from dial-up access (a "Dedicated Subscriber"), and any
person with a web page or domain name on Seller's server and to whom Seller
provides Internet access (a "Web-hosting/Domain-hosting Subscriber"); provided,
however, that "Subscriber" shall not include any person who is (i) more than
sixty (60) days delinquent in payment of such person's xxxx for such services
provided by the Business and (ii) any person receiving complimentary Internet
services or Internet services at a promotional discounted rate. Set forth on
Schedule 2.16(b) attached hereto is a listing of all such accounts which receive
complimentary Internet services or Internet services at a promotional discounted
rate. Set forth on Schedule 2.16(c) attached hereto is Seller's policy and
practice with respect to the disconnection of Subscribers, with which Seller
has, except as set forth on Schedule 2.16(c), at all times since its inception,
complied in all material respects.
2.17 Brokers. Seller has not retained any broker or finder or other person
who would have any valid claim against any of the parties to this Agreement for
a commission or brokerage fee in connection with this Agreement or the
transactions contemplated hereby.
2.18 Collectibility of Accounts Receivable. Except as set forth on
Schedule 2.18, each of the Accounts Receivable of Seller are or will be as of
the Closing Date bona fide, valid and enforceable claims, subject to no set off
or counterclaim and are collectible in accordance with their terms. Seller has
no accounts or loans receivable from any person, firm or corporation which is
affiliated with Seller or from any director, officer or employee of Seller, or
from any of their respective spouses or family members.
14
2.19 Banking Relations. All of the arrangements which Seller has with any
banking institution are completely and accurately described in Schedule 2.19
attached hereto, indicating with respect to each of such arrangements the type
of arrangement maintained (such as checking account, borrowing arrangements,
safe deposit box, etc.) and the person or persons authorized in respect thereof.
2.20 Intellectual Property.
(a) All of the Intellectual Property of Seller is set forth on
Schedule 2.20(a) attached hereto. For purposes hereof, the term "Intellectual
Property" includes: (i) all patents, patent applications, patent rights, and
inventions and discoveries and invention disclosures (whether or not patented)
(collectively, "Patents"); (ii) Seller's rights to the names "The Nashville
Exchange, Inc.," "DAVINCI Web design," "Xxxxxxxxx.xxx," "xxxxxxxxx.xxx,"
"xxx.xxx," "xxxxxx.xxx," "xxxxx.xxx" and "xxxxxxxxxxxxxxxx.xxx," all trade
names, trade dress, logos, packaging design, slogans, any and all Internet
domain names used in the business of Seller, registered and unregistered
trademarks and service marks and applications (collectively, "Marks"); (iii) all
copyrights in both published and unpublished works, including, without
limitation, all compilations, databases and computer programs, and all copyright
registrations and applications, and all derivatives, translations, adaptations
and combinations of the above (collectively, "Copyrights"), (iv) all trade
secrets, confidential or proprietary information, customer lists, IP addresses,
research in progress, algorithms, data, designs, processes, formulae, drawings,
schematics, blueprints, flow charts, models, prototypes, techniques, Beta
testing procedures and Beta testing results (collectively, "Trade Secrets"); (v)
Seller's web-sites (including the domain names "xxxxxxxxx.xxx," "xxx.xxx,"
"xxxxxx.xxx," "xxxxx.xxx," and "xxxxxxxxxxxxxxxx.xxx," and any other similar
domain name); (vi) all goodwill, franchises, licenses, permits, consents,
approvals, technical information, telephone numbers, and claims of infringement
against third parties (the "Rights"); and (vii) all contracts relating to the
Intellectual Property to which Seller is a party or is bound, including, without
limitation, all nondisclosure and/or confidentiality agreements entered into by
persons in connection with disclosures by Seller (collectively,"Assigned
Contracts") relating to the Business.
(b) Except as described on Schedule 2.20(b), Seller has exclusive
ownership of, and has good, valid and marketable title to, all of the
Intellectual Property, free and clear of any Liens, and has the right to use all
of the Intellectual Property without payment to any third party. Seller's rights
in all of such Intellectual Property are freely transferable. There are no
claims or demands pending or, to the knowledge of Seller and the Principal
Shareholder, threatened of any other person pertaining to any of such
Intellectual Property and no proceedings have been instituted, or are pending
or, to the knowledge of Seller and the Principal Shareholder, threatened against
Seller and/or its officers, employees and consultants which challenge the
validity and enforceability of Seller's rights in respect of the Intellectual
Property. The Intellectual Property represents all of the assets of Seller of
such class or type necessary for the operation of Seller's Business as currently
conducted.
15
Except as set forth on Schedule 2.20(b), all former and current employees,
consultants and contractors of Seller have executed written instruments with
Seller that assign to Seller all rights to any inventions, improvements,
discoveries, or information relating to the business of Seller. To the best
knowledge of Seller after inquiry, no employee, consultant or contractor of
Seller has entered into any agreement that restricts or limits in any way the
scope or type of work in which the employee, consultant or contractor may be
engaged or requires the employee, consultant or contractor to transfer, assign,
or disclose information concerning his work to anyone other than Seller.
(c) Except as set forth on Schedule 2.20(c), neither Seller nor the
Principal Shareholder owns any Patents relating to the Business.
(d) Schedule 2.20(d) sets forth a complete and accurate list and
summary description of all of Seller's Marks. All Marks that have been
registered with the U.S. Patent and Trademark Office and/or any other
jurisdiction are currently in compliance with formal legal requirements
(including, without limitation, the timely post-registration filing of
affidavits of use and incontestability and renewal applications), are valid and
enforceable, and are not subject to any maintenance fees or taxes or actions
falling due within ninety (90) days after the Closing Date. In each case where a
Xxxx is held by Seller by assignment, the assignment has been duly recorded with
the U.S. Patent and Trademark Office and all other jurisdictions of
registration. No Xxxx has been or is now involved in any opposition,
invalidation or cancellation proceeding and, to the knowledge of Seller and the
Principal Shareholder, no such action is threatened with respect to any of the
Marks. All products and materials containing a Xxxx xxxx the proper notice where
permitted by law.
(e) Except as set forth on Schedule 2.20(e), neither Seller nor the
Principal Shareholder owns any Copyrights relating to the Business.
(f) Seller has taken all reasonable security measures to protect the
secrecy, confidentiality and value of all Trade Secrets. To the knowledge of
Seller and the Principal Shareholder, there has not been any breach by any party
to any such confidentiality or non-disclosure agreement. The Trade Secrets have
not been disclosed by Seller to any person or entity other than employees or
contractors of Seller who had a need to know and use the Trade Secrets in the
course of their employment or contract performance. Seller has the right to use,
free and clear of claims of third parties, all Trade Secrets. To the knowledge
of Seller and the Principal Shareholder, there is not any assertion that the use
by Seller of any Trade Secret violates the rights of any third party.
(g) Seller has the exclusive right to use, license, distribute,
transfer and bring infringement actions with respect to the Intellectual
Property. Except as set forth on Schedule 2.20(g), Seller (i) has not licensed
or granted to anyone rights of any nature to use any of its Intellectual
Property and (ii) is not obligated to and does not pay royalties or other fees
to anyone for its ownership, use, license or transfer of any of its Intellectual
Property.
16
(h) All licenses or other agreements under which Seller is granted
rights by others in Intellectual Property are listed on Schedule 2.20(h). All
such licenses or other agreements are in full force and effect, to the knowledge
of Seller and the Principal Shareholder there is no material default by any
party thereto, and all of the rights of Seller thereunder are freely assignable.
True and complete copies of all such licenses or other agreements, and any
amendments thereto, have been provided to Buyer, and Seller has no reason to
believe that the licensors under the licenses and other agreements under which
Seller is granted rights and has granted rights to others do not have and did
not have all requisite power and authority to grant the rights purported to be
conferred thereby.
(i) All licenses or other agreements under which Seller has granted
rights to others in Intellectual Property are listed on Schedule 2.20(i). All
such licenses or other agreements are in full force and effect, and to the
knowledge of Seller and the Principal Shareholder there is no material default
by any party thereto. True and complete copies of all such licenses or other
agreements, and any amendments thereto, have been provided to Buyer.
(j) Seller has reviewed the areas within its businesses and
operations which could be adversely affected by, and has developed a program to
address on a timely basis, the "Year 2000 Problem" (i.e., the risk that
applications used by Seller or its suppliers and/or providers may be unable to
recognize and properly perform date-sensitive functions involving certain dates
prior to and any date after December 31, 1999). Seller and the Principal
Shareholder reasonably believe that the "Year 2000 Problem" will not have any
material adverse effect on the business or operations of Seller.
2.21 Absence of Restrictions. Seller has not entered into any other
agreement or arrangement with any other party with respect to the sale, transfer
or any other disposition or encumbrance of the Business or the Assets, in whole
or in part.
2.22 Transactions with Interested Persons. Except as set forth on Schedule
2.22 hereto, neither Seller, nor any shareholder, officer, supervisory employee
or director of Seller or, to the knowledge of Seller or the Principal
Shareholder, any of their respective spouses or family members owns directly or
indirectly on an individual or joint basis any material interest in, or serves
as an officer or director or in another similar capacity of, any competitor or
supplier of Seller, or any organization which has a material contract or
arrangement with Seller.
2.23 Employee Benefit Programs.
(a) Schedule 2.23 sets forth a list of every Employee Program (as
defined in Section 2.23(c) below) that has been maintained by the Seller or an
Affiliate (as defined herein) at any time during the six-year period ending on
the Closing Date. Each Employee Program which has ever been maintained by the
Seller or an Affiliate and which has been intended to qualify under Section
401(a) or 501(c)(9) of the Code has received a favorable determination or
approval letter from the Internal Revenue Service ("IRS") regarding its
17
qualification under such section and has, in fact, been qualified under the
applicable section of the Code from the effective date of such Employee Program
through and including the Closing Date (or, if earlier, the date that all of
such Employee Program's assets were distributed). No event or omission has
occurred which would cause any such Employee Program to lose its qualification
or otherwise fail to satisfy the relevant requirements to provide tax-favored
benefits under the applicable Code Section (including without limitation Code
Sections 105, 125, 401(a) and 501(c)(9)). With respect to any Employee Program
ever maintained by the Seller or any Affiliate, there has been no (i)
"prohibited transaction," as defined in Section 406 of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") or Code Section 4975, or (ii)
failure to comply with any provision of ERISA, other applicable law, or any
agreement which, in the case of either of (i) or (ii), could subject the Seller
or any Affiliate to liability either directly or indirectly (including, without
limitation, through any obligation of indemnification or contribution) for any
damages, penalties, or taxes, or any other loss or expense. All payments and/or
contributions required to have been made (under the provisions of any agreements
or other governing documents or applicable law) with respect to all Employee
Programs ever maintained by the Seller or any Affiliate, for all periods prior
to the Closing Date, either have been made or have been accrued (and all such
unpaid but accrued amounts are described on Schedule 2.23). Each Employee
Program ever maintained by the Seller or an Affiliate has complied with the
applicable notification and other applicable requirements of the Consolidated
Omnibus Budget Reconciliation Act of 1985.
(b) Neither the Seller nor any Affiliate (i) has ever maintained any
Employee Program which has been subject to title IV of ERISA or Code Section
412, including, but not limited to, any Multi employer Plan (as defined in
Section 3(37) of ERISA) or (ii) has ever provided health care or any other
non-pension benefits to any employees after their employment is terminated
(other than as required by part 6 of subtitle B of title I of ERISA) or has ever
promised to provide such post-termination benefits.
(c) For purposes of this section:
(i) "Employee Program" means all employee benefit plans within
the meaning of ERISA Section 3(3) as well as all other employee benefit
plans, agreements and arrangements of any kind.
(ii) An entity "maintains" an Employee Program if such entity
sponsors, contributes to, or provides benefits under or through such
Employee Program, or has any obligation (by agreement or under applicable
law) to contribute to or provide benefits under or through such Employee
Program, or if such Employee Program provides benefits to or otherwise
covers employees of such entity (or their spouses, dependents, or
beneficiaries).
(iii) An entity is an "Affiliate" of the Seller if it would
have ever been considered a single employer with the Seller under ERISA
Section 4001(b) or part of the same "controlled group" as the Seller for
purposes of ERISA Section 302(d)(8)(C).
18
2.24 Environmental Matters.
(a) Except as set forth in Schedule 2.24, (i) Seller has not
generated, transported, used, stored, treated, disposed of, or managed any
Hazardous Waste (as defined in Section 2.24(c) below) at any time; (ii) to the
knowledge of Seller and the Principal Shareholder, no Hazardous Material (as
defined in Section 2.24(c) below) has ever been or is threatened to be spilled,
released, or disposed of at any site associated with a structure presently or
formerly owned, operated, leased, or used by Seller, or has ever been located in
the soil or groundwater at any such site; (iii) to the knowledge of Seller and
the Principal Shareholder, no Hazardous Material has ever been transported from
any site associated with a structure presently or formerly owned, operated,
leased, or used by Seller for treatment, storage, or disposal at any other
place; (iv) to the knowledge of Seller and the Principal Shareholder upon
reasonable investigation, Seller does not presently own, operate, lease, or use,
and has not previously owned, operated, leased, or used any site associated with
a structure on which underground storage tanks are or were located; and (v) no
lien has ever been imposed by any governmental agency on any property, facility,
machinery, or equipment owned, operated, leased, or used by either Seller in
connection with the presence of any Hazardous Material.
(b) Except as set forth on Schedule 2.24 and to the knowledge of
Seller and the Principal Shareholder, (i) Seller does not have any liability
under, nor has it ever violated, any Environmental Law (as defined in Section
2.24(c) below); (ii) Seller, nor any property associated with a structure owned,
operated, leased, or used by Seller, nor facilities or operations thereon are
presently not in compliance with all applicable Environmental Laws; (iii) Seller
has not entered into or been subject to any judgment, consent decree, compliance
order, or administrative order with respect to any environmental or health and
safety matter or received any request for information, notice, demand letter,
administrative inquiry, or formal or informal complaint or claim with respect to
any environmental or health and safety matter or the enforcement of any
Environmental Law; and (iv) neither Seller nor any Principal Shareholder has any
knowledge or reason to know that any of the items enumerated in clause (iii) of
this subsection will be forthcoming.
(c) For purposes of this Agreement, (i) "Hazardous Material" shall
mean and include any hazardous waste, hazardous material, hazardous substance,
petroleum product, oil, toxic substance, pollutant, contaminant, or other
substance which may pose a threat to the environment or to human health or
safety, as defined or regulated under any Environmental Law; (ii) "Hazardous
Waste" shall mean and include any hazardous waste as defined or regulated under
any Environmental Law; and (iii) "Environmental Law" shall mean any
environmental or health and safety-related law, regulation, rule, ordinance, or
By-law at the foreign, federal, state, or local level, whether existing as of
the date hereof, previously enforced, or subsequently enacted.
2.25 Disclosure. The representations, warranties and statements contained
in this Agreement and in the certificates, exhibits and schedules delivered by
Seller and the Principal
19
Shareholder to Buyer pursuant to this Agreement do not contain any untrue
statement of a material fact, and, when taken together, do not omit to state a
material fact required to be stated therein or necessary in order to make such
representations, warranties or statements not misleading in light of the
circumstances under which they were made. There are no facts known to Seller or
the Principal Shareholder which presently or may in the future have a material
adverse affect on the Business, properties, Assets, prospects, operations or
(financial or other) condition of Seller which has not been specifically
disclosed herein or in a Schedule furnished herewith, other than general
economic or market conditions affecting the Internet services industry
generally.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF BUYER.
As a material inducement to Seller entering into this Agreement, Buyer
hereby represents and warrants to Seller as follows:
3.1 Organization. Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. Buyer has all
requisite power and authority to conduct its business as it is now conducted and
to own, lease and operate its properties and assets.
3.2 Required Action: Authority. All actions and proceedings necessary to
be taken by or on the part of Buyer in connection with the transactions
contemplated by this Agreement have been duly and validly taken, and this
Agreement and each other agreement, document and instrument to be executed and
delivered by or on behalf of Buyer pursuant to, or as contemplated by, this
Agreement (collectively, the "Buyer Documents") has been duly and validly
authorized, executed and delivered by Buyer. Buyer has full right, authority,
power and capacity to execute and deliver this Agreement and each other Buyer
Document and to carry out the transactions contemplated hereby and thereby. This
Agreement and each other Buyer Document constitutes, or when executed and
delivered will constitute, the legal, valid and binding obligations of Buyer
enforceable in accordance with its respective terms.
3.3 No Conflicts. The execution, delivery and performance by Buyer of this
Agreement and each other Buyer Document does not and will not (a) violate any
provision of the Certificate of Incorporation or By-Laws of Buyer, as amended to
date, (b) constitute a violation of, or conflict with or result in any breach
of, acceleration of any obligation under, right of termination under, or default
under, any agreement or instrument to which Buyer is a party or by which it is
bound, (c) violate any judgment, decree, order, statute, rule or regulation
applicable to Buyer, (d) require Buyer to obtain any approval, consent or waiver
of, or to make any filing with, any person or entity (governmental or otherwise)
that has not been obtained or made. The officers who execute this Agreement and
the other Buyer Documents contemplated hereby on behalf of Buyer have and shall
have all requisite power to do so in the name of and on behalf of Buyer.
20
3.4 Brokers. Except for fees payable to Rampart Associates, LLC, Buyer has
not retained any broker or finder or other person who would have any valid claim
against any of the parties to this Agreement for a commission or brokerage fee
in connection with this Agreement or the transactions contemplated hereby.
3.5 Litigation. There are no actions, suits, proceedings or
investigations, either at law or in equity, or before any commission or other
administrative authority in any United States or foreign jurisdiction, of any
kind now pending or, to Buyer's knowledge, threatened involving Buyer that (i)
questions the validity of this Agreement or (ii) seeks to delay, prohibit or
restrict in any manner any action taken or contemplated to be taken by Buyer
under this Agreement.
3.6 Disclosure. The representations, warranties and statements contained
in this Agreement and in the certificates and exhibits delivered by Buyer to
Seller and the Principal Shareholder pursuant to this Agreement do not contain
any untrue statement of a material fact, and, when taken together, do not omit
to state a material fact required to be stated therein or necessary in order to
make such representations, warranties or statements not misleading in light of
the circumstances under which they were made. There are no facts known to Buyer
which presently or may in the further have a material adverse affect on the
transactions contemplated by this Agreement which have not been specifically
disclosed herein or in any document furnished herewith other than general
economic or market conditions affecting the Internet services industry
generally.
SECTION 4. COVENANTS OF SELLER.
Seller covenants and agrees that:
4.1 Access to Premises and Records. Subject to Section 5.1 of this
Agreement and to the terms and conditions of the Mutual Non-Disclosure Agreement
defined in Section 4.8, from the date hereof until consummation of the
transactions contemplated hereby at the Closing, Seller shall give Buyer and its
representatives, at reasonable times and with reasonable prior notice, free
access to the properties, books and records of the Business and to the Assets
and will furnish to Buyer and its representatives such information regarding the
Business and the Assets as Buyer or its representatives may from time to time
reasonably request in order that Buyer may have full opportunity to make a
diligent investigation consistent with this Agreement. In addition to, and not
in limitation of the foregoing, Seller shall provide Buyer with access to and
copies of the records of all: (a) Accounts Receivable, (b) Subscriber xxxxxxxx,
(c) pre-paid accounts, (d) accounts for which no remuneration is received by
Seller and (e) general reports with respect to each category of service provided
by the Business.
21
4.2 Continuity and Maintenance of Operations of the Business. Except as to
actions of which Buyer has been advised and to which Buyer has consented to in
writing, and except as specifically permitted or required by this Agreement,
Seller shall:
(a) Operate the Business in the ordinary course consistent with past
practices, use its commercially reasonable efforts to keep available the
services of the employees who are involved in the operation of the Business, and
use commercially reasonable efforts to preserve any beneficial business
relationships with Subscribers, customers, suppliers and others having business
dealings with Seller relating to the Business;
(b) Use and operate the Assets in a manner consistent with past
practice and maintain the Assets in good operating condition, ordinary wear and
tear excepted;
(c) Maintain insurance upon the Assets in such amounts and types as
in effect on the date of this Agreement as set forth in Schedule 2.6 attached
hereto;
(d) Keep all of its business books, records and files in the
ordinary course of business in accordance with past practices, and provide Buyer
with access thereto upon its reasonable request;
(e) Continue to implement and enforce its procedures for
disconnection and discontinuance of service to Subscribers whose accounts are
delinquent in accordance with those in effect on the date of this Agreement;
(f) Perform and comply in all material respects with the terms of
the Contracts and keep such Contracts in full force and effect; and
(g) Use its reasonable good faith efforts to preserve the goodwill
of the Business.
4.3 Negative Covenants. Seller shall not, without the prior written
consent of Buyer:
(a) Sell, transfer, lease, assign or otherwise dispose of, or agree
to sell, transfer, lease, assign or otherwise dispose of, any Assets outside the
ordinary course of business;
(b) Enter into any contract or commitment for the acquisition of
goods or services relating to the Business (other than in the ordinary course of
business) or which otherwise obligates Seller to perform in full or in part
beyond the Closing Date;
(c) Hire any new employees or enter into any employment arrangements
or otherwise increase the salary or compensation of any existing employees;
22
(d) Renegotiate, modify, amend or terminate any Contract;
(e) Create, assume, or permit to exist, or agree to incur, assume or
acquire, any Lien, claim or liability on the Assets;
(f) Make any material modifications or changes to the existing rate
schedules or product offerings in effect with respect to the Business;
(g) Offer or employ any sales discounts, free services or other
extraordinary marketing practices or extraordinary promotions outside the
ordinary course of business and not consistent with Seller's past practices;
(h) Take any actions or permit its employees and agents to take any
actions which would materially interfere with or preclude the transactions
contemplated by this Agreement; or
(i) Cause or permit the provision for any new and material pension,
retirement or other employment benefits for employees who perform services in
connection with the conduct of the Business or any material increase in any
existing benefits (other than as required by law).
4.4 Consents. Seller will use its reasonable best efforts to obtain, as
soon as practicable and at its expense, the consent of all third parties under
the Contracts for which the prior approval of such third party is required
pursuant to the terms of the Contract; provided, however, that "reasonable best
effort" for this purpose shall not require Seller to undertake extraordinary or
unreasonable measures to obtain such approvals and consents, including, without
limitation, the initiation or prosecution of legal proceedings or the payment of
fees in excess of customary filing and processing fees.
4.5 Notification of Certain Matters. Seller shall promptly notify Buyer of
(i) any fact, event, circumstances or action the existence or occurrence of
which would cause any of Seller's representations or warranties under this
Agreement, or the disclosures in any schedules or exhibits attached hereto, not
to be true in any material respect and (ii) any failure on its part to comply
with or satisfy in any material respect any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement. Seller shall promptly
notify Buyer in writing of the assertion, commencement or threat of any claim,
litigation, proceeding or investigation in which Seller is a party or in which
the Assets or Business may be affected and which could reasonably be expected to
be material or which relates to the transactions contemplated hereby.
4.6 Adverse Change. Seller shall promptly notify Buyer in writing of any
materially adverse developments affecting the Assets or the Business which
become known to Seller, including, without limitation, (i) any damage,
destruction or loss (whether or not covered by insurance) materially and
adversely affecting any of the Assets or the Business, (ii)
23
any material notice of violation, forfeiture or complaint under any material
Contract, or (iii) anything which, if not corrected prior to the Closing Date,
would prevent Seller from fulfilling any condition to Closing described in
Section 6 hereof.
4.7 No Solicitation. Seller shall not, and Seller shall use its best
efforts to cause its officers, employees, stockholders, agents and
representatives (including, without limitation, any investment banker, attorney
or accountant retained by Seller) and all other employees who perform services
with respect to the operation of the Business not to, initiate, solicit or
encourage, directly or indirectly, any inquiries or the making of any proposal
with respect to the Assets or the Business, or engage in any negotiations
concerning, or provide to any other person any information or data relating to,
the Business, the Assets or Seller for the purpose of, or have any discussions
with, any person relating to, or otherwise cooperate in any way with or assist
or participate in, facilitate or encourage, any inquiries or the making of any
proposal which constitutes, or may reasonably be expected to lead to, any effort
or attempt by any other person to seek or effect a transaction, or enter into a
transaction with any person or persons, other than Buyer, concerning the
possible sale of the Assets or Business, or the capital stock of Seller. Seller
shall promptly inform Buyer of any such inquiries or proposals and provide all
pertinent documentation related thereto.
4.8 Confidentiality. Seller agrees that it and its representatives will
hold in strict confidence, and will not use, any confidential or proprietary
data or information obtained from Buyer with respect to its business or
financial condition except for the purpose of evaluating, negotiating and
completing the transactions contemplated hereby. Information generally known in
Buyer's industry or which has been disclosed to Seller by third parties which
have a right to do so shall not be deemed confidential or proprietary
information for purposes of this Agreement. If the transactions contemplated by
this Agreement are not consummated, Seller will return, and cause its respective
officers, directors, agents and representatives to return, to Buyer (or certify
that they have destroyed) all copies of such data and information made available
to Seller (and its officers, directors, agents and representatives) in
connection with the transaction. The Mutual Non-Disclosure Agreement by and
among Buyer, Seller and Rampart Associates, LLC (the "Mutual Non-Disclosure
Agreement") shall remain in full force and effect.
4.9 Use of Trade Names. After the Closing Date, neither Seller, nor any
person controlling, controlled by or under common control with Seller will for
any reason, directly or indirectly, for itself or any other person, (a) use the
names "The Nashville Exchange, Inc.," "Xxxxxxxxx.xxx," "DAVINCI Web Design" and
"xxxxxxxxxxxxxxxx.xxx" or any other Internet domain name used in the business of
Seller, or any other or (b) use or disclose any trade secrets, confidential
information, know-how, proprietary information or other intellectual property of
Seller transferred pursuant to this Agreement.
4.10 Post-Closing Transitional Matters. For a period of ninety (90) days
following the Closing, Seller shall provide, without additional cost to Buyer,
such assistance as is reasonably requested by Buyer in order to effect an
orderly transition in the ownership and
24
operation of the Assets; provided, however, such post-Closing assistance shall
not, in any event, exceed ten (10) hours per week.
4.11 Collection of Assets. Subsequent to the Closing, Buyer shall have the
right and authority to collect all receivables and other items transferred and
assigned to Buyer by Seller hereunder and to endorse with the name of Seller any
checks received on account of such receivables or other items, and Seller agrees
that it will promptly transfer or deliver to Buyer from time to time, any cash
or other property that such Seller may receive with respect to any claims,
contracts, licenses, leases, commitments, sales orders, purchase orders,
receivables of any character or any other items included in the Assets.
4.12 Payment of Obligations. Seller shall pay all of the Excluded
Liabilities in the ordinary course of business as they become due.
4.13 Further Assurances. Seller, from time to time after the Closing at
the request of Buyer and without further consideration, shall execute and
deliver further instruments of transfer and assignment and take such other
action as Buyer may reasonably require to more effectively transfer and assign
to, and vest in, Buyer the Assets free and clear of all Liens (as defined in
Section 2.8).
SECTION 5. COVENANTS OF BUYER.
Buyer covenants and agrees that:
5.1 Confidentiality. Buyer agrees that, from the date hereof until
consummation of the transactions contemplated hereby at the Closing, Buyer and
its representatives will hold in strict confidence, and will not use, any
confidential or proprietary data or information obtained from Seller with
respect to its business or financial condition except for the purpose of
evaluating, negotiating and completing the transactions contemplated hereby.
Information generally known in Seller's industry or which has been disclosed to
Buyer by third parties which have a right to do so shall not be deemed
confidential or proprietary information for purposes of this Agreement. If the
transactions contemplated by this Agreement are not consummated, Buyer will
return, and cause its respective officers, directors, agents and representatives
to return, to Seller (or certify that they have destroyed) all copies of such
data and information made available to Buyer (and its officers, directors,
agents and representatives) in connection with the transaction.
5.2 Assumed Liabilities. From and after the Closing Date, Buyer shall pay
and/or perform the Assumed Liabilities in the ordinary course as they become
due.
5.3 Notification of Certain Matters. Buyer shall promptly notify Seller of
(i) any fact, event, circumstances or action the existence or occurrence of
which would cause any of Buyer's representations or warranties under this
Agreement, or the disclosures in any
25
schedules or exhibits attached hereto, not to be true in any material respect
and (ii) any failure on its part to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied by
it under this Agreement. Buyer shall promptly notify Seller in writing of the
assertion, commencement or threat of any claim, litigation, proceeding or
investigation in which Seller is a party or in which the Assets or Business may
be affected and which could reasonably be expected to be material or which
relates to the transactions contemplated hereby.
5.4 Consents and Approvals. Buyer shall use its reasonable best efforts to
obtain, as soon as practicable and at its expense, all consents, authorizations
and approvals under applicable laws and regulations required to be obtained by
Buyer in connection with the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby;
provided, however, that "reasonable best effort" for this purpose shall not
require Seller to undertake extraordinary or unreasonable measures to obtain
such approvals and consents, including, without limitation, the initiation or
prosecution of legal proceedings or the payment of fees in excess of customary
filing and processing fees.
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATION OF BUYER.
Buyer's obligation to consummate the transactions contemplated by this
Agreement is subject to the satisfaction, on or prior to the Closing Date, of
each of the following conditions, unless otherwise waived by Buyer in writing:
6.1 Performance of Agreements and Deliveries. Seller shall have performed
in all material respects all of its covenants, agreements and obligations under
this Agreement which are to be performed or complied with by Seller prior to or
upon the Closing Date and shall have delivered all documents and items required
to be delivered at or prior to the Closing, including, without limitation:
(a) A certificate, dated the Closing Date, from the President of
Seller to the effect that the conditions set forth in Sections 6.1 and 6.2 have
been satisfied;
(b) A certificate, dated the Closing Date, from Seller's Secretary
as to the Certificate of Incorporation, By-Laws, authority and the incumbency of
all officers executing the Seller Documents on behalf of Seller;
(c) A certified copy of Seller's Certificate of Incorporation from
the Secretary of State of the State of Tennessee;
(d) An Amendment to the Certificate of Incorporation and any other
required documentation, which effect a change of Seller's name, which name
change shall take effect not more than five (5) days following the date of
Closing;
26
(e) A Certificate of Good Standing from the Secretary of State of
the State of Tennessee; and
(f) Such other certificates and instruments reasonably requested by
Buyer.
6.2 Asset Transfer. Seller shall have delivered to Buyer the following
instruments of transfer and assignment in accordance with the provisions hereof,
transferring to Buyer all of Seller's right, title and interest in and to the
Assets, free and clear of all Liens:
(a) A Xxxx of Sale in the form attached hereto as Exhibit B;
(b) An Assignment and Assumption Agreement in the form attached
hereto as Exhibit C;
(c) An Assignment of Internet Domain Name in the form attached
hereto as Exhibit D; and
(d) Such other instruments of transfer reasonably requested by
Buyer.
6.3 Assignment of Contracts and Authorizations; Approvals. All Contracts
shall have been duly and validly assigned to Buyer by Seller, and all consents
and approvals required in connection with the consummation of the transactions
contemplated hereby under any Contract or Authorization or otherwise shall have
been obtained in form and substance satisfactory to Buyer and without conditions
materially and adversely affecting Buyer and which do not require Buyer to pay
money to any party to any such Contract or Authorization in excess of amounts
required to be so paid pursuant to the terms and conditions thereof. All such
Contracts and Authorizations shall remain in full force and effect and shall not
have been amended, modified or repudiated in any material respect by either
party thereto. Neither Seller nor, to the knowledge of Seller and the Principal
Shareholder, the other party thereto, shall have breached or defaulted under any
Contract or Authorization. Seller shall not have received notice of or have
knowledge of any fact which could result in the termination, repudiation or
breach of any Contract or Authorization.
6.4 Escrow Agreement. Seller shall have executed and delivered to Buyer
the Escrow Agreement.
6.5 Non-Competition Agreement. Seller and the Principal Shareholder shall
have executed and delivered to Buyer a Non-Competition Agreement in
substantially the form attached hereto as Exhibit E.
6.6 Opinion of Seller's Counsel. Buyer shall have received the opinion or
opinions of Gullet, Sanford, Xxxxxxxx & Xxxxxx, PLLC, counsel for Seller, dated
the Closing Date, substantially in the form of Exhibit F attached hereto.
27
6.7 Closing Date Balance Sheet. No later than thirty (30) days following
the Closing, Seller shall provide to Buyer a balance sheet dated as of the
Closing dated, as determined in accordance with GAAP consistently applied, which
includes, but is not limited to, Seller's accounts receivable, accounts payable,
and all deferred and all unearned revenue.
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATION OF SELLER.
The obligation of Seller to consummate the transactions contemplated by
this Agreement is subject to the satisfaction, on or prior to the Closing Date,
of the following conditions, unless waived by Seller in writing:
7.1 Performance of Agreement and Deliveries. Buyer shall have performed in
all material respects all of its covenants, agreements and obligations under
this Agreement which are to be performed or complied with by Buyer prior to or
upon the Closing Date and shall have delivered all documents and items required
to be delivered at or prior to the Closing, including, without limitation:
(a) A certificate, dated the Closing Date, from the President of
Buyer to the effect that the conditions set forth in Sections 7.1 and 7.2 have
been satisfied;
(b) A certificate, dated the Closing Date, from Buyer's Secretary as
to the Certificate of Incorporation, By-Laws, authority and the incumbency of
all officers executing the Buyer Documents on behalf of Buyer;
(c) A certified copy of Buyer's Certificate of Incorporation from
the Secretary of State of the State of Delaware; and
(d) A Certificate of Good Standing from the Secretary of State of
the State of Delaware.
7.2 Escrow Agreement. Buyer shall have executed and delivered to Seller
the Escrow Agreement.
7.3 Opinion of Buyer's Counsel. Seller shall have received the opinion of
Xxxxxxx, Procter & Xxxx LLP, counsel to Buyer, dated the Closing Date.
SECTION 8. TERMINATION.
Intentionally Omitted.
SECTION 9. SURVIVAL.
28
9.1 Survival of Warranties. Each of the representations, warranties,
agreements, covenants and obligations herein or in any schedule, exhibit,
certificate or financial statement delivered by any party to the other party
incident to the transactions contemplated hereby are material, shall be deemed
to have been relied upon by the other party and shall survive the Closing for a
period of six (6) months, except for the representations and warranties set
forth in Sections 2.1, 2.3, 2.4 and 2.8 and the covenants set forth in Section
4.12, which shall survive until expiration of the applicable statute of
limitations, regardless of any investigation and shall not merge in the
performance of any obligation by either party hereto (i.e., a representation,
warranty or covenant, other than one set forth in Section 2.1, 2.3, 2.4, 2.8 and
4.12, shall only be effective for a period of six (6) months from the Closing
Date and after such six (6) month period a suit for breach may no longer be
brought unless written notice of breach was given to the party making such
representation or covenant within such six-month period).
SECTION 10. INDEMNIFICATION.
10.1 Indemnification by Seller and the Principal Shareholder.
(a) Seller and each of the Principal Shareholder hereby agrees,
jointly and severally, to indemnify and hold harmless Buyer, its affiliates and
its and their respective directors, officers, stockholders, partners, members,
employees, and agents (individually, a "Buyer Indemnified Party" and
collectively, "Buyer Indemnified Parties"), against and in respect of all
losses, liabilities, obligations, damages, deficiencies, actions, suits,
proceedings, demands, assessments, orders, judgments, costs and expenses
(including the reasonable fees, disbursements and expenses of attorneys and
consultants) of any kind or nature whatsoever, but net of the proceeds from any
insurance policies or other third party reimbursement for such loss, to the
extent sustained, suffered or incurred by or made against any Buyer Indemnified
Party, to the extent based upon, arising out of or in connection with: (i) any
breach of any representation or warranty made by Seller and the Principal
Shareholder in this Agreement or in any schedule, exhibit, certificate,
agreement or other instrument delivered pursuant to this Agreement; (ii) any
breach of any covenant or agreement made by Seller or the Principal Shareholder
in this Agreement or in any schedule, exhibit, certificate, financial statement,
agreement or other instrument delivered pursuant to this Agreement; (iii) any
claim made by any person or entity which relates to the operation of the Assets
or the Business which arises in connection with or on the basis of events, acts,
omissions, conditions or any other state of facts occurring on or existing
before the Closing Date; (iv) any claim which arises in connection with any
liability or obligation of Seller other than the Assumed Liabilities; (v) any
claim arising from Seller's failure to file any Tax returns or pay any Taxes;
and (vi) any and all claims, liabilities, losses, damages, costs and expenses
(including without limitation the reasonable fees and disbursements of counsel)
arising out of any failure of (A) Seller or any of its affiliates, service
providers or agents or (B) any Benefit Program, to comply with any provision of
ERISA, the Code, or other applicable law.
29
10.2 Indemnification by Buyer. Buyer agrees to indemnify and hold harmless
Seller and its officers, directors, managers, members, employees and agents
(individually, a "Seller Indemnified Party" and collectively, "Seller
Indemnified Parties") at all times against and in respect of all losses,
liabilities, obligations, damages, deficiencies, actions, suits, proceedings,
demands, assessments, orders, judgments, costs and expenses (including the
reasonable fees, disbursements and expenses of attorneys and consultants), of
any kind or nature whatsoever, to the extent sustained, suffered or incurred by
or made against any Seller Indemnified Party, to the extent based upon, arising
out of or in connection with: (i) any breach of any representation or warranty
made by Buyer in this Agreement or in any schedule, exhibit, certificate,
agreement or other instrument delivered pursuant to this Agreement; (ii) any
breach of any covenant or agreement made by Buyer in this Agreement or in any
schedule, exhibit, certificate, agreement or other instrument delivered pursuant
to this Agreement; (iii) any claim made against Seller which relates to, results
from or arises out of Buyer's operation of the Assets or the Business from and
after the Closing Date; and (iv) the Assumed Liabilities.
10.3 Notice; Defense of Claims.
(a) Notice of Claims. Promptly after receipt by an indemnified party
of notice of any claim, liability or expense to which the indemnification
obligations hereunder would apply, the indemnified party shall give notice
thereof in writing to the indemnifying party, but the omission to so notify the
indemnifying party promptly will not relieve the indemnifying party from any
liability except to the extent that the indemnifying party shall have been
prejudiced as a result of the failure or delay in giving such notice. Such
notice shall state the information then available regarding the amount and
nature of such claim, liability or expense and shall specify the provision or
provisions of this Agreement under which the liability or obligation is
asserted.
(b) Third Party Claims. With respect to third party claims, if
within twenty (20) days after receiving the notice described in clause (a) above
the indemnifying party (i) gives written notice to the indemnified party stating
that (A) it would be liable under the provisions hereof for indemnity in the
amount of such claim if such claim were successful and (B) that it disputes and
intends to defend against such claim, liability or expense at its own cost and
expense and (ii) provides reasonable assurance to the indemnified party that
such claim will be promptly paid in full if required, then counsel for the
defense shall be selected by the indemnifying party (subject to the consent of
the indemnified party which consent shall not be unreasonably withheld) and the
indemnified party shall not be required to make any payment with respect to such
claim, liability or expense as long as the indemnifying party is conducting a
good faith and diligent defense at its own expense; provided, however, that the
assumption of defense of any such matters by the indemnifying party shall relate
solely to the claim, liability or expense that is subject or potentially subject
to indemnification. The indemnifying party shall have the right, with the
consent of the indemnified party, which consent shall not be unreasonably
withheld, to settle all indemnifiable matters related to claims by third parties
which are susceptible to being settled provided the indemnifying parties'
obligation to indemnify the indemnified party therefor will be fully satisfied.
The indemnifying party shall
30
keep the indemnified party apprised of the status of the claim, liability or
expense and any resulting suit, proceeding or enforcement action, shall furnish
the indemnified party with all documents and information that the indemnified
party shall reasonably request and shall consult with the indemnified party
prior to acting on major matters, including settlement discussions.
Notwithstanding anything herein stated, the indemnified party shall at all times
have the right to fully participate in such defense at its own expense directly
or through counsel; provided, however, if the named parties to the action or
proceeding include both the indemnifying party and the indemnified party and
representation of both parties by the same counsel would be inappropriate under
applicable standards of professional conduct, the expense of separate counsel
for the indemnified party shall be paid by the indemnifying party. If no such
notice of intent to dispute and defend is given by the indemnifying party, or if
such diligent good faith defense is not being or ceases to be conducted, the
indemnified party shall, at the expense of the indemnifying party, undertake the
defense of (with counsel selected by the indemnified party), and shall have the
right to compromise or settle (exercising reasonable business judgment), such
claim, liability or expense. If such claim, liability or expense is one that by
its nature cannot be defended solely by the indemnifying party, then the
indemnified party shall make available all information and assistance that the
indemnifying party may reasonably request and shall cooperate with the
indemnifying party in such defense.
(c) Non-Third Party Claims. With respect to non-third party claims,
if within twenty (20) days after receiving the notice described in clause (a)
above the indemnifying party does not give written notice to the indemnified
party that it contests such indemnity, the amount of indemnity payable for such
claim shall be as set forth in the indemnified party's notice. If the
indemnifying party provides written notice to the indemnified party within such
20-day period that it contests such indemnity, the parties shall attempt in good
faith to reach an agreement with regard thereto within thirty (30) days of
delivery of the indemnifying party's notice. If the parties cannot reach
agreement within such 30-day period, the matter may be submitted by either party
for binding arbitration in accordance with the provisions of Section 12.11
hereof.
10.4 Claims Against Escrow Deposit. In the event that any Buyer
Indemnified Party sustains or incurs damages, liabilities, losses, taxes, fines,
penalties, costs or expenses, including, without limitation, attorneys fees, for
which it is entitled to indemnification from Seller or the Principal Shareholder
under this Agreement, in addition to all other rights or remedies that Buyer may
have (including the right to collect directly from Seller or the Principal
Shareholder), such Buyer Indemnified Party shall be entitled to receive in cash
from the Escrow Deposit an amount equal to the damages, liabilities, losses,
taxes, fines, penalties, costs and expenses, including, without limitation,
attorneys fees, sustained or incurred by such Buyer Indemnified Party. In order
to receive payment from the Escrow Deposit such Buyer Indemnified Party shall
first deliver to Seller a written claim for damages arising under or by virtue
of this Agreement specifying the nature of the claim and the type and amount of
damages, liabilities, losses, taxes, fines, penalties, costs and expenses
sustained or incurred by such Buyer Indemnified Party. Within thirty (30)
calendar days of receiving a claim against the Escrow Deposit from or on behalf
of any Buyer Indemnified Party, Seller shall provide a
31
written response to such Buyer Indemnified Party with a copy to the Escrow
Agent, which either accepts or rejects all or any portion of such Buyer
Indemnified Party's claim, the amount accepted by Seller shall be paid to such
Buyer Indemnified Party from the Escrow Deposit by the Escrow Agent within ten
(10) calendar days of the Escrow Agent's receipt of Seller's acceptance of such
Buyer Indemnified Party's claim. If Seller rejects any portion of such Buyer
Indemnified Party's claim, Seller's written response shall specify the specific
reason(s) for the rejection and the amount, if any, of such Buyer Indemnified
Party's claim which is accepted. The amount of any claim rejected by Seller
shall be retained in escrow and distributed by the Escrow Agent only as directed
by a written settlement agreement signed by both Seller and such Buyer
Indemnified Party or in accordance with an award rendered by an arbitrator(s) in
accordance with Section 12.11 of this Agreement. The principal amount of the
Promissory Note shall be reduced by the amount of any disbursements to Buyer
from the Escrow Account.
10.5 Limitations on Indemnity Obligations.
(a) Indemnification Threshold. As to any claim for indemnification
pursuant to this Section 10, no party shall be entitled to such indemnification
until the total losses claimed by the other party equal in the aggregate $25,000
(the "Indemnification Threshold"), whereupon the entire amount of such
indemnified party's claim shall be recoverable hereunder; provided that the
Indemnification Threshold shall not apply with respect to any willful breach,
intentional misrepresentation, or the commission of fraud by the Seller, the
Principal Shareholder or Buyer.
(b) Indemnification Cap. The aggregate indemnity obligations of: (i)
the Seller and the Principal Shareholder under this Agreement shall not in any
event exceed the Purchase Price, except to the extent that such losses arise
from or in connection with the Excluded Liabilities; or (ii) the Buyer under
this Agreement shall not in any event exceed the Purchase Price, except to the
extent that such losses arise from or result from the Buyer's operation of the
Business from or after the Closing date or in connection with the Assumed
Liabilities.
SECTION 11. NOTICES.
All notices and other communications required to be given hereunder, or
which may be given pursuant or relative to the provisions hereof, shall be in
writing and shall be deemed to have been given (i) if delivered or sent by
facsimile transmission, upon acknowledgment of receipt by the recipient, (ii) if
sent by a nationally recognized overnight courier, properly addressed with
postage prepaid, on the next business day (or Saturday or Sunday if sent for
delivery on such days), or (iii) if sent by registered or certified mail, upon
the earlier of the date on which receipt is acknowledged and the date which is
three (3) days after deposit in the United States post office facilities
properly addressed with postage prepaid as follows:
32
If to Seller: The Nashville Exchange, Inc.
0000 Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Attn.: Xxx X. Xxxxxxxxxx
With a copy to: Gullet, Sanford, Xxxxxxxx & Xxxxxx, PLLC
000 0xx Xxx. Xxxxx, 0xx Xxxxx
Xxxxxxxxx, XX 00000-0000
Attn.: Xxxxxx Xxxxxxxx, Jr.
If to Buyer: DURO Communications, Inc.
0000 Xxxxxxx Xxxx., Xxxxx 000
Xxxxxxxxxxx, XX 00000
Attn.: Xxxxx X. Xxxxxx, President
With a copy to: Xxxxxxx, Procter & Xxxx XXX
Xxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attn.: Xxxxx X. Xxxxx, P.C.
SECTION 12. MISCELLANEOUS.
12.1 Assignability; Binding Effect. This Agreement shall not be assignable
by Buyer or Seller except with the written consent of the other, except that
Buyer may assign its rights hereunder either (a) to any affiliate of Buyer or
its owners, (b) as a result of any merger, reorganization or other
consolidation, or (c) in connection with the granting of a security interest to
its senior lender. This Agreement shall be binding upon and shall inure to the
benefit of, the parties hereto and their respective successors and assigns.
12.2 Headings. The subject headings used in this Agreement are included
for purposes of convenience only and shall not affect the construction or
interpretation of any of its provisions.
12.3 Amendments; Waivers. This Agreement may not be amended or modified,
nor may compliance with any condition or covenant set forth herein be waived,
except by a writing duly and validly executed by Buyer and Seller or, in the
case of a waiver, the party waiving compliance. No delay on the part of any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any waiver on the part of any party of any such right,
power or privilege, or any single or partial exercise of any such right, power
or privilege, preclude any further exercise thereof or the exercise of any other
such right, power or privilege.
33
12.4 Bulk Sales Law. Buyer hereby waives compliance by Seller of any
applicable bulk sales law and Seller agrees, to make full and timely payment
when due of all amounts owed by such Seller to its creditors. Seller agrees to
indemnify and hold Buyer harmless from, and reimburse Buyer for, any loss, cost,
expense, liability or damage (including reasonable counsel fees and
disbursements and expenses) which Buyer may suffer or incur by virtue of the
non-compliance by Seller with such laws.
12.5 Entire Agreement. This Agreement, together with the schedules and
exhibits hereto, constitutes the entire agreement between the parties with
respect to the subject matter hereof and supersedes and cancels any and all
prior or contemporaneous arrangements, understandings and agreements between
them relating to the subject matter hereof.
12.6 Severability. In the event that any provision or any portion of any
provision of this Agreement shall be held to be void or unenforceable, then the
remaining provisions of this Agreement (and the remaining portion of any
provision held to be void or unenforceable in part only) shall continue in full
force and effect.
12.7 Governing Law. This Agreement and the transactions contemplated
hereby shall be governed and construed by and enforced in accordance with the
laws of the State of Tennessee, without regard to conflict of laws principles.
12.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which shall
constitute the same instrument.
12.9 Expenses. Each party shall pay its own expenses incident to the
negotiation, preparation and performance of this Agreement and the transactions
contemplated hereby, including all fees and expenses of its counsel and
accountants for all activities of such counsel and accountants undertaken
pursuant to this Agreement, whether or not the transactions contemplated hereby
are consummated.
12.10 Remedies. It is specifically understood and agreed that certain
breaches of this Agreement will result in irreparable injury to the parties
hereto, that the remedies available to the parties at law alone will be an
inadequate remedy for such breach, and that, in addition to any other legal or
equitable remedies which the parties may have, a party may enforce its rights by
an action for specific performance and the parties expressly waive the defense
that a remedy in damages will be adequate.
12.11 Dispute Resolution. Any dispute arising out of or relating to this
Agreement or the breach, termination or validity hereof shall be finally settled
solely and exclusively by arbitration conducted expeditiously in accordance with
the CPR Institute For Dispute Resolution Rules for Nonadministered Arbitration
of Business Disputes (the "CPR Rules"). The CPR Institute For Dispute Resolution
shall appoint a neutral advisor from its national CPR panel. The arbitration
shall be governed by the United States Arbitration Act, 9 U.S.C. ss.ss.1-16, and
34
judgment upon the award rendered by the arbitrators may be entered by any court
having jurisdiction thereof. The place of arbitration shall be Atlanta, Georgia.
Such proceedings shall be administered by the neutral advisor in
accordance with the CPR Rules as he/she deems appropriate, however, such
proceedings shall be guided by the following agreed upon procedures:
(a) Mandatory exchange of all relevant documents, to be accomplished
within forty-five (45) days of the initiation of the procedure;
(b) No other discovery;
(c) Hearings before the neutral advisor which shall consist of a
summary presentation by each side of not more than three hours; such hearings to
take place in one or two days at a maximum; and
(d) Decision to be rendered not later than ten (10) days following
such hearings.
Each of the parties hereto (a) hereby unconditionally and irrevocably
submits to the jurisdiction of any United States District Court of competent
jurisdiction located in the State of Florida for the purpose of enforcing the
award or decision in any such proceeding and (b) hereby waives, and agrees not
to assert in any civil action to enforce the award, any claim that it is not
subject personally to the jurisdiction of the above-named court, that its
property is exempt or immune from attachment or execution, that the civil action
is brought in an inconvenient forum, that the venue of the civil action is
improper or that this Agreement or the subject matter hereof may not be enforced
in or by such court, and (c) hereby waives and agrees not to seek any review by
any court of any other jurisdiction which may be called upon to grant an
enforcement of the judgment of any such court. Each of the parties hereto hereby
consents to service of process by registered mail at the address to which
notices are to be given. Each of the parties hereto agrees that its submission
to jurisdiction and its consent to service of process by mail is made for the
express benefit of the other parties hereto. Final judgment against any party
hereto in any such action, suit or proceeding may be enforced in other
jurisdictions by suit, action or proceeding on the judgment, or in any other
manner provided by or pursuant to the laws of such other jurisdiction; provided,
however, that any party may at its option bring suit, or institute other
judicial proceedings, in any state or federal court of the United States or of
any country or place where the other parties or their assets may be found.
Notwithstanding the foregoing, the parties may enforce their rights under
this Agreement in accordance with Section 12.10.
12.12 Third Party Rights. This Agreement is for the benefit of the parties
hereto and is not entered into for the benefit of, and shall not be construed to
confer any benefit upon, any other party or entity.
35
IN WITNESS WHEREOF, Seller, Principal Shareholder and Buyer have caused
this Asset Purchase Agreement to be executed as of the date first above written.
SELLER:
THE NASHVILLE EXCHANGE, INC.
By: /s/ Xxx X. Xxxxxxxxxx
-------------------------------------
Name: Xxx X. Xxxxxxxxxx
Title: President
PRINCIPAL SHAREHOLDER:
/s/ Xxx X. Xxxxxxxxxx
------------------------------------------
Xxx X. Xxxxxxxxxx
BUYER:
DURO COMMUNICATIONS, INC.
By: /s/ Xxxx Xxxxxxxxx
-------------------------------------
Name: Xxxx Xxxxxxxxx
Title: Chief Financial Officer and Treasurer
LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
Exhibit A - Form of Escrow Agreement
Exhibit B - Form of Xxxx of Sale
Exhibit C - Form of Assignment and Assumption Agreement
Exhibit D - Form of Assignment of Internet Domain Name
Exhibit E - Form of Non-Competition Agreement
Exhibit F - Form of Opinion of Seller's Counsel
SCHEDULES
Schedule 1.1(a) Equipment
Schedule 1.1(b) Contracts
Schedule 1.1(c) Intellectual Property
Schedule 1.1(d) Licenses and Authorizations
Schedule 1.1(e) Accounts Receivable
Schedule 1.2(a) Excluded Assets
Schedule 1.2(b) Excluded Contracts
Schedule 1.2(c) Excluded Insurance
Schedule 1.2(d) Excluded Tax Items
Schedule 1.6(b) Adjustment to Purchase Price--Revenues
Schedule 1.6(c) Estimated Adjustment Statement
Schedule 1.7 Purchase Price Allocation
Schedule 2.4 Taxes
Schedule 2.6 Insurance
Schedule 2.10 Employees; Labor Matters
Schedule 2.11 Financial Statements
Schedule 2.14 Approvals; Consents
Schedule 2.16(a) Subscribers
Schedule 2.16(b) Complimentary Accounts
Schedule 2.16(c) Disconnection Policy
Schedule 2.18 Collectibility of Accounts Receivable
Schedule 2.19 Banking Relations
Schedule 2.20(a) Intellectual Property--Intellectual Property
Schedule 2.20(b) Intellectual Property--Title
Schedule 2.20(c) Intellectual Property--Patents
Schedule 2.20(d) Intellectual Property--Marks
Schedule 2.20(e) Intellectual Property--Copyrights
Schedule 2.20(g) Intellectual Property--Non-Licensing
Schedule 2.20(h) Intellectual Property--Licenses
Schedule 2.20(i) Intellectual Property--Rights Granted to Others
Schedule 2.22 Transactions with Interested Persons
Schedule 2.23 Employee Benefit Programs
Schedule 2.24 Environmental Matters
Schedule 2.25 Disclosures
38
