STOCK PURCHASE AGREEMENT

 

TABLE OF CONTENTS

 

ARTICLE 1	DEFINITIONS
ARTICLE 2	PURCHASE OF STOCK; PURCHASE PRICE
2.1	Purchase and Sale of Stock
2.2	Purchase Price
2.3	Payment of Purchase Price on the Closing Date
2.4	Purchase Price Adjustment
2.5	Closing and Closing Deliveries
ARTICLE 3	REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER
3.1	Organization
3.2	Capitalization
3.3	Due Authorization
3.4	No Breach
3.5	Clear Title
3.6	Condition of Assets
3.7	Litigation
3.8	Labor Matters
3.9	Tax Matters
3.10	Employee Benefits
3.11	No Guarantees
3.12	Financial Statements
3.13	Absence of Certain Developments
3.14	Intellectual Property
3.15	Compliance with Laws
3.16	Operating Contracts
3.17	Real Estate
3.18	Accounts Receivable
3.19	Books and Records
3.20	Employees
3.21	Permits

 

 

i

 

 

3.22	Certain Arrangements
3.23	Subsidiaries
3.24	Insurance
3.25	Brokers
3.26	Relationship with Related Persons
3.27	Internal Disclosure Controls and Procedures
3.28	Environmental Matters
3.29	Debt Instruments
3.30	Customers and Suppliers
3.31	Shareholder Loans
3.32	Internal Accounting Controls
3.33	Absence of Certain Business Practices
3.34	Trade Regulation
3.35	Shareholder Ownership of the Stock
3.36	Employee Retention
3.37	Inventory
3.38	Warranties
3.39	Copies of Documents
3.40	Limitation on Representations and Warranties
ARTICLE 4	REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
4.1	Organization
4.2	Due Authorization
4.3	No Breach
4.4	Investment Representations
4.5	Brokers
4.6	Solvency and Fraudulent Conveyance
4.7	Telecommunications Utility
ARTICLE 5	PERFORMANCE AND COVENANTS PENDING CLOSING
5.1	Continuing Due Diligence

 

 

ii

 

 

5.2	Conduct of Business
5.3	Encumbrances
5.4	Pay Increases
5.5	Restrictions on New Contracts
5.6	Preservation of Business
5.7	Payment and Performance of Obligations
5.8	Restrictions on Sale of Assets
5.9	Prompt Notice
5.10	Consents
5.11	Retention Program Plan
5.12	No Solicitation of Other Offers
5.13	Accounts Receivable and Payable
5.14	Audited Financial Statements
5.15	Insurance
5.16	Filing Reports and Making Payments
5.17	Capital Expenditures
5.18	Monthly and Year-End Financials
5.19	Litigation
5.20	Notification of Inaccuracy
5.21	Debt Instruments
5.22	Guarantees
5.23	Cooperation with Respect to Permits, Licenses and Regulatory Matters
5.24	Intercompany Agreements
5.25	Asset Purchase, Transfer and Licensing
ARTICLE 6	MUTUAL CONDITIONS PRECEDENT TO THE PARTIES’ OBLIGATIONS
6.1	Proceedings
6.2	Required Consents and Approvals
6.3	Cisco Gold Status
6.4	Oracle Host License

 

 

iii

 

 

ARTICLE 7	ADDITIONAL CONDITIONS PRECEDENT TO THE PURCHASER’S OBLIGATIONS
7.1	Accuracy of Representations and Warranties
7.2	Compliance with Covenants and Agreements
7.3	No Material Adverse Effect
7.4	Legal Opinion
7.5	Financial Statements
ARTICLE 8	ADDITIONAL CONDITIONS PRECEDENT TO THE SHAREHOLDER’S OBLIGATIONS
8.1	Accuracy of Representations and Warranties
8.2	Compliance with Covenants and Agreements
8.3	Legal Opinion
8.4	Delivery of Purchase Price and Other Consideration
8.5	Payment of Auditor
ARTICLE 9	INDEMNIFICATION
9.1	Indemnification by the Shareholder
9.2	Indemnification by the Purchaser
9.3	Procedure for Indemnification
9.4	Dispute Resolution
9.5	Effect of Insurance
9.6	Effect of Taxes
ARTICLE 10	TAX MATTERS
10.1	Tax Returns
10.2	Controversies
10.3	Transfer Taxes
10.4	Amended Tax Returns
10.5	Tax Sharing Agreements
10.6	Section 338(h)(10) Election
10.7	Tax Indemnification
10.8	Post-Closing Access and Cooperation

 

 

iv

 

 

ARTICLE 11	PERFORMANCE FOLLOWING THE CLOSING DATE
11.1	Further Acts and Assurances
11.2	Non-Competition Agreement
11.3	Non-Solicitation Agreement
11.4	Reasonableness of Covenants
11.5	Injunctive Relief
11.6	Blue Pencil Doctrine
11.7	Guarantees
11.8	Employee Matters
11.9	Indemnification of Officers and Directors of the Company
11.10	Transition Services
11.11	Confidentiality
11.12	Assignment of Confidentiality Agreements
11.13	Release
11.14	Insurance
11.15	Dark Fiber Lease Agreement
11.16	Shareholder Payment of Retention Payments
11.17	Discharge and Solvency
11.18	Post-Closing Regulatory Filings
11.19	Use of Certain Marks, Logos and Names
11.20	Post-Closing Payments: Post-Retirement Medical Benefits, Approved Capital Projects and Long-Term Incentive Compensation
11.21	Onvoy, Inc. Litigation
ARTICLE 12	TERMINATION
12.1	Termination
12.2	Return of Documents and Nondisclosure
ARTICLE 13	MISCELLANEOUS
13.1	Survival of Representations and Warranties, Covenants and Agreements
13.2	Preservation of and Access to Records
13.3	Cooperation

 

 

v

 

 

13.4	Public Announcements
13.5	Notices
13.6	Entire Agreement
13.7	Remedies
13.8	Amendments
13.9	Successors and Assigns
13.10	Fees and Expenses
13.11	Governing Law and Jurisdiction
13.12	Counterparts and Electronic Signature
13.13	Headings
13.14	Scope of Agreement
13.15	Number and Gender
13.16	Severability
13.17	Parties in Interest
13.18	Waiver
13.19	Construction
13.20	Specific Performance
13.21	Supplementation of Schedules

 

 

vi

 

 

STOCK PURCHASE AGREEMENT

THIS STOCK PURCHASE AGREEMENT (this “ Agreement ”) is made and entered into as of November 9, 2005, by and between Hickory Tech Corporation , a Minnesota corporation (the “ Purchaser ”) and Minnesota Power Enterprises, Inc. , a Minnesota corporation (the “ Shareholder ”).

RECITALS

A.            The Shareholder is the sole owner of issued and outstanding shares of capital stock (the “ Stock ”) of Enventis Telecom, Inc., a Minnesota corporation (the “ Company ”).

B.            The Company generally provides communications infrastructure and services solutions to third party customers more fully described in the definition of the “Business” as set forth in Article 1 below.

C.            The Purchaser desires to purchase the Stock held by the Shareholder and the Shareholder desires to sell the Stock to the Purchaser on the terms and subject to the conditions set forth in this Agreement.

D.            As a condition to, and a material inducement for, each of the Purchaser and the Shareholder to enter into this Agreement, the Purchaser and the Executives (as defined in Article 1) have entered into those certain supplemental executive retention agreements that will become effective, if at all, only upon the Closing (the “ Supplemental Executive Retention Agreements ”).

E.             As a condition to, and a material inducement for, the Purchaser to enter into this Agreement, ALLETE, Inc., a Minnesota corporation, the ultimate corporate parent of the Shareholder and the Company (the “ Parent ”) has executed and delivered that certain Guarantee (the “ Guarantee ”) of the obligations of the Shareholder under the Stock Purchase Agreement, which Guarantee will become effective, if at all, only upon the Closing.

F.             Upon consummation of the purchase and sale of the Stock pursuant to this Agreement, the Purchaser will own all of the issued and outstanding capital stock of the Company, and the Supplemental Executive Retention Agreements and the Guarantee will become effective.

AGREEMENT

In consideration of the foregoing Recitals and the mutual promises contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Purchaser and the Shareholder agree as follows:

ARTICLE 1

DEFINITIONS

For purposes of this Agreement, the following terms have the meanings specified:

 

1

 

“ Acquisition Proposal ” means any proposal relating to the possible acquisition of the Company, whether by way of (i) merger, (ii) purchase of any capital stock of any of the Company representing fifty percent (50%) or more of the voting power or equity of the Company, or (iii) purchase of all or substantially all of the assets of the Company.

“ Adjustment ” has the meaning set forth in Section 2.4(a) of this Agreement.

“ Affiliate ” when used in reference to a specified Person, means any Person that, directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with the specified Person.

“ Agreement ” has the meaning set forth in the introductory paragraph of this Agreement.

“ Allocation Arbiter ” has the meaning set forth in Section 10.6(c) of this Agreement.

“ Ancillary Documents ” has the meaning set forth in Section 3.3 of this Agreement.

“ Applicable Laws ” means any and all laws, ordinances, constitutions, regulations, statutes, treaties, rules, codes, licenses, certificates, franchises, permits, requirements and Injunctions adopted, enacted, implemented, promulgated, issued, entered or deemed applicable by or under the authority of any Governmental Body having jurisdiction over a specified Person or any of such Person’s properties or assets.

“ Audited Financial Statements ” has the meaning set forth in Section 3.12(a) of this Agreement.

“ Auditor ” has the meaning set forth in Section 3.12(a) of this Agreement.

“ Balance Sheet ” has the meaning set forth in Section 3.12(b) of this Agreement.

“ Balance Sheet Date ” has the meaning set forth in Section 3.12(b) of this Agreement.

“ Basket Amount ” has the meaning set forth in Section 9.1(a) of this Agreement.

“ Benefit Plan ” means any and all bonus, stock option, restricted stock, stock purchase, stock appreciation, phantom stock, profit participation, profit-sharing, deferred compensation, severance, retention, pension, retirement, disability insurance, medical insurance, dental insurance, health insurance, or life insurance, death benefit, incentive, welfare and/or other benefit, compensation and/or retirement plan, policy, arrangement and/or Contract maintained, sponsored or participated in by the Company.

“ Business ” means the communications infrastructure and services solutions provided by the Company, predominately within Minnesota and Western Wisconsin, namely network integration, transport services and other services in the form of (i) transport services for the provision of fiber optic transport for small to medium size enterprise, carrier and service provider customers, (ii) enterprise network services for provision of network, system and call center integration, hardware, and associated support services for medium to large business, and (iii) hosted IP communications pursuant to the use of Voice Over Internet Technology (VoIP) as

2

included in the Encompass product line for small and medium businesses.  The “Business” does not include the authority to provide local facilities-based and resold local service and long-distance service, and therefore does not include CLEC authority.

“ Cisco ” has the meaning set forth in Section 6.3 of this Agreement.

“ Closing ” has the meaning set forth in Section 2.5(a) of this Agreement.

“ Closing Balance Sheet ” has the meaning set forth in Section 2.4(a) of this Agreement.

“ Closing Date ” has the meaning set forth in Section 2.5(a) of this Agreement.

“ Closing Net Working Capital ” has the meaning set forth in Section 2.4(f) of this Agreement.

“ Closing Net Working Capital Calculation ” has the meaning set forth in Section 2.4(a) of this Agreement.

“ Code ” means the Internal Revenue Code of 1986, as amended, or rules and regulations issued by the IRS pursuant to the Internal Revenue Code or any successor law.

“ Company ” has the meaning set forth in the Recitals to this Agreement.

“ Competing Business ” has the meaning set forth in Section 3.26 of this Agreement.

“ Confidential Information ” means any information or compilation of information not generally known to the public or the industry or which the Company has not disclosed to third parties without a written obligation of confidentiality, which is proprietary to the Company, relating to the Company’s procedures, techniques, methods, concepts, ideas, affairs, products, processes and services, including, but not limited to, information relating to marketing, merchandising, selling, distribution, research, development, manufacturing, purchasing, personnel, accounting, engineering, financing, costs, customers, plans, pricing, billing, needs of customers and products and services used by customers, all lists of customers and their addresses, prospects, sales calls, products, services, prices, historical financial statements, financial projections and budgets, historical and projected sales, capital spending budgets and plans and the like as well as any specifications, formulas, plans, drawings, accounts or sales records, sales brochures, code books, manuals, trade secrets, knowledge, know-how, pricing strategies, operating costs, sales margins, methods of operations, invoices or statements and the like.

“ Contract ” means any agreement, lease of personal or mixed property, license, contract, obligation, promise, commitment, arrangement, understanding or undertaking, instrument, document (whether written or oral and whether express or implied) of any type, nature or description that is legally binding but excluding leases of Leased Real Estate.  As used herein, the word “Contract” shall be limited in scope if modified by an adjective specifying the type of contract to which this Agreement or a Section hereof refers.

 

3

 

“ Convertible Securities ” means any and all securities convertible or exchangeable for any shares of capital stock of the Company, including, without limitation, common stock.

“ Dark Fiber Lease Agreement ” has the meaning set forth in Section 11.15 of this Agreement.

“ Debt Instruments ” has the meaning set forth in Section 3.29 of this Agreement.

“ Debt Payoff Instruments ” has the meaning set forth in Section 5.21 of this Agreement.

“ Debt Securities ” means any and all indebtedness issued by or on behalf of the Company which constitutes a security under the Securities Act of 1933, as amended (the “ Securities Act ”).

“ Director Indemnified Party ” or “ Director Indemnified Parties ” has the meaning set forth in Section 11.9(a) of this Agreement.

“ Disclose ” means to reveal, deliver, divulge, disclose, publish, copy, communicate, show or otherwise make known or available to any other Person, or in any way to copy, any of the Confidential Information of the Company.

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.

“ ERISA Affiliate ” has the meaning set forth in Section 3.10(b) of this Agreement.

“ Employees ” has the meaning set forth in Section 3.20(a) of this Agreement.

“ Encumbrance ” means and includes:

(i)            with respect to any personal property, any intangible property or any property other than real property, any security or other property interest or right, claim, lien, pledge, option, charge, security interest, contingent or conditional sale, or other title claim or retention agreement or lease or use agreement in the nature thereof whether voluntarily incurred or arising by operation of law, and including any agreement to grant or submit to any of the foregoing in the future; and

(ii)           with respect to any real property (whether and including Leased Real Estate), any mortgage, lien, easement, interest, right-of-way, condemnation or eminent domain proceeding, encroachment, any building, use or other form of restriction, encumbrance or other claim (including adverse or prescriptive) or right of third parties (including Governmental Bodies), any lease or sublease, boundary dispute, and agreements with respect to any real property including: purchase, sale, right of first refusal, option, construction, building or property service, maintenance, property management, conditional or contingent sale, use or occupancy, franchise or concession, whether voluntarily incurred or arising by operation of law, and including any agreement to grant or submit to any of the foregoing in the future.

“ Environmental Laws ” means any and all Applicable Laws (i) regulating the use, treatment, generation, transportation, storage, control, management, recycling or disposal of any

 

4

 

Hazardous Material, including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. § 9601 et seq .), the Resource Conservation and Recovery Act (42 U.S.C. § 6901 et   seq .), the Hazardous Materials Transportation Act (49 U.S.C. § 1801 et seq .), the Federal Water Pollution Control Act (33 U.S.C. § 1251 et seq .), the Clean Water Act (33 U.S.C. § 1251 et seq .), the Clean Air Act (42 U.S.C. § 7401 et seq .), the Toxic Substances Control Act (15 U.S.C. § 2601 et seq .), and/or (ii) relating to the protection, preservation or conservation of the environment, all as existing, defined or interpreted as of the date hereof.

“ Escrow Agent ” shall have the meaning set forth in Section 2.3 of this Agreement and the Escrow Agreement.

“ Escrow Agreement ” shall have the meaning set forth in Section 2.3 of this Agreement.

“ Executives ” means Richard T. Henderson, Walter A. Prahl and Thomas J. Oliverius.

“ FCC ” means the Federal Communications Commission, a regulatory agency of the United States of America.

“ Final Order ” means an action or decision of the Governmental Body as to which (i) no request for a stay is pending, no stay is in effect, and any deadline for filing such request that may be designated by Applicable Law has passed, (ii) no petition for rehearing or reconsideration or application for review is pending and the time for the filing of such petition or application has passed, (iii) the Governmental Body does not have the action or decision under reconsideration on its own motion and the time within which it may effect such reconsideration has passed, and (iv) no judicial appeal is pending or in effect and any deadline for filing any such appeal that may be designated by statute or rule has passed.

“ GAAP ” means generally accepted accounting principles in the United States.

“ GE Commercial Finance ” has the meaning set forth in Section 5.21 of this Agreement.

“ Governmental Body ” means any:

(i)            nation, state, county, city, town, village, district or other jurisdiction of any nature;

(ii)           federal, state, local, municipal, foreign or other government; and/or

(iii)          governmental or quasi-governmental authority of any nature (including any governmental agency, branch, board, commission, department, instrumentality, office or other entity, and any court or other tribunal).

“ Guarantee ” has the meaning set forth in the Recitals to this Agreement.

“ Hazardous Materials ” means any and all (i) dangerous, toxic or hazardous pollutants, contaminants, chemicals, wastes, materials or substances listed or identified in, or directly or indirectly regulated by, any Environmental Law, and (ii) any of the following, whether or not

 

5

 

included in the foregoing:  polychlorinated biphenyls, asbestos in any form or condition, urea-formaldehyde, petroleum (including crude oil or any fraction thereof), natural gas, natural gas liquids, liquefied natural gas, synthetic gas usable for fuel or mixtures thereof, nuclear fuels or materials, chemical wastes, radioactive materials, explosives and known possible carcinogens.

“ IBEW Labor Agreement ” has the meaning set forth in Section 11.8(e) of this Agreement.

“ IRS ” means the United States Internal Revenue Service.

“ Inactive Employees ” has the meaning set forth in Section 3.20(a) of this Agreement.

“ Indemnified Party ” has the meaning set forth in Section 9.3 of this Agreement.

“ Indemnifying Party ” has the meaning set forth in Section 9.3 of this Agreement.

“ Independent Accountants ” has the meaning set forth in Section 2.4(c) of this Agreement.

“ Injunction ” means any and all writs, rulings, awards, directives, injunctions (whether temporary, preliminary or permanent), judgments, decrees or orders (whether executive, judicial or otherwise) adopted, enacted, implemented, promulgated, issued, entered or deemed applicable by or under the authority of any Governmental Body.

“ Intellectual Property Right ” means any and all (i) inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto, and all patents, patent applications and patent disclosures, together with all reissuances, continuations, continuations in part, revisions, extensions and reexaminations thereof; (ii) trademarks, service marks, trade dress, logos, trade names, assumed names and corporate names, together with all translations, adaptations, derivations and combinations thereof and including all goodwill associated therewith, and all applications, registrations and renewals in connection therewith; (iii) copyrightable works, all copyrights and all applications, registrations and renewals in connection therewith; (iv) mask works and all applications, registrations and renewals in connection therewith; (v) trade secrets and confidential business information (including ideas, research and development, know-how, technology, formulas, compositions, manufacturing and production processes and techniques, technical data, database technologies, systems, structures, architectures, designs, drawings, specifications, (vi) customer and supplier lists, pricing and cost information and business and marketing plans and proposals); (vii) computer software (including data and related software program documentation in computer-readable and hard-copy forms); (viii) other intellectual property and proprietary rights of any kind, nature or description, including web sites, web site domain names and other e-commerce assets and resources of any kind or nature; (ix) copies of tangible embodiments thereof (in whatever form or medium); and (x) all other intellectual and industrial property rights of every kind and nature and however designated, whether arising by operation of law, Contract, license or otherwise.

“ Intercompany Accounts ” means the accounts maintained by the Shareholder or any Affiliate and the Company (in accordance with their customary practices) in which there are recorded the amounts owed (plus interest, if any, accrued through the Closing Date) by the Shareholder and its Affiliates (other than the Company) to the Company, or by the Company to the Shareholder and its Affiliates (other than the Company), attributable to intercompany

 

6

 

transactions through the Closing Date in respect of cash advances, current federal and state taxes payable and receivable, intercorporate expense allocations, Benefit Plans and other corporate charges or transactions in goods or services, whether provided by the Shareholder or its Affiliates (other than the Company) to the Company or by the Company to the Shareholder or its Affiliates (other than the Company), including Debt Instruments.

“ Knowledge ” means, with respect to an individual who is a natural being, an individual’s actual (as opposed to constructive) knowledge following due inquiry and investigation of a fact or other matter.  With respect to an entity that is a party to this Agreement, “Knowledge” shall be solely attributed to the Knowledge of the Persons listed on Schedule 1.0 , as applicable to the context used in this Agreement.

“ Leased Real Estate ” has the meaning set forth in Section 3.17 of this Agreement.

“ Leases ” has the meaning set forth in Section 3.17(a) of this Agreement.

“ Liability ” or “ Liabilities ” means any and all debts, liabilities and/or obligations of any type, nature or description (whether known or unknown, asserted or unasserted, secured or unsecured, absolute or contingent, accrued or unaccrued, liquidated or unliquidated and whether due or to become due).

“ Licensed-In Intellectual Property Rights ” means third party Intellectual Property Rights used or held for use by the Company with the permission of the owner.

“ Loss ” or “ Losses ” has the meaning set forth in Section 9.1 of this Agreement.

“ MPUC ” means the Minnesota Public Utilities Commission, a regulatory agency of the State of Minnesota.

“ Material Adverse Effect ” means, in connection with the Company, any event, change or effect that is materially adverse, individually or in the aggregate, to the condition (financial or otherwise), properties, assets, Liabilities, revenues, income, business, operations or results of operations of the Company; provided , however , that in no event shall any of the following be deemed to have a material adverse effect in the business, operations, assets, results of operations or condition of the Company:  (i) any change or effect resulting from conditions affecting the industry in which the Company operates or from changes in general business or economic conditions, except those having a disproportionate effect on the Company, (ii) any change or effect resulting from compliance by the Company with the terms of, or the taking of any action contemplated or permitted by, this Agreement and any Ancillary Document, or (iii) any change or effect resulting from any change in Applicable Law.

“ Net Working Capital Deficit ” has the meaning set forth in Section 2.4(f) of this Agreement.

“ Net Working Capital Excess ” has the meaning set forth in Section 2.4(f) of this Agreement.

“ Objection Notice ” has the meaning set forth in Section 2.4(b) of this Agreement.

 

7

 

“ Off-the-Shelf Software ” means Software that is widely commercially available for a price of less than $5,000 for any number of users or less than $500 per seat, PC, CPU or user.

“ Operating Contracts ” has the meaning set forth in Section 3.16 of this Agreement.

“ Oracle Host License ” has the meaning set forth in Section 6.4 of this Agreement.

“ Ordinary Course of Business ” means an action taken by a Person only if:

(i)            such action is consistent with the past practices of such Person and is taken in the ordinary course of the normal day-to-day operations of such Person; and

(ii)           such action is not required to be authorized by the board of directors of such Person (or by any Person or group of Persons constituting a governing body of a Person exercising similar authority).

“ Overlap Period ” has the meaning set forth in Section 10.2(c) of this Agreement.

“ Owned Intellectual Property Rights ” means Intellectual Property Rights owned by the Company.

“ PBGC ” means the Pension Benefit Guaranty Corporation.

“ PCAOB ” means the Public Company Accounting Oversight Board (established by Title I of the Sarbanes-Oxley Act of 2002).

“ Parent ” has the meaning set forth in the Recitals to this Agreement.

“ Permits ” means any permits, licenses, filings, authorizations, approvals, or other indicia of authority (and any pending applications for approval or renewal of a Permit), to own, construct, operate, sell, inventory, disburse or maintain any asset or conduct any business as issued by any Governmental Body.

“ Person ” means any individual, corporation (including any non-profit corporation), general, limited or limited liability partnership, limited liability company, joint venture, estate, trust, association, organization, or other entity or Governmental Body.

“ Pre-Closing Period ” has the meaning set forth in Section 3.9(b) of this Agreement.

“ Proceeding ” means any suit, litigation, arbitration, hearing, audit, investigation, order, or other action (whether civil, criminal, administrative or investigative) noticed, commenced, brought, conducted, or heard by or before, or otherwise involving, any Governmental Body or arbitrator.

“ Purchase Price ” has the meaning set forth in Section 2.2 of this Agreement.

“ Purchaser ” has the meaning set forth in the introductory paragraph of this Agreement.

 

8

 

“ Registered Intellectual Property Rights ” means Intellectual Property Rights that are the subject of a pending application or an issued patent, trademark, copyright, design right or other similar registration formalizing exclusive rights.

“ Related Persons ” means, with respect to a particular individual,

(i)            each other member of such individual’s “ family ” (as hereafter defined); and

(ii)           any Affiliate of one or more members of such individual’s family .

With respect to a specified Person other than an individual:

(i)            any Affiliate of such specified Person; and

(ii)           each Person that serves as a director, governor, officer, manager, general partner, executor or trustee of such specified Person (or in a similar capacity).

For purposes of this definition, the “ family ” of an individual includes (i) such individual, (ii) the individual’s spouse, (iii) any lineal ancestor or lineal descendant of the individual, or (iv) a trust for the benefit of any of the foregoing.

“ Required Consent ” means the items listed on Schedule 6.2 .

“ Retention Agreements ” has the meaning set forth in Section 3.36 of this Agreement.

“ Retention Plan ” has the meaning set forth in Section 5.11 of this Agreement.

“ Rights ” means any and all outstanding subscriptions, warrants, options, or other arrangements or commitments obligating or which may obligate (with or without notice or passage of time or both) the Company to issue or dispose of any securities of the Company including, without limitation, Convertible Securities and Debt Securities.

“ Schedules ” has the meaning set forth in the introductory paragraph to Article 3 of this Agreement.

“ Section 338 Forms ” has the meaning set forth in Section 10.6(c) of this Agreement.

“ Securities Act ” has the meaning set forth in the definition of “Debt Securities” in Article 1 of this Agreement.

“ September Financial Statements ” has the meaning set forth in Section 3.12(a) of this Agreement.

“ Shareholder ” has the meaning set forth in the introductory paragraph of this Agreement.

“ Shareholder Guarantee ” has the meaning set forth in Section 5.22 of this Agreement.

 

9

 

“ Shareholder’s Representative ” has the meaning set forth in Section 10.2(b) of this Agreement.

“ Software ” means computer programs or data in computerized form, whether in object code, source code or other form.

“ Stock ” has the meaning set forth in the Recitals to this Agreement.

“ Supplement ” has the meaning set forth in Section 13.21 of this Agreement.

“ Supplemental Executive Retention Agreements ” has the meaning set forth in the Recitals to this Agreement.

“ Target Net Working Capital ” has the meaning set forth in Section 2.4(f) of this Agreement.

“ Tax ” or “ Taxes ” means any and all net income, gross income, gross revenue, gross receipts, net receipts, ad valorem, franchise, profits, transfer, sales, use, social security, employment, unemployment, disability, license, withholding, payroll, privilege, excise, value-added, severance, stamp, occupation, property, customs, duties, real estate and/or other taxes, assessments, levies, fees or charges of any kind whatsoever imposed by any Governmental Body, together with any interest or penalty relating thereto.

“ Tax Matter ” has the meaning set forth in Section 10.2(a) of this Agreement.

“ Tax Return ” or “ Tax Returns ” means any return, declaration, report, claim for refund or information return or statement relating to Taxes, including, without limitation, any schedule or attachment thereto, any amendment thereof, and any estimated report or statement.

“ Threatened ” means a claim, Proceeding, dispute, action, or other matter for which any demand or statement has been made in writing, or any written notice has been given, that would lead a reasonably prudent Person to conclude that such a claim, Proceeding, dispute, action, or other matter may, with reasonable certainty, be asserted, commenced, taken or otherwise pursued in the future; provided , however , that the foregoing shall not include customer billing or service disputes in the Ordinary Course of Business.

“ Transactional Expenses ” has the meaning set forth in Section 13.10 of this Agreement.

“ Transition Services Agreement ” has the meaning set forth in Section 11.10 and is set forth as Exhibit E to this Agreement.

“ Use ” means to appropriate any of the Confidential Information of the Company for the benefit of oneself or any other Person other than the Company.

“ WARN Acts ” has the meaning set forth in Section 3.10(k) of this Agreement.

“ WPSC ” means the Wisconsin Public Service Commission, a regulatory agency of the State of Wisconsin.

 

 

10

 

ARTICLE 2

PURCHASE OF STOCK; PURCHASE PRICE

2.1          Purchase and Sale of Stock .  In reliance upon the representations, warranties and covenants contained in this Agreement as of the date hereof and on the Closing Date, the Purchaser agrees to purchase the Stock from the Shareholder, and the Shareholder agrees to sell, transfer, convey, assign and deliver the Stock to the Purchaser on the terms and conditions set forth in this Agreement.  Such sale, transfer, conveyance, assignment and delivery of the Stock shall convey good and marketable title to the Stock, free and clear of any and all Rights and Encumbrances, and at such time the Stock will be fully paid and non-assessable.  At the Closing the Shareholder will deliver to the Purchaser certificate(s) evidencing the Stock duly endorsed in blank or with stock powers duly executed by the Shareholder.

2.2          Purchase Price .  The purchase price to be paid to the Shareholder by the Purchaser for the Stock (the “ Purchase Price ”) shall be Thirty-Five Million Five Hundred Thousand Dollars ($35.5 million).

2.3          Payment of Purchase Price on the Closing Date .  The Purchase Price shall be paid on the Closing Date by wire transfer of immediately available funds to the escrow agent (the “ Escrow Agent ”) pursuant to the fully executed and delivered Escrow Agreement set forth as Exhibit A to this Agreement.  The Purchase Price shall be disbursed by the Escrow Agent in accordance with the terms, and subject to the conditions, of the Escrow Agreement.

2.4          Purchase Price Adjustment .

(a)           The Shareholder shall prepare and deliver to the Purchaser within sixty (60) days after the Closing Date an unaudited balance sheet of the Company as of the opening of business on the Closing Date (the “ Closing Balance Sheet ”) which shall set forth a calculation of Closing Net Working Capital determined from the Closing Balance Sheet (the “ Closing Net Working Capital Calculation ”), as well as a calculation of either the Net Working Capital Deficit or the Net Working Capital Excess (the “ Adjustment ”).  The Closing Balance Sheet, the Closing Net Working Capital, the Closing Net Working Capital Calculation and the Adjustment shall be prepared and calculated in accordance with the instructions and methodology set forth in Exhibit B to this Agreement.  The Purchaser shall cause the Company to provide to the Shareholder full access to any and all records, documents and personnel necessary to the proper preparation of the Closing Balance Sheet and the Closing Net Working Capital Calculation.  The Purchaser shall have the right to (i) be present and on-site during the work to be performed by the Shareholder in connection with the preparation of the Closing Balance Sheet, (ii) cooperatively consult with the Shareholder concerning the work for and preparation of the Closing Balance Sheet, and (iii) receive copies of final accounting workpapers prepared by the Shareholder in connection with its analysis of accounts, adjustments and compilation of the Closing Balance Sheet.  The Shareholder covenants and agrees that it shall cooperate with the Purchaser with respect to the foregoing.

 

11

 

(b)           On or prior to the fifteenth (15th) day following the Shareholder’s delivery of the Closing Balance Sheet (along with the Closing Net Working Capital Calculation and the Adjustment), the Purchaser may give the Shareholder a written notice stating in reasonable detail the Purchaser’s objections (an “ Objection Notice ”) to the Closing Balance Sheet, calculation of Closing Net Working Capital, the Closing Net Working Capital Calculation and the Adjustment.  Any Objection Notice shall specify in reasonable detail the dollar amount of any objection and the basis therefor.  Any determination set forth on the Closing Balance Sheet which is not specifically objected to in the Objection Notice shall be deemed acceptable and shall be final and binding upon the parties upon delivery of the Objection Notice.  If the Shareholder does not give the Purchaser an Objection Notice within such fifteen (15) day period, then the Closing Balance Sheet will be conclusive and binding upon the parties and the Closing Net Working Capital Calculation set forth in the Closing Balance Sheet will constitute the Closing Net Working Capital Calculation for purposes of Section 2.4(a) above and for purposes of calculating the Adjustment.

(c)           Following the Shareholder’s receipt of any Objection Notice, the Shareholder and the Purchaser shall attempt to negotiate in good faith to resolve such dispute.  In the event that the Shareholder and the Purchaser fail to agree on any of the Shareholder’s proposed adjustments set forth in the Objection Notice within thirty (30) days after the Purchaser has received the Objection Notice, the Shareholder and the Purchaser agree that a mutually acceptable accounting firm of nationally recognized standing (the “ Independent Accountants ”) shall, within thirty (30) days following referral of such matter to the Independent Accountants, make a detailed, written final determination of the Closing Net Working Capital that sets forth the resolution of all items in dispute in accordance with the terms of this Agreement, but only after first circulating a preliminary report for the comment of the parties.  The Purchaser and the Shareholder each shall provide the Independent Accountants with their respective determinations of the Closing Net Working Capital Calculation and the Adjustment.  The Independent Accountants will consider only those items in dispute as to which the parties have disagreed within the time periods and on the terms specified above and the Independent Accountants shall resolve such dispute in accordance with the terms of this Agreement.  In submitting such dispute to the Independent Accountants, each of the parties shall furnish, at its own respective expense, to the Independent Accountants and the other party such documents and information as the Independent Accountants may request.  Each party may also furnish to the Independent Accountants such other information and documents as it deems relevant, with copies of each such submission and all such documents and information being concurrently given to the other party.  Neither party shall have or conduct any communication, either written or oral, with the Independent Accountants without the other party, respectively, either being present or receiving a concurrent copy of any written communication.  The Independent Accountants shall conduct one or more conferences concerning the subject matter of the allowed objections and disagreements between the parties, at which conference(s) each party shall have the right to (i) present its documents, materials and other evidence (consistent with the requirements herein), and (ii) have present its or their advisors, accountants, counsel and other representatives.  Such conference shall take place either telephonically and/or at the offices selected by the Independent Accountants.  Such

 

12

 

conferences shall not exceed more than three (3) days, eight (8) hours each day of hearings, or such other amount of time reasonably determined by the Independent Accountants.  The Independent Accountants shall resolve each item of disagreement based solely on the presentations of supporting material provided by the parties and the terms of this Agreement, including the instructions of the parties as set forth in Exhibit B .  The Purchaser and the Shareholder shall cooperate fully with the Independent Accountants and respond on a timely basis to all requests for information or access to documents or personnel.  The Independent Accountants’ independent determination of the Closing Net Working Capital in accordance with the terms set forth in this Article 2 shall be final and binding on the Shareholder and the Purchaser.  The fees, costs and expenses of the Independent Accountants shall be equally shared and paid by the parties.

(d)           The term “ Closing Balance Sheet ” shall mean the Closing Balance Sheet delivered pursuant to Section 2.4(a) as adjusted, if at all, pursuant to Sections 2.4(b) and (c).

(e)           The Shareholder shall pay to the Purchaser an amount equal to the Net Working Capital Deficit, and the Purchaser shall pay to the Shareholder an amount equal to the Net Working Capital Excess.  The Purchase Price will be deemed adjusted accordingly.

(f)            For purposes of this Agreement:

(i)            “ Closing Net Working Capital ” means, as of the opening of business on the Closing Date, the current assets of the Company minus all current liabilities of the Company (excluding in each case Intercompany Accounts), determined in accordance Exhibit B hereto.

(ii)           “ Net Working Capital Deficit ” means the aggregate amount, if any, by which the Target Net Working Capital exceeds Closing Net Working Capital.

(iii)          “ Net Working Capital Excess ” means the aggregate amount, if any, by which Closing Net Working Capital exceeds the Target Net Working Capital.

(iv)          “ Target Net Working Capital ” means One Million Eight Hundred Ninety Thousand Nine Hundred Twenty-Eight dollars ($1,890,928).

2.5          Closing and Closing Deliveries .

(a)           Closing and Closing Date .  Subject to the satisfaction or waiver of the conditions precedent contained in Articles 6, 7 and 8 hereof, the closing of the transactions contemplated by this Agreement (the “ Closing ”) shall be held at a mutually agreed time, but in no event no more than ten (10) business days after (i) all Required Consents have been received, and (ii) all other conditions to the Closing have been duly satisfied or waived in writing, at the offices of Briggs and Morgan, Professional Association, 2200 IDS Center, Minneapolis, Minnesota, 55402.  The Closing shall be

 

13

 

effective as of the opening of business on the date of Closing and such date is referred to in this Agreement as the “ Closing Date .”

(b)           Closing Deliveries by the Shareholder .  At the Closing, the Shareholder shall execute, where necessary or appropriate, and deliver to the Purchaser each and all of the following:

(i)            A certificate in the form of Exhibit C hereto signed by a duly authorized officer of the Shareholder, and dated as of the Closing Date;

(ii)           The certificate evidencing the Stock duly endorsed by the Shareholder in blank or accompanied by stock powers duly executed by the Shareholder;

(iii)          A copy certified by the Secretary of the Shareholder of the duly adopted resolutions of the Board of Directors of the Shareholder approving this Agreement, including the Ancillary Documents, authorizing the execution and delivery of this Agreement and the Ancillary Documents, and the consummation of the transactions contemplated hereby and thereby;

(iv)          The corporate minute books, the corporate seal (if any), and stock books for the Company;

(v)           The Escrow Agreement substantially in the form of Exhibit A to this Agreement duly executed by the Shareholder and the Escrow Agent;

(vi)          The Transition Services Agreement substantially in the form of Exhibit E to this Agreement duly executed by the Shareholder;

(vii)         A duly executed written opinion letter by counsel for the Shareholder, dated as of the Closing Date, addressed to the Purchaser, as contemplated by Section 7.4 of this Agreement;

(viii)        Duly executed resignations of (A) the officers of the Company, as specified by the Purchaser in writing to the Shareholder at least ten (10) days prior to the Closing, and (B) the directors of the Company, in each case effective as of the Closing Date;

(ix)           Certificates of good standing for the Shareholder and the Company dated within five (5) days of the Closing Date issued by the Secretary of the state of Minnesota;

(x)            The termination documents for the guarantees described in Section 5.22, to the extent such guarantees have been terminated prior to the Closing;

(xi)           The Debt Payoff Instruments and a loan payoff letter issued by GE Commercial Finance;

 

14

 

(xii)          A true, correct and complete copy of the Oracle Host License;

(xiii)         True, correct and complete copies of the assignments to the Company of the retention and restrictive covenant agreements described in Section 11.8(b); and

(xiv)        Such other documents and items as are reasonably necessary or appropriate to effect the consummation of the transactions contemplated hereby or which may be customary under local law.

(c)           Closing Deliveries by the Purchaser .  At the Closing, the Purchaser shall execute, where necessary or appropriate, and deliver to the Shareholder each and all of the following:

(i)            Payment of the Purchase Price in the manner set forth in Section 2.3 of this Agreement;

(ii)           A certificate in the form of Exhibit D hereto signed by a duly authorized officer of the Purchaser, and dated as of the Closing Date;

(iii)          A copy certified by the Secretary of the Purchaser of the duly adopted resolutions of the Board of Directors of the Purchaser approving this Agreement, including the Ancillary Documents, and authorizing the execution and delivery of this Agreement, including the Ancillary Documents, and the consummation of the transactions contemplated hereby and thereby;

(iv)          The Escrow Agreement substantially in the form of Exhibit A to this Agreement duly executed by the Purchaser;

(v)           The Transition Services Agreement substantially in the form of Exhibit E to this Agreement duly executed by the Purchaser;

(vi)          A duly executed written opinion letter by counsel for the Purchaser, dated as of the Closing Date, addressed to the Shareholder, as contemplated by Section 8.3 of this Agreement;

(vii)         Written evidence reasonably satisfactory to the Shareholder that the release of any Shareholder Guarantee described in Section 5.22 obtained prior to the Closing Date has been provided to the Shareholder in accordance with the provisions of such section;

(viii)        A certificate of good standing of the Purchaser dated within five (5) days of the Closing Date issued by the Secretary of State of the Purchaser’s state of incorporation;

(ix)           The approval order of the MPUC to approve the acquisition of ownership and control of the Company by the Purchaser;

 

15

 

(x)            The approval order, or other authority to proceed under Applicable Law, of the FCC for the transfer of control with respect to the Company’s (A) domestic and international Section 214 authorizations, (B) subscriber/customer base, and (C) as applicable, the discontinuance of any services; and

(xi)           Such other documents and items as are reasonably necessary or appropriate to effect the consummation of the transactions contemplated hereby or which may be customary under local law.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER

As an inducement for the Purchaser to enter into this Agreement and to consummate the transactions contemplated hereby, the Shareholder represents and warrants to the Purchaser that each and all of the following representations and warranties (as qualified by the Schedules to this Agreement (the “ Schedules ”) and any Supplement delivered by the Shareholder pursuant to Section 13.21 of this Agreement)  are true and correct in all material respects as of the date of this Agreement and will be true and correct in all material respects as of the Closing Date.  The Schedules are generally arranged in paragraphs corresponding to the sections and subsections contained in this Article 3.

3.1          Organization .

(a)           The Shareholder .  The Shareholder is a Minnesota corporation and is duly organized, validly existing and in good standing under the laws of Minnesota.  The Shareholder has all requisite power and authority to own, operate and lease its properties and assets (including the Stock), to conduct its business as it is now being conducted and to enter into and perform this Agreement and the Ancillary Documents.

(b)           The Company .  The Company (i) is a corporation duly organized, validly existing and in good standing under the laws of Minnesota, (ii) has all requisite power and authority, corporate and otherwise, to own, operate and lease its properties and assets and to conduct the Business as it is now being conducted.  The Business is the only business conducted by the Company.  As set forth in Schedule 3.1(b) , the Company is duly qualified to transact business as a foreign corporation and is in good standing under the laws of every state or jurisdiction in which the nature of its activities or of its properties (owned, leased or operated) makes such qualification necessary.

3.2          Capitalization .  The authorized capital stock of the Company consists solely of 1,000 shares of common voting stock, no par value, of which 100 shares are issued and outstanding on the date hereof, and are owned beneficially and of record by the Shareholder, free and clear of all liens and Encumbrances.  None of the Stock has been issued in violation of the rights of any Person.  Except as set forth in Schedule 3.2 hereto, as of the date hereof, (i) there are no Convertible Securities or Debt Securities outstanding, (ii) there are no Rights outstanding,

 

16

 

and (iii) there are no shareholder agreements or other agreements, understandings or commitments relating to the rights of the Shareholder to vote or dispose of the Stock.

3.3          Due Authorization .  The execution, delivery and performance of this Agreement, including the Escrow Agreement, the Transition Services Agreement, the Dark Fiber Lease Agreement, the Guarantee and other certificates, documents and instruments to be executed and delivered by the Shareholder and/or its Affiliates pursuant to this Agreement (the “ Ancillary Documents ”), and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate action on the part of the Shareholder and/or its Affiliates.  This Agreement has been, and the Ancillary Documents to be executed and delivered by the Shareholder and/or the Parent will be, on or before the Closing Date (except in the case of the Dark Fiber Lease Agreement, which will be executed and delivered promptly following the Closing pursuant to Section 11.15), duly and validly executed (as applicable) and delivered by the Shareholder and/or its Affiliates, and the obligations of the Shareholder and/or its Affiliates hereunder and thereunder are or will be, upon such execution and delivery, valid, legally binding and, therefore, enforceable against the Shareholder and/or its Affiliates in accordance with their respective terms.

3.4          No Breach .  The Shareholder has full power and authority, corporate and otherwise, to sell, assign, transfer, convey and deliver the Stock to the Purchaser and to otherwise perform its obligations under this Agreement and the Ancillary Documents.  The execution and delivery of this Agreement and the Ancillary Documents to be executed and delivered by the Shareholder pursuant to this Agreement, and the consummation of the transactions contemplated hereby and thereby will not:  (i) violate any provision of the Articles of Incorporation or Bylaws of the Shareholder, (ii) except as set forth in Schedule 3.4 , or as contemplated by clause (iii) immediately following, violate any Applicable Laws or Injunction applicable to the Shareholder or the Company, (iii) except as provided in Schedule 3.4 hereto, require any filing with, Permits from, authorization, consent or approval of, or the giving of any notice to, any Person, (iv) except as provided in Schedule 3.4 hereto, result in a violation or breach of, constitute (with or without due notice or lapse of time or both) a default (or give another party any rights of termination, cancellation or acceleration), require any consent or increase the Company’s burdens under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, franchise, Permit (including, but not limited to, any Permits, approvals or authorizations of any Governmental Body), lease or other Contract to which the Company and/or the Shareholder is a party, or by which they or any of their properties or assets may be bound, or (v) result in the creation or imposition of any Encumbrance on any of the properties or assets of the Company.

3.5          Clear Title .  Except as otherwise set forth in Schedule 3.5 or the leased personal property disclosed in Schedule 3.16 hereto, on the Closing Date, (i) the Company will hold good title to its personal property, and (ii) such personal property is and shall be free and clear of any and all Encumbrances of any kind, nature and description whatsoever, except for Encumbrances which are disclosed, reflected or reserved for or against in the Balance Sheet or the Schedules.

3.6          Condition of Assets .  Except as set forth in Schedule 3.6 hereto, all of the properties and assets of the Company (i) have been maintained in accordance with industry standards in all material respects, (ii) are in reasonable operating condition and repair, and

 

17

 

(iii) subject to the services and assets provided by Affiliates listed on Schedule 3.22 , are the assets, tangible or intangible, real, personal or mixed, used to operate the Company’s Business as currently conducted.

3.7          Litigation .  Except as set forth in Schedule 3.7 hereto, and except for any Proceeding which generally affects the business of all Persons conducting business similar to the Company and in which the Company is not a named defendant, there is no Proceeding:

(a)           that has been commenced by or served upon the Company; or

(b)           to the Knowledge of the Company or the Shareholder, that challenges, or that will have, the effect of preventing, delaying, making illegal, or otherwise interfering with, any of the transactions contemplated hereby.

To the Knowledge of the Shareholder or the Company, no such Proceeding has been Threatened.  Except as provided in Schedule 3.7 hereto, the Company is not (individually or otherwise) a party to or subject to the provisions of any Injunction which could impair the ability of the Shareholder to consummate the transactions contemplated hereby.

3.8          Labor Matters .  Except as set forth in Schedule 3.8 hereto, the Company has never been a party to any collective bargaining agreement or other labor Contract and there has never been, and there is not presently pending or existing, and to the Knowledge of the Shareholder or the Company, there is not Threatened (i) any strike, slowdown, walkout, picketing, work stoppage, labor arbitration or other Proceeding in respect of the grievance of any employee, (ii) any petition, charge or complaint filed by any employee or union with the National Labor Relations Board, or any comparable Governmental Body, (iii) any organizational activity or other labor dispute against or affecting the Company, and no application for certification of a collective bargaining representative is pending or, to the Knowledge of the Shareholder or the Company, is Threatened.  There is no lockout of any employees by the Company and no such action is contemplated by the Company.  Except as set forth in Schedule 3.8 hereto, there is no Proceeding pending or, to the Knowledge of the Shareholder or the Company, Threatened by any Person against the Company or any of its current or former officers, directors or employees relating to employment, equal employment opportunity, discrimination, harassment, wrongful discharge, unfair labor practices, immigration, wages, hours, benefits, collective bargaining, the payment of social security or similar Taxes, occupational safety and health or plant closing.

3.9          Tax Matters .

(a)           Tax Returns .  Except as set forth in Schedule 3.9(a)(i) , (i) the Company has timely filed, or caused to be timely filed, or will timely file or cause to be timely filed with the appropriate taxing authorities, all Tax Returns that are required to be filed by, or with respect to, the Company on or prior to the Closing Date, and (ii) all such Tax Returns are or shall be true, correct and complete in all material respects.  Schedule 3.9(a)(ii) lists all income or franchise Tax Returns filed with any Governmental Body with respect to the Company for the taxable periods ended on or after December 31, 2002.

 

18

 

(b)           Payment of Taxes .  Except as set forth in Schedule 3.9(b) , all Taxes and Tax Liabilities of the Company for all taxable years or periods that end on or before the Closing Date and, with respect to any taxable year or period beginning before and ending after the Closing Date, the portion of such taxable year or period ending on the day immediately preceding the Closing Date (“ Pre-Closing Period ”) have been timely paid.

(c)           Other Tax Matters .  Except as set forth in Schedule 3.9(c) :

(i)            the Company has not been the subject of a dispute, claim, audit, administrative Proceeding or other examination of Taxes by the Tax authorities of any Governmental Body, nor has the Company received any notices from any such taxing authority relating to a Threatened or potential (whether written or otherwise to the Knowledge of the Shareholder or the Company) claim for Taxes or any Tax issue of the Company.  Schedule 3.9(c) lists all Tax examination reports and statements of deficiencies assessed against or agreed to by the Company since January 1, 2002 , each of which has been provided to the Purchaser;

(ii)           no deficiency for any Taxes has been proposed, asserted or assessed against the Company or any Tax Affiliate that has not been resolved and paid in full;

(iii)          neither the Company nor any Tax Affiliate has requested any extension of time within which to file any unfiled Tax Return;

(iv)          neither the Shareholder nor the Company (A) have entered into an agreement or waiver or been requested to enter into an agreement or waiver extending any statute of limitations relating to the payment or collection of Taxes of the Company, or (B) is presently contesting the Tax Liability of the Company before any Governmental Body;

(v)           the Company has not been included in any “consolidated,” “unitary” or “combined” Tax Return provided for under Applicable Laws with respect to Taxes for any taxable period for which the statute of limitations has not expired;

(vi)          the Company has no liability for the Taxes of any Person (other than the Company) under Treasury Regulations Section 1.1502-6 (or any similar provision of law) or as a transferee or successor, by contract or otherwise;

(vii)         no claim has ever been made in writing by a taxing authority or other Governmental Body in a jurisdiction where any of the Company does not file Tax Returns that it is or may be subject to taxation by that jurisdiction;

(viii)        all Taxes which the Company is (or has been) required by law to withhold or collect have been duly withheld or collected, and have been timely paid over to the proper authorities;

 

19

 

(ix)           the Company is not a “United States real property holding corporation” within the meaning of Section 897(c)(2) of the Code;

(x)            there are no Tax sharing, allocation, indemnification or similar agreements in effect between the Company or any predecessor or Affiliate thereof and any other party (including the Shareholder and any predecessors or Affiliates thereof) under which the Purchaser or the Company could be liable for any Taxes or other claims of any Person;

(xi)           neither the Company nor any Tax Affiliate has participated in any listed transaction as defined under Code Section 6011;

(xii)          there are no Encumbrances for Taxes upon any assets of the Company, except Encumbrances for Taxes not yet due;

(xiii)         no property of the Company is property that the Company is or will be required to treat as being owned by another Person under the provisions of Section 168(f)(8) of the Code (as in effect prior to amendment by the Tax Reform Act of 1986) or is “tax-exempt use property” within the meaning of Section 168(h) of the Code;

(xiv)        the Company has not applied for, been granted, or agreed to any accounting method change for which it will be required to take into account any adjustment under Section 481 of the Code or any similar provision of the Code or the corresponding Tax laws of any nation, state or locality and the United States Internal Revenue Service (the “ IRS ”) has not proposed any such adjustment or change in accounting method that would adversely affect a Tax year ending after the Closing Date;

(xv)         no election under former Section 341(f) of the Code has been made or shall be made prior to the Closing Date to treat the Company as a consenting corporation, as defined in former Section 341 of the Code;

(xvi)        the Company is not a party to any agreement, contract or other arrangement that would require it to make any payment that would constitute an “excess parachute payment” for purposes of Sections 280G and 4999 of the Code; and

(xvii)       there are no requests for rulings in respect of any Taxes pending between the Company and any Tax authority.

3.10        Employee Benefits .

(a)           Benefit Plans .  Except as set forth in Schedule 3.10(a) hereto, the Company does not maintain or contribute to any Benefit Plans.  Without limiting the generality of the foregoing provision of this Section, except as described in Schedule 3.10(a) hereto, there are no pension plans, welfare plans, or any employee benefit plans qualified under Section 401(a) of the Code, to which the Company is

 

20

 

required to contribute.  Except as described in Schedule 3.10(a) hereto, the Company does not and will not have any unfunded Liability for services rendered prior to the Closing Date under any Benefit Plans.  The Company is not in any material default under any Benefit Plan.  Except as set forth in Schedule 3.10(a) hereto, other than claims for benefits in ordinary course, there are no actions, suits, disputes, arbitrations or other material claims pending or, to the Knowledge of the Shareholder or the Company, Threatened with respect to any Benefit Plan.  Except as set forth in Schedule 3.10(a) hereto, none of the Benefit Plans, in form or in operation, is a “nonqualified deferred compensation plan” within the meaning of Section 409A(d)(1) of the Code.

(b)           Employee Pension Benefit Plans .  Except as set forth in Schedule 3.10(b) , neither the Company or any Person required to be aggregated with the Company under Section 414(b), (c), (m), or (o) of the Code (“ ERISA Affiliate ”), maintains or has ever maintained an Employee Pension Benefit Plan as defined in Section 3(2) of ERISA, that is subject to Section 412 of the Code and Section 302 of ERISA.  With respect to each such Employee Pension Benefit Plan maintained or ever maintained by the Company or by any ERISA Affiliate:  (i) no unsatisfied liabilities to participants, the IRS, the United States Department of Labor, the PBGC, or to any other Person or entity have been incurred as a result of the termination of any Employee Pension Benefit Plan, (ii) no Employee Pension Benefit Plan, which is subject to the minimum funding requirements of Part 3 of Subtitle B of Title I of ERISA or subject to Section 412 of the Code, has incurred any “accumulated funding deficiency” within the meaning of Section 302 of ERISA or Section 412 of the Code and there has been no waived funding deficiency within the meaning of Section 303 of ERISA or Section 412 of the Code, (iii) all premiums to the PBGC have been timely paid in full, and (iv) the PBGC has not instituted Proceedings to terminate any such Benefit Plan and no condition exists that presents a risk that such Proceedings will be instituted or that would constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any such Benefit Plan.  Except as set forth in Schedule 3.10(b) hereto, which includes the pension benefit plans subject to Title IV of ERISA:  Power and Affiliated Companies Retirement Plan A (Plan Number 001) and Plan B (Plan Number 003), the Company does not currently sponsor, maintain, contribute to, or is required to contribute to an Employee Pension Benefit Plan subject to Title IV of ERISA.

(c)           Multiemployer Plans .  Except as set forth in Schedule 3.10(c) hereto, the Company does not contribute to, and does not have, any Liability (including but not limited to withdrawal Liability) with respect to any multiemployer plan (as defined in Section 4064(a) of ERISA or Section 4001(a)(3) of ERISA).

(d)           Other Plans .  Except as otherwise set forth in Schedule 3.10(d) , there are no present or former employees of the Company who are entitled to (i) any pensions, group health, or other benefits to be paid upon or after termination of employment, including termination on account of disability (except as otherwise required under Section 601 of ERISA), or (ii) deferred compensation payments.

(e)           Documents .  The Shareholder has made available to the Purchaser true, complete and accurate copies of the following documents, as they may have been

 

21

 

amended to the date hereof, embodying or relating to each Benefit Plan of the Company set forth in Schedule 3.10(e) hereto:  (i) all written plan documents for each such Benefit Plan, including all amendments to each such Benefit Plan, any related trust agreements, group annuity contracts, insurance policies or other funding agreements or arrangements, (ii) the most recent determination letter received from the IRS, if any, as to the qualified status of any such Benefit Plan under Section 401(a) of the Code, (iii) the current summary plan description, if any, for each such Benefit Plan, and (iv) the most recent annual return/report on form 5500, 5500-C or 5500-R, if any, for each such Benefit Plan.

(f)            Prohibited Transactions .  Except as set forth in Schedule 3.10(f) , (i) neither the Company nor any other “disqualified person” or “party in interest”, as defined in Section 4975(e)(2) of the Code and Section 3(14) of ERISA, respectively, has engaged in a “prohibited transaction,” as such term is defined in Section 4975 of the Code and Section 406 of ERISA, with respect to any Benefit Plan of the Company subject to ERISA, which could reasonably be expected to subject the Company to a Tax or penalty on prohibited transactions imposed by either Section 502(i) of ERISA or Section 4975 of the Code, and (ii) the execution and delivery by the Shareholder of this Agreement and the consummation of the transactions contemplated hereby will not (i) involve any prohibited transaction within the meaning of Section 406 of ERISA or Section 4975 of the Code with respect to any Benefit Plan set forth in Schedule 3.10(f) hereto, or (ii) accelerate the payment of any benefits under any Benefit Plan set forth in Schedule 3.10(f) hereto.

(g)           Fiduciary Duty .  Neither the Company nor any other fiduciary of any Benefit Plan set forth in Schedule 3.10(g) hereto are engaged in any transaction with respect to such Benefit Plan or failed to act in a manner with respect to such Benefit Plan which could reasonably be expected to subject the Company to any material Liability for a breach of fiduciary duty under ERISA or any other Applicable Law.

(h)           Group Health Plans .  Except as set forth in Schedule 3.10(h) , the Company and all ERISA Affiliates have complied in all material respects with the coverage continuation requirements of all Applicable Laws, including Sections 601 through 609 of ERISA, Section 4980B of the Code, and the requirements of any similar state law regarding continued health coverage, and the Company has incurred no material Liability with respect to its failure to offer or provide continued coverage in accordance with the foregoing requirements, nor is there any suit or other action pending, or to the Knowledge of the Shareholder or the Company, Threatened, with respect to such requirements.  Except as set forth in Schedule 3.10(h) , (i) there has been no violation of the obligations imposed by Section 9801 of the Code and Part 7 of Subtitle B of Title I of ERISA with respect to any Benefit Plan to which such obligations apply, (ii) neither the Company nor any ERISA Affiliate has contributed to a nonconforming group health plan (as defined in Section 5000(c) of the Code), and (iii) neither the Company nor any ERISA Affiliate has incurred a Tax under Section 5000(a) of the Code which is, or is reasonably expected to become, a Liability of the Company or an ERISA Affiliate.

(i)            Triggering of Obligation and Other Binding Commitments .  Except for the claims set forth in Schedule 3.10(i) , the consummation of the transactions described in

 

22

 

this Agreement, in and of themselves, or in conjunction with any other event which has occurred on or prior to the date hereof (excluding the Retention Agreements), will not entitle any current or former employee of the Company to severance pay, unemployment compensation or any other similar payment, or accelerate the time of payment or vesting, or increase the amount of compensation due to any such employee or former employee.

(j)            Operational Compliance .  Each Benefit Plan has been administered in all material respects in accordance with its terms and all Applicable Laws, and, except as set forth in Schedule 3.10(j) , each Benefit Plan intended to be qualified under Section 401(a) of the Code is so qualified and is, as most recently amended, the subject of a favorable determination letter as to its qualification.  No event has occurred and no condition or set of circumstances exists in connection with which the Company could be directly or indirectly subject to any Encumbrance or loss of Tax deduction under ERISA or the Code or under any agreement, instrument, statute, rule of law or regulations pursuant to or under which the Company has indemnified or is required to indemnify any Person against any such liability (except liability for benefit claims and funding obligations payable in the ordinary course).

(k)           WARN Compliance .  The Company has complied in all respects with the Worker Adjustment and Retraining Notification Act, 29 U.S.C. § 2101 et seq., and its corresponding regulations, and any similar state law, rule or regulation or local ordinance, rule or regulation, in each case in effect as of the date hereof, providing for notification to employees affected by closing, relocation, sale of business, mass layoff or similar event (collectively, the “ WARN Acts ”) on account of closings, relocations, sales of businesses, mass layoffs or similar events occurring on or prior to the Closing and all related notices, payments, fines or assessments due to any Government Body pursuant to such WARN Acts.

(l)            Absence of Termination Restrictions .  Except as set forth in Schedule 3.10(l) , (i) each Benefit Plan may be terminated by the Company in accordance with its terms and without the Company incurring any obligation or liability arising or resulting from such termination, and (ii) neither the Company nor the Shareholder has made any representations to employees of the Company that any Benefit Plan would be continued without change for any period of time on and after the Closing Date.  The foregoing shall not be applicable to the Retention Agreements described in Sections 3.36 and 11.8 hereof.

3.11        No Guarantees .  Except as set forth in Schedule 3.11 , (i) none of the obligations of the Company is guaranteed by, or subject to a similar contingent Liability to, any Person, and (ii) the Company has not guaranteed, or otherwise become contingently liable for, any Liability of any Person.  No event has arisen that would give rise to any obligation under any guarantee set forth in Schedule 3.11 .

3.12        Financial Statements .

(a)           The Shareholder has caused the Company to furnish true and correct copies of the financial statements of the Company (i) prepared by the Company and

 

23

 

audited by the Parent’s independent certified public accounting firm registered with the PCAOB (the “ Auditor ”) for the calendar year ending December 31, 2004 (the “ Audited Financial Statements ”), and (ii) prepared by the Company for the nine (9) months ending September 30, 2005 (the “ September Financial Statements ”).  The Shareholder does not make any representations in this Agreement or any Ancillary Document with respect to any other financial statements or financial data, including any representation as to whether such financial statements or financial data is true, correct, complete or reliable.

(b)           The Audited Financial Statements, including the notes thereto, fairly present the financial position and condition of the Company as of December 31, 2004, and the results of its operations for the twelve (12) month period ended December 31, 2004, in accordance with GAAP.  Except for Liabilities (i) reflected or reserved against in the balance sheet set forth in the Audited Financial Statements (the “ Balance Sheet ”) of the Company as of December 31, 2004 (the “ Balance Sheet Date ”), or in the notes thereto, (ii) incurred in the Ordinary Course of Business since the Balance Sheet Date (none of which resulted from, arose out of, is related to, or was caused by any breach of Contract), (iii) arising under Contracts entered into in the Ordinary Course of Business to which the Company is a party, or (iv) set forth in Schedule 3.12 hereto, the Company does not have any Liabilities.  The reserves reflected in the Balance Sheet of the Company as of December 31, 2004 are adequate.

(c)           The September Financial Statements are attached within Exhibit B and fairly present the financial position as of September 30, 2005, and the results of its operations for the nine (9) month period ended September 30, 2005 in accordance with GAAP; provided , however , that the September Financial Statements (i) consist solely of a balance sheet and an income statement, and (ii) do not contain footnotes thereto and other required presentation items.

3.13        Absence of Certain Developments .  Except for the transactions contemplated by this Agreement or as otherwise set forth on Schedule 3.13 hereto, since the Balance Sheet Date, (i) there has not been any development or combination of developments affecting the Company that has had, or is likely to have, a Material Adverse Effect, and (ii) the Company has conducted the Business in the Ordinary Course of Business and has not:

(a)           declared, set aside or paid a dividend or made any other distribution with respect to any class of capital stock of the Company;

(b)           changed accounting methods or practices (including, without limitation, any change in depreciation, amortization or cost accounting policies or rates);

(c)           except as set forth in Schedule 3.36 , entered into any employment contract or collective bargaining agreement, written or oral, or modified the terms of any existing employment contract or agreement or adopted, amended, modified or terminated any Benefit Plan;

(d)           made any change or amendment in its articles of incorporation or bylaws;

 

24

 

(e)           issued or sold any securities; acquired, directly or indirectly, by redemption or otherwise, any securities; or granted or entered into any options, warrants, calls or commitments of any kind with respect thereto;

(f)            made any capital expenditure (including expenditures required under customer contracts) exceeding Fifty Thousand Dollars ($50,000); and/or

(g)           incurred any obligations for borrowed money or purchase money debt other than that incurred pursuant to the Debt Instruments described and set forth in Schedule 3.29 of this Agreement.

3.14        Intellectual Property .

(a)           Other than trade secrets and confidential business information, Schedule 3.14(a)(i) lists and describes all Owned Intellectual Property Rights that are Registered Intellectual Property Rights and all other Owned Intellectual Property Rights.  Schedule 3.14(a)(ii) lists all Contracts relating to Licensed-In Intellectual Property Rights other than Off-the-Shelf Software and describes the Intellectual Property Rights covered thereby.  Except as set forth in Schedule 3.14(a) , the Owned Intellectual Property Rights and the Licensed-In Intellectual Property Rights constitute all Intellectual Property Rights used in the conduct of the business of the Company.

(b)           Except as set forth in Schedule 3.14(b) , (i) the Company owns all right, title and interest in the Owned Intellectual Property Rights free and clear of all Encumbrances (including royalty or other payments), except for those licenses of the Owned Intellectual Property Rights to Persons, payments for use of the Owned Intellectual Property Rights and other Encumbrances listed on Schedule 3.14(b) , (ii) the Company is the sole owner of record of all Registered Intellectual Property Rights, (iii) to the Knowledge of the Shareholder and the Company, no Owned Intellectual Property Right has been infringed by any Person, (iv) the Company owns all Intellectual Property Rights developed by its current and former employees and independent contractors during the period of their employment or within the scope of their contracting or consulting relationship, as the case may be, with the Company, and (v) no employee or former employee or independent contractor of the Company has any claim with respect to any Intellectual Property Right of the Company.

(c)           Except as set forth in Schedule 3.14(c) , (i) all Owned Intellectual Property Rights are valid and enforceable, and no Person has asserted that any Owned Intellectual Property Right is invalid or not enforceable, (ii) all Owned Intellectual Property Rights that are Registered Intellectual Property Rights are in full force and effect, and all actions required to keep such rights pending or in effect or to provide full available protection, including payment of filing, examination, annuity, and maintenance fees and filing of renewals, statements of use or working, affidavits of incontestability and other similar actions, have been taken, and no such Registered Intellectual Property Right is the subject of any interference, opposition, cancellation, nullity, re-examination or other Proceeding placing in question the validity or scope of such rights, and (iii) all products covered by Owned Intellectual Property Rights and all usages of Owned Intellectual Property Rights

 

25

 

have been marked with the appropriate patent, trademark or other marking required by Applicable Law.

(d)           Except as set forth in Schedule 3.14(d) , (i) the documentation relating to all trade secrets has been made available to the Purchaser and is current, accurate and sufficient in all material respects in detail and content to identify and explain such trade secrets and to allow their full and proper use without reliance on the knowledge or memory of any individual, (ii) all reasonable precautions have been taken to protect the secrecy, confidentiality and value of the trade secrets and all other proprietary information used by the Company including the implementation and enforcement of policies requiring each employee or independent contractor who has access to trade secrets to execute proprietary information and confidentiality agreements substantially in a standard form, and each current and former employee and independent contractor of the Company has executed such an agreement, (iii) there has been no breach or other violation of such agreements, (iv) the Company has an unqualified right to use all trade secrets and other proprietary information currently used in its business, subject to any Contract relating to Licensed-In Intellectual Property Rights, and (v) no such trade secret or other proprietary information is part of the public knowledge or literature, and no trade secret or other proprietary information has been used, divulged or appropriated either for the benefit of any Person other than the Company or to the detriment of the Company.

(e)           Except as set forth in Schedule 3.14(e) , the Company has not taken action, or failed to take an action, that might have the effect of estopping or otherwise limiting its right to enforce Owned Intellectual Property Rights against any Person.

(f)            Except as set forth in Schedule 3.14(f) , (i) the Company has no present expectation or intention of not fully performing any obligation pursuant to any license, and to the Knowledge of the Shareholder and the Company, there is no breach, anticipated breach or default by any other party to any license, (ii) there are no renegotiations of, attempts to renegotiate, demands for or outstanding rights to renegotiate any license, and (iii) all rights under each license will be fully available to the Company after the Closing.

(g)           Except as set forth in Schedule 3.14(g) , (i) each Licensed-in Intellectual Property Right for which the Company has an exclusive right is in full force and effect, all actions required to keep such right pending or in effect or to provide full protection, including payment of filing, examination, annuity, and maintenance fees and filing of renewals, statements of use or working, affidavits of incontestability and other similar actions, have been taken, and (ii) no Licensed-in Intellectual Property Right that is a Registered Intellectual Property Right and for which the Company has an exclusive right is the subject of any interference, opposition, cancellation, nullity, re-examination or other Proceeding placing in question the validity or scope of such right.

(h)           Except as set forth in Schedule 3.14(h) , (i) the Company has not infringed, misappropriated or otherwise violated any third party Intellectual Property Right, and the Company has not received any notice of any infringement, misappropriation or violation by the Company of any third party Intellectual Property

 

26

 

Right, and (ii) no infringement, misappropriation or violation of any third party Intellectual Property Right has occurred or will occur with respect to products or services sold by the Company or with respect to the products or services currently under development or with respect to the conduct of the business of the Company as conducted or proposed to be conducted.

(i)            Except as set forth in Schedule 3.14(i) , (i) all Software that is used by the Company or is present at any facility or on any equipment of the Company is owned by the Company or is subject to a current license agreement that covers all use of the Software in the business of the Company as conducted or as proposed to be conducted, (ii) the Company has the right to use the Software used in its business as it is being used, without any conflict with the rights of others, (iii) the Company is not in breach of any license to, or license of, any Software, (iv) the Company does not use, rely on or contract with any Person to provide service bureau, outsourcing or other computer processing services to the Company, in lieu of or in addition to their respective use of the Software, and (v) following the Closing, subject to the Software and other related assets to be transferred or otherwise provided to the Company pursuant to the terms of this Agreement or the Transition Services Agreement, the Company will have sufficient rights to all necessary Software, to operate its business as it is conducted or as proposed to be conducted.

3.15        Compliance with Laws .  Except as set forth in Schedule 3.15 , (i) the Business has been operated and the Company is in material compliance with the requirements of Applicable Laws to which the Company is subject, and (ii) the Company has not received any notice of, and neither the Shareholder nor the Company have Knowledge of, any violation of a material nature of any Applicable Laws respecting the Company.

3.16        Operating Contracts .  Except as disclosed in Schedule 3.16 , and except with respect to (i) Contracts that have been fully performed as of the date hereof and have no further force or effect, (ii) Contracts for capital expenditures having a remaining balance of Fifty Thousand Dollars ($50,000) or less, (iii) leases of personal property having a term of less than one (1) year and which require payments on an annual basis of Twenty Five Thousand Dollars ($25,000) or less per annum, (iv) Contracts for services, raw materials, supplies or equipment having a term of less than one (1) year and involving payments of Fifty Thousand Dollars ($50,000) or less per annum, or (v) Contracts for the sale of any properties or services having a term of less than one (1) year and involving a value of Fifty Thousand Dollars ($50,000) or less per annum, the Company is not a party to any oral or written Contract.  All of the Contracts set forth in Schedule 3.16 hereto are referred to in this Agreement as the “ Operating Contracts .”  All of the Operating Contracts were made in the Ordinary Course of Business, and are valid, binding and currently in full force and effect.  Except as set forth in Schedule 3.16 hereto, the Company is not in material default under any of the Operating Contracts, and no event has occurred which, through the passage of time or the giving of notice, or both, would constitute a default by the Company, or give rise to a right of termination or cancellation by another party under any of the Operating Contracts, or cause the acceleration of any Liability of the Company, or result in the creation of any Encumbrance upon any of the properties or assets of the Company.  Except as set forth in Schedule 3.16 hereto, no other party is in default under any of the Operating Contracts.  Except as set forth in Schedule 3.16 hereto, none of the Operating

 

27

 

Contracts have been canceled, terminated, amended or modified and each of the Operating Contracts is in the name of the Company rather than an Affiliate of the Company.  Except as set forth in Schedule 3.4 hereto, the consummation of the transactions contemplated hereby will not require the consent or approval of any Person under any of the Operating Contracts.  The Shareholder has furnished or made available a true, complete and accurate copy of each Operating Contract.

3.17        Real Estate .  The Company does not now own and has never owned any real estate.  With respect to real estate (including fixtures and improvements) leased by the Company (the “ Leased Real Estate ”):

(a)           Schedule 3.17 contains a listing and description (including the parties, term, expiration date(s), address, and the general use description of the leased premises) of each written or oral lease regarding Leased Real Estate (the leases of Leased Real Estate described in Schedule 3.17 are collectively, the “ Leases ”);

(b)           Except as set forth in Schedule 3.17 hereto, there are no deferred property Taxes or assessments with respect to the Leased Real Estate which may or will become due and payable by the Company as a result of the consummation of the transaction contemplated hereby;

(c)           Except as set forth in Schedule 3.17 hereto, there are no condemnation Proceedings pending or, to the Knowledge of the Company or the Shareholder, Threatened with respect to all or any part of any parcel of Leased Real Estate.  Schedule 3.17 hereto sets forth all private condemnation Proceedings that have been initiated by the Company under a statutory power of condemnation;

(d)           The Company is not in default in the performance of any material obligation under the Leases, and to the Knowledge of the Company or the Shareholder, none of the other parties to the Leases are in default in performance of their material obligations thereunder, the Leases are in full force and effect, and the Company has not assigned its rights under the Leases;

(e)           Except as set forth in Schedule 3.17 the Company has not leased or sublet to any other Person or entity the right to use or occupy all or any portion of the Leased Real Estate, and the Leased Real Estate is not subject to an option or right in favor of any Person or entity;

(f)            Except as set forth in Schedule 3.17 , the Company now has, and after the Closing Date will continue to have, all necessary right and interest in easements and rights-of-way sufficient to carry on its Business as presently conducted; and

(g)           The Shareholder has furnished or made available a true, complete and accurate copy of each Lease.

3.18        Accounts Receivable .  The accounts receivable of the Company, and other rights to the payment of money represent, and on the Closing Date will represent, valid obligations

 

28

 

arising from sales actually made or services actually performed in the Ordinary Course of Business.

3.19        Books and Records .  All of the books of account and other financial and corporate records of the Company have been made available to the Purchaser and its representatives.  Such books of account and records are current and complete in all material respects and are consistent with the Audited Financial Statements and the September Financial Statements.

3.20        Employees .

(a)           Schedule 3.20(a) sets forth a complete and accurate list of all the employees of the Company as of the date hereof (the “ Employees ”), together with the following information for each such Employee:  name, position held, current salary, 2004 bonus, commission and incentive amounts (if any), deferred compensation, Fair Labor Standards Act status, date of hire, current salary grade, annual vacation entitlement, accrued, but unused vacation, service date for employee benefit plan purposes, work locations and any other information the Purchaser may reasonably and lawfully request.  Schedule 3.20(a) indicates which Employees are not actively at work due to an approved medical, family, military, or personal leave under the policies of the Company (the “ Inactive Employees ”) and, to the extent known, the date on which each Inactive Employee is expected to return to active employment.

(b)           Except as set forth in Schedule 3.20(b) , none of the Employees has informed the Company that he/she intends to terminate employment with the Company.  Schedule 3.20(b) also sets forth a description of any written Contract, including any secrecy or non-competition agreement or any other agreement or restriction of any kind that would impede in any way the ability of such employee to carry out fully all activities of such employee in furtherance of the business of the Company, other than the Benefit Plans set forth in Schedule 3.10 hereto, with respect to the conditions of employment of any of the Employees.  All Employees are employed on an “at-will” basis.

(c)           Except as set forth in Schedule 3.20(c) , the Company has complied in all material respects at all times with all Applicable Laws relating to employment and employment practices and those relating to the calculation and payment of wages (including overtime pay, maximum hours of work and child labor restrictions), equal employment opportunity (including Applicable Laws prohibiting discrimination and/or harassment or requiring accommodation on the basis of race, color, national origin, religion, gender, disability, age, sexual orientation or otherwise), affirmative action and other hiring practices, occupational safety and health, workers’ compensation, unemployment compensation, the payment of social security and other Taxes, and unfair labor practices under the National Labor Relations Act or applicable state law.

(d)           Except as set forth in Schedule 3.20(d) , none of the Employees is working based upon a non-resident visa and the Company has complied with its obligations under the Immigration Reform Control Act.

 

29

 

3.21        Permits .  Except as set forth in Schedule 3.21 , (i) the Company has timely obtained, or applied and meet the requirements for, all Permits material to the operation of the Business of each Governmental Body having jurisdiction over the Company, or any of its properties or assets, required to operate and carry on the Business as now being conducted and has timely applied to renew any such Permits for which such renewal application is required, and (ii) the Permits of the Company are in full force and effect.  The Company has received no notice that any Permit is being considered for non-renewal, termination, revocation or suspension.

3.22        Certain Arrangements .  Schedule 3.22 sets forth a true and complete list of all benefits, credits, services, discounts, payments or other arrangements made between the Company and any of its Affiliates for the benefit of the Business, including but not limited to management in