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ASSET PURCHASE AGREEMENT
By and Between
OW HOLDINGS, INC., as Seller,
and
SITESTAR CORPORATION, as Buyer,
February 28, 2007
TABLE
OF CONTENTS
EXHIBITS
Annex
I Certain
Definitions
SCHEDULES
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2.1(c)
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List
of Customers
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2.1(c)(i)
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Excluded
High Bandwidth Customers
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2.1(c)(iv)
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Excluded
Broadband Customers
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2.1(e)
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Equipment
Conveyed
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2.1(j)
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Domain
Names
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2.4
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Transition
Plan
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2.4(a)
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Transition
Related Expenses
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3.1(a)
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Accounts
Payable
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3.1(d)
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Contracts
to be assumed
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4.1(a)
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Estimated
Purchase Price
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4.3(b)
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Active
Prepaid Service Contracts
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5.11
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Litigation
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5.16(a)
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Telecom
circuits and Service Contracts
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8.2(a)(vii)
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Disputed
Accounts Payable
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ASSET PURCHASE AGREEMENT
THIS
ASSET PURCHASE AGREEMENT (“Agreement”)is entered
into as of the 28th day of February, 2007, by and between OW
Holdings, Inc., a Wyoming corporation (“Seller”),
and Sitestar Corporation a Nevada corporation
(“Buyer”).
WITNESSETH:
RECITALS
A.
Seller operates a business known as “OneWest.net,”
which provides Internet services to residential and commercial
customers, including principally dial-up and high speed Internet
access and hosting services (the
“Business”).
B.
Seller now desires to sell to Buyer and Buyer now desires to
purchase from Seller certain of the assets owned by Seller and/or
used or held for use in the operation of the Business, and in
connection therewith Buyer is willing to assume certain limited
liabilities of Seller relating to the Business, all on the terms
and conditions as more fully set forth in this
Agreement.
C.
The Parties have agreed that an orderly consummation of this
transaction requires three distinct steps as described herein so
that the funds are remitted to Seller and the assets are
transferred to Buyer.
NOW,
THEREFORE, in consideration of the premises and of the mutual
covenants, agreements, representations and warranties herein
contained, and other good and valuable consideration, the
Parties agree as follows:
AGREEMENT
ARTICLE 1.
DEFINITIONS
AND CONSTRUCTION
1.1
Definitions .
All terms not defined when used shall have the respective meanings
given such terms in
Annex I .
1.2
Accounting Terms .
All terms of an accounting nature not specifically defined herein
shall have the respective meanings given to them under
GAAP.
1.3
Other Definition Provisions .
The masculine form of words includes the feminine and the neuter
and vice versa, and, unless the context otherwise requires, the
singular form of words includes the plural and vice versa and
“or” is used in the sense of “and/or.” The
words “herein,” “hereof,”
“hereunder” and other words of similar import when used
in this Agreement refer to this Agreement as a whole, and not to
any particular section or subsection.
1.4
Transaction
timeline terminology. This transaction shall be consummated in
three steps. In this Agreement these are referred to
as:
(a)
“Closing” SIX HUNDRED THOUSAND DOLLARS ($600,000)
of the Estimated Purchase Price is transferred from Buyer to
Seller. The Estimated Purchase Price computation is based on
Seller’s audit of the revenue generated by the customers
contained in the PLATYPUS database. The Closing will be during
business hours on February 28, 2007.
(b)
“Transfer” The Acquired Assets and billing
responsibilities and Assumed Liabilities are transferred to
control of the Buyer with the customer database and supporting
information. Transfer shall occur at midnight on February 28,
2007.
(c)
“Settlement” This occurs within 90 days after
Transfer. Buyer shall have 90 days (the “Holdback
Period”)within which to confirm Seller’s
computation of the Purchase Price and reconcile other
adjustments as set forth herein. The balance of the purchase
price as adjusted shall be paid not later than 90 days after
Transfer.
ARTICLE 2.
PURCHASE
AND SALE OF ASSETS
2.1
Assets to be Sold to Buyer .
On the terms and subject to the conditions of this Agreement, and
on the basis of the representations and warranties herein
contained, Seller shall sell, assign, transfer, convey and deliver
to Buyer, on the Closing Date, free and clear of all Liens, all of
the assets described herein (collectively, the “Acquired
Assets or Assets”). , Such Acquired Assets shall include,
without limitation, all right, title and interest of Seller in, to
and under the following:
(a)
Accounts Receivable .
Any and all accounts receivable from conveyed Customers of Good
Standing of Seller that are due and collectable as of Transfer
including all Accounts Receivable due from USAC.
(b)
Prepaid Expenses .
All prepaid expenses existing as of the Closing Date
(“Prepaid Expenses”);
(c)
Clients and Customers All
current clients and customers of the Business in all Wyoming, Idaho
and Montana locations, which are set forth on Schedule 2.1(c),
including, without limitation, the following:
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(i) |
Dedicated
Access High Bandwidth Customers, except for certain Wyoming
customers identified in Schedule 2.1(c)(i);
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(ii) |
Dial-Up
Customers including “IKANO Customers”, Email customers
and value-added service (i.e., web acceleration)
customers
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(iii) |
Web
and Domain Hosting Customers; and
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(iv) |
Qwest
DSL Customers (It is expressly understood that there are certain
broadband customers served by wireless and Contact DSL which are
not a part of this Agreement, which customers are identified in
Schedule 2.1(c)(iv));
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(d)
Asset Contracts .
All the client and customer contracts and agreements of the
Business, including without limitation, those listed in Sections
2.1(c)(i) through 2.1(c)(iv).
(e)
Equipment All
computer servers used exclusively for the provision of services for
the Clients and Customers of the Business and listed on Schedule
2.1(e);
(f)
Claims and Rights .
All claims and rights of every kind relating to the Acquired Assets
of the Business, including, without limitation, all deposits,
prepayments and prepaid expenses, refunds.
(g)
Governmental Authorizations .
All Governmental Authorizations and all pending applications
therefore or renewals thereof to the extent transferable
Buyer;
(h)
Books and Records, etc .
Copies of all operating data and billing records, including,
without limitation, databases, accounts, prospect lists, client
lists, archives, and related materials used or held for use in the
Business and relating to the Acquired Assets.
(i)
Web Site Copies
of all files that comprise the web site known as
www.OneWest.net.
(j)
Seller Owned Internet Domains .
All Company owned domains used for the purpose of operating the
Business, including Domain Names. Such domains are listed in
schedule 2.1(j).
(k)
Telephone Numbers All
telephone, telex, telecopy and telecommunication numbers (except
DID phone numbers), e-mail addresses; and
(l)
Goodwill .
All goodwill related to the Business.
2.2
Excluded Assets .
Notwithstanding anything to the contrary in Section 2.1, all of the
right, title and interest of Seller in, to and under the following
assets, properties and other rights (collectively, the
“Excluded Assets”) shall be excluded from the Acquired
Assets:
(a)
All wireless broadband and Contact DSL customers
(b)
All Seller cash on hand, investments and marketable
securities.
(c)
All Seller-owned furniture, fixtures and equipment not listed on
Schedule 2.1(c);
(d)
All Tax returns and Tax refund claims of any type or description
for matters arising prior to the Closing Date;
(e)
All Accounts Receivable presently under the control of a collection
agency;
(f)
All Benefit Plans and any employment agreements with any Business
Employee (unless specifically assigned to Buyer
herein);
(g)
All insurance policies and rights thereunder, other than claims
with respect to Acquired Assets;
(h)
All rights and obligations of Seller under any Business Contract
that is not assigned to Buyer as an Acquired Contract;
(i)
The company books and records of Seller, including its Articles of
Incorporation and Bylaws, seals, minute books, and other documents
relating to the organization, maintenance and existence of Seller
as a corporation; and
(j)
All information pertaining to shareholders and investors in the
Seller.
2.3
Assignment of Contracts and Rights .
Other than the Acquired Contracts, Buyer assumes no rights or
responsibilities for any contracts, agreements, commitments,
obligations, liabilities or any other duties of Seller except as
specifically set forth in Schedule 3.1(d) or elsewhere in this
agreement. Notwithstanding anything to the contrary in this
Agreement, this Agreement shall not constitute an agreement to
assign any Governmental Authorization or any instrument, contract,
lease, permit or other arrangement included among the Acquired
Assets or Acquired Contracts, or any claim or right or any benefit
arising thereunder or resulting therefrom, if an assignment or
transfer thereof, without the consent of a necessary third party,
would constitute a breach or other contravention thereof or in any
way adversely affect the rights of Buyer thereunder; any assignment
or transfer which requires such a consent shall be made subject to
such consent being obtained. Seller shall use its best efforts at
all times (before and after Closing, as applicable) to obtain
required consents to assignment of the Acquired Contracts; and if a
consent is not obtained, or if an assignment thereof would be
ineffective as to Buyer, Seller and Buyer will enter into an
arrangement acceptable to Buyer under which Buyer will obtain the
benefits and assume the obligations thereunder in accordance with
this Agreement, whether by subcontract, sub-license or sublease,
and by which Seller would enforce such rights and/or agreements for
the benefit of Buyer. To the extent such an arrangement is
effected, Seller shall promptly pay to Buyer all monies received by
Seller under any Acquired Assets or any claim or right or any
benefit arising thereunder, except to the extent the same
represents an Excluded Asset. Seller acknowledges that the
assignment of certain Acquired Contracts is material to this
agreement. Nothing herein shall be deemed or construed to cure or
excuse any breach by Seller or Buyer of any of its representations,
warranties and covenants in this Agreement, and the rights and
remedies under this Section 2.3 shall be in addition to, and not in
lieu of, any other such rights or remedies provided for under this
Agreement or by operation of law.
2.4
Transition .
Both Parties agree to the transition plans and terms provided in
Schedule 2.4. During the transition period, which shall not exceed
90 days, Seller shall provide to Buyer such assistance as is
reasonably required to provide for the transfer of customer
accounts and the billing of such accounts. Should such assistance
require travel to Buyer’s location, all travel, lodging and
per diem expense shall be at the expense of Buyer.
ARTICLE 3.
ASSUM
P
TION
OF LIABILITIES
3.1
Assumed Liabilities .
Buyer agrees that at Closing it will assume, and agree to pay,
perform and discharge when due, only the following obligations of
Seller as such obligations relate to the Business (the
“Assumed Liabilities”):
(a)
Accounts Payable .
All accounts payable by Seller in respect of the Business, but only
to the extent existing from and after Closing and reflected in
Schedule 3.1(a) (“Accounts Payable”);
(b)
Accrued Expenses .
All expenses of Seller with respect to the Business, the type of
which are typically classified as an accrued expense, but only to
the extent existing as of Transfer (“Accrued
Expenses”);
(c)
Deferred Revenue Liability .
All unearned revenue fulfillment obligations of the Business
attributable to prepaid service contracts for active customers (the
“Active Prepaid Service Contracts”) and any credits for
services not yet rendered, but only to the extent existing as of
Transfer (“Deferred Revenue Liability”);
and
(d)
Liabilities Under Contracts .
All obligations of Seller under the Contracts set forth in Schedule
3.1(d), but only to the extent such obligations are to be performed
from and after the Transfer Date and do not constitute payment in
arrears for services or other matters occurring prior to Closing or
delayed payment on the purchase price of an Acquired
Asset.
(e)
Excluded Liabilities .
Notwithstanding any provision of Section 3.1 of this Agreement or
any other document or instrument to the contrary, Buyer shall
assume only the Assumed Liabilities as specifically set forth on
the Schedules herein set forth and shall not assume or in any way
be liable or responsible for any other debts, obligations or
liabilities of Seller of any kind whatsoever, whether known or
unknown, absolute, contingent, accrued or otherwise, and whether
arising before or after the Closing Date (the “Excluded
Liabilities”). The Excluded Liabilities shall remain the sole
obligation of Seller and shall be retained, paid, performed and
discharged by such parties.
ARTICLE 4.
PURCHASE
PRICE, MANNER OF PAYMENT AND CLOSING
4.1
Purchase Price .
a.
In consideration for the sale, assignment, transfer, conveyance and
delivery of the Acquired Assets to Buyer at Closing, and as
consideration for the representations, warranties, covenants and
agreements of Seller contained in this Agreement and contained in
the Ancillary Agreements, Buyer shall purchase all of the Acquired
Assets for a total purchase price based on a price multiple of
revenues plus accounts receivable minus deferred revenue. The price
multiple will be based on the annualized value of the current
monthly service obligations of the customers in Good Standing
conveyed (herein referred as “Annualized Revenues”) as
follows: The dial-up services, email services and web acceleration
and other related services shall be valued at sixty percent (60%)
of the annualized revenues for such services. The Qwest DSL and
related services shall be valued at fifty percent (50%) of their
annualized revenues. The dedicated T-1 and other high bandwidth
(Ethernet) services shall be valued at twenty percent (20%) of
their annualized revenues. All web hosting, IP address and domain
hosting services shall be valued at seventy-five percent (75%) of
their annualized revenues. Advertising trade accounts will be
valued based on the retail value of the services provided by
Seller. No other trade accounts will be valued in the sale. No
value shall be placed on non-recurring services. All of the
foregoing in aggregate shall be known as the “Subscriber
Value”. Seller’s computation of the purchase price
shall be set forth on Schedule 4.1(a) and shall serve as the
Estimated Purchase Price at Closing. The Purchase Price shall be
computed by Buyer and Seller at Settlement pursuant to
4.3.
4.2
Manner of Payment .
(a)
The Purchase Price shall be paid as follows:
(i)
At Closing, Buyer shall deliver to Seller (by wire transfer or
other immediately available funds) a cash amount equal to SIX
HUNDRED THOUSAND DOLLARS ($600,000) of the Estimated Purchase Price
(the “Closing Payment”). Buyer shall also provide
assurances in a form acceptable to Seller that an amount sufficient
to pay the remaining amounts due on the Purchase Price is reserved
and available for payment to Seller.; and
(ii)
At Settlement, Buyer shall deliver or cause to be delivered to
Seller a cash amount equal to the Purchase Price minus the cash
amount previously paid (the “Holdback”), .
4.3
Computation of Estimated Purchase Price and Purchase
Price .
(a)
Estimated Purchase Price .
At Closing, Seller will calculate the Estimated Purchase Price by
determining the annualized revenues per service category and apply
the multipliers from 4.1 for each category of service (Subscriber
Value). Expenses paid by Seller for periods on or after Transfer,
valued at 100%, and Accounts Receivable for these customers shall
be added to the Purchase Price. Deferred Revenue for these
customers shall be subtracted from the Purchase Price. For
determining the Estimated Purchase Price all customers who are paid
through the date of Transfer or who have made payments on their
accounts during January, 2007 shall be included and valued as set
forth in 4.1.
(b)
Purchase Price .
The Purchase Price shall be determined at Settlement as set forth
in this section.
At Settlement, Buyer and Seller shall determine the Subscriber
Value by determining the actual value of the annualized revenues
per service category of the customers conveyed and in Good Standing
as of the date of Transfer multiplied by the multipliers from
4.1. Amounts
prepaid by customers for periods after Transfer that are received
and retained by Seller for services to be received after Transfer,
and liabilities assumed by Buyer shall be deducted. Schedule 4.3(b)
sets forth a list of all Active Prepaid Service Contracts, which
list is complete and correct in all respects. The actual list will
be delivered to Buyer in electronic form
(c)
Any payments not accounted for in the calculation of the Purchase
Price and received by Buyer for services provided by Seller prior
to Transfer or any other payments accruing to Seller for times
prior to Transfer shall be paid to Seller by Buyer upon
receipt.
(i)
Transition Related Expenses :
All transition related expenses, included in schedule 2.4(a)
herein, or determined after closing, due to either Buyer or Seller
will be added or deducted from the Holdback amount at
Settlement.
(d)
Allocation of Purchase Price .
The Purchase Price shall be allocated at or after final Settlement
by mutual agreement. A reasonable allocation of consideration will
be determined by Buyer and must thereafter be approved by the
Seller. Each Party shall file its respective income tax returns on
the basis of the allocations agreed upon , and no Party shall
thereafter take a return position inconsistent with such
allocation. Each Party shall fully comply with the reporting
requirements of Section 1060 of the Code relating to allocation
rules for certain asset acquisitions, and will use this allocation
as the basis for completing IRS Form 8594, which the Parties shall
each file with the IRS on a timely basis.
4.4
Other Adjustments and Prorations .
Any real estate, personal property, and other taxes, utilities,
rents, charges, license charges and other assessments that inure to
the benefit of both Seller and Buyer, if any, shall be prorated at
the Closing between Seller and Buyer based on the actual number of
days applicable to pre-Closing and post-Closing use.
4.5
Closing and Settlement .
(a)
Closing shall take place via fax transmission on February 28, 2007.
Monies will be paid via electronic transfer of funds. Subsequent to
closing original signed documents will be exchanged via overnight
mail. All conditions set forth in Sections 7.1 and 7.2 must have
been satisfied or waived (other than conditions with respect to
actions that the respective Parties will take at Closing and
Settlement ) Closing may also occur on a date and at a location as
the Parties may mutually determine. (the “Closing
Date”).
(b)
Transfer of Assets and Assumption of Liabilities shall take place
as of midnight on the 28th of February, 2007. This shall be the
effective time and date for all matters regarding valuation of
revenues, assets and liabilities pursuant to this
transaction.
(c)
Settlement of the consideration payable under the terms of this
Agreement (“Settlement”) shall occur no later than ten
(10) days after the end of the Holdback Period. If any amount is in
dispute on the Settlement date, the amount not in dispute shall be
paid and the disputed amount shall be held in escrow at Smith River
Bank pending resolution of the dispute with interest accruing for
the benefit of the party receiving such sum or any portion
thereof.
ARTICLE 5.
REPRESENTATIONS
AND WARRANTIES OF SELLER
In
order to induce Buyer to enter into this Agreement, Seller
hereby represents and warrants to Buyer that the statements
contained in this ARTICLE 5 are, to the best of Seller’s
knowledge based upon diligent investigation and reliable
information, correct and complete as of the date of this
Agreement and will be correct and complete on the Closing Date
(as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this
ARTICLE 5, except where a specific date is
indicated).
5.1
Organization, Power and Authority .
Seller is a corporation duly organized, validly existing and in
good standing under the laws of Wyoming. Seller is duly qualified
to do business as a foreign corporation and is in good standing
under the laws of Idaho and Montana. Seller has full corporate and
other power and authority to conduct its business and to own its
property, as now conducted and owned.
5.2
Authorization, etc. Seller
will have full corporate and other power and authority to execute
and deliver this Agreement and all Ancillary Agreements required to
be executed and delivered by it under this Agreement, and to
perform the terms of this Agreement and of all such other Ancillary
Agreements. The execution, delivery and performance of this
Agreement and the Ancillary Agreements by Seller shall, on the
Closing Date, have been duly and validly authorized by all
necessary action in respect thereof on the part of Seller
(including, without limitation, all approvals required by
Seller’s Shareholders and Board of Directors), and no other
corporate action on the part of Seller or its shareholders will
then be necessary. This Agreement and the Ancillary Agreements each
represent the legal, valid and binding obligation of Seller,
enforceable against each of them in accordance with their
respective terms.
5.3
No Legal Bar .
The execution and delivery by Seller of this Agreement does not,
and the consummation of the transactions contemplated hereby will
not, violate, conflict with, result in a breach of, result in or
constitute a default (or an event which, with notice or lapse of
time or both, would constitute a default) under, or result in the
cancellation or unilateral modification or amendment of, or
accelerate the performance required by, or result in a right of
termination or acceleration under, or result in the creation of any
Lien upon any of the Acquired Assets under any of the terms,
conditions or provisions of (i) the Articles of Incorporation
or Bylaws of Seller, (ii) any contract, except for such
defaults (or rights of termination, cancellation or acceleration)
as to which requisite waivers or consents have been or will be
obtained by Seller prior to the Closing or the obtaining of which
has been waived by Buyer in writing, or (iii) any order, writ,
judgment, injunction, decree, award, ruling, statute, rule or
regulation applicable to Seller or any of the Acquired Assets or
the Business. There is no requirement applicable to Seller to make
any filing with, or to obtain any permit, authorization, consent,
waiver or approval of any governmental authority or any third party
as a condition to the lawful consummation of the transactions
contemplated by this Agreement or the transfer to Buyer of
ownership of the Acquired Assets.
5.4
No Defaults .
Seller is not in violation of, or in default under, (a) any
provision of the Articles of Incorporation or Bylaws of Seller, as
amended to the Closing Date, (b) any Governmental Authorization,
(c) any law, rule or regulation, (d) any order, judgment,
writ, injunction, award, decree, determination, license or permit
by which Seller or its assets or properties is or may be bound, or
(e) any contract relating to or otherwise affecting the operation
of the Business to which Seller is a party. To the best knowledge
of Seller, no event or circumstance has occurred and is continuing
which with the giving of notice or the passage of time or both
would constitute a default, or would cause any of the
representations and warranties contained in (a), (b), (c), (d) or
(e) above not to be true and correct. Except with respect to the
Qwest Contracts, there are no renegotiations of, attempts to
renegotiate, or outstanding rights to renegotiate any Business
Contract.
5.5
Governmental Authorizations .
All Governmental Authorizations necessary to permit Seller to own
the Acquired Assets and operate the Business as it is now being
operated are in full force and effect.
5.6
RESERVED
5.7
Absence of Certain Changes or Events .
Since October 16, 2006, Seller has carried on the Business in the
ordinary course, consistent with past practice, and has
not:
(a)
suffered (involuntarily or voluntarily (or received notice of any
event or occurrence which, with our without notice or the passage
of time or both, could reasonably result in) any adverse changes in
the condition (financial or otherwise), results of operations,
earnings, properties, business, or prospects which individually or
in the aggregate have been materially adverse to the Acquired
Assets or the condition (financial or otherwise), results of
operations, earnings, properties, business or prospects of the
Business other than historically consistent growth and churn in the
number of subscribers experienced by Seller;
(b)
incurred or paid any indebtedness, obligation, or other liability
(contingent or otherwise), except for indebtedness, obligations and
liabilities incurred or paid solely for the benefit of the Business
in the ordinary course of business, and there does not exist a set
of circumstances that could reasonably be expected to result in any
such indebtedness, obligation or liability;
(c)
changed the manner in which it collects its accounts
receivable;
(d)
failed to pay any material account payable or indebtedness when due
or otherwise delayed the payment of any material account payable
outside the ordinary course of business;
(e)
changed the payment terms with its vendors;
(f)
guaranteed any liabilities or obligations of any other
Person;
(g)
created, permitted or allowed any Lien of any kind with respect to
the Acquired Assets or any of its other properties, businesses or
assets;
(h)
made any capital expenditure or commitments for any addition to
property, plant or equipment, or entered into any service
agreement, capital or operating lease, or any other agreement
related to the operation of the Business, which exceeds $5,000 in
the aggregate;
(i)
suffered or received notice of any damage, destruction or loss in
excess of $5,000 (whether or not covered by insurance) to any
FF&E or properties;
(j)
suffered any strike, collective bargaining negotiation, dispute,
grievance, controversy or other similar labor trouble;
(k)
sold, transferred, licensed, leased or removed from its premises
any of its tangible assets except in the ordinary course of
business or sold, assigned, licensed, transferred or granted any
rights under or with respect to any of its Intellectual
Property;
(l)
executed, amended, or terminated any material Business Contract to
which it is or was a party or by which the Acquired Assets are or
were bound or affected; amended, terminated or waived any of its
rights thereunder; or received notice of termination, amendment, or
waiver of any agreement or any material rights
thereunder;
(m)
disclosed any confidential information or trade secrets of Seller
to any third party (other than Buyer);
(n)
made any change in its accounting methods or policies;
or
(o)
entered into any agreement or made any commitment to take any of
the types of action described in subsections 5.8(a) through 5.8(p)
through above.
5.8
Title Conveyed; Condition and Sufficiency of Assets
.
(a)
Seller is the sole and exclusive owner of all right, title and
interest in and to the Acquired Assets and has good and valid title
to the Acquired Assets, free and clear of Liens. Seller has
complete and unrestricted power and the unqualified right to sell,
assign, transfer and deliver the Acquired Assets to Buyer, and at
the Closing Buyer will acquire good and valid title to the Acquired
Assets, free and clear of all Liens (including, without limitation,
obligations under capital leases). Except for the Excluded Assets
and for such assets or properties as have been consumed or
otherwise disposed of in the ordinary course of business, the
Acquired Assets constitute all of the assets, properties and
property rights used by Seller to carry on the Business as
presently conducted and as proposed to be conducted and include all
tangible and intangible assets relating to the Business. None of
the Excluded Assets are essential for the operation of the Business
in the manner in which it is currently operated.
(b)
Each item of tangible personal property included in the Acquired
Assets has been maintained in accordance with normal industry
practice, is in good operating condition and repair (subject to
normal wear and tear), and is suitable for the purposes for which
it is presently used;
provided that,
other than warranties provided by manufacturers and included in the
Acquired Assets transferred to Buyer under the terms of this
Agreement, and, except as otherwise agreed to or represented to
Buyer in this or other documents executed in consummation of this
transaction, SELLER SHALL HAVE NO WARRANTY, OBLIGATION OR LIABILITY
TO BUYER WITH RESPECT TO ANY NON-COMFORMANCE OR DEFECT IN ANY
TANGIBLE PROPERTY INCLUDED IN THE ACQUIRED ASSETS SOLD PURSUANT TO
THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO: (A) ANY IMPLIED
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE;
(B) ANY IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE,
COURSE OF DEALING OR USAGE OF TRADE; BUYER
IS PURCHASING THE TANGIBLE PROPERTY INCLUDED IN THE ACQUIRED ASSETS
“AS IS”.
5.9
Accounts Receivable .
To the best of Seller’s knowledge, except with respect to
accounts billed pursuant to USAC governmental procedures, the
Active Accounts Receivable are reflected properly on the books and
records of Seller, are valid receivables arising only from bona
fide transactions, are subject to no setoffs or counterclaims, are
collectible, and will be collected in due course at their recorded
amounts, subject only to actual bad debts experienced. Seller is
not aware of any material vendor/payor relationship where the
vendor/payor has given notice of any inability to pay accounts
receivable according to the terms thereof.
5.10
Tax Matters .
(a)
All federal, state, local and foreign Tax returns (including,
without limitation, consolidated, combined or unitary income Tax
returns) required to be filed by or on behalf of Seller or with
respect to Taxes for which Seller may have any liability have been
accurately and correctly prepared and duly and timely filed. All
Taxes due and payable by Seller on or before Closing have been
paid. No Tax return relating to Seller is on extension, and to the
knowledge of Seller there is no audit examination, deficiency or
refund litigation or matter in controversy with respect to any
Taxes that might result in a determination adverse to Seller or the
Business except as adequately reserved against in its financial
statements. Seller
has sufficient assets in reserve, not including the Acquired
Assets, to fully pay any taxes, interest thereon, and/or penalties
which may or will become due to any taxing authority.
5.11
No Litigation .
Except as disclosed on Schedule 5.11, there are no actions, suits,
claims, investigations or proceedings pending or, to the knowledge
of Seller, threatened in any court or by or before any governmental
agency to which Seller is a party or otherwise affecting the
Acquired Assets or the Business as now or heretofore conducted by
Seller. The foregoing notwithstanding, there is no action, suit,
claim, investigation or proceeding which is pending or threatened
which questions the validity or propriety of this Agreement or any
action taken or to be taken by Seller in connection with this
Agreement. Seller is not subject to any judicial injunction or
mandate or any quasi-judicial order or quasi-judicial restriction
directed to or against it as a result of its ownership of the
Acquired Assets or its conduct of the Business as now or heretofore
conducted by it, and no governmental agency has at any time
challenged or questioned in writing, or commenced or given notice
of intention to commence any investigation relating to, the legal
right of Seller to conduct the Business or any part thereof as now
or heretofore conducted by it.
5.12
Insurance .
Seller shall, until the Closing Date, maintain insurance policies
against casualty losses on all Acquired Assets to the extent such
coverage is available and in such amounts as Seller deems
appropriate. There are no disputes with the underwriters of any
such policies and all premiums due, payable and invoiced have been
paid. There are no pending or, to the best knowledge of Seller,
threatened terminations or premium increases with respect to any of
such policies and Seller has no knowledge of any condition or
circumstance applicable to the Business which might result in such
termination or increase. To the best of Seller’s knowledge,
Seller is not in default with respect to any provisions or
requirements of any such policy and Seller has not failed to give
any notice or present any claim thereunder in due and timely
fashion.
5.13
Compliance with Laws .
(a)
Selle r,
to the best of its knowledge,
(i)
is in compliance with all laws, rules, regulations, ordinances,
reporting and licensing requirements and orders (including, without
limitation, all equal opportunity, safety (including the
Occupational Safety and Health Act of 1970), environmental and
zoning laws, rules and regulations) applicable to the Business or
any Business Employees (because of such employees’ activities
on behalf of it), and no condition exists which with or without
notice or passage of time or both shall cause Seller not to remain
in such compliance; and
(ii)
has received no notification from any agency or department of
federal or state or local government asserting that Seller is not
in compliance (or in the past has not been in compliance) with any
of the statutes, regulations, ordinances or standards of such
governmental authority, or threatening to revoke or not renew any
license, franchise, permit or other Governmental Authorization, and
is subject to no agreement or written understanding with any
governmental authority with respect to its assets or the
Business.
5.14
Vendor Contracts
(a)
Schedule 5.16(a) is complete
list of all telecommunications circuit and service contracts to be
assumed or executed by Buyer.
(b)
Buyer agrees to maintain the existing contractual relationship with
Contact Communications by executing new contracts for the existing
services for a minimum of one year following the date of Transfer.
These contracts are material elements of this sale and shall be
executed at Closing. True copies of all such contracts and other
vendor contracts to be assumed by Buyer have been provided to
Buyer.
(c)
All such vendor contracts are assignable to Buyer (with or without
consent) and, upon assignment to and assumption by Buyer pursuant
to this Agreement, will be valid, binding and in full force and
effect and enforceable by Buyer in accordance with their respective
terms.
5.15
RESERVED
5.16
RESERVED
5.17
No Guaranties .
None of the obligations or liabilities of Seller are guaranteed by
any Person, nor has Seller guaranteed the obligations or
liabilities of any other Person.
5.18
No Bankruptcy .
Seller is not insolvent or the subject of Bankruptcy or any similar
proceeding.
5.19
RESERVED
5.20
Misstatements and Omissions .
No representation or warranty made by the Seller in this Agreement
or the Ancillary Agreements, or in any statement, certificate,
exhibit, schedule, or other instrument furnished to Buyer pursuant
hereto, or in connection with the transactions contemplated by this
Agreement, to the best of Seller’s knowledge contains any
untrue statement of material fact or omits to state a material fact
necessary to make the statements contained herein or therein not
misleading and to the best of Seller’s knowledge there is no
fact or condition which has not been disclosed
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