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Exhibit 10.1
ASSET PURCHASE
AGREEMENT
dated as of February 28,
2007
by and among
DIGITAL COMMUNICATION SERVICES,
INC.,
the Shareholders of Digital
Communication Services, Inc.,
and
J&J LEASING PARTNERSHIP, a
Texas General Partnership,
the partners of J&J Leasing
Partnership,
and
BCI COMMUNICATIONS,
INC.
THIS ASSET PURCHASE AGREEMENT, dated as of
February 28, 2007 (this "Agreement"), is made by and among DIGITAL
COMMUNICATION SERVICES, INC, a Texas corporation, J&J LEASING
PARTNERSHIP, a Texas general partnership, (collectively, the
"Companies"), Jim Labenz, an individual domiciled in Texas, Jeff
Reis, an individual domiciled in Texas, who are collectively the
sole shareholders and partners of the Companies (the
"Shareholders"), and BCI COMMUNICATIONS, INC, a Delaware
corporation ("Purchaser"), and the wholly owned subsidiary of
Berliner Communications, Inc. ("Berliner").
WHEREAS, the Companies desire to sell to
Purchaser, and Purchaser desires to purchase from the Companies,
all of the Companies’ right, title and interest to the
Companies’ Transferred Assets (as defined herein), which
include the Companies’ business and various assets, and in
connection therewith Purchaser is willing to assume the
Companies’ Assumed Liabilities (as defined herein);
and
WHEREAS, as an inducement and condition to
Purchaser’s entering into this Agreement, the Shareholders,
who are now employees of the Companies, are, concurrently with the
execution and delivery of this Agreement, entering into employment
agreements with Purchaser (the "Employment Agreements");
and
NOW, THEREFORE, in consideration of the foregoing
and the respective representations, warranties, covenants,
agreements and conditions hereinafter set forth, and intending to
be legally bound hereby, the parties hereto agree as
follows:
ARTICLE I
SALE AND PURCHASE OF ASSETS
AND ASSUMPTION OF LIABILITIES
1.1 Certain
Definitions Related to the Companies’ Assets and
Liabilities . For the purposes of this Agreement, the
following terms shall have the meanings ascribed to them
below:
(a) "Companies
Retained Assets" shall mean the assets and properties of the
Companies listed on the Companies’ schedule of retained
assets (the "Companies’ Retained Assets Schedule") attached
to this Agreement.
(b) "Companies
Transferred Assets" shall mean all the assets and properties of the
Companies (i) including its business and various assets, (ii)
including all of the assets and properties listed on the
Companies’ schedule of enumerated assets attached to this
Agreement (the "Companies Schedule of Enumerated Assets"), but
(iii) excluding the Companies Retained Assets.
(c) "Companies
Retained Liabilities" shall mean all of the debts, liabilities and
obligations of the Companies, excluding the Companies Assumed
Liabilities, but including (i) those debts, liabilities and
obligations listed on, or related to those listed on, the schedule
of the Companies’ retained liabilities (the "Companies
Retained Liability Schedule") attached to this Agreement, and (ii)
those debts, liabilities and obligations arising under or related
to any Employee Benefit Plans (as defined herein) of the Companies,
except for liabilities relating to Employee Benefit Plans that are
to be assumed by or made the express responsibility of Purchaser
pursuant to the express terms of Section 4.5.
(d) "Companies
Assumed Liabilities" shall mean only the items listed on the
Companies’ schedule of assumed liabilities attached to this
Agreement (the "Companies Schedule of Assumed
Liabilities"),
(e) "Initial Cash
Payment" shall mean (A) $2,000,000, less the amount equal to the
Companies Assumed Liabilities as defined herein.
(f) "Promissory
Note" shall mean a note in the amount of $1,750,000, with a term of
three (3) years, payable quarterly and bearing interest at a fixed
rate equal to eight and one-quarter percent (8.25%) per annum. The
Promissory Note shall be substantially in the Form of the
Promissory Note attached to this Agreement as Exhibit A, and will
be secured by land and buildings purchased from J&J Leasing
Partners as evidenced by a Deed of Trust substantially in the form
attached hereto as Exhibit B.
(g) "Warrant" shall mean a warrant to purchase
500,000 shares of BCI Communications, Inc Common Stock, par value
.00002, at an exercise price of $0.73 per share. The Warrant shall
be substantially in the form of the Warrant attached to this
Agreement as Exhibit C.
1.2 Sale and
Purchase of the Companies Transferred Assets .
(a) Upon the terms
and subject to the conditions contained herein, concurrent with the
execution and delivery of this Agreement, the Companies shall sell,
transfer, assign, convey and deliver to Purchaser all of the
Companies’ right, title and interest in all of the Companies
Transferred Assets, in each case free and clear of all liens,
mortgages, pledges, encumbrances, security interests, charges or
other interests of other persons of every kind whatsoever, except
for Permitted Liens (as defined herein).
(b) Concurrently
with the execution and delivery of this Agreement, the Companies
will deliver to Purchaser (i) such general warranty deeds, bills of
sale with covenants of general warranty, endorsements, assignments,
consents and other good and sufficient instruments of sale,
transfer, assignment and conveyance, in form and substance
satisfactory to Purchaser and its counsel, as shall be effective to
vest in Purchaser good and marketable title to, and a valid and
enforceable legal interest in, each of the Companies Transferred
Assets, (ii) all of the Companies’ contracts, contract
amendments, commitments, leases, books and records and all other
information related to the Companies Transferred Assets, (iii) all
financial and general corporate records of the Companies, and (iv),
such other documents, certificates and instruments as Purchaser may
reasonably request. In addition, the Companies and the Shareholders
shall use their best efforts to put Purchaser into actual
possession and operating control of all the Companies Transferred
Assets.
(c) Concurrently
with such sale, transfer, assignment, conveyance and delivery of
the Companies Transferred Assets, upon the terms and subject to the
conditions of this Agreement and in reliance upon the
representations, warranties and covenants of the Companies and the
Shareholders contained herein, Purchaser shall purchase and accept
all of the Companies’ right, title and interest, including
but not limited to any rights, claims and causes of actions against
others, whether or not yet asserted, in the Companies Transferred
Assets.
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(d) Concurrently
with the execution and delivery of this Agreement and as an initial
purchase price for the Companies Transferred Assets, Purchaser
shall pay to the Companies, by wire transfer and in immediately
available funds, the Initial Cash Payment, as well as deliver the
Promissory Note, the Deed of Trust, and the Warrant (the "Combined
Initial Payment").
1.3 Assumption of
the Companies Assumed Liabilities . Concurrently with the
execution and delivery of this Agreement, Purchaser shall assume
and shall agree to pay, perform and discharge, as and when due, the
Companies Assumed Liabilities and shall deliver to the Companies
instruments of assumption or other documents in form and substance
reasonably satisfactory to the Companies and its counsel to
evidence such agreement and assumption.
1.4 Contingent
Purchase Price Adjustment Related to Operating
Results
(a) Purchaser agrees
to pay to James Labenz and Jeffrey Reis an additional contingent
purchase price of up to $1,000,000 (the "Aggregate Contingent
Purchase Price") in three annual installments of $333,333.33 (each
of which, the "Installment Sum"), if and only if (i) certain
performance objectives related to the combined operating results of
the Digital Communication Services, Inc. business and the now
existing operations of the Berliner Communications, Inc. business
located in Texas (together the "Texas Business") are met and (ii)
Messrs. Labenz and Reis are employed by Purchaser at the end of
each Contingent Purchase Price Payment Period unless terminated
"Without Cause" as set forth below in Section 1.4(b). The Texas
Business operating results will be measured at the end of the
twelve month period beginning on the first day of March 2007, and
on each of the subsequent two anniversaries thereof (each such
twelve-month period a "Contingent Purchase Price Payment Period").
At the end of each Contingent Purchase Price Payment Period, the
Purchaser will prepare financial statements for such period
reflecting the operating results of the Texas Business (the "Actual
Results"). Purchaser will compare the Actual Results to the
projected results presented on the Schedule of Projected Financial
Results attached hereto as Exhibit D (the "Projected Results").
Provided that both the revenue and EBITDA (as defined below)
reflected on the Actual Results are no less than 80% of the
Projected Results for the relevant Contingent Purchase Price
Payment Period, the Purchaser will pay the Installment Sum to James
Labenz and Jeffrey Reis within 30 days following the end of the
relevant Contingent Purchase Price Payment Period (the "Contingent
Payment Date"). If either gross revenue or EBITDA, calculated
according to GAAP, reflected on the Actual Results are less than
80% of the Projected Results, no portion of the Contingent Purchase
Price shall be paid for such period and the right to earn the
Installment Sum from that particular Contingent Purchase Price
Payment Period will be forever lost. "EBITDA" shall mean earnings
before interest, taxes, depreciation and amortization as shown on
the statement of operations for each Contingent Purchase Price
Payment Period. A termination event that occurs after the
Contingent Purchase Price Payment Period but before the Contingent
Payment Date shall not effect Purchaser’s obligation to make
the payment on any earned Installment Sum.
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(b) Notwithstanding the terms of Section 1.4
above, no Contingent Purchase Price will be due or payable if both
Messrs. Labenz and Reiss are no longer employed by the Purchaser on
the last day of the Contingent Purchase Price Period, unless such
termination resulted from a termination "Without Cause" as defined
in their respective Employment Agreements with the Purchaser. If
either one of Messrs. Labenz or Reiss is no longer employed by the
Purchase on the last day of the Contingent Purchase Price Period
(and the termination was not a termination "Without Cause" as
defined in the his Employment Agreement), and the other is still
employed, then one-half of the Contingent Purchase Price shall be
paid to the individual who is still employed with the Purchaser and
nothing shall be paid to the other.
1.5 License to Use
Digitcom Name. For a period of one year from the date hereof, the
Companies grant to Purchaser a limited, exclusive license to use
the name "Digitcom" for or on invoices, letterhead, signage, or
other marketing, press, administrative or other uses as may be
required in the ordinary course of business.
ARTICLE II
REPRESENTATIONS AND
WARRANTIES
OF THE COMPANIES AND THE SHAREHOLDERS
Except as set forth in the applicable sections of
the Companies’ Disclosure Schedule attached hereto (the
"Disclosure Schedule"), it being agreed that (a) a disclosure in
any one section of such Disclosure Schedule shall be deemed
disclosed in any other section of such disclosure if the relevance
of such disclosure to such other section is reasonably apparent,
and (b) mere inclusion of an item in the Disclosure Schedule as an
exception to a representation or warranty shall not be deemed an
admission by the Companies or the Shareholders that such item
constitutes a material exception or a fact, event or circumstance
that would reasonably be expected to have Material Adverse Effect
(as defined herein), the Companies and the Shareholders, jointly
and severally, represents and warrants to Purchaser as
follows:
2.1 Corporate
Organization . The Companies are corporations and/or
partnerships duly organized, validly existing and in good standing
under the laws of their state of incorporation and/or formation and
have full corporate and/or partnership power and authority to own
or lease their properties and assets and to carry on their business
as it is presently being conducted. The Companies are duly
qualified or licensed in the State of Texas are in good standing in
every jurisdiction where the character of its properties owned or
leased or the nature of its activities makes such qualification or
license necessary.
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2.2 No
Subsidiaries . The Companies have no subsidiaries and no
interest, direct or indirect, in any corporation, partnership,
joint venture, limited liability company, business trust or other
business entity. In connection with the transactions contemplated
by this Agreement, Purchaser shall incur no liability or obligation
of any nature for any liability, debt, cost, expense or other
obligation of any corporation, partnership, joint venture, limited
liability company, business trust or other business entity (other
than those disclosed in this Agreement and the schedules hereto) in
which the Companies have an interest, direct or indirect.
2.3 Certificate
of Incorporation; Bylaws .
(a) True and
complete copies of the Certificate of Incorporation of Digital
Services Communications, Inc. and the Partnership Agreement of
J&J Leasing Partnership (the "Certificates of Incorporation")
are included in Section 2.3(a) of the Disclosure
Schedule.
(b) A true and
complete copy of the Bylaws of Digital Services Communications,
Inc. (the "Bylaws") are included in Section 2.3(b) of the
Disclosure Schedule.
2.4 Authorization . Each of the Shareholders and/or Partners
and the Companies has the requisite power (corporate or otherwise),
capacity and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by
the Board of Directors of the Companies and/or the General Partners
and by the shareholders of the Companies, and no additional
proceedings (corporate or otherwise) on the part of the Companies,
their Board of Directors, any of its shareholders and/or General
Partners or, except as could not materially diminish the value to
Purchaser of the transactions contemplated by this Agreement, any
other person are necessary to authorize the execution, delivery and
performance of this Agreement and the consummation of the
transactions contemplated hereby. This Agreement has been duly
executed and delivered and constitutes the valid and binding
obligations of each of the Shareholders and/or General Partners the
Companies, enforceable against each of the Shareholders, General
Partners and the Companies in accordance with its terms.
2.5 Capitalization .
(a) All Outstanding
Target Shares are validly issued, fully paid and nonassessable and
were not issued in violation of any preemptive or similar right.
All of the Outstanding Target Shares are owned by the
Shareholders.
2.6 Noncontravention; Consents; Filings . The execution,
delivery and performance of this Agreement and the consummation by
the Shareholders, General Partners and the Companies of the
transactions contemplated hereby and compliance by the
Shareholders. General Partners and the Companies with the
provisions hereof do not and will not (a) conflict with or violate
any provision of the Certificate of Incorporation or Bylaws of
either of the Companies, (b) require any filing with, or the
permit, authorization, consent or approval of, any court,
arbitrator or arbitral tribunal, administrative agency or
commission or other governmental or regulatory authority or agency
(a "Governmental Entity"), (c) conflict with or violate any order,
writ, injunction, decree, statute, rule or regulation applicable
to, binding upon or enforceable against either the Shareholders or
the Companies or any of their respective properties or assets, (d)
constitute a breach of any duty owed by the Shareholders or any
other person acting in a representative or fiduciary capacity with
respect to any shareholder or any person with any beneficial
interest in either of the Companies or any shareholder of the
companies, or (e) create any lien, charge, encumbrance, security
interest, claim or right of others on or with respect to any
Transferred Asset, or (f) materially diminish the value of the
transactions contemplated by this Agreement to Purchaser, result in
a violation or breach of, or constitute (with or without notice or
lapse of time or both) a default or give rise to any right of
termination, amendment, cancellation or acceleration under, or
result in the creation or imposition of any lien, charge,
encumbrance, security interest, claim or right of others of
whatever nature upon any property or assets of any of the
Shareholders or the Companies under, any note, bond, mortgage,
indenture, lease, license, contract, agreement, or other instrument
or obligation to which either the Shareholders or the Companies are
a party or by which any of the Shareholders, the Companies or any
of their respective properties or assets may be bound.
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2.7 Financial
Statements . Section 2.7(a) of the Disclosure Schedule sets
forth the audited balance sheets of the Companies as at December
31, 2005, and 2004, and the unaudited financial statements through
the month ended December 31, 2006, and the related audited
statements of operations, stockholders’ equity or deficit and
cash flows for the periods then ended. The balance sheet of the
Companies as of December 31, 2006 is referred to in this Agreement
as the "2006 Balance Sheet." Such financial statements (i) are true
and complete in all material respects, and (ii) have been prepared
in accordance with GAAP applied on a consistent basis. Each of the
balance sheets of the Companies referred to in this Section 2.7
reflects, as of the dates thereof, all claims against and all debts
and liabilities of the Companies, fixed or contingent, as at the
date thereof, required to be shown thereon under GAAP, and the
related statements of operations, stockholders’ equity or
deficit and cash flows fairly present the results of operations,
the stockholders’ equity or deficit and cash flows of the
Companies for the respective periods indicated.
2.8 Books and
Records . All accounts, books and ledgers of the Companies
have been properly and accurately kept and completed in all
material respects, and there are no material inaccuracies or
material discrepancies of any kind contained or reflected therein.
The Companies have none of its records, systems controls, data or
information recorded, stored, maintained, operated or otherwise
wholly or partly dependent on or held by any means (including any
electronic, mechanical or photographic process, whether
computerized or not) which (including all means of access thereto
and therefrom) are not under the exclusive ownership (excluding
licensed software programs) and direct control of the
Companies.
2.9 No
Undisclosed Liabilities . As of the date of the 2006 Balance
Sheet, except as set forth in Section 2.9 of the Disclosure
Schedule, the Companies have no debt, liability or obligation of
any nature (absolute, accrued, contingent or otherwise) that is not
fully reflected on or reserved against in the 2006 Balance
Sheet.
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2.10 Interim
Changes . Except as set forth in Section 2.10 of the
Disclosure Schedule, since the date of the 2006 Balance Sheet, the
Companies have been operated only in the ordinary course of
business consistent with past practice in all respects, and the
Companies have not:
(a) suffered any
changes, nor has there occurred or arisen any events, facts,
circumstances or conditions, that have had or could reasonably be
expected to have, either singly or in the aggregate, a material
adverse effect on the business, operations, condition (financial or
otherwise), properties, liabilities, client relations, or prospects
of the Companies or on any Transferred Assets listed on the
Schedule of Enumerated Assets (a "Material Adverse Effect") or to
materially diminish the value to Purchaser of the transactions
contemplated hereby;
(b) made any capital
expenditures which are more than $20,000 individually or $50,000 in
the aggregate;
(c) employed,
engaged or entered into any new contract with or amended any
existing contract for the employment of, any person by the
Companies or increased the compensation or benefits of any employee
of the Companies;
(d) sold, assigned,
transferred, conveyed, leased or otherwise disposed of or agreed to
sell, assign, transfer, convey, lease or otherwise dispose of any
portion of its properties or assets, except in the ordinary course
of business and consistent with past practice in all
respects;
(e) suffered any
damage, destruction or loss of property related to the Companies,
whether or not covered by insurance;
(f) declared, paid
or set aside for payment any dividend or other distribution
(whether in cash, stock or property or any combination thereof),
directly or indirectly, in respect of the Companies’ capital
stock or other securities;
(g) made any change
in its accounting principles or methods;
(h) written down the
value of any inventory (including write-downs by reason of
shrinkage or mark-down) or assets or written off as uncollectible
any notes or accounts receivable, except for such write-downs or
write-offs in the ordinary course of business consistent with past
practice in all respects, nor suffered any change or experienced
any condition which would require any such write-down or
write-off;
(i) paid, loaned or
advanced any amount, other than advances to employees for travel
and entertainment expenses in the ordinary course of business and
consistent with past practice in all respects, or sold, transferred
or leased any properties or assets (real, personal or mixed,
tangible or intangible), other than properties or assets of nominal
value, to any of its employees, officers or directors or any
affiliate or associate of any of its employees, officers or
directors; or
(j) agreed, whether
in writing or otherwise, to take any action described in this
Section 2.10.
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2.11 Litigation . There is no action, suit or proceeding by
or before any Governmental Entity pending nor, to the Actual
Knowledge (as defined herein) of the Shareholders and the Companies
or which could have been discovered through reasonable
investigation, threatened, against or involving the Shareholders or
the Companies, or affecting any properties or assets of any of the
Shareholders or the Companies. Neither the Shareholders nor the
Companies are aware of any reasonable basis for any such claim,
action, suit, inquiry, proceeding or investigation. Neither the
Shareholders nor the Companies are subject to any order, writ,
injunction or decree which could reasonably be expected to impair
the ability of either the Shareholders or the Companies to
consummate the transactions contemplated hereby or diminish the
value of the transactions contemplated by this Agreement to
Purchaser.
2.12 No
Violation .
(a) The Companies
are not in violation or breach of, or in default under (and no
event has occurred which with notice or lapse of time or both would
constitute such a breach, violation or default or give rise to any
right of termination, amendment, cancellation or acceleration
under) any term, condition or provision of (i) the Certificate of
Incorporation or Bylaws of the Companies, (ii) any order, writ,
injunction, decree, statute, rule or regulation applicable to the
Companies or any of its properties, assets or business or (iii) any
note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument or obligation to which the Companies
are a party or by which the Companies or any of its properties or
assets may be bound.
(b) The Shareholders
and the Companies have obtained all permits, authorizations,
consents or approvals and made all notifications and applications
to Governmental Entities required under applicable law necessary to
conduct business as heretofore conducted which, if not obtained or
made, could reasonably be expected to (i) impair the ability of the
Shareholders or the Companies to consummate the transactions
contemplated hereby or (ii) in the aggregate have a Material
Adverse Effect on the business of the Companies or materially
diminish the value of the transactions contemplated by this
Agreement to Purchaser.
2.13 Title to
Properties; Encumbrances . Except as set forth in Section
2.6 of the Disclosure Schedule or in Section 2.15(a) of the
Disclosure Schedule with respect to Intellectual Property (as
defined herein), the Companies have good, marketable and valid
title to all Transferred Assets listed on the Schedule of
Enumerated Assets. Except as set forth in Section 2.6 of the
Disclosure Schedule or in Section 2.15(a) of the Disclosure
Schedule with respect to Intellectual Property, the Companies have
good, marketable and valid title to all Transferred Assets. Except
as set forth in Section 2.6 of the Disclosure Schedule or in
Section 2.15(a) of the Disclosure Schedule with respect to
Intellectual Property, all Transferred Assets are free and clear of
all title defects or objections, liens, claims, charges, security
interests or other encumbrances of any nature whatsoever. Upon the
consummation of the transactions contemplated by this Agreement,
the Companies will deliver, and Purchaser shall receive, good,
marketable and valid title to all Transferred Assets. With respect
to any real property transferred to Purchaser, such property is
held by J&J Leasing Partners free and clear of all liens,
rights of way, easements, restrictions, exceptions, variances,
reservations, covenants or other imperfections of title, if any,
that do not materially detract from the value of or materially
interfere with the present use of the property affected
thereby.
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2.14 Condition
and Sufficiency of Assets .
(a) Each of the
tangible Transferred Assets is in good condition (ordinary wear and
tear excepted) and is suitable for use in the business of the
Companies as such business has historically been
conducted.
(b) The
Companies’ schedule of Enumerated Assets contains,
(i) in Section
2.14(b)(i) thereof, a true and complete list of all real property
owned by the Companies or in which the Companies have an interest,
other than leases;
(ii) in Section
2.14(b)(ii) thereof, a true and complete list of all leases under
which the Companies lease any real property;
(iii) in Section
2.14(b)(iii) thereof, a true and complete list of all property
other than real property or Intellectual Property owned by
Companies, including but not limited to equipment, furniture and
machinery;
(iv) in Section
2.14(b)(iv) thereof, a true and complete list of all leases under
which the Companies lease any property other than real property
that is material to the Companies’ business;
(v) in Section
2.14(b)(v) thereof, a true and complete list of all contracts to
which the Companies are a party and that are material to its
business
(vi) in Section
2.14(b)(vi) thereof, a true and complete list of all Intellectual
Property (as defined herein) used by the Companies, including a
list of all trademarks, tradenames, service marks or service names
used by the Companies or in which the Companies have an
interest;
(vii) in Section
2.14(b)(vii) thereof, a true and complete list, as of the date
hereof, of all accounts receivable of the Companies, including,
with respect to each such account receivable, the amount due
thereunder to the Companies;
(viii) in Section
2.14(b)(viii) thereof, a true and complete list of the
Companies’ Material inventory, all consigned inventory, and a
general description of all inventory not deemed Material to the
satisfaction of Purchaser as of the date hereof;
(ix) in Section
2.14(b)(ix) thereof, a true and complete list of all insurance
policies under which the Companies are an insured person or
otherwise has a beneficial interest; and
(x) in Section
2.14(b)(x) thereof, a true and complete list of all governmental
and commercial licenses, permits, authorizations and otherwise
pertaining to the Companies’ business, both: 1) those that
the Companies currently have, or 2) those that are required to
conduct the Companies’ business in its ordinary course, and
an indication of whether or not such licenses are currently
effective, and
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(xi) in Section
2.14(xi) thereof, a true and complete list of all other assets or
properties of the Companies, of whatever nature, that are (A)
material to the business of the Companies, and (B) are not listed
elsewhere on the Companies’ Schedule of Enumerated
Assets.
(c) The Transferred
Assets comprise all of the Companies’ assets and properties
used in the conduct of its business and are sufficient to continue
to carry such business in the same manner in all respects as it has
historically been conducted by the Companies.
2.15 Intellectual
Property . Except as set forth in Section 2.15(a) of the
Disclosure Schedule, the Companies have all right, title and
interest in, or a valid and binding license to use, all
Intellectual Property (as defined herein) that is a part of the
Transferred Assets. Except as set forth in Section 2.15(a) of the
Disclosure Schedule, no claim of infringement or misappropriation
arising from the use of Intellectual Property that is part of the
Transferred Assets is or has been made or is or has been threatened
to be made in writing or, to the Best Knowledge of the Companies
and the Shareholders and General Partners, is or has been
threatened to be made orally against either of the Companies, and,
except as set forth in Section 2.15(a) of the Disclosure Schedule,
to the Best Knowledge of the Companies, the Shareholders and the
General Partners, the Companies are not infringing or
misappropriating any Intellectual Property of any other person or
entity in the Companies’ use of any Intellectual Property
that is part of the Transferred Assets. The Companies have granted
no license, franchise or permit in effect on the date hereof to any
person or entity to use any Intellectual Property that forms a part
of the Transferred Assets. As used herein, "Intellectual Property"
shall mean patents and patent rights, copyrights and copyright
rights, and other proprietary intellectual property, trade secrets,
and proprietary information, as well as all pending applications
for, and registrations rights of, any of the foregoing.
2.16 Leases . Section 2.16 of the Disclosure Schedule
contains a summary, accurate in all respects, of the terms of all
leases pursuant to which the Companies lease real property,
including but not limited to assignment rights and claims to such
property, whether or not asserted, or pursuant to which the
Companies lease personal property and which provide for lease
payments in excess of $10,000 during any twelve-month period. All
such leases are valid, binding and enforceable against the
Companies and, to the Actual Knowledge of the Shareholders and the
Companies, any other party thereto in accordance with their terms,
and are in full force and effect. There are no existing defaults by
the Companies thereunder, and the Companies are not in breach,
violation or default (and no event which with the giving of notice
or the passage of time or both would constitute such a breach,
violation or default or give rise to any right of termination,
amendment, renegotiation, cancellation or acceleration)
thereunder.
2.17 Bank
Accounts . Section 2.17 of the Disclosure Schedule sets
forth the names and locations of all banks, trust companies,
savings and loan associations and other financial institutions at
which the Companies maintain safe deposit boxes or accounts of any
nature and the names of all persons authorized to draw thereon,
make withdrawals therefrom or have access thereto.
2.18 Taxes
. (a) All Returns (as defined herein) required to be filed (taking
into account extensions) on or before the date hereof for Taxes (as
defined herein) properly attributable to periods ending on or
before the date hereof by, or with respect to any activities of, or
property owned by either of the Companies, have been or will be
filed in accordance with all applicable laws and are or, with
respect to Returns yet to be filed, will be, true, correct and
complete in all material respects as filed; all Taxes shown as due
on such Returns have been or will be timely paid; and reserves
reflected on the 2006 Balance Sheet are sufficient to cover all
Taxes (whether or not shown as due on any Return) accrued as of the
dates thereof, respectively, and, adjusted for the passage of time,
will be sufficient to cover all Taxes as of the date hereof; (b)
all Taxes required to be withheld by both Companies have been
withheld, and such withheld Taxes have either been duly and timely
paid to the proper Taxing Authorities (as defined herein) or set
aside in accounts for such purpose if not yet due; (c) no Return
filed by the Shareholders, General Partners or the Companies is
currently under audit by any Taxing Authority or is the subject of
any judicial or administrative proceeding, and to the Best
Knowledge of the Shareholders, General Partners and the Companies,
respectively, no Taxing Authority is threatening to commence any
such audit; (d) no Taxing Authority is now asserting against the
Companies any deficiency or claim for Taxes or any adjustment of
Taxes and no issue has been raised by any Taxing Authority in any
examination which, by application of the same or similar
principles, could reasonably be expected to result in a proposed
deficiency for any period not so examined; (e) the Companies are
not subject to or bound by any Tax sharing agreement (or other
arrangement or practice for the sharing of Taxes); (f) the
Companies have never been a member of a consolidated group within
the meaning of Section 1504 of the Code; (g) neither the
Shareholders nor the Companies have waived any statute of
limitations with respect to any Tax or agreed to any extension of
time for filing any Return that has not been filed, and neither the
Shareholders nor the Companies have consented to extend the period
in which any Tax may be assessed or collected by any Taxing
Authority; (h) there are no liens for Taxes (other than Taxes not
yet due) upon any of the assets of the Companies; (i) the Companies
have no liability under Treasury Regulation 1.1502-6 (or any
similar provision of state, local or foreign law) or any liability
as a transferee or successor, by contract or otherwise, for the
Taxes of any person other than the Companies; (j) all income tax
Returns for the Companies in respect of all years not barred by the
statute of limitations have heretofore been delivered by the
Companies to Purchaser and such Returns are true, correct, and
complete in all material respects, and all such Returns are listed
in Section 2.18 of the Disclosure Schedule; (k) there are no
outstanding powers of attorney enabling any party to represent the
Companies with respect to Tax matters; (l) no consent under Section
341(f) of the Internal Revenue Code of 1986, as amended (together
with the rules and regulations promulgated thereunder, the "Code")
has been filed with respect to the Companies; and (m) for all
relevant federal and state purposes, Digital Communication
Services, Inc. has been an S corporation at all times since
February 1, 1996.
-10-
2.19 Contracts
and Commitments .
(a) Section 2.19(a)
of the Disclosure Schedule sets forth a complete and accurate list
of all
(i) credit
agreements, notes, indentures, security agreements, pledges,
guarantees of or agreements to assume any such debt obligation of
others or similar documents relating to indebtedness for borrowed
money (including interest rate or currency swaps, hedges or
straddles or similar transactions) to which the Companies are a
party or by which an
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