|
ASSET PURCHASE AGREEMENT
BY AND AMONG
FRONTRUNNER NETWORK SYSTEMS CORP.
CAPITAL GROWTH SYSTEMS, INC.
AND
WILLIAMS INTERACTIVE MEDIA INC.
DATED FEBRUARY 19, 2008
TABLE OF CONTENTS
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ARTICLE
I PURCHASE AND SALE
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1
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1.1
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Purchased
Assets.
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1
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1.2
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Excluded
Assets
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2
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1.3
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Assumed
Liabilities.
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3
|
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1.4
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Excluded
Liabilities
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3
|
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ARTICLE
II CLOSING
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3
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2.1
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Closing
Date.
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3
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2.2
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Purchase
Price
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4
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2.3
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Payment
of Purchase Price
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6
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2.4
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Allocation
of Purchase Price
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6
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2.5
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Release
of Escrow Amount; Post-Closing Payment
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6
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2.6
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Buyer’s
Additional Deliveries.
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7
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2.7
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Seller’s
Deliveries.
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7
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ARTICLE
III REPRESENTATIONS, WARRANTIES AND COVENANTS
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8
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3.1
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Representations,
Warranties and Covenants of Seller and
Shareholder.
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8
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3.2
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Representations
and Warranties of Buyer.
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14
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ARTICLE
IV ADDITIONAL AGREEMENTS
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14
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4.1
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Sales
and Transfer Taxes; Tax Settlements.
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14
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4.2
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Discharge
of Liabilities.
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14
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4.3
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Operation
of Business Prior to Closing
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14
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4.4
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Further
Assurances.
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15
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4.5
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Access
to Books and Records; Audit
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15
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4.6
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Consents
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15
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4.7
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Change
in Representations and Warranties
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15
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4.8
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Employment
by Buyer
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15
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4.9
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Liability
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16
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4.10
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Post-Closing
Payment
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16
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4.11
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Over
90-Day A/R Amount
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16
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4.12
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Cafeteria
Plan
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16
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4.13
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401(k)
Plan
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17
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ARTICLE
V CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
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17
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5.1
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No
Misrepresentation or Breach of Covenants, Representations and
Warranties.
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17
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5.2
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No
Restraint or Litigation.
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17
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5.3
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Necessary
Consents.
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17
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5.4
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Corporate
Approvals
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17
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5.5
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Escrow
Agreement
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17
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5.6
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Liens
Releases
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18
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5.7
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Tax
Clearance
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18
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ARTICLE
VI CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER AND
SHAREHOLDER
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18
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6.1
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No
Misrepresentation or Breach of Covenants and
Warranties.
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18
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6.2
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No
Restraint or Litigation.
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18
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6.3
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Escrow
Agreement
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18
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ARTICLE
VII
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18
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SURVIVAL
OF REPRESENTATIONS, WARRANTIES AND COVENANTS AND
INDEMNIFICATION
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18
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7.1
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Survival
of Representations, Warranties, Covenants and
Indemnities
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18
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7.2
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Indemnification
by Seller and Shareholder
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19
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7.3
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Indemnification
by Buyer
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19
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7.4
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Limitation
on Indemnification
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20
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7.5
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Notice
of Indemnification Claims
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20
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7.6
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Miscellaneous
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21
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7.7
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Payment
of Indemnification
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22
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7.8
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Exclusivity
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22
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ARTICLE
VIII TERMINATION
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22
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8.1
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Methods
of Termination.
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22
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8.2
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Procedure
Upon Termination.
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23
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ARTICLE
IX GENERAL PROVISIONS
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23
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9.1
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Definitions.
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23
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9.2
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Public
Announcement.
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26
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9.3
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Notices.
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26
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9.4
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Successors
and Assigns.
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27
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9.5
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Entire
Agreement; Amendments.
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27
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9.6
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Interpretation.
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27
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9.7
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Waivers.
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27
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9.8
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Expenses.
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27
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9.9
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Partial
Invalidity.
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28
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9.10
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Execution
in Counterparts.
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28
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9.11
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Governing
Law.
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28
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9.12
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Currency
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28
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9.13
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Recitals.
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28
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SCHEDULES AND EXHIBITS
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Real
and Personal Property Leases
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Schedule
1.1(f)
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Contracts
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Schedule
1.1(g)
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Employment
Agreements
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Schedule
1.1(h)
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Equipment
and Personal Property
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Schedule
1.1(n)
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Intellectual
Property
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Schedule
1.2
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Excluded
Assets
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Schedule
2.4
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Allocation
of Purchase Price
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Schedule
3.1(j)
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Employees
and Independent Contractors
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Schedule
3.1(m)
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Real
Property
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Schedule
3.1(o)
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Product
Warranties
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Schedule
3.1(p)
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Contracts
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Schedule
3.1(q)
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Welfare
Plans
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Schedule
3.1(r)
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Customers
and Suppliers
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| |
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Exhibit
A
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Escrow
Agreement
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Exhibit
B
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Assumption
Agreement
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Exhibit
C
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Bill
of Sale
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Non-Competition
Agreement
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Exhibit
E
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Glendale
Heights Sublease
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ASSET PURCHASE AGREEMENT
THIS
ASSET PURCHASE AGREEMENT (the “
Agreement ”),
is entered into this 19th day of February, 2008 by and among
Williams Interactive Media Inc., a New York corporation
(“
Buyer ”),
Frontrunner Network Systems Corp., a Delaware corporation
(“
Seller ”)
and Capital Growth Systems, Inc., a Florida corporation
(“
Shareholder ”).
RECITALS
A.
Seller
is in the business of installing and servicing
customer-premise voice, data and video networks
(“
Business ”).
B.
Seller
desires to sell to Buyer and Buyer desires to purchase from
Seller, substantially all of Seller’s tangible and
intangible assets of the Business, all as further detailed in
this Agreement and on the terms and the conditions set forth
herein.
C.
Shareholder
is the sole owner of all the issued and outstanding stock of
Seller and will benefit from the consummation of the
transactions contemplated by this Agreement, and Buyer has
conditioned its willingness to enter into this Agreement upon
Shareholder assuming certain obligations under this
Agreement.
NOW,
THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, Buyer, Seller and
Shareholder, intending to be legally bound, hereby agree as
follows:
ARTICLE I
PURCHASE AND SALE
1.1
Purchased Assets .
Upon
the terms and subject to the conditions of this Agreement, on the
Closing Date (as hereinafter defined), Seller shall sell, transfer,
assign, convey and deliver to Buyer, and Buyer shall purchase from
Seller, on a going concern basis, free and clear of any liens,
claims, charges, security interests, mortgages, pledges, easements,
conditional sales or other title retention agreements, defects in
title, covenants or other restrictions of any kind (
“Encumbrances” ),
all of Seller’s right, title and interest of in, to and under
all of the tangible and intangible assets of the Business (except
for the Excluded Assets as defined in
Section 1.2) ,
including, but not limited to, the following:
(a)
all
accounts receivable of the Business;
(b)
all
inventory of the Business
(c)
the
real property and personal property leases listed on
Schedule 1.1(c) ;
(d)
all
prepaid expenses that are usable and consumable in the
ordinary course of Business;
(e)
all
prepaid deposits of the Business;
(f)
all
customer and other contracts, including, but not limited to,
those listed and described on
Schedule 1.1(f) (the
“
Contracts ”);
(g)
all
employment agreements listed and described on
Schedule 1.1(g) ;
(h)
the
equipment and other personal property listed on
Schedule 1.1(h) ;
(i)
all
rights of Seller pursuant to any express or implied
warranties, representations or guarantees made by suppliers
furnishing goods or services to the Business;
(j)
all
governmental and other permits, licenses, approvals,
certificates of inspection, authorizations relating to the
Business;
(k)
all
books, records, files and documents relating to the Business,
including, but not limited to, the original Contracts, books
of account, ledgers, journals, sales and purchase records,
credit information, cost and pricing information, business
reports, plans and projections and all other correspondence,
data and information, financial or otherwise, in any format
and media whatsoever;
(l)
all
claims, causes of action and rights of recovery relating to
the Business;
(m)
all
phone numbers, facsimile numbers or other similar property
associated with the Business;
(n)
all
patents, copyrights and trademarks (and all applications for
any of the foregoing), if any, and all licenses, processes,
products, apparatus, formulas, trade secrets, know-how,
discoveries, inventions, (including conceptions of
inventions), if any, product drawings, computer programs, and
design, manufacturing, engineering and other technical
information used or useful in the Business including, but not
limited to, the name “Frontrunner Network Systems,
Inc.” and any related or similar trade names,
trademarks, service marks, logos, e-mail addresses, web sites,
URLs, domain names or assumed names to the extent they
incorporate such name and the intellectual property identified
on
Schedule 1.1(n) (collectively,
the “
Intellectual Property ”)
;
(o)
all
insurance proceeds (including applicable deductibles,
co-payments or self insured requirements) arising in
connection with damage to the assets of the Business being
purchased by Buyer occurring prior to the Closing Date, to the
extent not expended for the repair or restoration of the
assets of the Business being purchased by Buyer;
and
(p)
all
goodwill associated with the Business (the
assets described in this
Section 1.1 being
collectively the “
Purchased Assets ”).
1.2
Excluded Assets .
The Purchased Assets shall not include any of Seller’s rights
to any tax refunds or tax settlements with any taxing authority
relating to any tax period ending on or prior to the Closing Date
(“
Tax Settlements ”),
and those assets listed and described on
Schedule 1.2 (the
“
Excluded Assets ”).
1.3
Assumed Liabilities .
Buyer
shall assume and perform all liabilities and obligations associated
with the Contracts and prepaid deposits, all account payables of
Seller listed on the Purchase Price Schedule (as defined in
Section 2.2(c) ),
Seller’s remaining debt obligation to Nortel Networks Inc.
(the “
Nortel Networks Debt ”)
evidenced by a the promissory note dated October 1, 2007 with a
face amount of $711,687.50 and amount outstanding of $591,634.42 as
of the date of this Agreement (the “
Assumed Liabilities ”)
and Seller’s obligations under the Cafeteria Plan (as
hereinafter defined) and Seller’s 401(k) Plan in accordance
with
Sections 4.12 and 4.13 .
(a)
all
liabilities in respect of all indebtedness of Seller to all
Persons, other than the accounts payable of Seller listed on
the Purchase Price Schedule and the Nortel Networks
Debt;
(b)
all
liabilities for all taxes, duties, levies, assessments and
other such charges, including any penalties, interests and
fines with respect thereto, payable by Seller to any
Governmental Agency, including, without limitation, any taxes
in respect of or measured by the sale, consumption or
performance by Seller of any product or service prior to the
Closing Date and any tax or any similar obligations in respect
of all remuneration payable to all Persons employed in the
Business prior to the Closing Date;
(c)
all
liabilities for salary, bonus, vacation pay and other
compensation and all liabilities under employee benefit plans
of Seller relating to employment of all Persons in the
Business prior to the Closing Date;
(d)
all
severance payments, damages for wrongful dismissal and all
related costs in respect of the termination by Seller of the
employment of any employee of the Business who does not accept
Buyer’s offer of employment referred to in
Section 4.8 ;
and
(e)
all
liabilities for claims for injury, disability, death or
workers’ compensation arising from or related to
employment in the Business prior to the Closing Date
(collectively, the “
Excluded Liabilities ”).
ARTICLE II
CLOSING
2.1
Closing Date .
Subject
to satisfaction of the conditions hereinafter set forth, the
closing shall be consummated on February 15, 2008, in Rochester,
New York or at such other place as shall be agreed upon in writing
by Buyer and Seller (the
“Closing” ).
The time and date on which the closing is actually held is
sometimes referred to herein as the
“Closing Date” .
2.2
Purchase Price .
(a)
Subject
to adjustment under
Section 2.2(c) ,
the purchase price for the Business and the Purchased Assets
(the
“Purchase Price” )
shall be the sum of (i) through (iv) below, less (v) and (vi)
below:
(i)
the
difference between (A) accounts receivable of Seller other
than those Seller accounts receivable that are in dispute by
customers of Seller on the Closing Date (with the amount of
such disputed accounts receivable being hereinafter referred
to as the “
Reserved A/R Amount ”),
and (B) trade accounts payable of Seller, each as valued as of the
Closing Date (the “
Accounts Balance ”),
provided that if the Accounts Balance is a negative number, it
shall serve to reduce the Cash Purchase Price (as hereinafter
defined) due at the Closing; plus
(ii)
the
assumption by Buyer of the Nortel Networks Debt;
plus
(iii)
the
value of Seller’s Closing Date warehoused inventory,
valued at average cost, provided, that in no case shall Buyer
pay more than $50,000 for Seller’s warehoused inventory
(the “
Inventory Amount ”);
plus
(iv)
the
dollar value of payroll and employment expenses from the
Closing Date through February 22, 2008 for exempt employees
(the “
Exempt Payroll Expenses ”);
(v)
the
actual cost of Seller’s Closing Date work in progress
inventory and staged inventory (the “
WIP Amount ”);
less
(vi)
the
difference, but not less than zero, between: (A) the outgoing
cash obligation for materials related to the Closing Date
Advanced Billings Liability (as hereinafter defined) and (B)
the incoming cash from the accounts receivables and amounts
scheduled to be invoiced related to the Closing Date Advanced
Billings Receivable (as hereinafter defined) (the
“
Net Advanced Billings Amount ”).
As used herein, the term “
Closing Date Advanced Billings Liability
”
means the sum of (1) the Closing Date accounts payable balance for
materials and equipment associated with the Closing Date Advanced
Billings balance, (2) amounts yet-to-be invoiced by suppliers as of
the Closing Date for materials and equipment associated with the
Closing Date Advanced Billing balance, and (3) the expected Seller
cost for material and equipment yet-to-be purchased as of the
Closing Date associated with the Closing Date Advanced Billings
balance. As used herein, the term “
Closing Date Advanced Billings Receivable
”
means the sum of (1) the Closing Date accounts receivable balance
associated with the Closing Date Advanced Billings balance, and (2)
amounts yet-to-be invoiced by Seller to its customers as of the
Closing Date associated with the Closing Date Advanced Billings
balance; less
(vii)
$60,000
for potential out-of-pocket expenses with respect to existing
maintenance contracts (the “
Maintenance Amount ”).
As used herein, the term “
Cash Purchase Price ”
means the Accounts Balance, Inventory Amount, the WIP Amount, the
Exempt Payroll Expenses less the Maintenance Amount and less the
Net Advanced Billings Amount.
(b)
The
Cash Purchase Price due at the Closing shall be reduced by the
following amounts to be held in escrow (the “
Escrow Holdback ”)
and paid out to the parties in accordance with the terms set forth
herein:
(i)
the
dollar value of Seller accounts receivable which are more than
90 days past due which do not otherwise constitute a part of
the Reserved A/R Amount (the “
Over 90-day A/R Amount ”);
and
(ii)
one-third
of the dollar value of Seller accounts receivable which are
greater than 60 days past due and less than 91 days past due
which do not otherwise constitute a part of the Reserved A/R
Amount (the “
60-90 Day A/R Amount ”).
(c)
Five
(5) days before the Closing, Seller shall deliver to Buyer a
schedule containing the estimated Closing Date Accounts
Balance, Inventory Amount, WIP Amount, the Exempt Payroll
Expenses and the Net Advanced Billing Amount (the
“
Purchase Price Schedule ”),
and a schedule containing the estimated Closing Date Reserved A/R
Amount (the “
Reserved A/R Schedule ”)
and a schedule containing the estimated Closing Date Over 90-day
A/R Amount and the 60-90 Day A/R Amount (the “
Escrow Holdback Schedule ”)
each as determined in good faith by Seller.
(d)
Within
thirty (30) days after the Closing, Seller shall deliver to
Buyer an actual Purchase Price Schedule (the “
Actual Schedule ”)
as of the Closing Date as determined in good faith by Seller. If on
or before ten (10) days following receipt of the Actual Schedule,
Buyer does not send written notice to Seller of an Objection to
amounts set forth on the Actual Schedules then on such tenth day
(or the next succeeding business day if the tenth day is not a
business day):
(i)
Buyer
shall pay to Seller the amount by which the Actual Schedule
exceeds the Purchase Price Schedule delivered in accordance
with
Section 2.2(b) ;
(ii)
Seller
shall pay to Buyer the amount by which the Purchase Price
Schedule delivered in accordance with
Section 2.2(b) exceeds
the Actual Schedule.
(i)
and (ii) above are referred to as a “
Post-Closing Payment Obligation ”.
(e)
If
on or before the ten (10) days following receipt of the Actual
Schedule, Buyer sends to Seller written notice of an objection
to any amounts set forth on the Actual Schedule with such
objection specifying which item Buyer objects to, then the
parties shall have five days to resolve the disputed amount.
If the parties are unable to resolve the disputed amount, then
the amounts that are not in dispute shall be paid, disbursed
and/or deposited in accordance with
Section 2.2(d) and
those that are disputed shall be submitted to an independent
appraiser mutually selected by the parties. The determination of
the appraiser as to the disputed amount shall be binding on the
parties. Disputed amounts that are resolved pursuant to the
agreement of the parties or pursuant to an independent appraiser
are hereinafter referred to as a “
Resolved Amount ”.
Within two business days of the resolution of an Objection as set
forth herein, the Resolved Amount shall be paid in accordance
with
Section 2.2(d) .
2.3
Payment of Purchase Price .
At the Closing, Buyer shall pay to Seller in immediately available
funds, the Cash Purchase Price as set forth on the Purchase Price
Schedule less the Escrow Holdback as set forth on the Escrow
Holdback Schedule and Buyer shall deposit the Escrow Holdback into
an escrow account with AztecAmerica Bank as escrow agent (the
“
Escrow Agent ”)
in accordance with that certain Escrow Agreement in the form
of
Exhibit A .
2.4
Allocation of Purchase Price .
The
Purchase Price shall be allocated among the Purchased Assets in
accordance with
Schedule 2.4 .
Seller and Buyer jointly shall complete and separately file Form
8594 with their respective federal income tax returns for the tax
year in which the Closing Date occurs in accordance with such
allocation and guidelines, and neither Seller nor Buyer shall,
without the written consent of the other, take a position on any
tax return or before any Governmental Agency charged with the
collection of any such tax, or in judicial proceeding, that is in
any manner inconsistent with the terms of such
allocation.
2.5
Release of Escrow Amount; Post-Closing Payment
.
The parties agree to send joint written instructions to the Escrow
Agent to release amounts from the Escrow Holdback and for other
post-Closing payments in accordance with this
Section 2.5 as
follows:
(a)
With
respect to the Over 90-day A/R Amount, if prior to February
28, 2009, either party shall receive any payment with respect
to those accounts constituting the Over 90-Day A/R Amount,
such party shall promptly notify the other of the name of the
customer and the amount received (the “
Paid Over 90-day A/R Amount ”).
On the last day of each calendar quarter and on February 28, 2009,
the parties shall send written notice (the “
Over 90-day A/R Notice ”)
to the Escrow Agent to pay to Seller from the Escrow Holdback any
Paid Over 90-day A/R Amounts received by Buyer during such calendar
quarter (or during such month, with respect to the February 28,
2009 notice) and to pay to Buyer from the Escrow Holdback any Paid
Over 90-day A/R Amounts received by Seller during such calendar
quarter (or during such month, with respect to the February 28,
2009 notice). Any Over 90-day A/R Amount remaining as part of the
Escrow Holdback after payment of the amounts set forth in the
February 28, 2009 Over 90-day A/R Notice shall be paid from the
Escrow Amount to Buyer.
(b)
With
respect to the 60-90 Day A/R Amount, if prior to February 28,
2009, either party shall receive any payment any payment with
respect to those accounts constituting the 60-90 Day A/R
Amount, such party shall promptly notify the other of the name
of the customer and the amount received (the “
Paid
60-90 Day A/R Amount ”).
If Seller receives the Paid 60-90 Day A/R Amount, then it shall
promptly pay to Buyer two-thirds of such Amount and the parties
shall promptly send written notice (the “
60-90 Day A/R Notice ”)
to the Escrow Agent to pay to Buyer from the Escrow Holdback an
amount equal to one-third of the Paid 60-90 Day A/R Amount. If
Buyer receives the Paid 60-90 Day A/R Amount, then the parties
shall send the 60-90 Day A/R Notice to the Escrow Agent instructing
the Escrow Agent to pay to Seller from the Escrow Holdback an
amount equal to one-third of the Paid 60-90 Day A/R Amount. Any
60-90 Day A/R Amount remaining as part of the Escrow Holdback at
February 28, 2009 shall be paid from the Escrow Holdback to
Buyer.
(c)
If
prior to February 28, 2009, Buyer shall receive any payment
with respect to those receivables set forth on the Reserved
A/R Schedule, Buyer shall immediately notify Seller of such an
occurrence and shall, within three (3) days of receipt
thereof, pay to Seller the amount received with respect to
such receivable.
2.6
Buyer’s Additional Deliveries .
Subject
to fulfillment or waiver of the conditions set forth in
Article V ,
at Closing, Buyer shall deliver to Seller the Escrow Agreement duly
executed by Buyer, the sublease for Seller’s Glendale Heights
facility, in the form of
Exhibit E ,
an assumption agreement executed by Buyer, Nortel Networks and
Seller with respect to Buyer’s obligation to assume the
Nortel Networks Debt (in a form reasonable to Seller), and such
other documents as Seller may reasonably request or as may be
otherwise necessary to evidence and effect the sale, assignment,
transfer, conveyance and delivery of the Business and Purchased
Assets to Buyer, including the Assumption Agreement in the form
of
Exhibit B .
2.7
Seller’s Deliveries .
Subject
to fulfillment or waiver of the conditions set forth in
Article VI ,
at Closing, Seller shall deliver to Buyer all the
following:
(a)
the
Escrow Agreement, duly executed by Seller;
(b)
a
Bill of Sale in the form of
Exhibit C ,
duly executed by Seller;
(c)
certificates
of title or origin (or like documents) with respect to any
equipment included in the Purchased Assets for which a
certificate of title or origin is required in order to
transfer title;
(d)
any
consents, waivers or approvals obtained by Seller with respect
to the Purchased Assets or the consummation of the
transactions contemplated by this Agreement;
(e)
the
Non-Competition Agreement in the form of
Exhibit D ,
duly executed by Seller and Shareholder;
(f)
the
original promissory note evidencing the Nortel Networks Debt;
and
(g)
such
other bills of sale, assignments and other instruments of
transfer or conveyance as Buyer may reasonably request or as
may be otherwise necessary to evidence and effect the sale,
assignment, transfer, conveyance and delivery of the Purchased
Assets to Buyer.
In
addition to the above deliveries, Seller shall take all steps
and actions as Buyer may reasonably request or as may
otherwise be necessary to put Buyer in actual possession or
control of the Business and the Purchased Assets.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
3.1
Representations, Warranties and Covenants of Seller and
Shareholder .
Seller
and Shareholder, jointly and severally, represent and warrant to
Buyer as of the date of this Agreement as follows and covenant that
from the date of this Agreement until the Closing Date, that they
will not perform any act or permit any action to be taken or
condition to exist which would make any of the following
representations and warranties untrue in any respect, and confirm
that Buyer is relying upon the accuracy of each representation and
warranty in connection with the purchase of the Business as a going
concern and completion of the transactions contemplated by this
Agreement:
(a)
Corporate Status .
Seller is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Seller and
Shareholder each has taken all actions necessary to authorize the
execution, delivery and performance of its obligations
hereunder.
(b)
Authority; Due Execution .
Seller and Shareholder each has full power and authority to
execute, deliver and perform this Agreement and all of the other
documents contemplated hereby to be executed by it (each an
“
Ancillary Agreement ”).
This Agreement has been duly executed and delivered by Seller and
Shareholder and this Agreement is, and each of the Ancillary
Agreements upon execution and delivery will be, legal, valid and
binding obligations of Seller and Shareholder enforceable in
accordance with their terms (subject to bankruptcy and similar laws
affecting creditors’ rights and principles of
equity).
(c)
Effect of Agreement .
Neither the execution and delivery of this Agreement or the
Ancillary Agreements nor the consummation of any of the
transactions contemplated hereby or thereby nor compliance with or
fulfillment of the terms, conditions and provisions hereof or
thereof will conflict with, result in a breach of the terms,
conditions or provisions of, or constitute a default, or result in
the creation or imposition of any Encumbrance upon any of the
Purchased Assets under (i) the articles of incorporation or bylaws
of Seller or Shareholder, (ii) any agreement, instrument, right,
restriction, license or obligation to which Seller or Shareholder
is a party or any of the Purchased Assets is subject or by which
Seller or Shareholder is bound, (iii) any judgment, order or decree
of any state, federal or local court or tribunal to which Seller or
Shareholder is a party or any of the Purchased Assets is subject or
by which Seller or Shareholder is bound, or (iv) any federal or
state law affecting Seller, Shareholder or the Purchased
Assets.
(d)
Title to Purchased Assets .
Seller has good and marketable title to all of the Purchased
Assets, free and clear of all Encumbrances, with the exception of:
(i) the lien in favor of Hilco Financial, LLC (“
Hilco ”)
and (ii) the lien in favor of the holders of Two Year Term Notes,
as administered by Aequitas Capital Management, Inc. as successor
in interest to CGSI Term Note Servicer, Inc. (“
Aequitas ”).
Upon delivery to Buyer on the Closing Date of the instruments of
transfer contemplated by
Section 2.7 ,
and the lien releases for the liens referenced in the preceding
sentence, Seller will hereby transfer to Buyer good and marketable
title to the Purchased Assets, subject to no Encumbrances, other
than any Encumbrances arising out of, or directly related to the
Nortel Networks Debt.
(e)
Taxes .
Except as
Schedule 3.1(e) ,
Seller has, in respect of the Business, accurately and timely filed
all tax returns and reports which are required to be filed and has
timely paid in full all foreign, federal, state and local taxes
(including interest and penalties) which have become due. Except as
described above, Seller is not a party to any pending action or
proceeding, nor, to Seller’s Knowledge, is any action or
proceeding threatened, by any Governmental Agency for assessment or
collection of taxes, and no claim for assessment or collection of
taxes, has been asserted against Seller. To Seller’s
Knowledge, no events have occurred which could result in the
imposition on Buyer of any transferred liability for any taxes,
penalties or interest due or to become due from Seller.
Seller
has not granted any extension or waiver of the statute of
limitations period applicable to any tax return, which period
(after giving effect to such extension or waiver) has not yet
expired. Seller has not entered into any agreement or arrangement
with any Governmental Agency with regard to the tax liability of
Seller. All
monies required to be withheld by Seller from any employee,
independent contractor, creditor, shareholder or other third party
for any and all taxes have been collected or withheld, and either
paid to the proper Governmental Agency or set aside in accounts for
such purpose.
(f)
Proceedings; Compliance with Laws .
Except as set forth on
Schedule 3.1(f) ,
there are no lawsuits, claims, proceedings or investigations
pending and there is no outstanding orders, notices, writs,
injunctions or decrees of any court, government or Governmental
Agency against or affecting Seller, the Purchased Assets or the
Business or, to Seller’s Knowledge, threatened against or
affecting Seller in respect of the Purchased Assets or the Business
nor, to Seller’s Knowledge, is there any basis for any of the
same. Except as set forth on
Schedule 3.1(f) ,
there is no lawsuit, claim or proceeding pending in which Seller is
the plaintiff or claimant which relates to the Purchased Assets or
the Business. The Purchased Assets and their uses comply in all
material respects with all applicable federal, state and local laws
affecting them and the Business, and Seller has complied in all
material respects with all federal, state and local laws which are
applicable to the Purchased Assets or the Business.
(g)
Licenses, Permits .
Seller owns, holds or possesses all licenses, franchises, permits,
privileges, immunities, approvals and other authorizations in all
applicable jurisdictions necessary or appropriate to conduct the
Business, and the conduct of the Business on the date hereof is
being conducted in all material respects in compliance with all
applicable laws and regulations.
(h)
No Omissions .
None of the representations or warranties of Seller or Shareholder
contained herein, and none of the information referred to in
this
Article III ,
and none of the other information or documents furnished or to be
furnished to Buyer by Seller pursuant to the terms of this
Agreement, is false or misleading in any material respect or omits
to state a fact necessary to make the statements herein or therein
not misleading in any material respect. To each of Seller’s
and Shareholder’s Knowledge, there is no fact which adversely
affects or in the future is likely to adversely affect the
Purchased Assets or the Business in any material respect which has
not been set forth or referred to in this Agreement.
(i)
Condition of Assets .
The tangible assets being purchased by Buyer pursuant hereto are
being sold on an as-is basis in their as-is condition. To
Seller’s Knowledge, these assets are in working condition as
of the date hereof. No other Person owns or has any right to occupy
or use any of the assets used in the Business. The Purchased Assets
constitute all of the assets necessary to operate and conduct the
Business as currently operated and conducted by
Seller.
(j)
Employees and Independent Contractors .
Set forth on
Schedule 3.1(j) is
a list of all employees and independent contractors of Seller
providing services in support of the Business on the Closing Date
(including all Persons currently on short or long-term disability),
along with the amount of the current annual salaries and total
compensation paid or due for services to each of them for the most
recent fiscal year end and the year to date, accrued vacation and
sick days, and a full and complete description of all arrangements
(oral and written) with regard to each of them with respect to
compensation in effect on the Closing Date or agreed to prior to
the Closing Date with effect thereafter, including, without
limitation, for any all pay, wages, commission, bonus, severance,
stay-pay, change in control, profit sharing or similar arrangement.
To Seller’s Knowledge, no executive, key employee, or group
of employees has any plans to terminate employment with Seller. To
Seller’s Knowledge, there is no attempt to organize or
establish a labor union or employee association for the employees
of Seller. Any and all wages and associated payroll costs and
similar charges or amounts with respect to all of the employees
owing by Seller will have been paid in full up to the Closing
Date.
(k)
Intellectual Property .
Schedule 1.1(n) lists
all the Intellectual Property used in the Business. Except as set
forth in
Schedule 1.1(n) ,
the Intellectual Property is legally and beneficially owned
exclusively by Seller and is used exclusively in the Business and
is not the subject of any pending or to Seller’s Knowledge
threatened proceeding for opposition, cancellation, reexamination,
revocation or rectification and to Seller’s Knowledge, there
are no facts or matters which might give rise to any such
proceeding. To Seller’s Knowledge, its use of the
Intellectual Property is not infringing upon or otherwise violating
the rights of any third party in or to such Intellectual Property,
and no proceedings have been instituted against, and no notices
have been received by, Seller that are presently outstanding
alleging that the use of the Intellectual Property infringes upon
or otherwise violates any rights of a third party in or to such
Intellectual Property. The consummation of the transactions
contemplated by this Agreement will not result in the loss of or
impairment of any rights in the Intellectual Property. Except as
set forth in
Schedule 1.1(n) ,
no shareholder, director, officer or employee of Seller owns,
directly or indirectly, in whole or in part, any right in the
Intellectual Property that Seller has used or the use of which is
necessary for the Business as now conducted.
(l)
Insurance .
Seller has delivered to Buyer true, correct and complete copies of
all policies of insurance to which Seller is a party or under which
the Business or any officer or director of the Business, is or has
been covered at any time within the 3 years immediately preceding
the date of this Agreement.
(m)
Real Property .
Schedule 3.1(m) contains
a true, complete and correct list of the Current Real Property.
Seller does not now own and has not in the past owned any real
property. Except as set forth on
Schedule 3.1(m) ,
(a) Seller enjoys peaceful and undisturbed possession of the
Current Real Property, (b) to Seller’s Knowledge none of the
Current Real Property is subject to any commitment for sale or use
by any Person other than Seller, (c) the Current Real Property and
each user thereof is in material compliance with all Governmental
Requirements (including without limitation all zoning, subdivision
and other applicable land use ordinances and by-laws and all health
and safety laws and regulations) and all existing covenants,
conditions, restrictions and easements, and the current use of the
Current Real Property does not constitute a non-conforming use
under the applicable zoning ordinances and by-laws. There are no
condemnation, eminent domain or expropriation proceedings pending,
or to the Knowledge of Seller contemplated or threatened, against
the Current Real Property or any part thereof, and Seller
know
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