ASSET PURCHASE AGREEMENT BY AND AMONG LEVEL 3 COMMUNICATIONS, LLC,Asset Purchase Agreement |
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Exhibit 10.20
EXECUTION VERSION
ASSET PURCHASE AGREEMENT
BY AND AMONG
LEVEL 3 COMMUNICATIONS, LLC,
ICG TELECOM GROUP, INC.,
and
ICG COMMUNICATIONS, INC.
Dated as of April 1, 2004
TABLE OF CONTENTS
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT , dated as of April 1, 2004 (“ Purchase Agreement ”), among Level 3 Communications, LLC, a Delaware limited liability company (“ Level 3 ” or the “ Buyer ”), ICG Communications, Inc. (“Parent”), a Delaware corporation, ICG Telecom Group, Inc., a Colorado corporation (the “ Company ” and, together with the Parent, the “ Sellers ”).
Recitals
WHEREAS , the Company is engaged in the Business (as defined in Article X hereof);
WHEREAS , upon the terms and subject to the conditions set forth herein, the Sellers desire to sell to the Buyer, and the Buyer desires to purchase from the Sellers, certain of the Sellers’ assets used or held for use in the conduct of the Business;
NOW, THEREFORE , in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth in this Purchase Agreement, and intending to be legally bound hereby, the parties hereto do hereby agree as follows.
SECTION 1.01 Sale and Purchase of the Acquired Assets .
Upon the terms and subject to the conditions of this Purchase Agreement, the Sellers shall sell, transfer, assign, convey and deliver to the Buyer (or Buyer’s designated assignee, as hereinafter provided), free and clear of any Encumbrances, and the Buyer shall purchase and acquire from the Sellers, all of their right, title to and interest in and to the following assets and properties (collectively, the “ Acquired Assets ”), as the same may exist on the date of conveyance thereof to Buyer:
(a) all Customer Contracts set forth on Schedule 1.01(a) (the “ Assumed Customer Contracts ”);
(b) all Numbers used by Sellers in the conduct of the Business, except for the Excluded Numbers, including, without limitation, all Numbers delineated on Schedule 1.01(b) , which Numbers shall be conveyed to Buyer through local number portability or “ LNP ,” or, at Buyer’s option, by assignment directly to Buyer (which assignment Sellers shall use all reasonable efforts to effect);
(c) the equipment delineated on Schedule 1.01(c) , which such equipment includes all of the network access servers, or NAS equipment, owned by Sellers and used, contemplated to be used, or held for use, solely in the Business (“ Purchased Equipment ”);
(d) subject to Section 1.05 , all accounts receivable arising from the Assumed Customer Contracts with respect to services provided on or after the Closing Date, including (i) all trade accounts receivable and other rights to payment from customers of the Sellers under the Assumed Customer Contracts and the full benefit of all security for such accounts or rights to payment, including all trade accounts receivable representing amounts receivable in respect of goods shipped or products sold or services rendered to customers of the Sellers under the Assumed Customer Contracts, (ii) all other accounts or notes receivable of the Sellers under the Assumed Customer Contracts and all deposits with respect to such accounts or notes receivable, (iii) any claim, remedy or other right related to any of the foregoing (“ Receivables ”), and (iv) reciprocal compensation, if any, with respect to each Number from and after the applicable Effective Date for such Number;
(e) all books and records to the extent related to the Acquired Assets (“ Books and Records ”), including, without limitation, client and customer lists and Records, referral sources, research and development reports and Records, production reports and Records, service and warranty Records, equipment logs, operating guides and manuals, environmental Records, financial and accounting Records, creative materials, advertising materials, promotional materials, studies, reports, correspondence and other similar documents and Records;
(f) all claims of Sellers against third parties arising on and after the Closing Date relating to the Acquired Assets or the Assumed Liabilities, whether choate or inchoate, known or unknown, contingent or noncontingent; and
The Acquired Assets shall include such other contracts or assets as requested by Buyer and which the Sellers and the Buyer reasonably determine are necessary for the Buyer’s operation of the Business after the Closing Date, as the Sellers and the Buyer may agree in writing by amendment to the schedules hereto.
SECTION 1.02 Excluded Assets .
Except as set forth in Section 1.01, none of the Sellers shall sell, transfer, assign, convey or deliver to the Buyer any of its right, title to or interest in or to any of its assets or properties (those assets and properties not conveyed by the Sellers shall be referred to herein, collectively, as the “ Excluded Assets ”). Excluded Assets are not part of the sale and purchase contemplated by this Purchase Agreement, are excluded from the Acquired Assets and shall remain the property of the Sellers after the Closing Date. Excluded Assets include, without limitation, the following:
(a) all assets that relate exclusively to any business of the Sellers other than the Business, and any other assets of any of the Sellers if such assets relate to any business other than the Business;
(b) any contract, agreement, or arrangement not expressly assumed by Buyer in writing;
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(c) all Customer Contracts except for Assumed Customer Contracts (the “ Excluded Customer Contracts ”), including, without limitation, those set forth on Schedule 1.02(c) ;
(d) the Sellers’ names and all related or associated trade names, trade name rights, trademarks, trademark rights, service marks and copyrights and all registrations and applications pending therefor;
(e) all cash, cash deposits, performance bonds, and other cash equivalents of the Sellers;
(f) subject to Section 1.05, all Receivables with respect to services provided under the Assumed Customer Contracts prior to the Closing Date;
(g) all equipment, gear, facilities, contracts and other rights (other than the Purchased Equipment, the Numbers and the Assumed Customer Contracts) held by Sellers and used to deliver services to customers under the Assumed Customer Contracts;
(h) all rights to refunds of Taxes paid by the Sellers;
(i) all Excluded Numbers;
(j) all reciprocal compensation payable with respect to each Excluded Number and with respect to each Retained Number until the applicable Effective Date of each such Retained Number; and
(k) all consideration received by, and all rights of, the Sellers pursuant to this Purchase Agreement.
SECTION 1.03 Limited Assumption of Liabilities .
Buyer is not acquiring or otherwise assuming any Liability of Sellers with respect to the Business or otherwise, except for any Liability under the Assumed Customer Contracts that arises from Buyer’s obligations under the Assumed Contracts on and after the Closing Date. Buyer shall assume and thereafter pay, perform and discharge, and shall from and after the applicable date of conveyance of the Acquired Assets indemnify, defend and hold the Sellers harmless from, any Liability under the Assumed Customer Contracts that arises from Buyer’s obligations under the Assumed Customer Contracts on and after the Closing Date (collectively, the “ Assumed Liabilities ”). Such indemnity by the Buyer shall survive the Closing.
SECTION 1.04 Excluded Liabilities .
(a) Notwithstanding the provisions of Section 1.03 or any other provision of this Purchase Agreement to the contrary, the Buyer shall not and does not assume, agree to pay, perform or discharge any of the Liabilities of the Sellers or the Business other than the Assumed Liabilities (those Liabilities not assumed by the Buyer shall be referred to herein, collectively, as the “ Excluded Liabilities ”). The Excluded Liabilities shall remain the sole responsibility of and shall be retained, paid, performed and discharged solely by the Sellers, and the Sellers shall from
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and after the Closing Date indemnify, defend and hold the Buyer harmless therefrom. Such indemnity by the Sellers shall survive the Closing.
(b) Excluded Liabilities shall include, without limitation:
(i) any Liabilities of the Sellers associated with or arising out of any business other than the Business;
(ii) any Liabilities with respect to the Business or otherwise incurred by any of the Sellers for goods or services provided prior to the Closing Date (including liabilities for service credits claimed under Assumed Customer Contracts relating to service issues experienced prior to the Closing Date);
(iii) any Liabilities for Taxes (regardless of whether such Taxes are reserved) owed or required to be remitted by any of the Sellers in respect of any periods prior to or after the date of conveyance of the Acquired Assets to Buyer;
(iv) any employee-related Liabilities, including, without limitation, any liability or obligation under any employee compensation plan or other arrangement or collective bargaining agreement or other labor contract associated with any employee of the Business or any Seller;
(v) any Liabilities of the Sellers arising under any credit agreement, credit facility, loan agreement or indenture;
(vi) any Environmental, Health and Safety Liabilities arising out of or relating to the operation of the Business by the Sellers or the current or former leasing, ownership or operation of real property by the Sellers in connection with the Business;
(vii) any Liabilities arising under or relating to any contract, arrangement or undertaking of the Sellers which is not an Assumed Customer Contract (including, but not limited to, the Excluded Customer Contracts);
(viii) any Liability with respect to any Accounts Payable of Sellers;
(ix) any Liabilities to indemnify, reimburse or advance amounts to any officer, director, employee, agent or Affiliate of either Seller;
(x) any Liabilities to distribute to any of the Sellers’ shareholders, or otherwise apply all or any part of the consideration received by the Sellers under this Purchase Agreement;
(xi) any Liability relating to or arising in respect of the ownership or operation of any Excluded Asset;
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(xii) any Liabilities of the Sellers under this Purchase Agreement or any other document executed by the Sellers in connection with any of the transactions contemplated by this Purchase Agreement; and
(xiii) any Losses or Liabilities arising from or relating to any claim or allegation brought by any stockholder of Parent in connection with or involving the transactions contemplated by this Purchase Agreement.
SECTION 1.05 Proration of Receivables .
(a) To the extent any Receivable under an Assumed Customer Contract relates in part to goods or services provided before the Closing Date and in part to goods or services provided after the Closing Date, each such Receivable (i) with respect to a customer that is invoiced at a flat rate based on number of ports used in the billing cycle, shall be proportioned as of 12:01 a.m., Mountain Time, on the Closing Date (the “ Proration Time ”), based on the number of calendar days in the relevant billing cycle to which the Receivable relates for which the Buyer, on the one hand, provided goods or services after the Proration Time, including the day of Closing (the “ Buyer’s Receivables ”), which shall be apportioned to the Buyer, and for which the Sellers, on the other hand, provided goods or services prior to the Proration Time, excluding the day of Closing, (the “ Sellers’ Receivables ”), which shall be apportioned to the Sellers, and (ii) with respect to a customer that is invoiced based on actual usage during the billing cycle, based on actual usage, pursuant to which usage by the customer before the Proration Time shall be Sellers’ Receivables and usage from and after the Proration Time shall be Buyer’s Receivables.
(b) Sellers shall bill customers with respect to Receivables that would be invoiced in April 2004 in accordance with its normal billing practices in the ordinary course of business only (i) for March 2004 port usage for customers invoiced based on actual usage and (ii) for March 2004 port fees for customers that are invoiced in arrears at a flat rate per port based on number of ports used. Buyer shall bill customers with respect to Receivables that would be invoiced in April 2004 for April 2004 port fees for customers that are invoiced in advance at a flat rate per port based on number of ports used. Buyer shall also bill customers with respect to Receivables that would be invoiced in May 2004 in accordance with its normal billing practices in the ordinary course of business (i) for April 2004 port usage for customers invoiced based on actual usage, (ii) for April 2004 port fees for customers that are invoiced in arrears at a flat rate per port based on number of ports used, and (iii) for May 2004 port fees for customers that are invoiced in advance at a flat rate per port based on number of ports used. The Sellers, on the one hand, and the Buyer, on the other hand, shall be entitled to collect and retain those funds so collected with respect to the Receivables for which it is obligated to bill customers pursuant to this Section 1.05(b), subject to adjustment of the Purchase Price in accordance with Sections 1.05(a) and 1.07.
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(c) From and after the Closing Date, (i) Buyer shall, within five (5) business days, remit to Sellers any monies, checks or instruments of payment received from customers that reference or otherwise relate to invoices sent by Sellers pursuant to Section 1.05(b) and (ii) Sellers shall, within five (5) business days, remit to Buyer any monies, checks or instruments of payment received from customers that reference or otherwise relate to invoices sent by Buyer pursuant to Section 1.05.
SECTION 1.06 Consents of Third Parties .
To the extent required by any Assumed Customer Contract and with respect to each Key Customer Contract, the Sellers shall seek the consent of the parties (other than the Sellers) to each such Assumed Customer Contract with respect to the assignment of such Assumed Customer Contract to the Buyer. Notwithstanding anything in this Purchase Agreement to the contrary, to the extent the assignment of any Assumed Customer Contract shall require, in the Buyer’s reasonable judgment, the consent of any party, this Purchase Agreement shall not constitute a breach thereof or create rights in others not desired by the Buyer. During the Closing Period, the Sellers covenant and agree that they shall each use commercially reasonable efforts to obtain written, unconditional and irrevocable consents to the assignment to the Buyer of each such Assumed Customer Contract from all parties (other than the Sellers) to such Assumed Customer Contract, (each such consent, which shall be in form and substance reasonably acceptable to Buyer, shall be referred to herein as a “ Third Party Consent ”). At the request of the Sellers, the Buyer shall use its commercially reasonable efforts to assist the Sellers in such undertaking.
SECTION 1.07 Purchase Price .
The Purchase Price is $35 million (“ Purchase Price ”), adjusted and payable as follows:
(a) Adjustments: The Purchase Price shall be adjusted (the “ Net Adjustment ”) in connection with the distribution of the Holdback pursuant to Section 1.07(c) as follows (as adjusted, the “ Adjusted Purchase Price ”):
(i) The Purchase Price shall be reduced by the amount of Buyer’s Receivables which are invoiced by Sellers, regardless of whether such Buyer’s Receivables are collected by Sellers.
(ii) The Purchase Price shall be increased by the amount of Sellers’ Receivables which are invoiced by Buyer regardless of whether such Sellers’ Receivables are collected by Buyer.
(iii) The Purchase Price shall be decreased by the amount of customer service credits and customer deposits assumed by Buyer.
(b) Closing Date Payment: All of the Purchase Price except $10 million (the “ Holdback ”) shall be paid by Buyer to the Company at Closing in immediately available funds by wire transfer to an account designated by Company to Buyer in writing prior to the Closing Date.
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(c) Holdback: The Holdback shall secure Sellers’ performance of this Purchase Agreement and the Seller Ancillary Agreements. In the event Buyer suffers a Loss, or reasonably believes that it will suffer, a Loss, Buyer shall have the right to offset the amount of such Loss (or Buyer’s reasonable estimate thereof) from the Holdback to the extent it is or believes it may reasonably be entitled to indemnification for such Loss under Article VIII of this Agreement. On the date three months after the Closing Date, Buyer shall pay Sellers $5 million of the Holdback (i) less any amount offset for Losses pursuant to Section 8.02(h) to the extent it is or believes it may reasonably be entitled to indemnification for such Losses under the terms of Article VIII of this Purchase Agreement, and (ii) further adjusted up or down to reflect the Net Adjustment, in immediately available funds by wire transfer to an account designated by Sellers to Buyer in writing prior thereto. On the date six months after the Closing Date, Buyer shall pay Sellers the remaining amount of the Holdback, (i) after adjustment pursuant to the prior sentence, (ii) less any additional amounts offset for Losses pursuant to Section 8.02(h), to the extent Buyer is or believes it may reasonably be entitled to indemnification for such Losses under the terms of Article VIII of this Purchase Agreement, and (iii) further adjusted up or down to reflect any additional Net Adjustment, in immediately available funds by wire transfer to an account specified by Sellers to Buyer in writing prior to the date thereof.
SECTION 1.08 Allocation of Purchase Price .
The Adjusted Purchase Price and other relevant items shall be allocated among the Acquired Assets in accordance with the rules of Section 1060 of the Code and Treasury Regulations thereunder. Such allocation shall be set forth on a schedule which shall be prepared jointly and in good faith by the Buyer and Sellers within 75 days following the payment of the Holdback. All allocations contained in such schedule shall be used by each party in preparing any filings required pursuant to Section 1060 of the Code or any similar provisions of state or local Law and all relevant Tax Returns, subject to adjustment to reflect (x) the Sellers’ selling expenses as a reduction of sales proceeds, and (y) the Buyer’s acquisition expenses as an addition to the Adjusted Purchase Price.
SECTION 1.09 The Closing .
(a) Subject to the terms and conditions of this Purchase Agreement, the closing of the transactions contemplated hereby (the “ Closing ”) shall take place as soon as practicable (but, in any event, within two business days) after the satisfaction or, if permissible, the waiver of the conditions set forth in Article VI hereof (other than conditions which by their terms are to be satisfied at the Closing) (the “ Closing Date ”), at the offices of Otten, Johnson, Robinson, Neff & Ragonetti, P.C., 950 Seventeenth Street, Suite 1600, Denver, Colorado, unless another date or place is agreed to in writing by the parties hereto.
(b) At the Closing, (i) Company shall deliver to the Buyer duly executed instruments of transfer and assignment of the Assumed Customer Contracts that, taken together with any necessary consents of third parties in connection with such transfer and assignment, will be sufficient to vest in the Buyer the interests in the Assumed Customer Contracts; (ii) Company
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shall convey such of the Numbers as it can through the consummation of any LNP arrangements which have, as of the Closing Date, been finalized; (iii) the Buyer shall deliver to Company duly executed instruments of assumption evidencing the assumption by the Buyer of the Assumed Customer Contracts in accordance with the terms of this Purchase Agreement; (iv) Company shall deliver to the Buyer duly executed instruments of transfer and conveyance of the Purchased Equipment; and (v) Company shall deliver to the Buyer duly executed instruments of transfer, assignment, and conveyance of all other Acquired Assets. The Buyer and Sellers shall bear equally the cost of any documentary, stamp, sales, excise, transfer, gross receipts or other Taxes (other than Income Taxes) payable in respect of the sale of the Acquired Assets. The Sellers shall, subject to the Buyer’s review and consent, which consent shall not be unreasonably withheld, pay such Taxes to the applicable Taxing authority and prepare and file all Tax Returns with respect to such Taxes, and Buyer shall, promptly after receipt of evidence of Sellers’ payment thereof, reimburse Sellers for its half of such Taxes.
(c) At the Closing, the Buyer and the Sellers shall execute (i) a transition services agreement (the “ Transition Services Agreement ”) substantially in the form set forth as Exhibit A hereto, and (ii) a non-competition agreement (the “ Non-Competition Agreement ”) substantially in the form set forth as Exhibit B hereto.
(d) At the Closing, the Sellers shall deliver to the Buyer a certificate certifying the accuracy of their representations and warranties in all material respects as of the date of this Purchase Agreement and as of the Closing in accordance with Section 6.02(a) and as to their compliance with and performance of, in all material respects, their covenants and obligations to be performed or complied with at or before the Closing in accordance with Section 6.02(b).
(e) At the Closing, the Buyer shall deliver to the Sellers a certificate certifying the accuracy of its representations and warranties in all material respects as of the date of this Purchase Agreement and as of the Closing in accordance with Section 6.03(a) and as to its compliance with and performance of, in all material respects, its covenants and obligations to be performed or complied with at or before the Closing in accordance with Section 6.03(b).
(f) At the Closing, each Seller shall deliver to the Buyer a certificate of the secretary of such Seller certifying and attaching all requisite resolutions or actions of such Seller’s board of directors or other governing body and shareholders approving the execution and delivery of this Purchase Agreement and the consummation of the transactions contemplated hereby and certifying to the incumbency and signatures of the officers of such Seller executing this Purchase Agreement and any other document executed at the Closing by such Seller.
(g) At the Closing, the Buyer shall deliver to the Sellers a certificate of the secretary of the Buyer certifying and attaching all requisite resolutions or actions of the Buyer’s board of directors or other governing body and shareholders approving the execution and delivery of this Purchase Agreement and the consummation of the transactions contemplated hereby and certifying to the incumbency and signatures of the officers of the Buyer executing this Purchase Agreement and any other document executed at the Closing by the Buyer.
(h) At the Closing, the Sellers shall deliver to Buyer an opinion of counsel in form and substance acceptable to Buyer in its sole discretion.
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(i) At the Closing, the Sellers shall deliver all originally executed Assumed Customer Contracts.
ARTICLE II
Except as specifically set forth in the attached disclosure schedule delivered by the Sellers to the Buyer (the “ Business Disclosure Schedule ”), acknowledging that the Buyer is hereby, and in consummating the transactions contemplated hereby will be, relying thereon, hereby jointly and severally represent and warrant (which representation and warranty shall be deemed to include only the disclosures with respect to the representation and warranty so specified or specifically cross-referenced with respect to the disclosures in the Business Disclosure Schedule) to the Buyer as follows, both as of the date hereof and as of the Closing Date, unless otherwise specifically set forth herein:
SECTION 2.01 Organization; Authority; Binding Obligation .
(a) The Business Disclosure Schedule contains a complete and accurate list of the Sellers’ respective jurisdictions of incorporation or formation and any other jurisdictions in which they are qualified to do business as a foreign corporation. Each of the Sellers is an entity duly organized, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization, and has the full corporate or limited liability company power and authority to execute and deliver this Purchase Agreement, to carry out the transactions contemplated hereby, to conduct its business as it is now being conducted, to own or use the properties and assets that it purports to own or use, and to perform all its obligations under the Business Contracts. Each Seller is duly qualified to do business as a foreign corporation and is in good standing under the laws of each state or other jurisdiction in which either the ownership or use of the properties owned or used by it, or the nature of the activities conducted by it, requires such qualification, except where the failure to be so qualified or be in good standing would not reasonably be expected to have a Business Material Adverse Effect. The execution and delivery by the Sellers of this Purchase Agreement and all other agreements, instruments or other documents to be executed by any of them in connection with any of the transactions contemplated hereby, including the Transition Services Agreement and the Non-Competition Agreement (collectively, the “ Seller Ancillary Agreements ”), and the consummation by the Sellers of the transactions contemplated hereby and thereby, have been duly authorized by all necessary corporate action, and no other corporate or company proceedings on the part of the Sellers are necessary to authorize this Purchase Agreement and the Seller Ancillary Agreements or to consummate the transactions contemplated hereby and thereby, including, without limitation, any consent, vote or other approval of Parent’s stockholders. The sale of the Acquired Assets hereunder is not part of plan by Parent or its Board of Directors to sell all or substantially all of Parent’s consolidated assets.
(b) This Purchase Agreement has been duly executed and delivered by the Sellers and constitutes a legal, valid and binding obligation of the Sellers, enforceable in accordance with its terms, except as such enforceability may be subject to the effects of any applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar Laws affecting
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creditors’ rights generally and subject to the effects of general equitable principles (whether considered in a proceeding in equity or at law).
SECTION 2.02 No Conflict; Required Filings and Consents .
The execution, delivery and performance by the Sellers of this Purchase Agreement and of all Seller Ancillary Agreements, and the consummation by the Sellers of the transactions contemplated hereby and thereby, do not and will not, directly or indirectly (with or without notice or lapse of time): (i) conflict with, or violate any provision of, the certificate or articles of incorporation or formation or the bylaws or operating agreement of any of the Sellers; (ii) conflict with or violate any Law applicable to any of the Sellers; (iii) conflict with, result in any breach of, or constitute a default (or an event that with notice or lapse of time or both would become a default) under any Assumed Customer Contract; (iv) result in or require the creation or imposition of any Encumbrance, or result in the acceleration of any indebtedness, of any nature upon, or with respect to, any of the Acquired Assets; (v) require any consent, approval, authorization or permit of, or filing with or notification to, any Person not party to this Purchase Agreement other than those consents that will have been obtained as of the Closing; or (vi) result in or give rise to any penalty, forfeiture, termination, right of termination, amendment, cancellation or restriction under any Assumed Customer Contract.
SECTION 2.03 Licenses; Compliance .
(a) Each of the Sellers is, and since January 1, 2003 has been, in possession of all Licenses necessary for it to own, lease and operate the Business and to carry on the Business as presently conducted (the “ Business Licenses ”), except where the failure to possess any such Business License would not reasonably be expected to have a Business Material Adverse Effect. None of the Sellers is in violation of or default under any Business License, except for any such violation or default that would not reasonably be expected to have a Business Material Adverse Effect.
(b) Each of the Sellers is, and since January 1, 2003 has been, in full compliance with all Laws that are applicable to the conduct or operation of the Business or the ownership or use of the Acquired Assets, except where the failure so to comply would not reasonably be expected to have a Business Material Adverse Effect.
(c) The Sellers have not, in connection with the Business, received, since January 1, 2003, any written notice or other written communication of any actual, alleged or potential violation of, or failure to comply with, any Laws, or of any actual, alleged or potential obligation on the part of the Sellers to undertake, or to bear all or any portion of the cost of, any remedial action of any nature, except violations, failures or obligations that would not reasonably be expected to have a Business Material Adverse Effect.
(d) All returns, reports, statements and other documents required to be filed by each of the Sellers with any Governmental Entity in connection with the Business have been filed and complied with and are true, correct and complete (and any related fees required to be paid have been paid in full), except where the failure of any of the foregoing would not reasonably be expected to have a Business Material Adverse Effect. To the Knowledge of the Sellers, all
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written Records relating to the Business Licenses or the Business have been maintained in accordance with good business practices and the rules of any Governmental Entity and are maintained at the appropriate Seller, except where the failure so to maintain would not reasonably be expected to have a Business Material Adverse Effect.
(e) Since January 1, 2003, the Company has been the sole provider of all services to customers purchasing services from the Business, and has been the only Person that has presented bills to customers relating to the Business.
SECTION 2.04 Financial Statements and Condition
(a) Prior to the Closing Date, Sellers have delivered to Buyer the audited consolidated balance sheets and statements of income, changes in stockholders’ equity, and cash flow as of and for the fiscal year ended December 31, 2003 for Parent and its subsidiaries (the “ Most Recent Financial Statements ”). The Most Recent Financial Statements (including the notes thereto) have been prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby, present fairly the financial condition of Parent and its subsidiaries as of such date and the results of operations of Parent and its subsidiaries for such periods, are correct and complete, and are consistent with the books and records of Parent and its subsidiaries (which books and records are correct and complete).
(b) Immediately after giving effect to the consummation of the transactions contemplated hereby, Parent and its subsidiaries, will (i) be able to pay their respective debts as they become due, and their respective properties will have a fair saleable value determined on a going concern basis greater than the amounts required to pay their respective debts (including a reasonable estimate of the amount of all known contingent liabilities), and (ii) have adequate capital to conduct their respective businesses. No action has been taken nor any obligation incurred by Sellers in connection with the transactions contemplated hereby, or by any of their Affiliates at either of their direction, with the intent to hinder, delay or defraud any of their respective present or future creditors.
SECTION 2.05 Intellectual Property .
Each of the Sellers has valid right, title and interest in, or a valid and binding license or similar right to use, all material Intellectual Property used or held for use by any such Seller in connection with the Business or necessary for the operation of the Business (“ Business Intellectual Property ”). None of the Sellers (a) has defaulted under any license to use Business Intellectual Property or (b) is the subject of or a party to any proceeding or litigation for infringement of any Intellectual Property in connection with the operation of the Business, other than a default, proceeding or litigation that would not reasonably be expected to have a Business Material Adverse Effect. Sellers have no patents used in connection with the Business and, to the Knowledge of the Sellers, there are no infringements of any patents of other Persons in connection with the operation of the Business.
SECTION 2.06 Absence of Undisclosed Liabilities .
There are no Liabilities associated with or arising out of the Business conducted with the Acquired Assets other than (i) those Liabilities reflected, or reserved against, in the Most Recent
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Financial Statements, (ii) Liabilities arising in accordance with the terms of the Business Contracts of a nature not required under GAAP to be reflected, or reserved against, in the Most Recent Financial Statements, and (iii) Liabilities arising after December 31, 2003 in the Ordinary Course of Business, none of which will be assumed by Buyer except to the extent any Liability under an Assumed Contract constitutes an Assumed Liability.
SECTION 2.07 Absence of Certain Changes or Events .
Since December 31, 2003, (a) there has been no adverse change, and no change except in the Ordinary Course of Business, in the business, operations or condition (financial or otherwise) of the Business, except such changes that would not reasonably be expected to have a Business Material Adverse Effect, (b) the Business has been conducted in all material respects substantially in the manner theretofore conducted and only in the Ordinary Course of Business (excluding the incurrence of reasonable and customary liabilities related to this Purchase Agreement and the Seller Ancillary Agreements and the transactions contemplated hereby and thereby), and (c) none of the Sellers has taken any action or omitted to take any action, which, if taken or omitted after the date hereof, would violate Section 4.01, except for actions or omissions that would not reasonably be expected to have a Business Material Adverse Effect.
SECTION 2.08 Litigation; Disputes .
There are no actions, suits, claims, arbitrations, proceedings or investigations pending or, to the Knowledge of the Sellers, threatened against any of the Sellers in respect of the Business, the Acquired Assets, the Assumed Liabilities or the transactions contemplated hereby, at law or in equity, or before or by any court, arbitrator or Governmental Entity, domestic or foreign, except for actions, suits, claims, arbitrations, proceedings or investigations that would not reasonably be expected to (i) have a Business Material Adverse Effect or (ii) prevent the consummation of the transactions contemplated hereby. None of the Sellers is (i) operating under or subject to any order (except for orders that Persons similarly situated, engaged in similar businesses and owning similar assets are operating under or subject to), award, writ, injunction, decree or judgment of any court, arbitrator or Governmental Entity, or (ii) in default with respect to any order, award, writ, injunction, decree or judgment of any court, arbitrator or Governmental Entity, except for orders, awards, writs, injunctions, decrees, judgments or defaults that would not reasonably be expected to (iii) have a Business Material Adverse Effect or (iv) prevent the consummation of the transactions contemplated hereby. To the Knowledge of the Sellers, no officer, director, agent or employee of a Seller is subject to any order that prohibits such officer, director, agent or employee from engaging in or continuing any conduct or activity relating to the Business, except for orders that would not reasonably be expected to have a Business Material Adverse Effect.
SECTION 2.09 Taxes and Tax Matters .
(a) The Sellers have duly and timely filed all Business Tax Returns required to be filed by the Sellers and all such Business Tax Returns are true and complete in all material respects, in each case. The Sellers have paid all Taxes with respect to the Business which are due or claimed to be due by any Taxing authority, other than those Taxes currently in good faith
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dispute (without regard to whether or not such Taxes are shown as due on any Business Tax Returns).
(b) Section 2.09 of the Business Disclosure Schedule lists all Business Tax Returns that have been examined by the relevant Taxing authorities, and all deficiencies proposed as a result of such examinations, all of which have been paid. There is no action, suit, proceeding, audit, investigation or claim pending or, to the Knowledge of the Sellers, threatened in respect of any Taxes relating to the Business for which a Seller is or may become liable, nor has any deficiency or claim for any such Taxes been proposed, asserted or, to the Knowledge of the Sellers, threatened.
(c) None of the Sellers is subject to a Business Contract relating to the sharing, allocation or payment of, or indemnity for, Taxes relating to the Business (other than a Business Contract the only parties to which are the Sellers).
(d) The Sellers have complied in all material respects with all rules and regulations relating to the collection and withholding of Taxes relating to the Business.
SECTION 2.10 Disclosure Schedule Documents .
True and complete copies of all documents listed in the Business Disclosure Schedule have been made available to the Buyer prior to the execution of this Purchase Agreement. No representation or warranty made by the Sellers in Article II of this Purchase Agreement (as qualified by the Business Disclosure Schedule) or in the Seller Ancillary Agreements, as of the date when made or deemed made for purposes of this Purchase Agreement, contains or will contain any untrue statement of material fact or omits or will omit to state any material fact required to be disclosed by the terms of such representation or warranty.
SECTION 2.11 Title to Assets .
Each of the Sellers has good and marketable title to or a valid leasehold interest or valid contractual right in all of the assets and properties relating to the Business which it purports to own and which are material to the Business, free and clear of all Encumbrances other than statutory liens for property Taxes on Purchased Equipment located in Arapahoe County, Colorado for the year 2000. On the Closing Date, the Buyer will receive good and marketable title to or a valid contractual right in, all of the Acquired Assets, free and clear of all Encumbrances. Except as set forth on Schedule 2.11 , none of the Purchased Equipment is subject to any maintenance agreement or to any software license. The Purchased Equipment includes all of the network access servers, or NAS equipment, owned by Sellers, and used, contemplated to be used, or held for use, solely in the Business.
SECTION 2.12 Scope of Business .
None of the Business is performed or provided outside of the United States.
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SECTION 2.13 Insurance .
(a) Each of the Sellers is insured with financially responsible insurers in such amounts and against such risks and losses as are customary for companies conducting business as conducted by the Sellers. Since January 1, 2003, no Seller has received notice of cancellation or termination with respect to any material insurance policy of such Seller which has not been cured, except for notices which would not reasonably be expected to have a Business Material Adverse Effect. The insurance policies of the Sellers are valid and enforceable policies, except to the extent that such invalidity or unenforceability would not reasonably be expected to have a Business Material Adverse Effect.
(b) The Sellers have not received (i) any refusal of coverage or any written notice that a defense will be afforded with reservations of rights or (ii) any written notice of cancellation or any other indication that any insurance policy is no longer in full force or effect or that the issuer of any insurance policy is not willing or able to perform its obligations thereunder, except for such refusals, notices or indications that would not reasonably be expected to have a Business Material Adverse Effect. The Sellers have paid all premiums due from the Sellers, and have otherwise performed all of their obligations, under each insurance policy relating to the Business to which a Seller is a party or that provides coverage to the Sellers, and have given notice to the insurer of all claims that may be insured thereby, except for failures to pay or give notice that would not reasonably be expected to have a Business Material Adverse Effect.
SECTION 2.14 Certain Contracts .
(a) The Business Disclosure Schedule sets forth a list, as of the date hereof, of all contracts, agreements and commitments which are material to the Business to which any of the Sellers is a party or by which any of the Sellers may be bound (the “ Business Contracts ”). Except as set forth on Schedule 2.14 , the Sellers have provided to the Buyer true, correct and complete copies of all Assumed Customer Contracts, as in effect as of the date hereof. There are no customer contracts or other understandings or arrangements for the provision of services in the Business except as provided in the Assumed Customer Contracts and the Excluded Customer Contracts. Except as set forth in the Business Disclosure Schedule, neither Sellers nor their Affiliates provide any services under the Assumed Customer Contracts other than dial-up Internet access. All of the Assumed Customer Contracts are valid and in full force and effect except to the extent that such invalidity or failure to be in full force and effect would not reasonably be expected to have a Business Material Adverse Effect, and none of the Sellers, nor (to the Sellers’ Knowledge) any other Person that is a party to any Assumed Customer Contract has violated any provision of, or committed or failed to perform any act which with or without notice, lapse of time or both would constitute a default under the provisions of, any Assumed Customer Contract, except for defaults which would not reasonably be expected to result in a Business Material Adverse Effect. To the best of Sellers’ Knowledge, there is no Customer MAC threatened, proposed or pending.
(b) There are no agreements or arrangements pursuant to which any Person is or may be entitled to receive any of the revenues or earnings, or any payment based thereon or calculated in accordance therewith, of the Business, other than employee bonus compensation (including, without limitation, sales commission arrangements) entered into in the Ordinary Course of Business.
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(c) To Sellers’ Knowledge, no event has occurred or circumstance exists that (with or without notice or lapse of time) may contravene, conflict with or result in a breach of, or give the Sellers or other Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or payment under, or to cancel, terminate or modify, any Assumed Customer Contract, except for events or circumstances that would not reasonably be expected to have a Business Material Adverse Effect.
(d) The Sellers have not given to or received from any other Person any written notice or other written communication (or, to Sellers’ Knowledge, oral communication) regarding any actual or alleged violation or breach of, or default under, any Assumed Customer Contract, except for notices or communications that would not reasonably be expected to have a Business Material Adverse Effect.
(e) None of the Sellers has made any oral or written promise to modify any Assumed Customer Contract in any material respect other than in connection with the transactions contemplated by this Purchase Agreement as set forth on the Business Disclosure Schedule.
SECTION 2.15 Brokers .
Except for Gleacher Partners, no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Purchase Agreement based upon arrangements made by or on behalf of the Sellers or any of their respective Affiliates. Buyer will not become liable for any such fees. Sellers shall indemnify Buyer and hold Buyer harmless from any and all fees or expenses claimed by Gleacher Partners.
SECTION 2.16 Receivables .
The Receivables, as of the Closing, will represent valid obligations arising under Assumed Customer Contracts and will relate to sales actually made or services actually performed by the Sellers in the Ordinary Course of Business. To the Knowledge of the Sellers, there is no contest, claim, defense or right of setoff involving a material amount under any Assumed Customer Contract with any account debtor of a Receivable relating to the amount or validity of such Receivable.
SECTION 2.17 Minute Books and Financial Records .
The Sellers have provided to the Buyers all material portions of the minute books of the Sellers relating to the Business. Those portions of the minute books of the Sellers relating to the Business are complete and accurate in all material respects. The books of account and other financial Records of the Sellers with respect to t |
AGREEMENTS / CONTRACTS
CLAUSES
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