Management Services Agreement, dated as of October 1, 2014, between American CareSource Holdings, Inc. and HealthSmart Preferred Care II, L.P

(i)            a bill of sale and assignment and assumption agreement in the form attached as Exhibit A (the “Assignment and Assumption Agreement”) and such other assignments, certificates and other appropriate documents of transfer reasonably necessary to transfer the Acquired Assets to the Purchaser;

(ii)          copies of the certificate of incorporation of the Company, certified by the Secretary of State of the State of Delaware, and the By-laws of the Company, certified by an officer of the Company;

(iii)         a certificate of good standing or other similar evidence with respect to the Company as of a recent date; and

 

(iv)        such other documents as the Purchaser may reasonably request and that are reasonably necessary to effectuate the transaction contemplated under this Agreement.

(b)            Delivery of Documents and Purchase Price by Purchaser. At the Closing, the Purchaser shall deliver, or cause to be delivered, to the Company the following:

(i)            the Purchase Price in accordance with Section 1.4 hereof; and

 

(ii)          the Assignment and Assumption Agreement executed by the Purchaser

 

(iii)        such other documents as the Company may reasonably request that are reasonably necessary to effectuate the transaction contemplated under this Agreement.

2.3         Termination.  This Agreement may be terminated by the Company or the Purchaser by delivery to each party of specific and reasonably detailed written notice setting forth the basis for the termination, including, as applicable, details of the conditions which have not been satisfied, to all other parties at any time prior to the applicable date set forth below as follows:

   (a)            by the mutual written consent of the Company and the Purchaser at any time.

3.1         Organization; Good Standing.  The Company is a corporation duly incorporated, validly existing and in good standing or with active status under the laws of the State of Delaware, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted.  The Company is not in violation or default of any of the provisions of the Company’s certificate of incorporation or bylaws. The Company is duly qualified or licensed to conduct business and is in good standing or with active status as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it requires it to be so qualified or licensed, except where the failure to be so qualified or licensed or in good standing or with active status, as the case may be, could not have or reasonably be expected to result in (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document (as defined in Section 8.1 hereof), (ii) a material adverse effect on the results of operations, assets, business or condition (financial or otherwise) of the Company, taken as a whole, or (iii) a material adverse effect on the Company’s ability to perform, in any material respect on a timely basis, its obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”) “); provided, that it shall not be a Material Adverse Effect if such effect is based on (x) economic factors affecting the national or world economy or acts or war or terrorism; (y) changes in laws, rules or regulations that are not known to the Company as of the date of this Agreement; and (z) changes in generally acceptable accounting practices and no Legal Proceeding (as defined in Section 8.1 hereof) has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

 

3.2         Authorization of Agreement: Enforceability.  Subject to any shareholder approval and any other matter set forth on Schedule 3.3 (all of which will have been obtained prior to Closing), the Company has obtained all necessary corporate approvals to enter into this Agreement and consummate the transactions contemplated hereby and (a) the Company has all requisite power and authority to execute and deliver this Agreement and each other agreement, document, instrument or certificate contemplated by this Agreement or to be executed by the Company in connection with the consummation of the transactions contemplated by this Agreement, and to perform fully its respective obligations hereunder and thereunder; (b) the execution, delivery and performance by the Company of this Agreement and the Transaction Documents has been duly authorized by all necessary action on the part of the Company; and (c) upon execution and delivery by the Company, this Agreement and each of the applicable Transaction Documents will constitute the legal, valid and binding obligations of the Company enforceable against the Company in accordance with their respective terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar Laws affecting creditors’ rights and remedies generally and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).

 

3.3         No Conflict; Consents of Third Parties. None of the execution and delivery by the Company of this Agreement and the Transaction Documents, the consummation of the transactions contemplated hereby or thereby, or compliance by the Company with any of the provisions hereof or thereof will: (a) conflict with, or result in the breach of, any provision of the articles of incorporation or bylaws of the Company, (b) except as set forth on Schedule 3.3(b), conflict with, violate, result in the breach or termination of, or constitute a default or give rise to any right of termination or acceleration or right to increase the obligations or otherwise modify the terms thereof under any contract, agreement, permit, order or other written instrument to which the Company is a party or by which the Company, or by which any of the Acquired Assets, is bound; (c) subject to any shareholder approval and any other regulatory requirement, constitute a violation of any Law applicable to the Company, or any of the Acquired Assets, (d) constitute a violation of any judgment, order, writ, injunction, decree or award of any court, arbitrator or governmental or regulatory official, body or authority which is applicable to the Network, or (e) result in the creation of any Lien upon the Acquired Assets. Except as set forth on Schedule 3.3(d), no consent, waiver, approval, order, permit or authorization of, or declaration or filing with, or notification to, any Person or Governmental Body is required on the part of the Company in connection with the execution and delivery of this Agreement or the Transaction Documents, or the compliance by the Company with any of the provisions hereof or thereof.

3.4         Title to Assets. Except as set forth on Schedule 3.4, the Company has good, valid and marketable title to all of the Acquired Assets, free and clear of any Liens or restrictions on transfer, except liens for current taxes, assessments or governmental charges not yet due as to which sufficient reserves have been created.  Except as set forth on Schedule 3.4, the Acquired Assets constitute all of the assets necessary to operate the Network as it is currently conducted in the ordinary course.

 

3.5         Financial Statements.  The Company’s financial statements as set forth in all filings made with the Securities and Exchange Commission, including without limitation those made using Forms 10-Q, 10-K and 8-K were true and correct, in all material respects, at the time such filings were made.

 

3.6         Absence of Changes.  Since the date of its last public filing, the Company has conducted the portion of its business related to the Network in the ordinary course consistent with past practices and has used commercially reasonable efforts to preserve intact its business organizations, keep available the services of its officers and employees, and maintain satisfactory relationships with customers and others having business relationships with the Network.  Except for the transactions contemplated by this Agreement and as disclosed in Schedule 3.6 or the Company Financial Statements, since the date of its last public filing, the Company has not, solely with respect to the Network:

   (a)            suffered any Material Adverse Effect nor, has any event occurred which could reasonably be expected to result in any Material Adverse Effect; or

 

   (b)           suffered any material damage, destruction or loss, whether or not covered by insurance, adversely affecting the business, operations (present or prospective), assets, properties, liabilities or condition (financial or otherwise) of the Company;

   (c)            made any sale, assignment, lease or other transfer of any of its assets or properties other than sales of obsolete assets no longer used in the operation of its business or other assets sold or disposed of in the normal and usual course of business with suitable replacements being obtained therefor;

   (d)            made any loans, advances or capital contributions to, or investments in, any Person or paid any fees or expenses to any Affiliate of the Company, other than for reimbursement of expenses in the ordinary course of business consistent with past practices;

 

(e)            created, incurred, assumed or guaranteed any material liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise), or mortgaged, pledged or subjected any of its assets to any Lien;

   (f)            suffered any material write-down of the value of any Acquired Assets or any material write-offs as uncollectible of any accounts receivable;

 

   (g)           made or suffered any amendment or termination of any Contract to which it is a party or by which it is bound, or canceled, modified or waived any debts or claims held by it or waived any rights of substantial value (other than a termination of a Contract at the end of its stated term);

 

   (h)            transferred or granted any rights under any Contracts or Proprietary Rights (as defined in Section 3.12(a) hereof) used by the Company in its business;

 

   (i)              lost any customer from the previous fiscal quarter, or been notified that any customer from the previous fiscal quarter has any intent to terminate its business or any Contract with the Company;

 

   (j)             changed any of the material accounting principles followed by it or the methods of applying such principles;

 

   (k)            entered into any material transaction other than in the ordinary course of business consistent with past practice; or

 

   (l)             agreed, whether or not in writing, to do any of the foregoing.

 

(a)    The Company has properly and timely filed all Tax Returns (as defined in Section 8.1) required to be filed by or on behalf of the Company in the manner prescribed by applicable Law.  All such Tax Returns are complete and correct in all material respects.  No Tax Returns have been amended.  All Taxes (as defined in Section 8.1) payable by or due from the Company (whether or not shown on any Tax Return) have been paid, and the Company has not requested any extensions of time within which to file any Tax Return.  No claim has ever been made by an authority in a jurisdiction where the Company does not file Tax Returns that it is or may be subject to taxation by that jurisdiction. There are no Security Interests (as defined in Section 8.1) on any of the assets of any of the Company that arose in connection with any failure (or alleged failure) to pay any Tax.

 

(b)    No Tax Return of the Company is or has ever been under audit or examination by any Taxing Authority (as defined in Section 8.1), and the Company has not received any written notice of intent to commence any examination, audit or inquiry of any such Tax Return from any Taxing Authority.  The Company does not expect any Taxing Authority to assess any additional Taxes for any period for which Tax Returns were filed.  There is no notice of any dispute or claim concerning any liability for Taxes of the Company either (i) claimed or raised by any Taxing Authority in writing or (ii) as to which the Company has knowledge based on contact with any agent of such Taxing Authority.

(c)    The Company has not entered into an agreement having the effect of extending the period of assessment or collection of any Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency.

   (a)            Schedule 3.8(a) sets forth all leases of personal property to which the Company is a party (and which related to the Network) and by which the Acquired Assets are bound (“Personal Property Leases”). The Company has provided to the Purchaser true, correct and complete copies of the Personal Property Leases, together with all amendments, modifications, supplements or side letters affecting the obligations of any party thereunder.

   (b)            Each of the Personal Property Leases is in full force and effect and is valid, binding and enforceable against each in accordance with their respective terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar Laws affecting creditors’ rights and remedies generally and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding at Law or in equity), and there is no default under any Personal Property Lease by the Company or, to the knowledge of the Company, by any other party thereto, and no event has occurred that with the lapse of time or the giving of notice or both would constitute a default by the Company thereunder and, to the knowledge of the Company, no previous or current party to any such Personal Property Lease has given notice of or made a claim with respect to any breach or default thereunder.

   (c)            With respect to those Personal Property Leases that were assigned or subleased to the Company by a third party, all necessary consents to such assignments or subleases have been obtained.

   (d)            The Company has good, legal and marketable title to all of the material items of tangible personal property owned by it, free and clear of any and all Liens, except for Liens incurred in the ordinary course of business which individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

   (a)            “Proprietary Rights” shall mean any and all of the following which have been or are used, and/or owned by, and/or issued or licensed to the Company for use in the operation of the Network, along with all income, royalties, damages and payments due or payable after the Closing, including, without limitation, damages and payments for infringements or misappropriations thereof, the right to sue and recover for infringements or misappropriations thereof and any and all corresponding rights that, now or hereafter, may be secured throughout the world: (i) patents, patent applications, patent disclosures and inventions (whether or not patentable and whether or not reduced to practice) and any reissue, continuation, continuation-in-part, division, revision, extension or reexamination thereof, utility model registrations and applications; (ii) design registrations and applications; (iii) trademarks, service marks, trade dress, logos, trade names and corporate names together with all goodwill associated therewith; (iv) copyrights registered or unregistered and copyrightable works; (v) mask works; (vi) all Internet websites, URLs and domain names, and all registrations, applications, and renewals for any of the foregoing; (vii) trade secrets and confidential information; (viii) computer software and software systems; (ix) other proprietary and intellectual property rights, licenses or other agreements including but not limited to those assigning, waiving or relating to rights of publicity, moral rights or neighboring rights to or from third parties; and all copies and tangible embodiments of the foregoing (in whatever form or medium).

   (c)            The Company owns and possesses all right, title and interest, free and clear of all Liens (other than Liens to be released at Closing), in and to, and, has a valid and enforceable right to, each of the Proprietary Rights listed as “owned” on Schedule 3.9, and, to the Company’s knowledge, (i) no claim by any third party contesting the validity, enforceability, use or ownership of any of the Proprietary Rights has been made, is currently outstanding or is threatened.  With respect to each item of Proprietary Rights that any third party owns and that the Company uses pursuant to license, sublicense, agreement or permission, including without limitation the Proprietary Rights listed as “licensed” on Schedule 3.9, the license, sublicense, agreement or permission covering the Proprietary Right is legal, valid, binding, enforceable and in full force and effect and is not terminable by anyone other than the Company; (ii) to the Company’s knowledge, no party to the license, sublicense, agreement or permission is in breach or default and no event has occurred which with notice or lapse of time would constitute a breach or default or permit termination, modification or acceleration thereunder.

   (d)            The Company has not received any notices of any infringement or misappropriation by, or conflict with, any third party with respect to any of the Proprietary Rights including, without limitation, any demand or request by the Company that such third party license any of the Proprietary Rights from the Company or to the Company.  The Company has not infringed, misappropriated or otherwise conflicted with any rights, including intellectual property rights, of any third parties, and the Company is not aware of any infringement, misappropriation or conflict by the Company of any third-party patent, trademark, copyright or other intellectual property right, or of any such infringement, misappropriation or conflict which shall occur as a result of the continued operation of the Network, as currently conducted or to conduct the Network as presently conducted, and there is no demand or request from a third party that the Company take a license under any intellectual property right.

3.11      Litigation. The Company has not received notice of any Legal Proceedings pending or, to the knowledge of the Company, threatened that question the validity of this Agreement or the Transaction Documents or any action taken or to be taken by in connection with the consummation of the transactions contemplated hereby or thereby. Schedule 3.11 sets forth a true, correct and complete list of all Legal Proceedings the Company has received notice of pending against or affecting the Network or the Acquired Assets at Law or in equity. The Company has not received notice of any outstanding or, to the knowledge of the Company, threatened Order of any Governmental Body against, affecting or naming the Company with respect to the Network or affecting any of the Acquired Assets.

   (a)            Except as set forth on Schedule 3.12(a), the Company is, and at all times has been, in compliance with all Laws and Orders promulgated by any Governmental Body (as defined in Section 8.1 hereto) applicable to the Company with respect to the conduct of the Network and the Acquired Assets, except where the failure to be in such compliance would not, individually or in the aggregate, cause a Material Adverse Effect. Except as set forth on Schedule 3.12(a), the Company has not received or knows of the issuance of, any notices of violation or alleged violation by the Company of any such Law or Order by any Governmental Body in connection with the Network.

 

   (b)            Except as set forth on Schedule 3.12(b), the Company has obtained all Permits necessary for the conduct of the Network as currently conducted except where the failure to acquire such Permit would not cause a Material Adverse Effect. Except as set forth on Schedule 3.12(b), the Company has not received any notice from any source to the effect that there is lacking any such Permit required in connection with such current operations. The Company has made all required filings with Governmental Bodies, except where the failure to make such filings would not, individually or in the aggregate, cause a Material Adverse Effect. The Company is not in default, or has received any notice of any claim of default, with respect to any such Permit.

   (a)            The operations of the Company in connection with the Network were, as of the effective date of the MSA, in material compliance with all Environmental Laws, and the Company has not received any notice of any liability arising under, any Environmental Laws applicable to the operation of the Network.  The Company is not subject to any Legal Proceeding alleging the violation of any Environmental Law or arising from or relating to any Environmental Matter.  To the knowledge of the Company, the Company has not received (nor has there been issued) any written communication, whether from a Governmental Body, citizens’ group, employee or any other Person, that alleges that the Company is not in compliance with any Environmental Law in connection with the Network.

3.14       Restrictions.  The Company is not a party to any indenture, agreement, contract, commitment, lease, plan, license, permit, authorization or other instrument, document or agreement, oral or written, or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree or award which materially adversely affects or materially restricts the business operations, assets, properties, or condition (financial or otherwise) of the Company in connection with the Network.

3.15      Financial Advisors.  No agent, broker, investment banker, finder, financial advisor or other person acting on behalf of the Company or under its respective authority is or will be entitled to any broker’s or finder’s fee or any other commission or similar fee, directly or indirectly, in connection with the transactions contemplated by this Agreement or any Transaction Document and no Person is entitled to any fee or commission or like payment in respect thereof based in any way on agreements, arrangements or understandings made by or on behalf of the Company.

3.16      Insurance. The Company, in connection with the Network, carries property, casualty, liability, workers compensation coverage and such other types of insurance pursuant to insurance policies listed and briefly described on Schedule 3.17, including information regarding the name of the insurance company, the coverage limits and deductibles under each insurance policy, and whether the policies are claims made or occurrence based policies.  All of the insurance policies are legal, valid, binding, enforceable and in full force and effect.  All insurance policies shall be maintained in full force and effect without interruption up to and including the Closing Date. The Company has not received notice of any pending or, to the knowledge of the Company, threatened termination, premium increase or retroactive premium increase with respect thereto, and the Company is in compliance with all conditions contained therein, the noncompliance with which could result in termination of insurance coverage or increased premiums for prior or future periods.  There are no pending material claims against current or prior insurance by the Company as to which insurers have denied liability, there exists no material claim under current or prior insurance that has not been properly filed by a given Company.  All pending claims have been filed by the Company under their respective insurance policies.

3.17      Solvency.  The Company is not entering into this Agreement with the intent to hinder, delay or defraud any Person to which it is, or may become, indebted. The Company’s assets, at a fair valuation, exceed its liabilities, and the Company is able, and will continue to be able after the Closing, to meet its debts as they mature and will not become insolvent as a result of this transaction. After the Closing of this Agreement, the Company will have sufficient capital and property remaining to continue to conduct the operations of the Company in which the Company will thereafter be engaged, if any, or wind down its operations in an orderly manner. As of the date of this Agreement and at Closing, the Company shall have paid and will pay its debts as they become due.

 

3.18      Bulk Sales Compliance.  No action is required in connection with the transactions contemplated by this Agreement in order to comply with the provisions of any applicable bulk transfer law (the “Bulk Sales Law”).

The Purchaser represents and warrants to the Company that the statements contained in this Article 4 are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date.

4.1         Organization.   The Purchaser is a limited partnership duly formed, validly existing and in good standing or with active status under the Laws of the State of Texas, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. The Purchaser is not in violation or default of any of the provisions of the Purchaser’s formation documents or partnership agreement. The Purchaser is duly qualified or licensed to conduct business and is in good standing or with active status as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it requires it to be so qualified or licensed, except where the failure to be so qualified or licensed or in good standing or with active status, as the case may be, could not have or reasonably be expected to result in (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business or condition (financial or otherwise) of the Purchaser, taken as a whole, or (iii) a material adverse effect on the Purchaser’s ability to perform, in any material respect on a timely basis, its obligations under any Transaction Document and no Legal Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

 

4.2         Authorization of Agreement: Enforceability.  The Purchaser has all requisite power and authority to execute and deliver this Agreement and each other agreement, document, instrument or certificate contemplated by this Agreement or to be executed by the Purchaser in connection with the consummation of the transactions contemplated by this Agreement, and to perform fully its obligations hereunder and thereunder. The execution, delivery and performance by the Purchaser of this Agreement and the Transaction Documents to which the Purchaser may be a party have been duly authorized by all necessary action on the part of the Purchaser. This Agreement and each of the Transaction Documents have been duly and validly executed and delivered by the Purchaser and this Agreement and each of the Transaction Documents constitutes the legal, valid and binding obligations of the Purchaser enforceable against the Purchaser in accordance with their respective terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar Laws affecting creditors’ rights and remedies generally and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).

(i)            any breach by the Company of its representations, warranties, or covenants set forth in this Agreement, or

(ii)           the breach or nonfulfillment of any agreement or covenant by the Company contained in this Agreement, or

(iii)         any misrepresentation in or omission from any closing certificate furnished to the Company in connection with the performance hereof, or

(iv)         the Company or the Network on or before the Closing Date.

   (b)            From and after the Closing, the Purchaser shall defend, reimburse, indemnify and hold harmless the Company and its Affiliates, officers, directors, shareholders, employees, agents, representatives, successors and assigns (each a “Company Indemnified Party”) for and against any and all Losses, arising out of or resulting from:

(i)            the breach of any representation or warranty made by the Purchaser contained in this Agreement, or

(ii)           the breach or nonfulfillment of any agreement or covenant by the Purchaser contained in this Agreement, or

(iii)         any misrepresentation in or omission from any closing certificate furnished to the Company in connection with the performance hereof, or

(iv)         any of the Assumed Liabilities and Assumed Current Obligations expressly assumed by the Purchaser hereunder.

   (c)            For all purposes of this Section 6, “Losses” shall be net of any insurance or other recoveries payable to the Indemnified Party (as defined below) or its Affiliates in connection with the facts giving rise to the right of indemnification.

   (a)            If a Purchaser Indemnified Party or a Company Indemnified Party (an “Indemnified Party”) believes that a matter has occurred that entitles it to indemnification (other than matters covered by Section 6.3(b)), the Indemnified Party shall give prompt written notice to the Indemnifying Party describing such matter in reasonable detail. The Indemnified Party shall be entitled to give such notice prior to the establishment of the amount of its Losses and to supplement its claim from time to time thereafter by further notices as they are established. The Indemnifying Party shall send a written response to such claim for indemnification within thirty (30) days after receipt of the claim stating its acceptance or objection to the indemnification claim, and explaining its position with respect thereto in reasonable detail (an “Objection Notice”). If such Indemnifying Party does not respond within such thirty (30) day period, it will be deemed to have accepted the Indemnified Party’s indemnification claim as specified in the notice given by the Indemnified Party. If the Indemnifying Party gives a timely Objection Notice, then the parties will negotiate in good faith to attempt to resolve the dispute. Upon the expiration of an additional thirty (30) day period from the date of the Objection Notice or such longer period as to which the Indemnified and Indemnifying Parties may agree, any such dispute shall be submitted to arbitration in Dallas, Texas to a member of the American Arbitration Association mutually appointed by the Indemnified and Indemnifying Parties (or, in the event the Indemnified and Indemnifying Parties cannot agree on a single such member, to a panel of three members selected in accordance with the rules of such Association), who shall promptly arbitrate such dispute in accordance with the rules of such Association and report to the parties upon such Disputed Items, and such report shall be final, binding and conclusive on the parties. Judgment upon the award by the arbitrator(s) may be entered in any court having jurisdiction. The prevailing party in any such arbitration may, as determined by the arbitrator or arbitrators in his, her or their discretion, recover from, and have paid by, the other party hereto, all fees and disbursements of such arbitrator or arbitrators and reasonable attorney’s fees, costs and expenses incurred by the prevailing party in such arbitration.

   (b)            If an Indemnified Party shall receive notice of any Legal Proceeding, audit, demand or assessment (each, a “Third Party Claim”) against it or which may give rise to a claim for Loss under this Section 6, within 30 days of the receipt of such notice, the Indemnified Party shall give the Indemnifying Party notice of such Third Party Claim; provided, however, that the failure to provide such notice shall not release the Indemnifying Party from any of its obligations under this Section 6 except to the extent that the Indemnifying Party is materially prejudiced by such failure and shall not relieve the Indemnifying Party from any other obligation or Liability that it may have to any Indemnified Party otherwise than under this Section 6. If the Indemnifying Party acknowledges in writing its obligation to indemnify the Indemnified Party hereunder against any Losses that may result from such Third Party Claim, then the Indemnifying Party shall be entitled to assume and control the defense of such Third Party Claim at its expense and through counsel of its choice if it gives notice of its intention to do so to the Indemnified Party within twenty (20) days of the receipt of such notice from the Indemnified Party; provided, however, that if there exists or is reasonably likely to exist a conflict of interest that would make it inappropriate in the reasonable judgment of the Indemnified Party for the same counsel to represent both the Indemnified Party and the Indemnifying Party, then the Indemnified Party shall be entitled to retain its own counsel in each jurisdiction for which the Indemnified Party reasonably determines counsel is required, at the expense of the Indemnified Party. In the event that the Indemnifying Party exercises the right to undertake any such defense against any such Third Party Claim as provided above, the Indemnified Party shall cooperate with the Indemnifying Party in such defense and make available to the Indemnifying Party, at the Indemnifying Party’s expense, all witnesses, pertinent records, materials and information in the Indemnified Party’s possession or under the Indemnified Party’s control relating thereto as is reasonably required by the Indemnifying Party. Similarly, in the event the Indemnified Party is, directly or indirectly, conducting the defense against any such Third Party Claim, the Indemnifying Party shall cooperate with the Indemnified Party in such defense and make available to the Indemnified Party, at the Indemnifying Party’s expense, all such witnesses, records, materials and information in the Indemnifying Party’s possession or under the Indemnifying Party’s control relating thereto as is reasonably required by the Indemnified Party. No such Third Party Claim may be settled by the Indemnified Party or the Indemnifying Party, and neither party shall admit to any criminal liability with respect to any such Third Party Claim, without the prior written consent of the other party hereto, which consent shall not be unreasonably withheld or delayed.

6.4         Limitation on Liability.

 

   (a)            No Proceeding or Litigation. No Legal Proceeding or Orders shall have been commenced or issued by or before any Governmental Body against any of the parties hereto, seeking to restrain or materially and adversely alter the transactions contemplated by this Agreement which, in the reasonable, good faith determination of each party, is likely to render it impossible or unlawful to consummate such transactions.

   (b)            Shareholder Approval.  If required by applicable law, rule or regulation, the Company shall obtained the requisite approval of its shareholders prior to the consummation of the transactions contemplated hereby; provided that, until revenue from the Company’s non-network business segments exceeds $40,000,000, the Company will seek shareholder approval prior to the consummation of the transactions contemplated hereby regardless of whether such shareholder is approval is required by law, rule or regulation.

7.2         Conditions to the Obligations of Purchaser. The obligations of the Purchaser to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or written waiver, at or prior to the Closing, of each of the following conditions:

   (a)            Representations, Warranties and Covenants. (i) The representations and warranties of the Company contained in this Agreement (x) that are not qualified by “materiality” or “Material Adverse Effect” shall have been true and correct in all material respects when made and shall be true and correct in all material respects as of the Closing with the same force and effect as if made as of the Closing and (y) that are qualified by “materiality” or “Material Adverse Effect” shall have been true and correct when made and shall be true and correct as of the Closing with the same force and effect as if made as of the Closing, except to the extent such representations and warranties are as of another date, in which case, such representations and warranties shall be true and correct as of that date with the same force and effect as if made as of the Closing, and except in the case of clause (y) above for such failure of such representations and warranties to be true and correct that would not have, individually or in the aggregate, a Material Adverse Effect, and (ii) the covenants and agreements contained in this Agreement to be performed by or complied with by the Company at or before the Closing shall have been performed and complied with in all material respects.

 

   (b)            Consents and Approvals. The authorizations, consents, orders and approvals set forth on Schedule 7.2 shall have been obtained by the Company.

   (c)            No Material Adverse Effect. No event or events shall have occurred which, individually or in the aggregate, have a Material Adverse Effect other than as a result of: (i) changes adversely affecting the United States economy, (ii) changes adversely affecting the industry in which the Network operates, (iii) the announcement or pendency of the transactions contemplated by this Agreement, (iv) changes in laws, (v) changes in accounting principles other than by the Company, or (vi) acts of war or terrorism.

   (e)            Closing Deliveries.  The Company shall have delivered the documents required in accordance with Section 2.2(a).

 

   (f)             Disclosure Schedules.  The Company shall have delivered all Disclosure Schedules in a form reasonably acceptable to the Purchaser.

7.3         Conditions to Obligations of the Company. The obligations of the Company to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or written waiver, at or prior to the Closing, of each of the following conditions:

   (a)            Representations. Warranties and Covenants. The representations and warranties of the Purchaser contained in this Agreement shall have been true and correct in all material respects when made and shall be true and correct in all material respects as of the Closing, except to the extent such representations and warranties are as of another date, in which case, such representations and warranties shall be true and correct as of that date, in each case, with the same force and effect as if made as of the Closing, other than such representations and warranties as are made as of another date, the covenants and agreements contained in this Agreement to be complied with by Purchaser at or before the Closing shall have been complied with in all material respects.

   (b)            Certificate.  The Purchaser shall have delivered to the Company a certificate to the effect that each of the conditions specified in Sections 7.3(a) and (c) is satisfied in all respects.

 

   (c)            Consents and Approvals.  The authorizations, consents, orders and approvals set forth on Schedule 7.3 shall have been obtained by the Company, including shareholder approval, if required, and any other required regulatory approval.

 

   (d)            Closing Deliveries.  The Purchaser shall have delivered the documents and the Purchase Price required in accordance with Section 2.2(b).

   “Affiliate” of any Person means any Person that directly or indirectly controls, or is under common control with, or is controlled by, such Person. As used in this definition, “control” (including with its correlative meanings, “controlled by” and “under common control with”) shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise).

   “Code” means the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.

 

       “Contract(s)” means any material contract, agreement, indenture, note, bond, loan, instrument, lease, conditional sale contract, mortgage, license, franchise, insurance policy, commitment or other arrangement or agreement, whether written or oral.

 

   “Disclosure Schedules” means all of the disclosure schedules in Article 3 of this Agreement.

 

   “Environmental Law” means any Law concerning Releases into any part of the natural environment, or activities that might result in damage to the natural environment, or any Law that is concerned in whole or in part with the natural environment and with protecting or improving the quality of the natural environment and protecting public and Employee health and safety and includes, but is not limited to, the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) (42 U.S.C. § 9601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. § 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq.), the Clean Water Act (33 U.S.C. § 1251 et seq.), the Clean Air Act (33 U.S.C. § 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. § 2601 et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. § 136 et seq.) and the Occupational Safety and Health Act (29 U.S.C. § 651 et seq.) (“OSHA”), as such Laws have been amended or supplemented, and the regulations promulgated pursuant thereto, and any and all analogous state or local statutes, and the regulations promulgated pursuant thereto, and any and all treaties, conventions and environmental public and employee health and safety statutes and regulations or analogous requirements of non-United States jurisdictions in which the Company conducts any business.

 

   “Environmental Matters” means any matter arising out of or relating to the production, storage, transportation, disposal or Release of any Hazardous Material or otherwise arising out of or relating to safety, health or the environment which could give rise to liability or require the expenditure of money to address, and shall include, without limitation, the costs of investigating and remedying any of the foregoing matters, any fines and penalties arising in connection therewith, and any claim in respect thereof for damages or injunctive relief for alleged personal injury, property damage or damage to natural resources under common Law or other Environmental Law.

 

       “Governmental Body” means any government or governmental or regulatory body thereof, or political subdivision thereof, whether federal, state, local or foreign, or any agency, instrumentality or authority thereof, or any court or arbitrator (public or private).

 

   “Hazardous Materials” means any substance, material or waste which is regulated by any local, state or federal Governmental Body in the jurisdiction in which the Company conducts business, or the United States, including, without limitation, any material or substance which is defined as a “hazardous waste,” “hazardous material,” “hazardous substance,” “extremely hazardous waste” or “restricted hazardous waste,” “subject waste,” “contaminant,” “toxic waste” or “toxic substance” under any provision of Environmental Law, including but not limited to, petroleum products, asbestos, radon and polychlorinated biphenyls.

    ““IRS” means the Internal Revenue Service.

 

   “Law” means any applicable federal, national, supranational, foreign, state, provincial, local or similar statute, law, ordinance, regulation, rule, code, order, requirement or rule of law (including common law).

 

   “Legal Proceeding” means any judicial, administrative or arbitral actions, suits, proceedings (public or private), claims or governmental proceedings.

 

   “Lien” means any lien, pledge, hypothecation, levy, mortgage, deed of trust, security interest, claim, lease, charge, option, right of first refusal, easement, or other real estate declaration, covenant, condition, restriction or servitude, transfer restriction under any shareholder or similar agreement, encumbrance or any other restriction or limitation whatsoever.

 

   “Order” means any order, injunction, judgment, decree, ruling, writ, assessment or arbitration award.

 

   “Person” means any individual, corporation, partnership, firm, joint venture, association, joint-stock company, trust, unincorporated organization, Governmental Body or other entity.

 

       “Release” means any release, spill, effluent, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching, or migration into the indoor or outdoor environment, or into or out of any property owned, operated or leased by the Company, including the movement of any Hazardous Material or other substance through or in the air, soil, surface water, groundwater, or property.

 

   ““Representatives” of a Person means its officers, employees, agents, legal and financial advisors and accountants.

 

   “Security Interest” means any mortgage, pledge, lien, encumbrance, charge or other security interest other than (i) mechanic’s materialmen’s and similar liens, (ii) liens for Taxes not yet due and payable, (iii) purchase money liens and liens securing rental payments under capital lease arrangements, and (iv) other liens arising in the ordinary course of business and not incurred in connection with the borrowing of money.

 

   “Tax” or “Taxes” means any federal, state, local or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code Section 59A), customs, duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, ad valorem, sales, use, transfer, parking, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not.

   “Taxing Authority” means any Federal, state, county, municipal or local, domestic or foreign, governmental body (including any subdivision, agency or commission thereof), or any quasi-governmental body, in each case, exercising regulatory authority in respect to Taxes.

 

   “Tax Return” means any return declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

 

   “Transaction Documents” means this Agreement, the related bill of sale, the Assignment and Assumption Agreement and any ancillary agreements contemplated hereby and thereby.

8.3         Default; Remedies.  Subject to any rights to cure expressly provided herein, if the transactions contemplated hereunder are not closed solely due to a party’s default hereunder, the non-defaulting party may only either: (i) terminate this Agreement and recover from the defaulting party the non-defaulting party’s actual, out-of-pocket, third party costs and expenses incurred by the non-defaulting party in connection with this transaction, whereupon the parties hereto shall have no further rights or obligations under this Agreement, except for such rights and obligations that, by the express terms hereof, survive any termination hereof; or (ii) bring an action for specific performance of this Agreement.

 

8.3         Further Assurances. The parties agree to execute and deliver such other documents or agreements as may be necessary or desirable for the implementation of this Agreement and the consummation of the transactions contemplated hereby.

 

8.4         Entire Agreement; Amendments and Waivers. This Agreement (including the schedules and exhibits hereto), the Transaction Documents represent the entire understanding and agreement among the parties hereto with respect to the subject matter hereof. This Agreement can be amended, supplemented or changed, and any provision hereof can be waived, only by written instrument making specific reference to this Agreement signed by the Company and the Purchaser and any such amendment or waiver shall be binding on all parties hereto. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a further or continuing waiver of such breach or as a waiver of any other or subsequent breach. No failure on the part of any party to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a. waiver thereof, nor shall any single or partial exercise of such right, power or remedy by such party preclude any other or further exercise thereof or the exercise of any other right, power or remedy. All remedies hereunder are cumulative and are not exclusive of any other remedies provided by Law.

 

8.5         Third Party Beneficiaries. Nothing in this Agreement, express or implied, shall provide any benefit to any third party or entitle any third party to any claim, cause of action, remedy or right of any kind, it being the intent of the parties that this Agreement shall not be construed as a third party beneficiary contract.

 

8.6         Governing Law. This Agreement shall be governed by and construed in accordance with the Laws of the State of Texas without giving effect to the principles of conflict of laws thereunder which would specify the application of the Law of another jurisdiction.

 

8.7         Headings; Interpretive Matters.   The section headings of this Agreement are for reference purposes only and are to be given no effect in the construction or interpretation of this Agreement. No provision of this Agreement will be interpreted in favor of, or against, any of the parties hereto by reason of the extent to which any such party or its counsel participated in the drafting thereof or by reason of the extent to which any such provision is inconsistent with any prior draft hereof or thereof.

 

8.8         Notices. All notices and other communications under this Agreement shall be in writing and shall be deemed given when (i) delivered personally, (ii) mailed by certified mail, return receipt requested, (iii) mailed by a nationally recognized overnight courier service (postage prepaid), or (iv) delivered by facsimile (with a copy (which shall not constitute notice) sent via another approved method identified in this Section 8.8), to the parties at the following addresses (or to such other address as a party may have specified by notice given to the other party pursuant to this provision):

 

8.9         Severability. If any provision of this Agreement is invalid or unenforceable, the balance of this Agreement shall remain in effect.

 

8.10      Binding Effect; Assignment. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns (as permitted in accordance with the terms of this Agreement). Nothing in this Agreement shall create or be deemed to create any third-party beneficiary rights in any person or entity not a party to this Agreement except as provided below. No assignment of this Agreement or of any rights or obligations hereunder may be made by the Company or the Purchaser (by operation of Law or otherwise) without the prior written consent of the other parties hereto and any attempted assignment without the required consents shall be void; provided that the Purchaser may assign its rights and obligations under this Agreement to any affiliate of the Purchaser without the Company’s prior consent; provided further, that no such assignment by the Purchaser shall relieve the Purchaser of its duties, obligations or liabilities under this Agreement.

 

8.11      Counterparts and Facsimile. This Agreement may be executed simultaneously in two or more counterparts and by facsimile or other electronic transmission, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.