Exhibit 2.13
STOCK PURCHASE AGREEMENT
by and among
SHAREHOLDERS OF CRAIG ENTERPRISES, INC.
and
LINC.NET, INC.
Dated as of June 16, 2000
TABLE OF CONTENTS
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ARTICLE I
CERTAIN DEFINITIONS......................................................................................1
1.1 Definitions..................................................................................1
ARTICLE II
PURCHASE AND SALE OF THE CORPORATION INTERESTS...........................................................6
2.1 Basic Transaction............................................................................7
2.2 Closing Transactions.........................................................................7
2.3 Purchase Price...............................................................................8
ARTICLE III
CONDITIONS TO CLOSING...................................................................................10
3.1 Conditions to Buyer's Obligations...........................................................10
3.2 Conditions to Sellers' Obligations..........................................................14
ARTICLE IV.......................................................................................................15
[Intentionally Omitted].................................................................................15
ARTICLE V
REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY AND SELLERS.......................................16
5.1 Capacity, Organization, Corporate Power and Licenses........................................16
5.2 Capital Stock and Related Matters...........................................................16
5.3 Authorization; Noncontravention.............................................................17
5.4 Subsidiaries................................................................................17
5.5 Financial Statements........................................................................17
5.6 Accounts Receivable.........................................................................18
5.7 Inventory...................................................................................18
5.8 Absence of Undisclosed Liabilities..........................................................18
5.9 No Material Adverse Effect..................................................................19
5.10 Absence of Certain Developments.............................................................19
5.11 Assets......................................................................................21
5.12 Contracts and Commitments...................................................................23
5.13 Intellectual Property Rights................................................................25
5.14 Litigation..................................................................................26
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5.15 Compliance with Laws........................................................................27
5.16 Environmental and Safety Matters............................................................27
5.17 Employees...................................................................................28
5.18 Employee Benefit Plans......................................................................29
5.19 Insurance...................................................................................30
5.20 Tax Matters.................................................................................30
5.21 Brokerage and Transaction Bonuses...........................................................32
5.22 Bank Accounts...............................................................................32
5.23 Names and Locations.........................................................................32
5.24 Affiliate Transactions......................................................................32
5.25 Service Warranties..........................................................................32
5.26 Customers and Suppliers.....................................................................33
5.27 Disclosure..................................................................................33
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER.................................................................34
6.1 Organization and Power......................................................................34
6.2 Capitalization..............................................................................34
6.3 Authorization...............................................................................34
6.4 No Violation................................................................................34
6.5 Governmental Authorities and Consents.......................................................34
6.6 Litigation..................................................................................35
6.7 Brokerage...................................................................................35
ARTICLE VII......................................................................................................35
ARTICLE VIII
ADDITIONAL AGREEMENTS; COVENANTS AFTER CLOSING..........................................................35
8.1 Survival of Representations and Warranties..................................................35
8.2 Indemnification.............................................................................36
8.3 Mutual Assistance...........................................................................39
8.4 Non-Competition; Non-Solicitation...........................................................39
8.5 Press Release and Announcements.............................................................41
8.6 Expenses....................................................................................41
8.7 Specific Performance........................................................................42
8.8 Arbitration Procedure.......................................................................42
8.9 Further Assurances..........................................................................43
8.10 Confidentiality.............................................................................43
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8.11 Tax Matters.................................................................................44
8.12 Guarantees of Capital Leases................................................................45
8.13 Environmental Procedures....................................................................46
ARTICLE IX
MISCELLANEOUS...........................................................................................47
9.1 Amendment and Waiver........................................................................47
9.2 Notices.....................................................................................47
9.3 Successors and Assigns......................................................................48
9.4 Severability................................................................................49
9.5 Interpretation..............................................................................49
9.6 Captions....................................................................................49
9.7 No Third-Party Beneficiaries................................................................49
9.8 Complete Agreement..........................................................................49
9.9 Counterparts................................................................................50
9.10 Delivery by Facsimile.......................................................................50
9.11 Governing Law...............................................................................50
9.12 Schedules...................................................................................50
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EXHIBITS AND SCHEDULES
EXHIBITS:
Exhibit A - Escrow Agreement
Exhibit B - Employment Agreement
Exhibit C - Executive Purchase Agreement
Exhibit D - Amended and Restated Stockholders Agreement
Exhibit E - Amended and Restated Registration Agreement
Exhibit F - Form of Opinion of Counsel for Sellers and the Company
Exhibit G - Form of Opinion of Counsel for Buyer
SCHEDULES
Indebtedness Schedule
Permitted Liens Schedule
Owned Property Schedule
Schedule of Sellers
Officers and Directors Schedule
Restrictions Schedule
Financial Statements Schedule
Accounts Receivable Schedule
Liabilities Schedule
Contracts Schedule
Developments Schedule
Assets Schedule
Leased Real Property Schedule
Excluded Assets Schedule
Intellectual Property Schedule
Litigation Schedule
Compliance Schedule
Permits Schedule
Environmental Schedule
Employees Schedule
Employee Benefits Schedule
Insurance Schedule
Taxes Schedule
Brokerage Schedule
Transaction Bonuses Schedule
Bank Account Schedule
Names and Locations Schedule
Affiliated Transactions Schedule
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Warranty Schedule
Customers and Suppliers Schedule
Identified Environmental Matters Schedule
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INDEX OF DEFINED TERMS
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Accounting Firm................................................................................................2, 9
Affiliate.........................................................................................................1
Affiliated Group..................................................................................................1
Agreement.........................................................................................................1
Applicable Rate...................................................................................................1
Bank..............................................................................................................1
Buyer.............................................................................................................1
Buyer Parties....................................................................................................36
CERCLA........................................................................................................2, 28
Closing...........................................................................................................7
Closing Balance Sheet.............................................................................................8
Closing Cash Amount...............................................................................................8
Closing Date......................................................................................................7
Closing Indebtedness..............................................................................................8
Closing Net Working Capital.......................................................................................8
Closing Net Worth.................................................................................................8
Closing Tax Liability.............................................................................................8
Code..............................................................................................................2
Confidential Information..........................................................................................2
control...........................................................................................................1
controlled by.....................................................................................................1
controlling.......................................................................................................1
Disputes.........................................................................................................42
Disputing Person.................................................................................................42
Employment Agreements............................................................................................12
Encumbrance.......................................................................................................2
Environmental and Safety Requirements.........................................................................2, 28
ERISA.............................................................................................................3
Escrow Agent......................................................................................................3
Escrow Agreement...............................................................................................3, 7
Escrow Amount.....................................................................................................3
Estimated Purchase Price..........................................................................................8
Executive Purchase Agreement.....................................................................................12
Executive Purchase Agreements....................................................................................12
Executive Securities..............................................................................................3
Final Determination..............................................................................................43
Final Purchase Price.............................................................................................10
GAAP..............................................................................................................3
Governmental Approvals...........................................................................................11
Guaranty..........................................................................................................3
Improvements.....................................................................................................22
Indebtedness......................................................................................................3
Indemnitee.......................................................................................................37
Indemnitor.......................................................................................................37
Institute........................................................................................................42
Intellectual Property Rights......................................................................................3
Investment........................................................................................................4
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Knowledge.........................................................................................................4
Latest Balance Sheet.............................................................................................18
Leased Real Property.............................................................................................21
Leased Realty....................................................................................................21
Lien..............................................................................................................4
Losses...........................................................................................................36
Material Adverse Effect...........................................................................................4
Net Working Capital...............................................................................................4
Net Worth.........................................................................................................4
Notice of Arbitration............................................................................................42
Notice of Disagreement............................................................................................9
Owned Real Property..............................................................................................22
Permitted Encumbrances............................................................................................5
Permitted Liens...................................................................................................5
Person............................................................................................................5
Plan.............................................................................................................29
Pre-Closing Taxes................................................................................................44
Purchase Price....................................................................................................8
Real Property Laws...............................................................................................23
Real Property Permits............................................................................................23
Realty Leases....................................................................................................21
Registration Agreement...........................................................................................12
Restricted Territories...........................................................................................40
Restrictive Covenants............................................................................................40
Rules............................................................................................................42
Securities Act....................................................................................................5
Seller Representative.............................................................................................5
Sellers...........................................................................................................1
Stockholders Agreement...........................................................................................12
Straddle Tax Returns.............................................................................................44
Subsidiary........................................................................................................6
Tax...............................................................................................................6
Tax Returns.......................................................................................................6
Third-Party Approvals............................................................................................10
Title Commitments................................................................................................12
Title Insurer....................................................................................................12
Title Policies...................................................................................................12
Treasury Regulations..............................................................................................6
under common control with.........................................................................................1
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT") is made and
entered into as of June 16, 2000, by and among Royce Craig, Katherine Craig, the
Community Foundation of North Texas (collectively, referred to as "SHAREHOLDERS"
or each a "SELLER" and collectively the "SELLERS"), Craig Enterprises, Inc., a
New Mexico corporation (the "COMPANY") and Linc.net, Inc., a Delaware
corporation ("BUYER"). The Sellers and Buyer are collectively referred to as the
"PARTIES."
WHEREAS, the Sellers in the aggregate own all of the
outstanding shares (the "SHARES") of capital stock of the Company.
WHEREAS, on the terms and subject to the conditions set forth
in this Agreement, the Buyer will purchase from the Sellers, and the Sellers
will sell to the Buyer, all of the outstanding capital stock of the Company in
return for cash.
NOW, THEREFORE, in consideration of the mutual covenants,
agreements and understandings contained herein and intending to be legally
bound, the parties hereto hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1 DEFINITIONS. For the purposes of this Agreement, the following
terms have the meanings set forth below:
"AFFILIATE" of any particular Person means any other Person
controlling, controlled by or under common control with such Person. For
purposes of this definition, "CONTROL" (including the terms "CONTROLLING,"
"CONTROLLED BY" and "UNDER COMMON CONTROL WITH") means the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise, and such "control" will be presumed if any Person owns
10% or more of the voting capital stock or other ownership interests, directly
or indirectly, of any other Person.
"AFFILIATED GROUP" means an affiliated group as defined in
Section 1504 of the Code (or any analogous combined, consolidated or unitary
group defined under state, local or foreign income Tax law) of which the Company
is or has been a member.
"APPLICABLE RATE" means the prime rate of interest reported
from time to time by the Wall Street Journal.
"BANK" means PNC Bank National Association.
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"CASH EQUIVALENTS" means the amount of the Split-Dollar
Premiums plus the amount of the Note Receivable.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.
"CODE" means the Internal Revenue Code of 1986, as amended,
and any reference to any particular Code section shall be interpreted to include
any revision of or successor to that section regardless of how numbered or
classified.
"CONFIDENTIAL INFORMATION" means all information of a
confidential or proprietary nature (whether or not specifically labeled or
identified as "confidential"), in any form or medium, that relates to the
business, products, services or research or development of the Company or their
respective suppliers, distributors, customers, independent contractors or other
business relations. Confidential Information includes, but is not limited to,
the following: (i) internal business information (including information relating
to strategic and staffing plans and practices, business, training, marketing,
promotional and sales plans and practices, cost, rate and pricing structures and
accounting and business methods); (ii) identities of, individual requirements
of, specific contractual arrangements with, and information about, the Company's
suppliers, distributors, customers, independent contractors or other business
relations and their confidential information; (iii) trade secrets, know-how,
compilations of data and analyses, techniques, systems, formulae, recipes,
research, records, reports, manuals, documentation, models, data and data bases
relating thereto; (iv) inventions, innovations, improvements, developments,
methods, designs, analyses, drawings, reports and all similar or related
information (whether or not patentable); and (v) other Intellectual Property
Rights.
"CRAIGS" means Royce Craig and Katherine Craig.
"ENCUMBRANCE" means any lien, charge, security interest,
claim, pledge, Tax, option, warrant, right, contract, call, commitment, equity,
demand, proxy, voting agreement, restriction on transfer (other than
restrictions on transfer under the Securities Act and applicable state
securities laws) or other encumbrance.
"ENVIRONMENTAL AND SAFETY REQUIREMENTS" means all federal,
state, local and foreign statutes, regulations, ordinances and other provisions
having the force or effect of law, all judicial and administrative orders and
determinations, all contractual obligations and all common law, in each case
concerning public health and safety, worker health and safety and pollution or
protection of the environment (including all those relating to the presence,
use, production, generation, handling, transport, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control or cleanup of any hazardous or otherwise regulated materials,
substances or wastes, chemical substances or mixtures, pesticides, pollutants,
contaminants, toxic
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chemicals, petroleum products or byproducts, asbestos, polychlorinated
biphenyls, noise, radiation or radon), each as amended and as now or
hereafter in effect.
"ESCROW AGENT" means Norwest Bank Minnesota, N.A.
"ESCROW AGREEMENT" means the escrow agreement in the form of
EXHIBIT A attached hereto.
"Escrow Amount" means 1,000,000.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"EXECUTIVE SECURITIES" means the shares of Buyer's Series A
Redeemable Preferred Stock and Common Stock issued to the Craigs pursuant to the
respective Executive Purchase Agreements between the Craigs and Buyer.
"GAAP" means United States generally accepted accounting
principles, as in effect from time to time.
"GUARANTY" means any agreement, undertaking or arrangement by
which any Person guarantees, endorses or otherwise becomes or is contingently
liable upon the debt, obligation or other liability of any other Person (other
than by endorsements of instruments in the ordinary course of collection), or
guaranties of the payment of dividends or other distributions upon the shares of
any other Person.
"INDEBTEDNESS" means, with respect to any Person at any date,
without duplication: (i) all obligations of such Person for borrowed money or in
respect of loans or advances, (ii) all obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments or debt securities, (iii)
all obligations in respect of letters of credit and bankers' acceptances issued
for the account of such Person, (iv) all obligations arising from cash/book
overdrafts, (v) all obligations arising from deferred compensation arrangements,
(vi) all obligations of such Person secured by a Lien, (vii) all Guaranties of
such Person in connection with any of the foregoing, (viii) all capital lease
obligations, (ix) all accrued interest, prepayment premiums or penalties related
to any of the foregoing; (x) all deferred rent, (xi) all indebtedness for the
deferred purchase price of property or services with respect to which a Person
is liable, contingently or otherwise, as obligor or otherwise (other than trade
payables, subcontractor payables and accrued expenses incurred in the ordinary
course of business which are not past due and billings in excess of cost on
uncompleted contracts), and (xii) all other liabilities classified as
non-current liabilities in accordance with GAAP as of the Closing Date, other
than deferred income tax liabilities.
"INTELLECTUAL PROPERTY RIGHTS" means all (i) patents, patent
applications, patent disclosures and inventions, (ii) Internet domain names,
trademarks, service marks, trade dress, trade names, logos and corporate names
and registrations and applications for registration thereof together
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with all of the goodwill associated therewith, (iii) copyrights (registered
or unregistered) and copyrightable works and registrations and applications
for registration thereof, (iv) mask works and registrations and applications
for registration thereof, (v) computer software, data, data bases and
documentation thereof, (vi) trade secrets and other confidential information
(including ideas, formulas, recipes, compositions, inventions (whether
patentable or unpatentable and whether or not reduced to practice), know-how,
manufacturing and production processes and techniques, research and
development information, drawings, specifications, designs, plans, proposals,
technical data, copyrightable works, financial and marketing plans and
customer and supplier lists and information), (vii) other intellectual
property rights and (viii) copies and tangible embodiments thereof (in
whatever form or medium).
"INVESTMENT" as applied to any Person means (i) any direct or
indirect purchase or other acquisition by such Person of any notes, obligations,
instruments, stock, securities or ownership interest (including limited
liability company interests, partnership interests and joint venture interests)
of any other Person and (ii) any capital contribution by such Person to any
other Person.
"KNOWLEDGE" of the Company or the Sellers means the actual
knowledge of Executives after reasonable investigation.
"LIEN" means any mortgage, pledge, hypothecation, lien
(statutory or otherwise), preference, priority, security interest, security
agreement, easement, covenant, restriction or other encumbrance of any kind or
nature whatsoever (including any conditional sale or other title retention
agreement and any lease having substantially the same effect as any of the
foregoing and any assignment or deposit arrangement in the nature of a security
device).
"MATERIAL ADVERSE EFFECT" means a material and adverse effect
or development upon the business, operations, assets, liabilities, financial
condition, value, business prospects, operating results, cash flow, net worth or
employee, customer or supplier relations of the Company.
"NET WORKING CAPITAL" means as of any date of determination,
the excess of the Company's total current assets (excluding the Note Receivable
and the cash surrender value of any life insurance) as of such date over the
Company's total current liabilities (excluding Indebtedness and any Closing Tax
Liability) as of such date determined in accordance with GAAP. In determining
total current assets and total current liabilities hereunder, (i) all accounting
entries shall be taken into account regardless of their amount and all errors
and omissions corrected, (ii) all proper adjustments shall be made, and (iii)
appropriate reserves for all liabilities and obligations for which reserves are
appropriate in accordance with GAAP shall be included.
"NET WORTH" means, as of any date of determination, the excess
of the Company's total assets (excluding the Note Receivable, the cash surrender
value of any life insurance and the net book value of the Excluded Assets) as of
such date over the Company's total liabilities (excluding Indebtedness and any
Closing Tax Liability) as of such date, determined in accordance with GAAP.
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In determining total assets and total liabilities hereunder, (i) all
accounting entries shall be taken into account regardless of their amount and
all errors and omissions shall be corrected, (ii) all proper adjustments
shall be made, and (iii) appropriate reserves for all liabilities and
obligations for which reserves are appropriate in accordance with GAAP shall
be included.
"NOTE RECEIVABLE" means the note or notes or other forms of
obligation pursuant to which the Craigs or their family members or relatives are
obligated to the Company for borrowed money.
"PERMITTED ENCUMBRANCES" means (a) statutory liens for current
taxes or other governmental charges with respect to the real property not yet
due and payable or the amount or validity of which is being contested in good
faith by appropriate proceedings by Seller and for which appropriate reserves
have been established in accordance with GAAP; (b) mechanics, carriers workers,
repairers and similar statutory liens arising or incurred in the ordinary course
of business for amounts which are not delinquent and which are not, individually
or in the aggregate, material to the business; (c) zoning, entitlement, building
and other land use regulations imposed by governmental agencies having
jurisdiction over the real property which are not violated by the current use
and operation of the real property; and (d) covenants, conditions, restrictions,
easements and other similar matters of record affecting title to the real
property which do not materially impair the occupancy or use of the real
property for the purposes for which it is currently used in connection with the
business.
"PERMITTED LIENS" means (i) Liens that are set forth on the
PERMITTED LIENS SCHEDULE attached hereto, (ii) Liens for Taxes not delinquent or
the validity of which are being contested in good faith by appropriate
proceedings and as to which adequate reserves have been established on the
Company's financial statements in accordance with GAAP, (iii) statutory
landlord's, mechanic's, carrier's, workmen's, repairmen's or other similar Liens
arising or incurred in the ordinary course of business and (iv) Liens arising
from zoning ordinances.
"PERSON" means any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated association, corporation,
limited liability company, entity or governmental entity (whether federal,
state, county, city or otherwise and including any instrumentality, division,
agency or department thereof).
"SECURITIES ACT" means the Securities Act of 1933, as amended,
or any similar federal law then in force.
"SELLER REPRESENTATIVE" means Royce Craig.
"SPLIT DOLLAR PREMIUMS" means the cumulative amount of
premiums paid by the Company with respect to the life insurance policies on the
lives of Katherine Craig and Royce Craig.
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"SUBSIDIARY" means, with respect to any Person, any
corporation, partnership, limited liability company, association or other
business entity of which (i) if a corporation, a majority of the total voting
power of shares of stock entitled (irrespective of whether, at the time, stock
of any other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a partnership,
limited liability company, association or other business entity, either (A) a
majority of the partnership or other similar ownership interest thereof is at
the time owned or controlled, directly or indirectly, by that Person or one or
more Subsidiaries of that Person or a combination thereof, or (B) such Person is
a general partner, managing member or managing director of such partnership,
limited liability company, association or other entity.
"TAX" means any (i) federal, state, local or foreign income,
gross receipts, franchise, estimated, alternative minimum, add-on minimum,
sales, use, transfer, registration, value added, excise, natural resources,
severance, stamp, occupation, premium, windfall profit, environmental, customs,
duties, real property, personal property, capital stock, social security,
unemployment, disability, payroll, license, employee or other withholding, or
other tax, of any kind whatsoever, including any interest, penalties or
additions to tax or additional amounts in respect of the foregoing; (ii)
liability of the Company for the payment of any amounts of the type described in
clause (i) above arising as a result of being (or ceasing to be) a member of any
Affiliated Group (or being included (or required to be included) in any Tax
Return relating thereto); and (iii) liability of the Company for the payment of
any amounts of the type described in clause (i) above as a result of any express
or implied obligation to indemnify or otherwise assume or succeed to the
liability of any other Person.
"TAX RETURNS" means returns, declarations, reports, claims for
refund, information returns or other documents (including any related or
supporting schedules, statements or information) filed or required to be filed
in connection with the determination, assessment or collection of any Taxes of
any party or the administration of any laws, regulations or administrative
requirements relating to any Taxes.
"TREASURY REGULATIONS" means the United States Treasury
Regulations promulgated under the Code, and any reference to any particular
Treasury Regulation section shall be interpreted to include any final or
temporary revision of or successor to that section regardless of how numbered or
classified.
ARTICLE II
PURCHASE AND SALE OF THE CORPORATION INTERESTS
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2.1 BASIC TRANSACTION. On the terms and subject to the conditions set
forth in this Agreement, at the Closing, Buyer shall purchase from the Sellers
the Shares and the Sellers shall sell to Buyer the Shares free and clear of all
Encumbrances.
2.2 CLOSING TRANSACTIONS.
(a) CLOSING. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Kirkland &
Ellis in Chicago, Illinois, at 9:00 a.m. local time on June 16, 2000, or at such
other time or place as is mutually agreeable to the parties, or, if any of the
conditions to Closing set forth in Article III have not been satisfied at or
waived by the party entitled to the benefit thereof on or prior to such date, on
the second business day following satisfaction or waiver of such conditions (the
"CLOSING DATE").
(b) DELIVERIES. At the Closing:
(i) Buyer shall pay to the Community Foundation of
North Texas an amount equal to (A) the percentage set forth opposite such
Seller's name on the SCHEDULE OF SELLERS attached hereto multiplied by (B) the
Estimated Purchase Price and shall pay to the Craigs an aggregate amount equal
to (C) the percentage set forth opposite the Craigs name on the SCHEDULE OF
SELLERS attached hereto, MULTIPLIED BY (D) an amount equal to the Estimated
Purchase Price LESS the Escrow Amount, in each case by wire transfer of
immediately available funds to the respective accounts designated by Sellers;
(ii) Buyer shall deliver the Escrow Amount to the
Escrow Agent for deposit into an escrow account established pursuant to the
terms of the Escrow Agreement. The Escrow Amount shall be available on a
non-exclusive basis to satisfy amounts owing to the Buyer Parties pursuant to
Section 8.2 below;
(iii) Each of the Sellers shall deliver to the Buyer
stock certificates representing all of his or her or its Shares, endorsed in
blank or accompanied by duly executed assignment documents;
(iv) the Company, Sellers and Buyer, as applicable,
shall deliver the opinions, certificates and other documents and instruments
required to be delivered by or on behalf of such party under Article III below;
and
(v) Sellers shall deliver to Buyer all corporate
books and records and other property of the Company in its possession.
(c) EXCLUDED ASSETS. At any time prior to Closing, the Company
may declare a dividend consisting of, sell or otherwise dispose of, or
distribute to the Sellers all of the assets set forth on the EXCLUDED ASSETS
SCHEDULE. Buyer agrees to cooperate with Sellers after Closing as may be
reasonably necessary to assist Sellers in completing the distribution of any
Excluded Assets.
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(d) PAYMENT OF NET AMOUNTS OWED TO COMPANY. Immediately after
the deliveries in clause (b) above, the Craigs shall pay to the Company cash in
the amount of the Note Receivable LESS any amounts that the Company owes the
Craigs.
(e) PAYMENT OF SPLIT-DOLLAR PREMIUMS. Immediately after the
deliveries in clause (b) above, the Craigs shall pay to the Company cash in the
amount of the Split-Dollar Premiums and the Company shall release the collateral
assignment of the life insurance policies on the lives of the Craigs.
2.3 PURCHASE PRICE.
(a) The aggregate purchase price to be paid for the Shares
(the "PURCHASE PRICE") shall be an amount equal to $23,500,000, MINUS (i) an
amount equal to the aggregate amount of all Indebtedness of the Company existing
as of the Closing (the "CLOSING INDEBTEDNESS"), MINUS (ii) an amount equal to
the aggregate amount of all Taxes of or payable by the Company with respect to
any taxable year or taxable period or portion thereof ended on or prior to the
Closing Date (reduced by any estimated tax payments made by the Company related
to such Taxes to the extent such payments did not already reduce such Taxes)
(the "CLOSING TAX LIABILITY"), MINUS (iii) an amount equal to the amount (if
any) by which the Net Working Capital of the Company as of the Closing Date as
shown on the Closing Balance Sheet (the "CLOSING NET WORKING CAPITAL") is less
than $2,400,000 (it being understood that any Cash Equivalents may be treated
like cash in order to satisfy such target number), MINUS (iv) an amount equal to
the amount (if any) by which the Net Worth of the Company as of the Closing Date
as shown on the Closing Balance Sheet (as defined in Section 2.3(c) below and as
prepared in accordance with the provisions thereof) (the "CLOSING NET WORTH") is
less than $7,500,000 (it being understood that any Cash Equivalents may be
treated like cash in order to satisfy such target number) (without duplication
of any reduction under clause (iii) above), plus (v) the amount of the
Split-Dollar Premiums, PLUS (vi) the amount of the Note Receivable, PLUS (vii)
an amount equal to the aggregate value of cash and Cash Equivalents of the
Company in excess of $200,000 as shown on the Closing Balance Sheet (the
"CLOSING CASH AMOUNT"); PROVIDED that the Purchase Price will be increased by
the Closing Cash Amount only as long as the Closing Net Worth is equal to or
greater than $7,500,000 and the Closing Net Working Capital is equal to or
greater than $2,400,000; PROVIDED FURTHER that the Closing Cash Amount shall
exclude any cash or Cash Equivalents that are treated like cash that were used
by Sellers to satisfy the Closing Net Working Capital or Closing Net Worth
target numbers set forth above.
(b) At the Closing, Buyer shall pay to Sellers in the manner
described in clause (i) of Section 2.2(b) above an amount equal to the Purchase
Price, as estimated in good faith by Buyer and the Seller Representative
(including an estimate of the components of the Purchase Price), not less than
two days prior to the Closing (the "ESTIMATED PURCHASE PRICE").
(c) Within 120 days following the Closing Date, Buyer shall
deliver to the Seller Representative a consolidated balance sheet of the Company
(in its final and binding form, the "CLOSING BALANCE SHEET") as of the end of
the business day immediately preceding the Closing Date,
8
setting forth the Closing Indebtedness, the Closing Tax Liability, the
Closing Net Worth, the Closing Cash Amount, the Closing Net Working Capital,
the Split-Dollar Premiums, the Note Receivable (collectively, the "PRICE
COMPONENTS") and the resulting Purchase Price calculated with reference to
such amounts. The Closing Balance Sheet shall include all known adjustments
required in a year-end closing of the books and shall be prepared in
accordance with GAAP. The Craigs shall cooperate as reasonably requested in
connection with the preparation of the Closing Balance Sheet. During the
30-day period immediately following the Seller Representative's receipt of
the Closing Balance Sheet, the Craigs shall be permitted to review the
Company's books and records and the Company's working papers related to the
preparation of the Closing Balance Sheet and determination of the Purchase
Price. The Closing Balance Sheet shall become final and binding upon the
parties 30 days following the Seller Representative's receipt thereof, unless
the Seller Representative shall give written notice of their disagreement (a
"NOTICE OF DISAGREEMENT") to Buyer prior to such date. Any Notice of
Disagreement shall specify in reasonable detail the nature and dollar amount
of any disagreement so asserted and shall be delivered only if (and to the
extent that) the Craigs reasonably and in good faith determine that the
Closing Balance Sheet and the resulting Purchase Price calculated with
reference thereto delivered by Buyer has not been determined in accordance
with the guidelines and procedures set forth in this Agreement. If a timely
Notice of Disagreement is received by Buyer, then the Closing Balance Sheet
(as revised in accordance with clause (x) or (y) below) shall become final
and binding upon the parties on the earliest of (x) the date the parties
resolve in writing any differences they have with respect to the matters
specified in the Notice of Disagreement or (y) the date all matters in
dispute are finally resolved in writing by the Accounting Firm (defined
below). During the 30 days following delivery of a Notice of Disagreement,
the Parties shall seek in good faith to resolve in writing any differences
which they have with respect to the matters specified in the Notice of
Disagreement. Following delivery of a Notice of Disagreement, Buyer and its
agents and representatives shall be permitted to review Craigs' and their
representatives' working papers relating to the Notice of Disagreement. At
the end of the 30-day period referred to above, the parties shall submit to a
mutually satisfactory independent "big-five" accounting firm other than Ernst
& Young LLP and the Company's accountants prior to the Closing for review and
resolution of all matters (but only such matters) that remain in dispute and
that were properly included in the Notice of Disagreement. If the parties are
unable to mutually agree upon an accounting firm, Buyer's and the Sellers'
Representative shall select by lot a "big-five" accounting firm other than
Ernst & Young LLP and the Company's accountants prior to the Closing. The
parties shall instruct the accounting firm ultimately agreed upon or selected
by lot under this Section 2.3(c) (the "ACCOUNTING FIRM") to make a final
determination of the Price Components and the resulting Purchase Price
calculated with reference to such amounts to the extent such amounts are in
dispute, in accordance with the guidelines and procedures set forth in this
Agreement. The Parties will cooperate with the Accounting Firm during the
term of its engagement. The Parties shall instruct the Accounting Firm to not
assign a value to any item in dispute greater than the greatest value for
such item assigned by Buyer, on the one hand, or the Craigs, on the other
hand, or less than the smallest value for such item assigned by Buyer, on the
one hand, or the Craigs, on the other hand. The Parties shall also instruct
the Accounting Firm to make its determination based solely on presentations
by Buyer and the Craigs which are in accordance with the guidelines and
procedures set forth in this Agreement (i.e. not on the basis of an
independent review). The Closing Balance Sheet and the determination of the
Price Components shall become final and binding on the Parties on the
9
date the Accounting Firm delivers its final resolution in writing to the
parties (which final resolution shall be requested by the Parties to be
delivered not more than 45 days following submission of such disputed
matters). The fees and expenses of the Accounting Firm shall be shared
equally by Buyer, on the one hand, and the Craigs, on the other hand.
(d) Promptly after the Closing Balance Sheet and the
determination of the Price Components and the resulting Purchase Price
calculated with reference to such amounts become final and binding on the
parties under Section 2.3(c) above, the Estimated Purchase Price shall be
recalculated by giving effect to the final and binding Price Components (as
recalculated, the "FINAL PURCHASE PRICE"). If the Estimated Purchase Price is
greater than the Final Purchase Price, the Craigs shall, and if the Final
Purchase Price is greater than the Estimated Purchase Price, Buyer shall, within
three business days after the Closing Balance Sheet becomes final and binding on
the parties, make payment by wire transfer to Buyer or the Craigs, as the case
may be, in immediately available funds of the amount of such difference,
together with interest thereon at a rate per annum equal to the Applicable Rate,
calculated on the basis of the actual number of days elapsed over 360, from the
Closing Date to the date of payment.
ARTICLE III
CONDITIONS TO CLOSING
3.1 CONDITIONS TO BUYER'S OBLIGATIONS. The obligation of Buyer to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions on or prior to the Closing Date:
(a) The representations and warranties in Article V hereof
that are subject to materiality qualifications shall be true and correct in all
respects at and as of the Closing and the representations and warranties
contained in Article V hereof that are not subject to materiality qualifications
shall be true and correct in all material respects at and as of the Closing, in
each case as though then made and as though the Closing Date was substituted for
the date of this Agreement throughout such representations and warranties, and
each of the Craigs and the Company shall have performed in all material respects
all of the covenants and agreements required to be performed by the Craigs and
the Company hereunder prior to the Closing;
(b) The Craigs and the Company shall have received or obtained
all third-party consents and approvals that are necessary (i) for the
consummation of the transactions contemplated hereby or (ii) to prevent a breach
of or default under, or a termination, modification or acceleration of, any
instrument, contract, lease, license or other agreement identified with an
asterisk on the attached RESTRICTIONS SCHEDULE (collectively, the "THIRD-PARTY
APPROVALS"), in each case on terms reasonably satisfactory to Buyer;
10
(c) Buyer and the Company shall have received or obtained all
governmental and regulatory consents, approvals, licenses and authorizations
that are necessary (i) for the consummation of the transactions contemplated
hereby or (ii) for Buyer to own the Company and to operate the business of and
control the Company following the Closing (including any required approvals from
the State of New Mexico), in each case on terms and conditions reasonably
satisfactory to Buyer (collectively, the "GOVERNMENTAL APPROVALS");
(d) No suit, action or other proceeding shall be pending or
threatened before any court or governmental or regulatory official, body or
authority or any arbitrator wherein an unfavorable injunction, judgment, order,
decree, ruling or charge would (i) prevent the performance of this Agreement or
the consummation of any of the transactions contemplated hereby or declare
unlawful any of the transactions contemplated hereby, (ii) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, (iii) affect adversely the right of Buyer to own the Company or
operate the business of or control the Company or (iv) affect adversely the
right of the Company to own its assets or control its business, and no such
injunction, judgment, order, decree or ruling shall have been entered or be in
effect;
(e) Since December 31, 1999, there shall have been no material
adverse change or development in the business, financial condition, value,
operating results, assets, operations, business prospects, cash flow, net worth
or customer, supplier or employee relations of the Company taken as a whole (as
determined by Buyer in its sole discretion);
(f) Buyer shall have completed and shall be satisfied in its
sole discretion with the results of its and its attorneys', accountants' and
other representatives' business, legal, accounting and financial due diligence
investigation and evaluation of the Company (which investigation and evaluation
shall include a review of the Company's relationships with key customers and
suppliers, ongoing relationships with key employees (including the Craigs) and
Intellectual Property Rights, as well as the Company's acquisition opportunities
and any other matters as deemed appropriate by Buyer);
(g) Buyer shall have obtained all of the financing it needs in
order to consummate the transactions contemplated hereby and fund the working
capital requirements of the Company following the Closing (in each case on terms
and conditions satisfactory to Buyer in its sole discretion);
(h) The Craigs shall have delivered to the Company (i) all
property owned by the Company that is currently used by any persons who are not
full-time employees of the Company, and (ii) all credit cards issued in the name
of the Company and used by any persons who are not full-time employees of the
Company;
(i) The Company shall have obtained and delivered to Buyer a
fully-executed estoppel certificate and landlord lien waiver agreement from the
lessor of the Leased Real Property demised by the Real Estate Lease in form and
substance reasonably satisfactory to Buyer and Buyer's
11
lender, and such estoppel certificate and landlord lien waiver agreement
shall be in full force and effect at Closing;
(j) The respective employment agreements between Company and
each of the Craigs shall have been entered into, each in form substantially the
same as that attached hereto as EXHIBIT B (the "EMPLOYMENT AGREEMENTS"), and all
of such agreements shall be in full force and effect at the Closing;
(k) Royce Craig shall have entered into an executive stock
purchase agreement with Buyer providing for the purchase of at least $2,350,000
in the aggregate of capital stock of Buyer, in form substantially the same as
that attached hereto as EXHIBIT C (the "EXECUTIVE PURCHASE AGREEMENTS"), and
such agreement shall be in full force and effect at the Closing;
(l) The Craigs shall have entered into the Amended and
Restated Stockholders Agreement dated as of June 12, 2000, among Buyer and the
stockholders of Buyer attached hereto as EXHIBIT D (the "STOCKHOLDERS
AGREEMENT"), and such agreement shall be in full force and effect at the
Closing;
(m) The Craigs shall have entered into the Amended and
Restated Registration Agreement dated as of June 12, 2000, as amended, among
Buyer and the stockholders of Buyer attached hereto as EXHIBIT E (the
"REGISTRATION AGREEMENT"), and such agreement shall be in full force and effect
at the Closing;
(n) TITLE INSURANCE. Buyer in cooperation with the Craigs
shall have obtained, in preparation for Closing, a commitment for an ALTA Owners
or Leasehold Policy of Title Insurance, as the case may be, Form B-1970, for
each of the parcels of real property located in the United States and an
equivalent policy acceptable to Buyer for each of the parcels of real property
located outside of the United States (the "TITLE COMMITMENTS"), issued by a
title insurer satisfactory to Buyer (the "TITLE INSURER"), in such amount as
Buyer determines to be the fair market value (including all improvements
thereon), insuring Buyer=s interest in such parcel as of Closing, subject only
to the Permitted Encumbrances. The Craigs shall deliver at the time of delivery
of the Title Commitments, copies of all documents of record referred to therein.
The Craigs will provide Buyer with title insurance policies ("TITLE POLICIES")
on or before the Closing, from the Title Insurer based upon the Title
Commitments. The Craigs will deliver to the Title Insurer all affidavits,
undertakings and other title clearance documents necessary to issue the Title
Policies and endorsements thereto. Each such Title Policy will be dated as of
the date of closing and (a) insure title to the applicable parcels of real
estate and all recorded easements benefitting such parcels, subject only to
Permitted Encumbrances, (b) contain an "extended coverage endorsement" insuring
over the general exceptions contained customarily in such policies, (c) contain
an ALTA Zoning Endorsement 3.1, with parking (or equivalent), (d) contain an
endorsement insuring that the parcel described in such Title Policy is the
parcel shown on the survey delivered with respect to such parcel and a survey
accuracy endorsement, (e) contain an endorsement insuring that each street
adjacent to such parcel is a public street and that there is direct and
unencumbered pedestrian and vehicular access to such street from such parcel,
(f)
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if the real estate covered by such policy consists of more than one record
parcel, contain a "contiguity" endorsement insuring that all of the record
parcels are contiguous to one another, (g) contain a non-imputation
endorsement, (h) contain a tax number endorsement and (i) contain such other
endorsements as Buyer and Buyer's lender, if any, may reasonably request. The
cost of the Title Commitment will be borne by the Buyer.
(o) SURVEYS. Buyer shall have procured in preparation for the
Closing, current surveys of each parcel of the real property, prepared by a
licensed surveyor, satisfactory to Buyer, and conforming to 1992 ALTA/ACSM
Minimum Detail Requirements for Urban Land Title Surveys ("SURVEYS"), and such
standards as the Title Insurer may require as a condition to the removal of any
survey exceptions from the Title Policy, and certified to Buyer, Buyer's lender
and the Title Insurer, within 30 days of the Closing Date, in a form
satisfactory to such parties. The Survey shall disclose the location of all
Improvements, easements, party walls, sidewalks, roadways, utility lines and
such matters shown customarily on such surveys, show access affirmatively to
public streets and roads, and include Table A Item Nos. 1-4 and 6-14. No Survey
shall disclose any survey defect or encroachment from or onto any of the real
property which has not been cured or insured over prior to the Closing. The cost
of the Surveys will be shared equally by Buyer on the one hand and the Craigs on
the other hand.
(p) Each of the Craigs and the Escrow Agent shall have
executed and delivered the Escrow Agreement, and the Escrow Agreement shall be
in full force and effect as of the Closing and shall not have been amended or
modified;
(q) Buyer shall have received from Decker, Jones, McMackin,
McClane, Hall & Bates P.C., counsel for Sellers and the Company, an opinion with
respect to the matters set forth in EXHIBIT F attached hereto, which shall be
addressed to Buyer and Buyer's lenders, dated as of the Closing Date, and in
form and substance reasonably satisfactory to Buyer and Buyer's lenders;
(r) Buyer shall have received evidence (in form and substance
satisfactory to Buyer) that the Company's and Sellers' legal counsel, investment
bankers and other agents and representatives have been paid in full and that the
Company does not have any liability to any of the Company's or Sellers' legal
counsel, investment bankers, agents or representatives;
(s) The Company shall have obtained releases of all Liens
(other than any Permitted Liens) relating to the assets and properties of the
Company and the Company shall have obtained and delivered to Buyer and Buyer's
lenders payoff letters with respect to all Indebtedness for borrowed money
outstanding as of the Closing (in each case on terms and conditions satisfactory
to Buyer);
(t) The Craigs and the Company shall have delivered to Buyer
copies of the Company's most recently prepared interim monthly and year-to-date
financial statements; and
(u) At the Closing, the Craigs shall have delivered to Buyer
(i) a certificate signed by the Company, dated the date of the Closing, stating
that the conditions specified in subsections (a)
13
through (t) above (other than subsection (f),(g) and (q)) have been satisfied
as of the Closing; (ii) a certificate from the Craigs and the Company
indicating their good faith and best estimates of the Price Components; (iii)
copies of all Third-Party Approvals and Governmental Approvals; (iv)
certified copies of the resolutions of the Board of Directors of the Company
authorizing the execution, delivery and performance of this Agreement and the
other agreements contemplated hereby and the consummation of the transactions
contemplated hereby and thereby; (v) good standing certificates for the
Company from its jurisdiction of incorporation and each jurisdiction in which
the Company is qualified to do business as a foreign corporation, in each
case dated as of a recent date prior to the Closing Date; and (vi) such other
documents or instruments as are required to be delivered by the Craigs or the
Company at the Closing pursuant to the terms hereof or that Buyer reasonably
request prior to the Closing Date to effect the transactions contemplated
hereby.
All proceedings to be taken by the Craigs and the Company in
connection with the consummation of the transactions contemplated hereby and all
certificates, opinions, instruments and other documents required to effect the
transactions contemplated hereby reasonably requested by Buyer shall be
reasonably satisfactory in form and substance to Buyer and their special
counsel. Any condition specified in this Section 3.1 may be waived by Buyer if
such waiver is set forth in a writing duly executed by Buyer.
3.2 CONDITIONS TO SELLERS' OBLIGATIONS. The obligation of Sellers to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions at or prior to the Closing:
(a) The representations and warranties made in Article VI
hereof shall be true and correct in all material respects at and as of the
Closing Date as though then made and as though the Closing Date was substituted
for the date of this Agreement throughout such representations and warranties,
and Buyer shall have performed in all material respects all the covenants and
agreements required to be performed by Buyer hereunder prior to the Closing;
(b) No suit, action or other proceeding shall be pending
before any court or governmental or regulatory official, body or authority
wherein an unfavorable injunction, judgment, order, decree or ruling would (i)
prevent consummation of the transactions contemplated by this Agreement or (ii)
cause the transactions contemplated by this Agreement to be rescinded following
consummation, and no such injunction, judgment, order, decree or ruling shall be
in effect;
(c) Buyer and the Escrow Agent shall have executed and
delivered the Escrow Agreement, and the Escrow Agreement shall be in full force
and effect as of the Closing;
(d) Buyer shall have executed and delivered the Stockholders
Agreement, and the Stockholders Agreement shall be in full force and effect as
of the Closing;
(e) Buyer shall have executed and delivered the Registration
Agreement, and the Registration Agreement shall be in full force and effect as
of the Closing;
14
(f) Buyer shall have executed and delivered the Executive
Purchase Agreement, and the Executive Purchase Agreement shall be in full force
and effect as of the Closing;
(g) At the Closing, Buyer shall have delivered to the Seller
Representative (i) a certificate signed by Buyer, dated the date of the Closing,
stating that the conditions specified in subsection (a) through (f) above have
been satisfied, (ii) certified copies of the resolutions of Buyer's board of
directors authorizing the execution, delivery and performance of this Agreement
and the other agreements contemplated hereby and the consummation of the
transactions contemplated hereby and thereby and (iii) such other documents or
instruments as are required to be delivered by Buyer at the Closing pursuant to
the terms hereof or that Sellers reasonably request prior to the Closing Date to
effect the transactions contemplated hereby;
(h) Sellers shall have received from Kirkland & Ellis, counsel
for Buyer, an opinion with respect to the matters set forth in EXHIBIT G
attached hereto, which shall be addressed to the Sellers, dated as of the
Closing Date and in a form reasonably satisfactory to Sellers;
(i) The Craigs and the Company shall have received or obtained
all governmental and regulatory consents, approvals, licenses and authorizations
that are necessary for the consummation of the transactions contemplated hereby
(including any required approvals from the State of New Mexico), in each case on
terms and conditions reasonably satisfactory to the Craigs; and
(j) The Company and Linc.net shall have executed and delivered
the Employment Agreements, and the Employment Agreements shall be in full force
and effect as of the Closing.
All proceedings to be taken by Buyer in connection with the
consummation of the transactions contemplated hereby and all documents required
to be delivered by Buyer to effect the transactions contemplated hereby
reasonably requested by Sellers or the Seller Representative shall be reasonably
satisfactory in form and substance to Sellers and their counsel. Any condition
specified in this Section 3.2 may be waived if such waiver is set forth in a
writing duly executed by Sellers.
ARTICLE IV
[Intentionally Omitted]
15
ARTICLE V
REPRESENTATIONS AND WARRANTIES CONCERNING
THE COMPANY AND SELLERS
With respect to Article V of the Agreement, any reference to Seller or
Sellers does not include the Community Foundation of North Texas. As a material
inducement to Buyer to enter into this Agreement and consummate the transactions
contemplated hereby, each of Sellers and the Company hereby jointly and
severally represent and warrant to Buyer that:
5.1 CAPACITY, ORGANIZATION, CORPORATE POWER AND LICENSES. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of New Mexico and is qualified to do business in every
jurisdiction in which the failure to so qualify would have a Material Adverse
Effect. The Company possesses all requisite corporate power and authority and
all material licenses, permits and authorizations necessary to own and operate
its properties, to carry on its businesses as now conducted and presently
proposed to be conducted and to carry out the transactions contemplated by this
Agreement. The copies of the Company's charter documents and bylaws as currently
in effect which have been made available to the Buyer's special counsel reflect
all amendments made thereto at any time prior to the date of this Agreement and
are correct and complete. Each Seller has full power, authority and legal
capacity to enter into this Agreement and the other documents contemplated
hereby to which such Seller is a party and to perform his obligations hereunder
and thereunder. The minute books (containing the records of meetings) and the
ownership record books, if any, of the Company are correct and complete in all
material respects. The Company is not in default under or in violation of any
provision of their organizational and governance documents. The attached
OFFICERS AND DIRECTORS SCHEDULE sets forth a list all of the officers and
directors of the Company.
5.2 CAPITAL STOCK AND RELATED MATTERS. As of the Closing, the
authorized capital stock of the Company shall consist of the number of shares of
Common Stock set forth in the SCHEDULE OF SELLERS. The Company does not have
outstanding any stock or securities convertible or exchangeable for any shares
of its capital stock or containing any profit participation features, nor shall
it have outstanding any rights or options to subscribe for or to purchase its
capital stock or any stock or securities convertible into or exchangeable for
its capital stock or any stock appreciation rights or phantom stock plans. As of
the Closing, the Company shall not be subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of its
capital stock or any warrants, options or other rights to acquire its capital
stock. As of the Closing, all of the outstanding shares of the Company's capital
stock shall be validly issued, fully paid and nonassessable and are held of
record by the respective Shareholders as set forth in the SCHEDULE OF SELLERS.
The Company has not violated any federal or state securities laws in connection
with the offer, sale or issuance of its securities. There are no voting trusts,
proxies, or other agreements or understandings with respect to the voting of the
capital stock of the Company. Each of the Sellers holds of record and owns
beneficially the number of Shares set forth next to his or her name on the
SCHEDULE OF SELLERS free and clear of any Liens or Encumbrances. Each of the
Sellers is not a party to any option, warrant,
16
purchase right, or other contract or commitment that could require the Seller
to sell, transfer, or otherwise dispose of any capital stock of the Company
(other than this Agreement). Each of the Sellers is not a party to any voting
trust, proxy, or other agreement or understanding with respect to the voting
of any capital stock of the Company.
5.3 AUTHORIZATION; NONCONTRAVENTION. The execution, delivery and
performance of this Agreement and all of the other agreements and instruments
contemplated hereby to which the Company is a party have been duly authorized by
the Company, and no other act or other proceeding on the part of the Company is
necessary to authorize the execution, delivery or performance of this Agreement
or the other agreements contemplated hereby and the consummation of the
transactions contemplated hereby or thereby. This Agreement has been duly
executed and delivered by the Company and Sellers and constitutes a valid and
binding obligation of the Company and Sellers, enforceable in accordance with
its terms, and each of the other agreements and instruments contemplated hereby
to which the Company or any Seller is a party, when executed and delivered by
the Company or such Seller(s), as applicable, in accordance with the terms
hereof and thereof, shall each constitute a valid and binding obligation of such
Person, enforceable in accordance with its respective terms. Except as set forth
on the attached RESTRICTIONS SCHEDULE, the execution and delivery by the Company
and Sellers of this Agreement and all of the other agreements and instruments
contemplated hereby to which the Company or any Seller(s) is a party and the
fulfillment of and compliance with the respective terms hereof and thereof by
the Company and Sellers do not and shall not (a) conflict with or result in a
breach of the terms, conditions or provisions of, (b) constitute a default under
(whether with or without the passage of time, the giving of notice or both), (c)
result in the creation of any Lien upon the Company's capital stock or assets
pursuant to, (d) give any third party the right to modify, terminate or
accelerate any obligation under, (e) result in a violation of, or (f) require
any authorization, consent, approval, exemption or other action of or by or
notice or declaration to, or filing with, any third party or any court or
administrative or governmental body or agency pursuant to, the Company's
organizational documents, or any law, statute, rule or regulation to which the
Company or any Seller is subject, or any agreement, instrument, license, permit,
order, judgment or decree to which the Company or any Seller is subject. Neither
the Company nor any Seller is a party to or bound by any written or oral
agreement or understanding with respect to a Company Transaction other than this
Agreement, and each such Person has terminated all discussions with third
parties (other than with Buyer and its Affiliates) regarding Company
Transactions.
5.4 SUBSIDIARIES. The Company does not have and never has had any
Subsidiaries.
5.5 FINANCIAL STATEMENTS. Attached hereto as the FINANCIAL STATEMENTS
SCHEDULE are the following financial statements:
(a) the audited balance sheet of the Company as of June 30,
1999 and the reviewed balance sheet of the Company as of June 30, 1998 and June
30, 1997, and the related statements of income and cash flows (or the
equivalent) for the fiscal years then ended; and
17
(b) the unaudited combined balance sheet of the Company as of
April 30, 2000 (the "LATEST BALANCE SHEET"), and the related statements of
income and cash flows (or the equivalent) for the three-month period then ended.
Each of the foregoing Financial Statements (including in all cases the notes
thereto, if any) is accurate and complete, is consistent with the books and
records of the Company (which, in turn, are accurate and complete), fairly
presents the financial condition and operating results of the Company and has
been prepared in accordance with GAAP consistently applied throughout the
periods covered thereby (except for GAAP omissions as are noted on the FINANCIAL
STATEMENTS SCHEDULE), subject in the case of the unaudited financial statements
to the absence of footnote disclosures and normal year end adjustments (none of
which footnote disclosures or adjustments would, alone or in the aggregate, be
materially adverse to the business, operations, assets, liabilities, financial
condition, operating results, value, cash flow or net worth of the Company taken
as a whole).
5.6 ACCOUNTS RECEIVABLE. Except as set forth on the attached ACCOUNTS
RECEIVABLE SCHEDULE, all accounts and notes receivable reflected on the Latest
Balance Sheet and all accounts and notes receivable to be reflected on the
Closing Balance Sheet (net of allowances for doubtful accounts as reflected
thereon and as determined in accordance with GAAP) are or shall be valid
receivables arising in the ordinary course of business and are or shall be
current and collectible at the aggregate recorded amount therefor as shown on
the Latest Balance Sheet and on the Closing Balance Sheet, as the case may be
(net of allowances for doubtful accounts as reflected thereon and as determined
in accordance with GAAP). Except as set forth on the attached ACCOUNTS
RECEIVABLE SCHEDULE, no Person has any Lien on such receivables or any part
thereof, and no agreement for deduction, free goods, discount or other deferred
price or quantity adjustment has been made with respect to any such receivables.
5.7 INVENTORY. All of the Company's inventory consists of a quantity
and quality usable and salable in the ordinary course of business consistent
with past practice, is not obsolete, defective, damaged or slow-moving, is
merchantable and fit for its intended use, and is being actively marketed in
normal commercial channels and in normal commercial quantities, subject only to
the reserves for inventory write-down set forth on the face of the Latest
Balance Sheet and the Closing Balance Sheet (rather than the notes thereto) and
as determined in accordance with GAAP.
5.8 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth on the
attached LIABILITIES SCHEDULE, the Company neither has nor will have any
obligation or liability (whether accrued, absolute, contingent, unliquidated or
otherwise, whether or not known to the Company, whether due or to become due and
regardless of when or by whom asserted) arising out of any transaction entered
at or prior to the date hereof, or any action or inaction at or prior to the
date hereof, or any state of facts existing at or prior to the date hereof,
other than (a) liabilities reflected on the Latest Balance Sheet, (b)
liabilities and obligations which have arisen after the date of the Latest
Balance Sheet in the ordinary course of business (none of which is a liability
for breach of contract, breach of warranty, tort, infringement, violation of
law, claim or lawsuit), (c) obligations under contracts and commitments
described on the attached CONTRACTS SCHEDULE or under contracts and commitments
entered into in the
18
ordinary course of business consistent with past practice which are not
required to be disclosed on such Schedule pursuant to Section 5.12 below (but
not liabilities for any breach of any such contract or commitment occurring
on or prior to the Closing Date), and (d) other liabilities and obligations
expressly disclosed in the other Schedules referred to in this Article V.
5.9 NO MATERIAL ADVERSE EFFECT. Since December 31, 1999, there has
occurred no fact, event or circumstance which has had or would reasonably be
expected to have a Material Adverse Effect. Since December 31, 1999, the Company
has conducted its business only in the ordinary course of business consistent
with past practice.
5.10 ABSENCE OF CERTAIN DEVELOPMENTS. Except as set forth on the
attached DEVELOPMENTS SCHEDULE, since December 31, 1999, the Company has not:
(a) issued any notes, bonds or other debt securities or any
capital stock or other equity securities or any securities or rights
convertible, exchangeable or exercisable into any capital stock or other equity
securities;
(b) borrowed any amount or incurred or become subject to any
material liabilities, except commercial loan borrowing and current liabilities
incurred in the ordinary course of business and consistent with past practice;
(c) discharged or satisfied any material Lien or paid any
material obligation or liability, other than current liabilities or commercial
loan borrowings paid in the ordinary course of business;
(d) declared, set aside or made any payment or distribution of
cash (including so-called "tax distributions") or other property to any of its
shareholders with respect to such shareholder's capital stock or otherwise, or
purchased, redeemed or otherwise acquired any shares of its capital stock or
other equity securities (including any warrants, options or other rights to
acquire its capital stock or other equity);
(e) mortgaged or pledged any of its properties or assets or
subjected them to any Lien, except for Permitted Liens;
(f) sold, assigned, transferred, leased, licensed or otherwise
encumbered any of its tangible assets, except in the ordinary course of business
consistent with past practice, or canceled any material debts or claims;
(g) sold, assigned, transferred, leased, licensed or otherwise
encumbered any Intellectual Property Rights, disclosed any proprietary
confidential information to any Person (other than to Buyer and its Affiliates
and other than in the ordinary course of business consistent with past practice
in circumstances in which it has imposed reasonable confidentiality
restrictions), or abandoned or permitted to lapse any Intellectual Property
Rights;
19
(h) made or granted any bonus or any wage or salary increase
to any employee or group of employees (other than any wage or salary increase to
any employee of the Company whose annual compensation is less than $50,000 in
the ordinary course of business and consistent with past practice and except as
required by pre-existing contracts described on the attached CONTRACTS
SCHEDULE), or made or granted any increase in any employee benefit plan or
arrangement, or amended or terminated any existing employee benefit plan or
arrangement or adopted any new employee benefit plan or arrangement;
(i) suffered any extraordinary losses or waived any rights of
material value (whether or not in the ordinary course of business or consistent
with past practice) in excess of $25,000 in the aggregate;
(j) made capital expenditures or commitments therefor that
amount in the aggregate to more than $25,000;
(k) delayed or postponed the payment of any accounts payable
or commissions or any other liability or obligation or agreed or negotiated with
any party to extend the payment date of any accounts payable or commissions or
any other liability or obligation or accelerated the collection of (or
discounted) any accounts or notes receivable;
(l) made any loans or advances to, guaranties for the benefit
of, or any Investments in, any Person (other than advances to the Company's
employees in the ordinary course of business consistent with past practice);
(m) made any charitable contributions or pledges exceeding in
the aggregate $5,000 or made any political contributions;
(n) suffered any damage, destruction or casualty loss
exceeding in the aggregate $25,000, whether or not covered by insurance;
(o) made any change in any method of accounting or accounting
policies or made any write-down in the value of its inventory that is material
or that is other than in the usual, regular and ordinary course of business
consistent with past practice or reversed any accruals (whether or not in the
ordinary course of business or consistent with past practice);
(p) made any Investment in or taken any steps to incorporate
any Subsidiary;
(q) amended its articles of incorporation, by-laws or other
organizational documents;
(r) entered into any agreement or arrangement prohibiting or
restricting it from freely engaging in any business or otherwise restricting the
conduct of its business anywhere in the world;
20
(s) taken any action or failed to take any action that has,
had or would reasonably be expected to have the effect of accelerating to
pre-Closing periods sales to the trade or other customers that would otherwise
be expected to occur after the Closing;
(t) entered into any contract other than in the ordinary
course of business consistent with past practice, entered into any other
material transaction, whether or not in the ordinary course of business or
consistent with past practice, or materially changed any business practice; or
(u) agreed, whether orally or in writing, to do any of the
foregoing.
5.11 ASSETS.
(a) Except as set forth on the attached ASSETS SCHEDULE, the
Company has good and marketable title to, or a valid leasehold interest in, all
properties and assets used by it, located on its premises or shown on the Latest
Balance Sheet or acquired after the date thereof, free and clear of all Liens
(other than properties and assets disposed of for fair consideration in the
ordinary course of business since the date of the Latest Balance Sheet and
except for Liens disclosed on the Latest Balance Sheet (including any notes
thereto) and Liens for current property taxes not yet due and payable and
Permitted Liens). The Company owns, has a valid leasehold interest in or has the
valid and enforceable right to use all assets, tangible or intangible, necessary
for the conduct of its business as presently conducted and as presently proposed
to be conducted. Except as set forth on the attached ASSETS SCHEDULE, the
Company's buildings (including all components of such buildings, structures and
other improvements), equipment, machinery, fixtures, improvements and other
tangible assets (whether owned or leased) are in good condition and repair
(ordinary wear and tear excepted) and are fit for use in the ordinary course of
the Company's business as presently conducted and as presently proposed to be
conducted. All such assets have been installed and maintained in all material
respects in accordance with all applicable laws, regulations and ordinances. The
attached ASSETS SCHEDULE sets forth and describes in reasonable detail the
actual out-of-pocket capital expenditures (as determined in accordance with
GAAP) made by the Company during the twelve months ended December 31, 1999 and
the three-months ended March 31, 2000.
(b) The LEASED REAL PROPERTY SCHEDULE attached hereto contains
a complete list of all real property leased or subleased by the Company
(individually "LEASED REAL PROPERTY" and collectively, the "LEASED REALTY"). The
Company has a valid leasehold interest in each Leased Real Property, subject to
Permitted Liens and other than oral leases. The Company has previously delivered
to Buyer's special counsel complete and accurate copies of each of the leases in
writing, or a summary of terms of any oral lease, for the Leased Realty (the
"REALTY LEASES"). With respect to each Realty Lease: (i) each written Realty
Lease is legal, valid, binding, enforceable and in full force and effect; (ii)
neither the Company nor any other party to the Realty Lease is in breach or
default, and no event has occurred which, with notice or lapse of time or both,
would constitute such a breach or default or permit termination, modification or
acceleration under the Realty Lease; (iii) no party to the Realty Lease has
repudiated any provision thereof; (iv) there are no disputes, oral agreements or
forbearance programs in effect as to the Realty Lease; (v) the Realty Lease has
not been modified in any respect,
21
except to the extent that such modifications are disclosed by the documents
delivered to Buyer; and (vi) the Company has not assigned, transferred,
conveyed, mortgaged, deeded in trust or encumbered any interest in the Realty
Lease.
(c) OWNED PROPERTIES. The OWNED PROPERTIES SCHEDULE sets forth
a list of all owned U.S. real property and owned foreign real property
(collectively, the "OWNED REAL PROPERTY") used by the Company in the operation
of the Company's business. With respect to each such parcel of Owned Real
Property: (i) the Company has good and marketable fee simple title to such
parcel free and clear of all encumbrances, except Permitted Encumbrances; (ii)
there are no leases, subleases, licenses, concessions, or other agreements,
written or oral, granting to any person the right of use or occupancy of any
portion of such parcel; and (iii) there are no outstanding actions or rights of
first refusal to purchase such parcel (other than the right of the Buyer
pursuant to this Agreement), or any portion thereof or interest therein. There
are no proceedings in eminent domain or other similar proceedings pending or, to
the knowledge of Sellers, threatened, affecting any portion of the real
property. There exists no writ, injunction, decree, order or judgment
outstanding, nor any litigation, pending or threatened, relating to the
ownership, lease, use, occupancy or operation by any person of the real
property.
(d) CURRENT USE. The current use of the Owned Real Property
does not violate in any material respect any instrument of record or agreement
affecting such Owned Real Property. There is no violation of any covenant,
condition, restriction, easement, agreement or order of any governmental
authority having jurisdiction over any of the Owned Real Property that affects
such real property or the use or occupancy thereof. No damage or destruction has
occurred with respect to any of the Owned Real Property that, individually or in
the aggregate, has had or resulted in, or will have or result in, a significant
adverse effect on the operation of the Company's business.
(e) CONDITION AND OPERATION OF IMPROVEMENTS. All buildings and
all components of all buildings, structures and other improvements included
within the real property (the "IMPROVEMENTS"), including, without limitation,
the roofs and structural elements thereof and the heating, ventilation, air
conditioning, air pollution emission capture and abatement, plumbing,
electrical, mechanical, sewer, waste water and paving and parking equipment
systems and facilities included therein, are in good condition and repair and
adequate to operate such facilities as currently used, to the best of Sellers'
knowledge and belief, there are no facts or conditions affecting any of the
Improvements which would, individually or in the aggregate, interfere in any
significant respect with the use, occupancy or operation thereof as currently
used, occupied or operated or intended to be used, occupied or operated. There
are no structural deficiencies or, to the Seller's knowledge, latent defects
affecting any Improvements located upon the Owned Real Property. All water, gas,
electrical, steam, compressed air, telecommunication, sanitary and storm sewage
lines and systems and other similar systems serving the Owned Real Property are
installed and operating and are sufficient to enable the Owned Real Property to
continue to be used and operated in the manner currently being used and
operated, and any so-called hook-up fees or other associated charges have been
fully paid. Each such utility or other service is provided by a public or
private utility or service company and enters the Owned Real Property from an
adjacent public street or valid private easement owned by the supplier
22
of such utility or other service. Each Improvement has direct access to a
public street adjoining the Owned Real Property on which such Improvement is
situated over the driveways and accessways currently being used in connection
with the use and operation of such Improvement and no existing accessway
crosses or encroaches upon any property or property interest not owned by the
Company and being conveyed to Buyer. No Improvement or portion thereof is
dependent for its access, operation or utility on any land, building or other
improvement not included in the real property.
(f) PERMITS. All certificates of occupancy, permits, licenses,
franchises, approvals and authorizations (collectively, the "REAL PROPERTY
PERMITS") of all governmental authorities having jurisdiction over the Owned
Real Property, required or appropriate to have been issued to the Company to
enable the Owned Real Property to be lawfully occupied and used for all of the
purposes for which it is currently occupied and used have been lawfully issued
and are, as of the date hereof, in full force and effect. Sellers have delivered
complete and correct copies of the Real Property Permits to the Buyer. Sellers
have not received or been informed by a third party of the receipt by it of any
notice from any governmental authority having jurisdiction over the real
property threatening a suspension, revocation, modification or cancellation of
any Real Property Permit and, to the best knowledge of Sellers, there is no
basis for the issuance of any such notice or the taking of any such action.
(g) COMPLIANCE WITH LAWS. The Owned Real Property is in full
compliance with all applicable building, zoning, subdivision and other land use
and similar laws affecting the real property (collectively, the "REAL PROPERTY
LAWS"), and Sellers have not received any notice of violation or claimed
violation of any Real Property Law. There is no pending or, to the best
knowledge of Seller, any anticipated change in any Real Property Law that will
have or result in a significant adverse effect upon the ownership, alteration,
use, occupancy or operation of the real property or any portion thereof. No
current use by the Company of the real property is dependent on a nonconforming
use or other approval from a governmental authority, the absence of which would
significantly limit the use of any of the properties or assets in the operation
of the business.
5.12 CONTRACTS AND COMMITMENTS.
(a) Except as expressly contemplated by this Agreement or as
set forth on the attached CONTRACTS SCHEDULE, the Company is not a party to or
bound by any written or oral:
(i) pension, profit sharing, stock option, employee
stock purchase or other plan or arrangement providing for deferred or other
compensation to employees, former employees or consultants, or any other
employee benefit plan or arrangement, or any collective bargaining agreement or
any other contract with any labor union, or severance agreements, programs,
policies or arrangements;
(ii) contract for the employment of any officer,
individual employee or other Person on a full-time, part-time, consulting or
other basis or relating to loans to officers, directors or Affiliates;
23
(iii) contract under which the Company has advanced
or loaned any other Person amounts in the aggregate exceeding $25,000;
(iv) agreement or indenture relating to borrowed
money or other Indebtedness or the mortgaging, pledging or otherwise placing a
Lien on any material asset or material group of assets of the Company;
(v) Guaranty;
(vi) lease or agreement under which the Company is
lessee of or holds or operates any property, real or personal, owned by any
other party, except for any lease of real or personal property under which the
aggregate annual rental payments do not exceed $25,000;
(vii) lease or agreement under which the Company is
lessor of or permits any third party to hold or operate any property, real or
personal, owned or controlled by the Company;
(viii) contract or group of related contracts with
the same party or group of affiliated parties the performance of which involves
consideration in the aggregate in excess of $25,000, other than purchase and
sales orders incurred in the ordinary course of business;
(ix) assignment, license, indemnification or
agreement with respect to any intangible property (including any Intellectual
Property Rights);
(x) warranty agreement with respect to its services
rendered or its products sold or leased;
(xi) agreement under which it has granted any Person
any registration rights (including demand or piggyback registration rights);
(xii) sales, distribution, supply or franchise
agreement;
(xiii) agreement with a term of more than six
months which is not terminable by the Company upon less than 30 days' notice
without penalty and involves a consideration in excess of $25,000 annually;
(xiv) contract regarding voting, transfer or other
arrangements related to the Company's capital stock or warrants, options or
other rights to acquire any of the Company's capital stock;
(xv) contract or agreement prohibiting it from freely
engaging in any business or competing anywhere in the world; or
24
(xvi) any other agreement which is material to its
operations and business prospects or involves a consideration in excess of
$25,000 annually.
(b) All of the contracts, leases, agreements and instruments
set forth or required to be set forth on the CONTRACTS SCHEDULE are valid,
binding and enforceable in accordance with their respective terms and shall be
in full force and effect without penalty in accordance with their terms upon
consummation of the transactions contemplated hereby. Except as set forth on the
CONTRACTS SCHEDULE, (i) the Company has performed all obligations required to be
performed by it and is not in default under or in breach of nor in receipt of
any claim of default or breach under any contract, lease, agreement or
instrument to which the Company is subject; (ii) no event has occurred which
with the passage of time or the giving of notice or both would result in a
default, breach or event of noncompliance by the Company under any contract,
lease, agreement or instrument to which the Company is subject; (iii) the
Company has not any present expectation or intention of not fully performing all
such obligations; (iv) no partially-filled or unfilled customer purchase order
or sales order is subject to cancellation or any other material modification by
the other party thereto or is subject to any penalty, right of set-off or other
charge by the other party thereto for late performance or delivery; and (v)
neither the Company nor any Seller has knowledge of any breach or anticipated
breach by the other parties to any contract, lease, agreement, instrument or
commitment to which they are parties. The Company is not a party to any
contract, agreement or commitment the performance of which could reasonably be
expected to have a Material Adverse Effect.
(c) Buyer and Buyer's counsel have been supplied with or has
reviewed a true and correct copy of each of the written instruments, plans,
contracts and agreements and an accurate description of each of the oral
arrangements, contracts and agreements which are referred to on the attached
CONTRACTS SCHEDULE, together with all amendments, waivers or other changes
thereto.
5.13 INTELLECTUAL PROPERTY RIGHTS.
(a) The attached INTELLECTUAL PROPERTY SCHEDULE contains a
complete and accurate list of all (i) patented or registered Intellectual
Property Rights owned or, to the Company's or any Seller's knowledge, used by
the Company, (ii) pending patent applications and applications for other
registrations of Intellectual Property Rights filed by or on behalf of the
Company, and (iii) material unregistered Intellectual Property Rights owned or
used by the Company. The attached INTELLECTUAL PROPERTY SCHEDULE also contains a
complete and accurate list of all licenses and other rights granted by the
Company to any third party with respect to any Intellectual Property Rights and
all licenses and other rights granted by any third party to the Company with
respect to any Intellectual Property Rights, in each case identifying the
subject Intellectual Property Rights. The Company owns and possesses all right,
title and interest to, or has the right to use pursuant to a valid and
enforceable license, all Intellectual Property Rights necessary for the
operation of the businesses of the Company as presently conducted and as
presently proposed to be conducted, free and clear of all Liens. Without
limiting the generality of the foregoing, the Company owns and possesses all
right, title and interest in and to all Intellectual Property Rights created or
developed by the Company's employees and independent contractors or under the
direction or supervision of the Company's employees or independent
25
contractors relating to the businesses of the Company or to the actual or
demonstratively anticipated research or development conducted by the Company.
Except as set forth on the attached INTELLECTUAL PROPERTY SCHEDULE, the loss
or expiration of any Intellectual Property Right or related group of
Intellectual Property Rights owned or used by the Company have not had and
would not reasonably be expected to have a Material Adverse Effect, and no
loss or expiration of any Intellectual Property Right is threatened, pending
or, to the Company's or any Seller's knowledge, reasonably foreseeable. The
Company has taken all necessary steps to maintain and protect the
Intellectual Property Rights which it owns and uses. To the Company's and
Sellers' knowledge, the owners of any Intellectual Property Rights licensed
to the Company have taken commercially reasonable action to maintain and
protect the Intellectual Property Rights which are subject to such licenses.
(b) Except as set forth on the attached INTELLECTUAL PROPERTY
SCHEDULE, (i) there have been no claims made against the Company asserting the
invalidity, misuse or unenforceability of any of the Intellectual Property
Rights owned or used by the Company and, to the Company's and each Seller's
knowledge, there is no basis for any such claim, (ii) neither the Company nor
any Seller has received any notices of, and has no knowledge of any facts which
indicate a likelihood of, any infringement or misappropriation by, or conflict
with, any third party with respect to any Intellectual Property Rights
(including any demand or request that the Company license any rights from a
third party), (iii) the conduct of the Company's business has not infringed,
misappropriated or conflicted with and does not infringe, misappropriate or
conflict with any Intellectual Property Rights of other Persons, and (iv) to the
Company's and each Seller's knowledge, the Intellectual Property Rights owned by
or licensed to the Company have not been infringed, misappropriated or
conflicted by other Persons. The transactions contemplated by this Agreement
will not have a Material Adverse Effect on the Company's right, title or
interest in and to the Intellectual Property Rights listed on the INTELLECTUAL
PROPERTY SCHEDULE and all of such Intellectual Property Rights shall be owned or
available for use by the Company on identical terms and conditions immediately
after the Closing.
(c) Except as disclosed on the INTELLECTUAL PROPERTY SCHEDULE,
to the knowledge of the Sellers and the Company, none of the computer software,
computer firmware, computer hardware (whether general or special purpose) or
other similar or related computer systems or software that are used or relied on
by Company in the conduct of its business will malfunction, will cease to
function, will generate incorrect data or will produce incorrect results when
processing, providing or receiving (i) date-related data from, into and between
the twentieth and twenty-first centuries or (ii) date-related data in connection
with any valid date in the twentieth and twenty-first centuries.
5.14 LITIGATION. Except as set forth on the attached LITIGATION
SCHEDULE, there are no (and, during the five years preceding the date hereof,
there have not been any) actions, suits, proceedings (including any arbitration
proceedings), orders, investigations or claims pending or, to the Company's or
any Seller's knowledge, threatened against or affecting the Company (or to the
Company's or any Seller's knowledge, pending or threatened against or affecting
any of the officers, directors or employees of the Company with respect to their
business or proposed business activities), or pending or threatened by the
Company against any Person, at law or in equity, or before or by any
governmental department, commission, board, bureau, agency or instrumentality
(including any actions, suits,
26
proceedings or investigations with respect to the transactions contemplated
by this Agreement); the Company is not subject to any arbitration proceedings
under collective bargaining agreements or otherwise or any governmental
investigations or inquiries; and, to the Company's or any Seller's knowledge,
there is no basis for any of the foregoing. The foregoing includes, without
limitation, actions pending or threatened involving the prior employment of
any of the Company's employees, their use in connection with the Company's
business of any information or techniques allegedly proprietary to any of
their former employers or their obligations under any agreements with prior
employers. The Company is fully insured with respect to each of the matters
set forth on the attached LITIGATION SCHEDULE. The Company is not subject to
any judgment, order or decree of any court or other governmental agency, and
the Company has not received any opinion or memorandum or advice from legal
counsel to the effect that it is exposed, from a legal standpoint, to any
material liabilities. There are no actions, suits, proceedings (including any
arbitration proceedings), orders, investigations or claims pending or, to the
Company's or any Seller's knowledge, threatened against or affecting any
Seller in which it is sought to restrain or prohibit or to obtain damages or
other relief in connection with the transactions contemplated hereby.
5.15 COMPLIANCE WITH LAWS. Except as set forth on the attached
COMPLIANCE SCHEDULE:
(a) The Company has complied and is in compliance with all
applicable laws, ordinances, codes, rules, requirements and regulations of
foreign, federal, state and local governments and all agencies thereof relating
to the operation of its business and the maintenance and operation of its
properties and assets. No notices have been received by and no claims have been
filed against the Company alleging a violation of any such laws, ordinances,
codes, rules, requirements or regulations. The Company has not made any bribes,
kickback payments or other similar payments of cash or other consideration,
including payments to customers or clients or employees of customers or clients
for purposes of doing business with such Persons.
(b) The Company holds and is in compliance with all permits,
licenses, bonds, approvals, certificates, registrations, accreditations and
other authorizations of all foreign, federal, state and local governmental
agencies required for the conduct of its business and the ownership of its
properties (including as the same relate to Environmental and Safety
Requirements and International Trade Laws and Regulations), and the attached
PERMITS SCHEDULE sets forth a list of all of such material permits, licenses,
bonds, approvals, certificates, registrations, accreditations and other
authorizations. No notices have been received by the Company alleging the
failure to hold any of the foregoing. All of such permits, licenses, bonds,
approvals, accreditations, certificates, registrations and authorizations will
be available for use by the Company immediately after the Closing.
5.16 ENVIRONMENTAL AND SAFETY MATTERS. Except as set forth on the
attached ENVIRONMENTAL SCHEDULE:
(a) The Company has complied with and is in compliance with
all Environmental and Safety Requirements, including, without limitation, all
permits and licenses required thereunder. The Company has not received any
oral or written notice, report or information regarding any actual
27
or alleged violation of Environmental and Safety Requirements or any
liabilities or potential liabilities (contingent or otherwise), including any
investigation, correction or remedial obligations relating to it or its
facilities arising under Environmental and Safety Requirements.
(b) Neither this Agreement nor the consummation of the
transactions contemplated hereby will result in any obligations for site
investigation or cleanup, or notification to or consent of any government
agencies or third parties under any Environmental and Safety Requirements
(including any so called "transaction-triggered" or "responsible property
transfer" laws and regulations).
(c) To the knowledge of the Sellers and the Company, none of
the following exists at any property or facility owned, occupied or operated by
the Company: (i) underground storage tanks; (ii) asbestos-containing material in
any form or condition; (iii) materials or equipment containing polychlorinated
biphenyls; or (iv) landfills, surface impoundments or other disposal areas.
(d) Neither the Company nor any of their respective
predecessors or Affiliates has treated, stored, disposed of, arranged for or
permitted the disposal of, transported, handled or released any substance
(including any hazardous substance) or owned, occupied or operated any facility
or property (and no such property or facility is contaminated by any such
substance) in a manner that has given or could give rise to any liabilities
(including any liability for response costs, corrective action costs, personal
injury, natural resource damages, property damage or attorneys fees or any
investigative, corrective or remedial obligations) pursuant to CERCLA or any
other Environmental and Safety Requirements.
(e) The Company has not, either expressly or by operation of
law, assumed or undertaken any liability or corrective, investigatory or
remedial obligation of any other Person relating to any Environmental and Safety
Requirements.
(f) The Company has furnished to the Buyer all environmental
audits, reports and other material environmental documents relating to the
Company and any of its facilities, which are in its possession, custody or
control.
5.17 EMPLOYEES. The attached EMPLOYEES SCHEDULE correctly sets forth
the name and current annual salary of each of the Company's employees receiving
more than $50,000 in annual compensation and whether any employees are absent
from active employment, including, but not limited to, leave of absence or
disability. Except as set forth on the attached EMPLOYEES SCHEDULE, (a) the
Company is not aware that any executive or key employee of the Company or any
group of employees of the Company have any plans to terminate employment with
the Company; (b) the Company has complied with all laws relating to the
employment of labor (including provisions thereof relating to wages, hours,
equal opportunity, collective bargaining and the payment of social security and
other Taxes), and the Company is not aware that it has any labor relations
problems (including any union organization activities, threatened or actual
strikes or work stoppages or material grievances); and (c) neither the Company
nor, to the best of the Company's or any Seller's knowledge, any of its
employees are subject to any noncompete, nondisclosure, confidentiality,
employment, consulting or
28
similar agreements relating to, affecting or in conflict with the present or
proposed business activities of the Company, except for agreements between
the Company and its present and former employees. The EMPLOYEES SCHEDULE sets
forth the bonuses paid and reasonably expected to be paid to the Company's
officers and employees during 2000.
5.18 EMPLOYEE BENEFIT PLANS.
(a) The attached EMPLOYEE BENEFITS SCHEDULE sets forth an
accurate and complete list of each "employee benefit plan" (as such term is
defined in Section 3(3) of ERISA) and each other employee benefit plan, program
or arrangement providing benefits to current or former employees (including any
bonus plan, plan for deferred compensation, retirement, severance, sick leave,
employee health or other welfare benefit plan or other arrangement), at any time
maintained, sponsored, or contributed to by the Company, or with respect to
which the Company has any liability or potential liability. Each such item
listed on the attached EMPLOYEE BENEFITS SCHEDULE is referred to herein as a
"PLAN."
(b The Company does not have any obligation to contribute to
(or any other liability, including current or potential withdrawal liability,
with respect to) any "multi employer plan" (as defined in Section 3(37) of
ERISA) or any employee benefit plan which is a "defined benefit plan" (as
defined in Section 3(35) of ERISA), whether or not terminated.
(c) The Company does not have any obligation under any Plan or
otherwise to provide medical, health, life insurance or other welfare-type
benefits to current or future retired or terminated employees (except for
limited continued medical benefit coverage required to be provided under Section
4980B of the Code or as required under applicable state law).
(d) Except as set forth on the EMPLOYEE BENEFITS SCHEDULE
under the heading "Profit Sharing Plans," the Company does not maintain,
contribute to or have any liability or potential liability under (or with
respect to) any employee benefit plan which is a "defined contribution plan" (as
defined in Section 3(34) of ERISA), whether or not terminated.
(e) For purposes of this Section 5.18, the term "Company"
includes all entities treated as a single employer with the Company pursuant to
Section 414 of the Code.
(f) With respect to the Plans, all required or recommended (in
accordance with historical practices) payments, premiums, contributions,
reimbursements or accruals for all periods ending prior to or as of the Closing
shall have been made or properly accrued on the Latest Balance Sheet. None of
the Plans has any unfunded liabilities which are not reflected on the Latest
Balance Sheet.
(g) The Plans and all related trusts, insurance contracts and
funds have been maintained, funded and administered in compliance in all
material respects with their terms and with the applicable provisions of ERISA,
the Code and other applicable laws. Neither the Company nor,
29
to the knowledge of the Sellers, any trustee or administrator of any Plan has
engaged in any transaction with respect to the Plans which would subject the
Company or any trustee or administrator of the Plans, or any party dealing
with any such Plan, nor do the transactions contemplated by this Agreement
constitute transactions which would subject any such party, to either a civil
penalty assessed pursuant to Section 502(i) of ERISA or the tax or penalty on
prohibited transactions imposed by Section 4975 of the Code. No actions,
suits or claims with respect to the assets of the Plans (other than routine
claims for benefits) are pending or, to the Company's or any Seller's
knowledge, threatened which could result in or subject the Company to any
liability and there are no circumstances which would give rise to or be
expected to give rise to any such actions, suits or claims. No liability to
the Pension Benefit Guaranty Corporation or otherwise under Title IV of ERISA
has been or could be incurred by the Company.
(h) Each of the Plans which is intended to be qualified under
Section 401(a) of the Code has received a favorable determination from the
Internal Revenue Service that such plan is qualified under Section 401(a) of the
Code, and there are no circumstances which would adversely affect the qualified
status of any such Plan.
(i) The Company has provided Buyer with true and complete
copies of all documents pursuant to which the Plans are maintained, funded and
administered, and the most recent annual reports (Form 5500 and attachments) for
the Plans, and all such reports have been filed in a timely manner.
5.19 INSURANCE. The attached INSURANCE SCHEDULE contains a description
of each insurance policy maintained by the Company with respect to its
properties, assets and businesses, and each such policy is in full force and
effect as of the Closing. The Company is not in default with respect to its
obligations under any insurance policy maintained by it, and the Company has not
been denied insurance coverage. Except as set forth on the INSURANCE SCHEDULE,
the Company does not have any self-insurance or co-insurance programs, and the
reserves set forth on the Latest Balance Sheet are adequate (and the reserves to
be set forth on the Company's books and records as of the Closing will be
adequate) to cover all anticipated liabilities with respect to any such
self-insurance or co-insurance programs.
5.20 TAX MATTERS.
(a) The Company and each Affiliated Group has timely filed all
Tax Returns required to be filed by it, each such Tax Return has been prepared
in compliance with all applicable laws and regulations, and all such Tax Returns
are true and accurate. All Taxes due and payable by the Company have been paid
and the Company has withheld and paid over to the appropriate taxing authority
all Taxes which it is required to withhold from amounts paid or owing to any
employee, stockholder, creditor or other third party. All Taxes accrued but not
yet due are accrued on the Latest Balance Sheet and will be accrued on the
Closing Balance Sheet.
(b) Except as set forth on the attached TAXES SCHEDULE:
30
(i) the Company has not requested or been granted an
extension of the time for filing any Tax Return which has not yet been filed;
(ii) the Company has not consented to extend to a
date later than the date hereof the time in which any Tax may be assessed or
collected by any taxing authority;
(iii) the Company has not been a member of an
Affiliated Group for any taxable period ending on or before December 31, 1999;
(iv) no deficiency or proposed adjustment which has
not been settled or otherwise resolved for any amount of Tax has been proposed,
asserted or assessed by any taxing authority against the Company;
(v) there is no action, suit, taxing authority
proceeding or audit now in progress, pending or, to the Company's or any
Seller's knowledge, threatened against or with respect to the Company;
(vi) the Company does not reasonably expect any
taxing authority to claim or assess any amount of additional Taxes;
(vii) no claim has ever been made by a taxing
authority in a jurisdiction where the Company does not file Tax Returns claiming
that the Company is or may be subject to Taxes assessed by such jurisdiction;
(viii) the Company has not made any election under
Section 341(f) of the Code (or any corresponding provision of state, local or
foreign income Tax law);
(ix) there are no Liens for Taxes (other than for
current Taxes not yet due and payable) upon the assets of the Company;
(x) the Company will not be required (A) as a result
of a change in method of accounting for a taxable period ending on or prior to
the Closing Date, to include any adjustment in taxable income for any taxable
period (or portion thereof) ending after the Closing Date, (B) as a result of
any "closing agreement," as described in Section 7121 of the Code (or any
corresponding provision of state, local or foreign income Tax law), to include
any item of income in, or exclude any item of deduction from, taxable income for
any taxable period (or portion thereof) ending after the Closing Date, (C) as a
result of any sale reported on the installment method, to include in taxable
income any amount from a sale in a taxable period ending on or prior to the
Closing Date, or (D) as a result of any prepaid amount received in a taxable
period ending on or prior to the Closing Date, to include in taxable income such
amount (or portion thereof) for any taxable period (or portion thereof) ending
after the Closing Date;
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(xi) the Company is not a party to or bound by any
Tax allocation or Tax sharing agreement and has no current or potential
contractual obligation to indemnify any other Person with respect to Taxes; and
(xii) Buyer will not be required to deduct and
withhold any amount pursuant to Section 1445(a) of the Code upon the transfer of
any cash or property pursuant to this Agreement.
(c) Each of the Sellers is a resident of the State of Texas.
5.21 BROKERAGE AND TRANSACTION BONUSES. Except for brokerage fees set
forth on the attached BROKERAGE SCHEDULE, there are no claims for brokerage
commissions, finders' fees or similar compensation in connection with the
transactions contemplated by this Agreement based on any arrangement or
agreement binding upon any Seller or the Company. Except as set forth on the
attached TRANSACTION BONUSES SCHEDULE, there are no special bonuses or other
similar compensation payable to any employee of the Company in connection with
the transactions contemplated hereby. Sellers shall pay, and hold the Company,
Buyer and its Affiliates harmless against, any liability, loss or expense
(including reasonable attorneys' fees and out-of-pocket expenses) arising in
connection with any such claim or special bonus or other similar compensation.
5.22 BANK ACCOUNTS. The BANK ACCOUNT SCHEDULE attached hereto lists all
of the Company's bank accounts (designating each authorized signatory and the
level of each signatory's authorization).
5.23 NAMES AND LOCATIONS. Except as set forth on the attached NAMES AND
LOCATIONS SCHEDULE, during the five-year period prior to the execution and
delivery of this Agreement, neither the Company nor its predecessors has used
any name or names under which it has invoiced account debtors, maintained
records concerning its assets or otherwise conducted business. All of the
tangible assets and properties of the Company are located at the locations set
forth on the NAMES AND LOCATIONS SCHEDULE.
5.24 AFFILIATE TRANSACTIONS. Except as set forth on the attached
AFFILIATED TRANSACTIONS SCHEDULE, no officer, director, shareholder, employee or
Affiliate of the Company or, to the Company's or any Seller's knowledge, any
individual related by blood, marriage or adoption to any such individual or any
entity in which any such Person or individual owns any beneficial interest, is a
party to any agreement, contract, commitment or transaction with the Company or
has any interest in any property used by the Company (including any Intellectual
Property Rights). The Company has not paid any fees, expenses or costs of the
type described in Section 8.6 below that are to be paid by Sellers pursuant to
Section 8.6 below.
5.25 SERVICE WARRANTIES. To the Sellers' knowledge, all services
rendered by the Company have been in conformity in all material respects with
all applicable contractual commitments and all express and implied warranties,
and, to the Sellers' knowledge, the Company does not have any liability (and, to
the Company's or any Seller's knowledge, there is no reasonable basis for any
present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand against
32
it giving rise to any such liability) for curing or providing additional
services or other damages in connection therewith in excess of any warranty
reserve specifically established with respect thereto and included on the
face of the Latest Balance Sheet (rather than the notes thereto), to be
included on the Closing Balance Sheet or as may be set forth on the attached
WARRANTY SCHEDULE. To the Sellers' knowledge, no services rendered by the
Company are subject to any guaranty, warranty or other indemnity beyond the
applicable standard terms and conditions of such sale (including as a result
of any course of conduct between the Company and any Person or as a result of
any statements in any of the Company's service or promotional literature).
The attached WARRANTY SCHEDULE includes copies of such standard terms and
conditions of sale for the Company (containing applicable guaranty, warranty
and indemnity provisions). To the Sellers' knowledge, the Company has not
been notified of any claims for (and neither Sellers nor the Company has any
knowledge of any threatened claims for) any extraordinary warranty
obligations or additional services relating to any of its services.
5.26 CUSTOMERS AND SUPPLIERS. The CUSTOMERS AND SUPPLIERS SCHEDULE
attached hereto sets forth (a) a list of the customers of the Company (on a
consolidated basis) (by volume of sales to such customers) and (b) a list of the
top ten suppliers of the Company (on a consolidated basis) (by volume of
purchases from such suppliers), for the fiscal year ended December 31, 1999 and
the three-month period ended March 31, 2000 and, with respect to such customers,
the committed volume of purchases by such customers for the fiscal year ending
December 31, 1999 and three-month period ended March 31, 2000 and prices related
thereto. The Company has not received any indication from any material customer
of the Company to the effect that, and the Company has no reason to believe
that, such customer will stop, materially decrease the rate of, or materially
change the terms (whether related to payment, price or otherwise) with respect
to, buying products from the Company (whether as a result of the consummation of
the transactions contemplated hereby or otherwise). The Company has not received
any indication from any material supplier to the Company to the effect that, and
the Company has no reason to believe that, such supplier will stop, materially
decrease the rate of, or materially change the terms (whether related to
payment, price or otherwise) with respect to, supplying materials, products or
services to the Company (whether as a result of the consummation of the
transactions contemplated hereby or otherwise).
5.27 DISCLOSURE. Neither this Article V or any of the Exhibits or
Schedules attached hereto nor any of the written statements, documents,
certificates or other items prepared and supplied to Buyer or its Affiliates by
or on behalf of the Company or Sellers in connection with the transactions
contemplated hereby, when taken together as a whole, contain any untrue
statement of a material fact or omit a material fact necessary to make each
statement contained herein or therein, in light of the circumstances in which
they were made, not misleading. There is no fact which the Company has not
disclosed to Buyer in writing and of which any of its shareholders, officers,
directors or executive employees is aware which has had or would reasonably be
expected to have a Material Adverse Effect.
33
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Sellers and the Company to enter into this
Agreement and consummate the transactions contemplated hereby, Buyer hereby
represents and warrants to Sellers and the Company as follows:
6.1 ORGANIZATION AND POWER. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Buyer has all requisite corporate power and authority to execute and deliver
this Agreement and to perform its obligations hereunder.
6.2 CAPITALIZATION. The authorized capital stock of Buyer consists of
1,500,000 shares of common stock, par value $0.01 per share, of which
881,349.813 shares of common stock are issued and outstanding immediately prior
to the date hereof and 150,000 shares of Series Preferred Stock par value $0.01
per share, of which 68,723.983 shares of Series A Preferred and 5,760 shares of
Series B Preferred are issued and outstanding immediately prior to the date
hereof. All of such capital stock has been validly issued, is fully paid and
nonassessable, and has not been issued in violation of any preemptive rights or
rights of refusal. There are no voting trusts, proxies or any other agreements
or understandings with respect to the voting of the capital stock of Buyer.
Buyer is not subject to any obligation (contingent or otherwise) to repurchase
or otherwise acquire or retire any shares of its capital stock.
6.3 AUTHORIZATION. The execution, delivery and performance by Buyer of
this Agreement and the consummation of the transactions contemplated hereby have
been duly and validly authorized by Buyer and no other corporate act or
proceeding on the part of Buyer, its board of directors or stockholders is
necessary to authorize the execution, delivery or performance of this Agreement
and the consummation of the transactions contemplated hereby. This Agreement has
been duly executed and delivered by Buyer and this Agreement constitutes a valid
and binding obligation of Buyer, enforceable in accordance with its terms.
6.4 NO VIOLATION. Buyer is not subject to nor obligated under its
certificate of incorporation or by-laws, or any applicable law, rule or
regulation of any governmental authority, or any agreement, instrument, license
or permit, or subject to any order, writ, injunction or decree, which would be
breached or violated by its execution, delivery or performance of this Agreement
or the consummation of the transactions contemplated hereby.
6.5 GOVERNMENTAL AUTHORITIES AND CONSENTS. Except as set forth on the
BUYER CONSENT SCHEDULE attached hereto, no permit, consent, approval or
authorization of, or declaration to or filing with, any governmental or
regulatory authority or any other Person is required in connection with the
execution, delivery or performance of this Agreement by Buyer or the
consummation by Buyer of the transactions contemplated hereby.
34
6.6 LITIGATION. There are no actions, suits, proceedings, orders or
investigations pending or, to Buyer's knowledge, threatened against or affecting
Buyer, at law or in equity, or before or by any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which would adversely affect Buyer's
performance under this Agreement or the consummation of the transactions
contemplated hereby.
6.7 BROKERAGE. Other than fees paid to Gateway Partners, Inc., there
are no claims for brokerage commissions, finders' fees or similar compensation
in connection with the transactions contemplated by this Agreement based on any
arrangement or agreement made by or on behalf of Buyer.
ARTICLE VII
[Intentionally Omitted]
ARTICLE VIII
ADDITIONAL AGREEMENTS; COVENANTS AFTER CLOSING
For purposes of Article VIII, any reference to Seller or Sellers does
not include the Community Foundation of North Texas.
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties in this Agreement and the Schedules and Exhibits attached hereto
or in any writing delivered by any party to another party in connection with
this Agreement shall survive the Closing as follows:
(a) the representations and warranties in Section 5.15
(Compliance with Laws), Section 5.16 (Environmental and Safety Matters), Section
5.18 (Employee Benefits Plans) and Section 5.20 (Tax Matters) shall terminate
when the applicable statutes of limitations with respect to the liabilities in
question expire (after giving effect to any extensions or waivers thereof), PLUS
thirty (30) days;
(b) the representations and warranties in Section 5.2 (Capital
Stock and Related Matters; Title to Shares), the first two sentences of Section
5.3 (Authorization; Noncontravention), Section 5.21 (Brokerage and Transaction
Bonuses), Section 6.3 (Authorization) and Section 6.7 (Brokerage) shall not
terminate; and
(c) all other representations and warranties in this Agreement
and the Schedules and Exhibits attached hereto or in any writing delivered by
any party to another party in connection with this Agreement shall terminate on
the first anniversary of the Closing;
35
PROVIDED THAT any representation or warranty in respect of which indemnity may
be sought under Section 8.2 below, and the indemnity with respect thereto, shall
survive the time at which it would otherwise terminate pursuant to this Section
8.1 if notice of the inaccuracy or breach or potential inaccuracy or breach
thereof giving rise to such right or potential right of indemnity shall have
been given to the party against whom such indemnity may be sought prior to such
time (regardless of when the Losses in respect thereof may actually be
incurred). The representations and warranties in this Agreement and the
Schedules and Exhibits attached hereto or in any writing delivered by any party
to another party in connection with this Agreement shall survive for the periods
set forth in this Section 8.1 and shall in no event be affected by any
investigation, inquiry or examination made for or on behalf of any party, or the
knowledge of any party's officers, directors, stockholders, employees or agents
or the acceptance by any party of any certificate or opinion hereunder.
8.2 INDEMNIFICATION.
(a) INDEMNIFICATION BY SELLERS. Each of Sellers shall jointly
and severally indemnify Buyer and its Affiliates, stockholders, officers,
directors, employees, agents, partners, representatives, successors and assigns
(collectively, the "BUYER PARTIES") and save and hold each of them harmless
against and pay on behalf of or reimburse such Buyer Parties as and when
incurred for any loss, liability, demand, claim, action, cause of action, cost,
damage, deficiency, Tax, penalty, fine or expense, whether or not arising out of
third-party claims (including interest, penalties, reasonable attorneys' fees
and expenses and all amounts paid in investigation, defense or settlement of any
of the foregoing) (collectively, "LOSSES"), which any such Buyer Party may
suffer, sustain or become subject to, as a result of, in connection with,
relating or incidental to or by virtue of: (i) any breach by the Company or any
Seller of any representation or warranty made by the Company or any Seller in
this Agreement or any of the Schedules or Exhibits attached hereto, or in any of
the certificates or other instruments or documents furnished by the Company or
any Seller pursuant to this Agreement; (ii) any nonfulfillment or breach of any
covenant or agreement by the Company or any Seller under this Agreement or any
of the Schedules and Exhibits attached hereto; (iii) any Taxes of the Company
with respect to any Tax year or portion thereof ending on or before the Closing
Date (with it being understood that, for purposes of this clause (iii) in the
case of any Taxes that are imposed on a periodic basis and are payable for a
Taxable period that includes (but does not end on) the Closing Date, the portion
of such Tax which relates to the portion of such Taxable period ending on the
Closing Date which shall be calculated in accordance with the provisions of
Section 8.11(b) hereof; or (iv) any violations of, or any liabilities or
investigatory, corrective or remedial obligations arising under, Environmental
and Safety Requirements with respect to the past or current properties,
facilities or operations of the Company, whether or not constituting a breach of
any representation or warranty hereunder and whether or not disclosed to Buyer
prior to the Closing Date or identified by Buyer or its agents or
representatives through their due diligence investigations prior to the Closing
Date, including without limitation all matters set forth on the IDENTIFIED
ENVIRONMENTAL MATTERS SCHEDULE attached hereto, except for any such violations,
liabilities, or obligations the facts or circumstances underlying which are
caused solely by the operation of the Company's business after the Closing Date;
PROVIDED THAT Sellers shall not have any liability under clause (i) above (other
than with respect to the representations and warranties contained in Section 5.2
(Capital Stock and Related Matters; Title to
36
Shares), the first two sentences of Section 5.3 (Authorization;
Noncontravention), Section 5.20 (Tax Matters) and Section 5.21(Brokerage and
Transaction Bonuses)) unless and until the aggregate of all Losses relating
thereto for which Sellers would, but for this proviso, be liable exceeds on a
cumulative basis an amount equal to $100,000 (and then Sellers shall be
liable for all such Losses in excess of the $100,000 threshold amount); and
PROVIDED FURTHER that Sellers' aggregate liability under this Section 8.2(a)
(other than for a breach of Sections 8.4 or 8.10 hereof) shall in no event
exceed the amount of the Purchase Price. Nothing in this Agreement shall
limit or restrict any of the Buyer Parties' right to maintain or recover any
amounts in connection with any action or claim based upon fraudulent
misrepresentation or deceit.
(b) INDEMNIFICATION BY BUYER. Buyer agree to and shall
indemnify Sellers and hold them harmless against any Losses which Sellers may
suffer, sustain or become subject to, as the result of, in connection with,
relating or incidental to or by virtue of the breach by Buyer of any
representation, warranty, covenant or agreement made by Buyer in this Agreement.
(c) MANNER OF PAYMENT. Except as otherwise provided herein,
any indemnification of the Buyer Parties or Sellers pursuant to this Section 8.2
shall be effected by wire transfer of immediately available funds from Sellers
or Buyer, as the case may be, to an account(s) designated by the applicable
Buyer Party or Sellers, as the case may be, within ten days after the
determination thereof. Any such indemnification payments shall include interest
at the Applicable Rate calculated on the basis of the actual number of days
elapsed over 360, from the date any such Loss is suffered or sustained to the
date of payment. Any amounts owing from Sellers pursuant to this Section 8.2
shall first be made to the extent possible from the Escrow Funds (as defined in
the Escrow Agreement) in the Escrow Account (as defined in the Escrow Agreement)
and thereafter shall be made directly by Sellers (i) in accordance with the
terms of this Section 8.2(c) and/or (ii) if the Buyer Parties have not been paid
any amounts determined to be owing to them within 30 days of the date due based
on a Final Determination or a settlement agreement between Buyer and Sellers,
then, at the option of Buyer, by delivery by Sellers to Buyer of a certificate
or certificates representing shares of Series A Preferred Stock of Buyer having
an aggregate value (based on the liquidation value plus accrued but unpaid
dividends thereon) equal to the amounts owing, duly endorsed in blank or
accompanied by duly executed stock powers; PROVIDED THAT amounts (if any) owing
from Sellers to any Buyer Party pursuant to Section 2.3 above shall be made from
the Escrow Funds only with the prior written consent of Buyer. All
indemnification payments under this Section 8.2 shall be deemed adjustments to
the Purchase Price set forth in Section 2.3(a) above.
(d) DEFENSE OF THIRD-PARTY CLAIMS. Any Person making a claim
for indemnification under this Section 8.2 (an "INDEMNITEE") shall notify the
indemnifying party (an "INDEMNITOR") of the claim in writing promptly after
receiving written notice of any action, lawsuit, proceeding, investigation or
other claim against it (if by a third party), describing the claim, the amount
thereof (if known and quantifiable) and the basis thereof; PROVIDED THAT the
failure to so notify an Indemnitor shall not relieve the Indemnitor of its
obligations hereunder except to the extent that (and only to the extent that)
such failure shall have caused the damages for which the Indemnitor is obligated
to be greater than such damages would have been had the Indemnitee given the
Indemnitor prompt notice
37
hereunder. Any Indemnitor shall be entitled to participate in the defense of
such action, lawsuit, proceeding, investigation or other claim giving rise to
an Indemnitee's claim for indemnification at such Indemnitor's expense, and
at its option (subject to the limitations set forth below) shall be entitled
to assume the defense thereof by appointing a recognized and reputable
counsel acceptable to the Indemnitee to be the lead counsel in connection
with such defense; PROVIDED THAT:
(i) the Indemnitee shall be entitled to participate
in the defense of such claim and to employ counsel of its choice for such
purpose; PROVIDED THAT the fees and expenses of such separate counsel shall be
borne by the Indemnitee (other than any fees and expenses of such separate
counsel that are incurred prior to the date the Indemnitor effectively assumes
control of such defense which, notwithstanding the foregoing, shall be borne by
the Indemnitor but only to the extent of those fees and expenses incurred after
receipt by Indemnitor of notice of a claim as required herein);
(ii) the Indemnitor shall not be entitled to assume
control of such defense (unless otherwise agreed to in writing by the
Indemnitee) or shall relinquish control of such defense and in either case shall
pay the fees and expenses of counsel retained by the Indemnitee if (1) the claim
for indemnification relates to or arises in connection with any criminal or
quasi-criminal proceeding, action, indictment, allegation or investigation; (2)
the Indemnitee reasonably believes an adverse determination with respect to the
action, lawsuit, investigation, proceeding or other claim giving rise to such
claim for indemnification would be materially detrimental to or materially
injurious to the Indemnitee's reputation or future business prospects; (3) the
claim seeks an injunction or equitable relief against the Indemnitee; (4) the
Indemnitee has been advised by counsel that a reasonable likelihood exists of a
conflict of interest between the Indemnitor and the Indemnitee; (5) upon
petition by the Indemnitee, the appropriate court rules that the Indemnitor
failed or is failing to vigorously prosecute or defend such claim or (6) the
Indemnitor has indicated to the Indemnitee that it will not be responsible for
any material portion of the damages sought by the claim; and
(iii) if the Indemnitor shall control the defense of
any such claim, the Indemnitor agrees to vigorously defend such claim and to
obtain the prior written consent of the Indemnitee (which consent will not be
unreasonably withheld) before entering into any settlement of a claim or ceasing
to defend such claim; PROVIDED THAT prior written consent will not be necessary,
if pursuant to or as a result of such settlement or cessation, injunctive or
other equitable relief will be imposed against the Indemnitor (and not the
Indemnitee) or if such settlement expressly and unconditionally releases the
Indemnitee from all liabilities and obligations with respect to such claim, with
prejudice.
(iv) if the Indemnitee shall control the defense of
any such claim, the Indemnitee agrees to vigorously defend such claim and to
obtain the prior written consent of the Indemnitor (which consent will not be
unreasonably withheld) before entering into any settlement of a claim or ceasing
to defend such claim; PROVIDED THAT prior written consent will not be necessary,
if pursuant to or as a result of such settlement or cessation, injunctive or
other equitable relief will be imposed against the Indemnitee (and not the
Indemnitor) or if such settlement expressly and
38
unconditionally releases the Indemnitor from all liabilities and obligations
with respect to such claim, with prejudice.
(e) CERTAIN WAIVERS; ETC. Each Seller hereby agrees that he or
she shall not make any claim for indemnification against Buyer, the Company or
any of their respective Affiliates by reason of the fact that such Seller is or
was a shareholder, director, officer, employee or agent of the Company or any of
its Affiliates or is or was serving at the request of the Company or any of its
Affiliates as a partner, trustee, director, officer, employee or agent of
another entity (whether such claim is for judgments, damages, penalties, fines,
costs, amounts paid in settlement, losses, expenses or otherwise and whether
such claim is pursuant to any statute, charter document, bylaw, agreement or
otherwise) with respect to any action, suit, proceeding, complaint, claim or
demand brought by any of the Buyer Parties against such Seller pursuant to this
Agreement or applicable law or otherwise, and each Seller hereby acknowledges
and agrees that he or she shall not have any claim or right to contribution or
indemnity from the Company or any of its Affiliates with respect to any amounts
paid by him or her pursuant to this Agreement or otherwise. Effective upon the
Closing, each Seller hereby irrevocably waives, releases and discharges the
Company and its Affiliates from any and all liabilities and obligations to him
or her of any kind or nature whatsoever, whether in his or her capacity as a
shareholder, officer or director of the Company or any of its Affiliates or
otherwise (including in respect of any rights of contribution or indemnification
but excluding compensation otherwise payable as an employee of the Company), in
each case whether absolute or contingent, liquidated or unliquidated, known or
unknown, and whether arising under any agreement or understanding (other than
this Agreement and any of the other agreements executed and delivered in
connection herewith) or otherwise at law or equity, and each Seller agrees that
he or she shall not seek to recover any amounts in connection therewith or
thereunder from the Company or any of its Affiliates. In no event shall the
Company or any of its Affiliates have any liability whatsoever to any Seller for
any breaches of the representations, warranties, agreements or covenants of the
Company hereunder, and in any event no Seller may seek contribution from the
Company or any of its Affiliates in respect of any payments required to be made
by a Seller pursuant to this Agreement.
8.3 MUTUAL ASSISTANCE. Buyer, the Company and each of Sellers agree
that they will mutually cooperate in the expeditious filing of all notices,
reports and other filings with any governmental authority required to be
submitted jointly by the Company and Buyer in connection with the execution and
delivery of this Agreement and/or the other agreements contemplated hereby and
the consummation of the transactions contemplated hereby or thereby.
8.4 NON-COMPETITION; NON-SOLICITATION.
(a) Each Seller hereby acknowledges that he or she is familiar
with the Company's trade secrets and with other Confidential Information. Each
Seller acknowledges and agrees that the Company would be irreparably damaged if
he or she were to provide services to or otherwise participate in the business
of any Person competing with the Company in a similar business and that any such
competition by such Seller would result in a significant loss of goodwill by the
Company. Each Seller further acknowledges and agrees that the covenants and
agreements set forth in this
39
Section 8.4 were a material inducement to Buyer to enter into this Agreement
and to perform its obligations hereunder, and that Buyer and its stockholders
would not obtain the benefit of the bargain set forth in this Agreement as
specifically negotiated by the parties hereto if such Seller breached the
provisions of this Section 8.4. Therefore, each Seller agrees, in further
consideration of the amounts to be paid hereunder for the Shares and the
goodwill of the Company sold by Sellers, that until the fifth anniversary of
the Closing, such Seller shall not (and shall cause his Affiliates not to)
directly or indirectly own any interest in, manage, control, participate in
(whether as an officer, director, employee, partner, agent, representative or
otherwise), consult with, render services for, or in any other manner engage
anywhere in the Restricted Territories in any business engaged directly or
indirectly in the installation and construction of telecommunication and data
transmission networks or the provision of communications infrastructure
services; PROVIDED THAT nothing herein shall prohibit a Seller or a Seller's
Affiliate from being a passive owner of not more than 2% of the outstanding
stock of any class of a corporation which is publicly traded so long as none
of such Persons has any active participation in the business of such
corporation or an owner of Buyer or its Affiliates or their successors and
assigns. For purposes of this Agreement, "RESTRICTED TERRITORIES" shall mean
the United States of America. Each Seller acknowledges that the Company's
business has been conducted or is presently proposed to be conducted
throughout the Restricted Territories and that the geographic restrictions
set forth above are reasonable and necessary to protect the goodwill of the
Company's business being sold by Sellers pursuant to this Agreement.
(b) No Seller may (and each Seller shall cause his Affiliates
not to) directly, or indirectly through another Person, (i) induce or attempt to
induce any employee of the Company or any of its Affiliates, to leave the employ
of the Company or any of its Affiliates, or in any way interfere with the
relationship between the Company or any of its Affiliates and any employee
thereof, (ii) hire any person who was an employee of the Company or any of its
Affiliates, at any time during the six-month period immediately prior to the
date on which such hiring would take place (it being conclusively presumed by
the parties so as to avoid any disputes under this Section 8.4(b) that any such
hiring within such six-month period is in violation of clause (i) above), or
(iii) for so long as any Seller has continuing obligations under Section 8.4(a)
above, call on, solicit or service any customer, supplier, licensee, licensor or
other business relation of the Company or any of its Affiliates in order to
induce or attempt to induce such Person to cease doing business with the Company
or any of its Affiliates, or in any way interfere with the relationship between
any such customer, supplier, licensee or business relation and the Company or
any of its Affiliates (including making any negative statements or
communications about the Company or any of its Affiliates).
(c) If, at the time of enforcement of the covenants
contained in this Section 8.4 (the "RESTRICTIVE COVENANTS"), a court shall
hold that the duration, scope or area restrictions stated herein are
unreasonable under circumstances then existing, the parties agree that the
maximum duration, scope or area reasonable under such circumstances shall be
substituted for the stated duration, scope or area and that the court shall
be allowed and directed to revise the restrictions contained herein to cover
the maximum period, scope and area permitted by law. Each Seller has
consulted with legal counsel regarding the Restrictive Covenants and based on
such consultation has determined and hereby acknowledges that the Restrictive
Covenants are reasonable in terms of duration, scope and area
40
restrictions and are necessary to protect the
goodwill of the Company's business and the substantial investment in the
Company made by Buyer hereunder. Each Seller further acknowledges and agrees
that the Restrictive Covenants are being entered into by him in connection
with the sale by such Seller of the Shares and the goodwill of the Company's
business pursuant to this Agreement and not directly or indirectly in
connection with such Seller's employment or other relationship with the
Company.
(d) If any Seller or an Affiliate of any Seller breaches, or
threatens to commit a breach of, any of the Restrictive Covenants, the Company
shall have the following rights and remedies, each of which rights and remedies
shall be independent of the others and severally enforceable, and each of which
is in addition to, and not in lieu of, any other rights and remedies available
to the Company or its Affiliates at law or in equity:
(i) the right and remedy to have the Restrictive
Covenants specifically enforced by any court of competent jurisdiction, it being
agreed that any breach or threatened breach of the Restrictive Covenants would
cause irreparable injury to the Company and that money damages would not provide
an adequate remedy to the Company; and
(ii) the right and remedy to require Sellers to
account for and pay over to the Company any profits, monies, accruals,
increments or other benefits derived or received by such Person as the result of
any transactions constituting a breach of the Restrictive Covenants.
(iii) In the event of any breach or violation by any
Seller of any of the Restrictive Covenants, the time period of such covenant
shall be tolled until such breach or violation is resolved.
8.5 PRESS RELEASE AND ANNOUNCEMENTS. After the Closing, Buyer and
the Company may issue any press releases, announcements to the employees,
customers or suppliers of the Company or other releases of information related
to this Agreement or the transactions contemplated hereby without the consent of
any other party hereto.
8.6 EXPENSES. Except as otherwise provided herein, Sellers and Buyer
shall pay all of their own respective fees, costs and expenses (including fees,
costs and expenses of legal counsel, investment bankers, brokers or other
representatives and consultants and appraisal fees, costs and expenses) incurred
in connection with the negotiation of this Agreement, the performance of its
obligations hereunder and the consummation of the transactions contemplated
hereby. In addition, Sellers shall pay all fees, costs and expenses of the
Company incurred in connection with the negotiation of this Agreement, the
performance of its obligations hereunder and the consummation of the
transactions contemplated hereby, and the Company shall not pay any fees, costs
or expenses (including legal and accounting fees, costs and expenses) arising in
connection with the transactions contemplated hereby if the transactions are
consummated. Notwithstanding the foregoing, the Company shall be entitled to pay
the fees and expenses of the Company and the Craigs in connection with the
transactions contemplated to the extent, but only to the extent, that after
paying such fees and
41
expenses, the Closing Working Capital is greater than $2,400,000, the Closing
Net Worth is greater than $7,500,000 and the Closing Cash Amount is greater
than $200,000.
8.7 SPECIFIC PERFORMANCE. Each of the Company, Sellers and Buyer
acknowledges and agrees that the other parties would be damaged irreparably in
the event any of the provisions of this Agreement is not performed in accordance
with its specific terms or is otherwise breached. Accordingly, each of the
Company, Sellers and Buyer agree that the other parties shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in any action instituted in any court in the United States or
in any state having jurisdiction over the parties and the matter in addition to
any other remedy to which they may be entitled pursuant hereto.
8.8 ARBITRATION PROCEDURE.
(a) Each of the Buyer and Sellers agree that the arbitration
procedure set forth below shall be the sole and exclusive method for resolving
and remedying claims for money damages arising out of the provisions this
Article VIII (the "DISPUTES") following the Closing; PROVIDED THAT nothing in
this Section 8.8 shall prohibit a party hereto from instituting litigation to
enforce any Final Determination (as defined below). The parties hereby
acknowledge and agree that, except as otherwise provided in this Section 8.8 or
in the Rules for Non-Administered Arbitration of Business Disputes (the "RULES")
promulgated by the Center for Public Resources Institute for Dispute Resolutions
(the "INSTITUTE") as in effect from time to time, the arbitration procedures and
any Final Determination hereunder shall be governed by, and shall be enforced
pursuant to, the United States Arbitration Act, 9 U.S.C. Section 1 ET. SEQ.
(b) In the event that any party asserts that there exists a
Dispute, such party shall deliver a written notice to each other party involved
therein specifying the nature of the asserted Dispute and requesting a meeting
to attempt to resolve the same. If no such resolution is reached within ten
business days after the delivery of such notice, the party delivering such
notice of Dispute (the "DISPUTING PERSON") may thereafter commence arbitration
hereunder by delivering to each other party involved therein a notice of
arbitration (a "NOTICE OF ARBITRATION"). Such Notice of Arbitration shall
specify the nature of any Dispute and any other matters required by the Rules as
in effect from time to time to be included therein. The Arbitrator shall permit
and facilitate such discovery as the party initiating such claim shall
reasonably request. Buyer and Sellers shall mutually agree upon one arbitrator
to resolve any Dispute pursuant to the procedures set forth in this Section 8.8
and the Rules.
(c) The arbitrator selected pursuant to Section 8.8(b) will
determine the allocation of the costs and expenses of arbitration based upon
the percentage which the portion of the contested amount not awarded to each
party bears to the amount actually contested by such party. For example, if
Buyer submit a claim for $1,000 and if Sellers contest only $500 of the
amount claimed by Buyer, and if the arbitrator ultimately resolves the
dispute by awarding Buyer $300 of the $500 contested, then the costs and
expenses of arbitration will be allocated 60% (i.e., 300 DIVIDED BY 500) to
Sellers and 40% (i.e., 200 DIVIDED BY 500) to Buyer.
42
(d) The arbitration shall be conducted in Miami, Florida under
the Rules as in effect from time to time. The arbitrator shall conduct the
arbitration so that a final result, determination, finding, judgment and/or
award (the "FINAL DETERMINATION") is made or rendered as soon as practicable,
but in no event later than 90 business days after the delivery of the Notice of
Arbitration nor later than 10 days following completion of the arbitration. The
Final Determination shall be final and binding on all parties and there shall be
no appeal from or reexamination of the Final Determination, except for fraud,
perjury, evident partiality or misconduct by an arbitrator prejudicing the
rights of any party and to correct manifest clerical errors.
(e) Buyer or Sellers may enforce any Final Determination in
any state or federal court of competent jurisdiction. For the purpose of any
action or proceeding instituted with respect to any Final Determination, each
party hereto hereby irrevocably submits to the jurisdiction of such courts,
irrevocably consents to the service of process by registered mail or personal
service and hereby irrevocably waives, to the fullest extent permitted by law,
any objection which it may have or hereafter have as to personal jurisdiction,
the laying of the venue of any such action or proceeding brought in any such
court and any claim that any such action or proceeding brought in any court has
been brought in an inconvenient forum.
8.9 FURTHER ASSURANCES. In the event that at any time after the
Closing any further action is necessary or desirable to carry out the purposes
of this Agreement, each of the parties hereto will take such further action
(including the execution and delivery of such further instruments and documents)
as any other party hereto reasonably may request. Sellers acknowledge and agree
that, from and after the Closing, Buyer will be entitled to possession of all
documents, books, records (including Tax records), agreements and financial data
of any sort relating to the Company. Sellers shall have access at reasonable
times and upon reasonable notice to the Company's books and records for
legitimate business or personal financial purposes.
8.10 CONFIDENTIALITY. Each Seller agrees not to disclose or use at
any time (and each Seller shall cause each of his Affiliates not to use or
disclose at any time) any Confidential Information, except to the extent that
such disclosure or use is directly related to and required by the performance of
such Seller's duties to the Company as an officer or employee. Each Seller
further agrees to take all appropriate steps (and to cause each of his
Affiliates to take all appropriate steps) to safeguard such Confidential
Information and to protect it against disclosure, misuse, espionage, loss and
theft. In the event any Seller or any Affiliates of a Seller is required by law
to disclose any Confidential Information, Sellers shall promptly notify Buyer in
writing, which notification shall include the nature of the legal requirement
and the extent of the required disclosure, and Sellers shall cooperate with
Buyer and the Company to preserve the confidentiality of such information
consistent with applicable law.
43
8.11 TAX MATTERS
(a) TAX PERIODS ENDING ON OR BEFORE THE CLOSING DATE. Sellers
shall prepare or cause to be prepared and file or cause to be filed all Tax
Returns for the Company for all periods ending on or prior to the Closing Date
or for which the date of measurement for such Tax occurs prior to the Closing
Date which are filed after the Closing Date. All such Tax Returns shall be
prepared in accordance with past practice insofar as they relate to the Company.
Sellers shall permit Buyer to review and comment on each such Tax Return prior
to filing. Sellers shall reimburse Buyer for Taxes of Sellers and the Company
with respect to such periods within five (5) days prior to any payment by Buyer
or the Company of such Taxes to the extent such Taxes are not accrued as a
liability on the Closing Balance Sheet and used to determine the Purchase Price
pursuant to Section 2.3.
(b) TAX PERIODS BEGINNING BEFORE AND ENDING AFTER THE CLOSING
DATE. Buyer shall prepare or cause to be prepared and file or cause to be filed
any Tax Returns of the Company for Tax periods which begin before the Closing
Date and end after the Closing Date ("STRADDLE TAX RETURNS"). Buyer shall permit
Sellers to review and comment on each such Tax Return prior to filing. Any
portion of any Tax which must be paid in connection with the filing of a
Straddle Tax Return, to the extent attributable to any period or portion of a
period ending on or before the Closing Date, shall be referred to herein as
"PRE-CLOSING TAXES." Sellers shall pay to Buyer an amount equal to the
Pre-Closing Taxes due with any Straddle Tax Returns (to the extent such Taxes
are not accrued as a liability on the Closing Balance Sheet used to determine
the Purchase Price pursuant to Section 2.3) at least ten (10) days before Buyer
is required to cause to be paid the related Tax liability. Where the Pre-Closing
Taxes involve a period which begins before and ends after the Closing Date, such
Pre-Closing Taxes shall be calculated as though the taxable year of the Company
terminated as of the close of business on the Closing Date; PROVIDED, HOWEVER,
that in the case of a Tax not based on income, receipts, proceeds, profits or
similar items, Pre-Closing Taxes shall be equal to the amount of Tax for the
taxable period multiplied by a fraction, the numerator of which shall be the
number of days from the beginning of the taxable period through the Closing Date
and the denominator of which shall be the number of days in the taxable period.
All determinations necessary to give effect to the foregoing allocations shall
be made in a manner consistent with prior practice of the Company.
Notwithstanding the foregoing, it is agreed that any Texas franchise Tax imposed
on the Company for the calendar year 2001 privilege period (which will be based
upon the financial condition of the Company as of June 30, 2000) shall be paid
as follows: (i) that portion of the Texas franchise Tax attributable to the
earned surplus of the corporation for the period beginning on July 1, 1999,
through and including the Closing Date shall be treated as part of the Closing
Tax Liability under Section 2.3(a)(ii) and (ii) the balance of the franchise Tax
payable by the Company shall be the responsibility of the Company or Buyer, and
Sellers shall have no liability therefor.
(c) COOPERATION ON TAX MATTERS.
(i) Sellers, the Company and Buyer shall cooperate
fully, as and to the extent reasonably requested by the other party, in
connection with the filing of Tax Returns pursuant to this Section 8.11 and any
audit, litigation or other proceeding with respect to Taxes. Such
44
cooperation shall include signing any Tax Return, amended Tax Returns, claims
or other documents necessary to settle any Tax controversy, the retention and
(upon the other party's request) the provision of records and information
which are reasonably relevant to any such audit, litigation or other
proceeding and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder. Sellers agree to retain all books and records with respect to Tax
matters pertinent to the Company relating to any taxable period beginning
before the Closing Date until the expiration of the statute of limitations
(and, to the extent notified by Buyer, any extensions thereof) of the
respective taxable periods, and to abide by all record retention agreements
entered into with any taxing authority and to give Buyer reasonable written
notice prior to transferring, destroying or discarding any such books and
records and, if the other party so requests, Buyer shall allow Sellers to
take possession of such books and records.
(ii) Buyer shall have the right to participate in
any Tax proceeding related to a pre-Closing Tax year of the Company which may
have the effect of increasing Buyer's or the Company's Tax liability for any Tax
period ending after the Closing, and Sellers shall not settle or compromise any
such proceeding without Buyer's prior written consent (which consent will not be
unreasonably withheld).
(iii) Buyer and Sellers further agree, upon
request by the other, to use their best efforts to obtain any certificate or
other document from any governmental authority or any other Person as may be
necessary to mitigate, reduce or eliminate any Tax that could be imposed
(including, but not limited to, with respect to the transactions contemplated
hereby).
(iv) Without the prior written consent (which shall
not be unreasonably withheld) of Buyer, neither any of Sellers nor the Company
shall make or change any election, change an annual accounting period, file any
amended Tax Return, enter into any closing agreement, settle any Tax claim or
assessment relating to the Company, surrender any right to claim a refund of
Taxes, or take any other similar action, or omit to take any action relating to
the filing of any Tax Return or the payment of any Tax, if such action or
omission would have the effect of increasing the present or future Tax liability
or decreasing any present or future Tax asset of the Company, Buyer or any
Affiliate of Buyer. Sellers shall notify Buyer of any consent to any extension
or waiver of the limitation period applicable to any Tax claim or assessment
relating to the Company within fifteen (15) days of making such consent or
waiver.
8.12 GUARANTEES OF CAPITAL LEASES. The Craigs are personal
guarantors under certain capital leases (the "LEASES") in which Wells Fargo
Equipment Finance, Inc. is the Lessor (the "LESSOR") in connection with the
business conducted by the Company. Buyer will use reasonable best efforts to
negotiate with the Lessor of such Leases the release of the personal guarantees
of the Craigs. To the extent that the Lessor refuses to allow the release of
such guarantees, Buyer shall indemnify the Craigs for any payments that become
due and payable after the Closing with respect to such Leases; PROVIDED THAT
Buyer shall not be obligated to indemnify the Craigs if the circumstances giving
rise to such payment are the subject matter of, relate to or constitute a breach
of any of the representations,
45
warranties or covenants of the Company or the Craigs in this Agreement with
respect to which the Buyer Parties would be entitled to indemnification
pursuant to Section 8.2 above.
8.13 ENVIRONMENTAL PROCEDURES.
(a) As of the Closing Date, subject to the provisions of
Section 8.2(d), Buyer shall have Coordinating Authority (as defined below) with
respect to any matters listed on the Identified ENVIRONMENTAL MATTERS SCHEDULE
and to all other claims hereunder with respect to Environmental and Safety
Requirements. Seller shall be entitled, at its sole cost and expense, to
reasonably participate in the management of such matters or claims. Such
reasonable participation shall include, without limitation: (i) the right to
receive copies of all reports, workplans and analytical data submitted to
governmental agencies, all notices or other letters or documents received from
governmental agencies, any other documentation and correspondence materially
bearing on the environmental matter, and notices of material meetings; (ii) the
opportunity to attend and participate in such material meetings; (iii) the right
to reasonably consult with Buyer as Coordinating Authority with regard to all
aspects of the environmental matter; and (iv) the right to approve in advance
(such approval not to be unreasonably withheld or delayed) Buyer's selection of
any third party environmental consultant or contractor retained to perform
corrective action with respect to any environmental matter.
(b) Buyer as Coordinating Authority shall manage the matter in
good faith and in a responsible and reasonably cost effective manner, and any
activities conducted in connection therewith shall be undertaken promptly and
completed expeditiously using commercially reasonable efforts, subject to the
schedules and approvals required by the applicable governmental body. The
parties agree to reasonably cooperate with one another in connection with
addressing any matter hereunder. Either party may take such action as is
reasonable under the circumstances, and without prejudice to its rights to
indemnification under this Agreement, to respond to an actual or threatened
emergency or imminent endangerment situation arising from a matter otherwise
covered hereunder.
(c) Any remedial action covered hereunder shall be deemed to
have been adequately completed to the extent that it: (i) attains compliance
with Environmental and Safety Requirements, including without limitation, all
action levels or cleanup standards promulgated thereunder, and any lawful order
or directive of an appropriate governmental body; (ii) reasonably mitigates
risks to human health and the environment; and (iii) does not unreasonably
interfere with the operations at the affected property.
(d) "COORDINATING AUTHORITY" means the authority to
principally direct the handling of the subject matter of an environmental
matter, including, without limitation, selection of consultants, contractors,
experts or advisors; evaluation, selection and implementation of remedial
measures; and negotiations with or challenges to any governmental body and third
parties.
46
ARTICLE IX
MISCELLANEOUS
9.1 AMENDMENT AND WAIVER. This Agreement may be amended, and any
provision of this Agreement may be waived only if such amendment or waiver is
set forth in a writing executed by Sellers, the Company and Buyer. No course of
dealing between or among any Persons having any interest in this Agreement shall
be deemed effective to modify, amend or discharge any part of this Agreement or
any rights or obligations of any Person under or by reason of this Agreement. No
waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provisions, whether or not similar, nor shall
any waiver constitute a continuing waiver.
9.2 NOTICES. All notices, demands and other communications to be given
or delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given (i) when personally delivered,
sent by telecopy (with hard copy to follow) or sent by reputable overnight
express courier (charges prepaid), or (ii) five days following mailing by
certified or registered mail, postage prepaid and return receipt requested.
Unless another address is specified in writing, notices, demands and
communications to Sellers, the Company and Buyer shall be sent to the addresses
indicated below:
NOTICES TO THE SELLERS:
Mr. Royce Craig
Ms. Katherine Craig
Craig Enterprises, Inc.
1205 West Dunnam Street
Hobbs, NM 88240
WITH A COPY TO (WHICH SHALL NOT CONSTITUTE
NOTICE TO THE SELLERS):
Decker, Jones, McMackin
500 Throckmorton St., Suite 2500
Ft. Worth, TX 76102
Attn: Charles B Milliken
James L. Stripling
Phone: (817) 336-2400
Fax: (817) 336-2181
47
NOTICES TO THE COMPANY AND BUYER:
Linc.net, Inc.
6161 Blue Lagoon Drive, Suite 300
Miami, FL 33126
Attn: Ismael Perera
Telecopy: (305) 266-0875
WITH COPIES TO (WHICH SHALL NOT CONSTITUTE NOTICE TO THE COMPANY OR BUYER):
First Chicago Equity Capital
55 West Monroe St., 16th Floor
Chicago, IL 60670
Attn: Burton E. McGillivray
Paul Whiting, Jr.
Telecopy: (312) 732-7483
Saunders Karp & Megrue
262 Harbor Drive, 4th Floor
Stamford, CT 06902
Attn: John F. Megrue
Timothy B. Armstrong
Telecopy: (203) 708-6677
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attn: Ted H. Zook
E. Paul Quinn
Telecopy: (312) 861-2200
9.3 SUCCESSORS AND ASSIGNS. This Agreement and all of the covenants
and agreements contained herein and rights, interests or obligations hereunder,
by or on behalf of any of the parties hereto, shall bind and inure to the
benefit of the respective heirs, successors and assigns of the parties hereto
whether so expressed or not, except that neither this Agreement nor any of the
covenants and agreements herein or rights, interests or obligations hereunder
may be assigned or delegated by Sellers without the prior written consent of
Buyer. Buyer may assign its rights and obligations hereunder (including its
right to purchase the Shares), in whole or in part, to any of its Affiliates
without the consent of any of the other parties hereto. In addition, Buyer may
assign its rights and obligations pursuant to this Agreement, including its
rights and obligations under the Escrow Agreement, in whole or in part, in
connection with any disposition or transfer of all or any portion of the Company
or their respective businesses in any form of transaction without the consent of
any of the other parties hereto.
48
Buyer and, following the Closing, the Company may assign any or all of its
rights pursuant to this Agreement, including its rights to indemnification,
to any of its lenders as collateral security.
9.4 SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
9.5 INTERPRETATION. The headings and captions used in this Agreement,
in any Schedule or Exhibit hereto, in the table of contents or in any index
hereto are for convenience of reference only and do not constitute a part of
this Agreement and shall not be deemed to limit, characterize or in any way
affect any provision of this Agreement or any Schedule or Exhibit hereto, and
all provisions of this Agreement and the Schedules and Exhibits hereto shall be
enforced and construed as if no caption or heading had been used herein or
therein. Any capitalized terms used in any Schedule or Exhibit attached hereto
and not otherwise defined therein shall have the meanings set forth in this
Agreement. Each defined term used in this Agreement shall have a comparable
meaning when used in its plural or singular form. The use of the word
"including" herein shall mean "including without limitation" and, unless the
context otherwise required, "neither," "nor," "any," "either" and "or" shall not
be exclusive. The parties hereto intend that each representation, warranty and
covenant contained herein shall have independent significance. If any party has
breached any representation, warranty or covenant contained herein in any
respect, the fact that there exists another representation, warranty or covenant
relating to the same subject matter (regardless of the relative levels of
specificity) which such party has not breached shall not detract from or
mitigate the fact that such party is in breach of the first representation,
warranty or covenant. The parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties, and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement.
9.6 CAPTIONS. The captions used in this Agreement are for convenience
of reference only and do not constitute a part of this Agreement and shall not
be deemed to limit, characterize or in any way affect any provision of this
Agreement, and all provisions of this Agreement shall be enforced and construed
as if no caption had been used in this Agreement.
9.7 NO THIRD-PARTY BENEFICIARIES. Nothing herein expressed or implied
is intended or shall be construed to confer upon or give to any Person other
than the parties hereto and their respective permitted successors and assigns,
any rights or remedies under or by reason of this Agreement, such third parties
specifically including employees and creditors of the Company.
9.8 COMPLETE AGREEMENT. This Agreement and the agreements and
documents referred to herein contain the entire agreement and understanding
between the parties with respect to the subject matter hereof and supersede all
prior agreements and understandings (including that certain letter of
49
intent dated February 2, 2000, between Buyer and the Company), whether
written or oral, relating to such subject matter in any way.
9.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts (including by means of telecopied signature pages), all of which
taken together shall constitute one and the same instrument.
9.10 DELIVERY BY FACSIMILE. This Agreement and any signed agreement or
instrument entered into in connection with this Agreement, and any amendments
hereto or thereto, to the extent signed and delivered by means of a facsimile
machine, shall be treated in all manner and respects as an original agreement or
instrument and shall be considered to have the same binding legal effect as if
it were the original signed version thereof delivered in person. At the request
of any party hereto or to any such agreement or instrument, each other party
hereto or thereto shall re-execute original forms thereof and deliver them to
all other parties. No party hereto or to any such agreement or instrument shall
raise the use of a facsimile machine to deliver a signature or the fact that any
signature or agreement or instrument was transmitted or communicated through the
use of a facsimile machine as a defense to the formation of a contract and each
such party forever waives any such defense.
9.11 GOVERNING LAW. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
the internal law of the State of Texas without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of Texas or any
other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of Texas.
9.12 SCHEDULES. Nothing in any schedule attached hereto shall be
adequate to disclose an exception to a representation or warranty made in this
Agreement unless such schedule identifies the exception with particularity and
describes the relevant facts in reasonable detail. Without limiting the
generality of the foregoing, the mere listing (or inclusion of a copy) of a
document or other item shall not be adequate to disclose an exception to a
representation or warranty made in this Agreement, unless the representation or
warranty has to do with the existence of the document or other item itself. No
exceptions to any representations or warranties disclosed on one schedule shall
constitute an exception to any other representations or warranties made in this
Agreement unless the exception is disclosed as provided herein on each such
other applicable schedule or is cross-referenced to another schedule.
* * * * *
50
IN WITNESS WHEREOF, the parties hereto have executed this
Purchase Agreement on the date first written above.
BUYER: LINC.NET, INC.
By:_______________________________
Name:
Title:
SELLERS: ___________________________________
Royce Craig
__________________________________
Katherine Craig
COMMUNITY FOUNDATION OF NORTH TEXAS
By:________________________________
Name: Homer M. Dowd, President
COMPANY: CRAIG ENTERPRISES, INC.
By:________________________________
Name:
SCHEDULE OF SELLERS
Number of Percentage of
Name and Address Shares Owned Purchase Price
- ----------------------------------------------------- ------------ --------------
Royce Craig and Katherine Craig 950 95%
as Joint Tenants with Rights of
Survivorship
Community Foundation of North Texas 50 5%
-------
100%
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