EXHIBIT NO 2.6
EXECUTION COPY
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STOCK PURCHASE AGREEMENT
by and among
GEORGE M. CONSTRUCTION, INC.,
THOMAS E. MURRELL
and
LINC.NET, INC.
Dated as of May 2, 2000
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TABLE OF CONTENTS
Page
ARTICLE I
CERTAIN DEFINITIONS.............................................................- 1 -
1.1 Definitions........................................................- 1 -
ARTICLE II
PURCHASE AND SALE OF THE SHARES.................................................- 8 -
2.1 Basic Transaction...................................................- 8 -
2.2 Closing Transactions................................................- 9 -
2.3 Purchase Price......................................................- 9 -
2.4 Earnout Payments...................................................- 12 -
2.5 Certain Adjustments Prohibited.....................................- 13 -
ARTICLE III
CONDITIONS TO CLOSING..........................................................- 13 -
3.1 Conditions to Buyer's Obligations..................................- 13 -
3.2 Conditions to Seller's Obligations.................................- 16 -
ARTICLE IV
[INTENTIONALLY OMITTED.].......................................................- 17 -
ARTICLE V
REPRESENTATIONS AND WARRANTIES CONCERNING
THE COMPANY AND SELLER.........................................................- 18 -
5.1 Organization, Corporate Power and Licenses.........................- 18 -
5.2 Capital Stock and Related Matters; Title to Shares.................- 18 -
5.3 Authorization; Noncontravention....................................- 19 -
5.4 Subsidiaries.......................................................- 19 -
5.5 Financial Statements...............................................- 19 -
5.6 Accounts Receivable................................................- 20 -
5.7 Inventory..........................................................- 20 -
5.8 Absence of Undisclosed Liabilities.................................- 20 -
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TABLE OF CONTENTS (CONTINUED)
Page
5.9 No Material Adverse Effect.........................................- 21 -
5.10 Absence of Certain Developments....................................- 21 -
5.11 Assets.............................................................- 23 -
5.12 Contracts and Commitments..........................................- 25 -
5.13 Intellectual Property Rights.......................................- 27 -
5.14 Litigation.........................................................- 28 -
5.15 Compliance with Laws...............................................- 28 -
5.16 Environmental and Safety Matters...................................- 29 -
5.17 Employees..........................................................- 30 -
5.18 Employee Benefit Plans.............................................- 30 -
5.19 Insurance..........................................................- 32 -
5.20 Tax Matters........................................................- 32 -
5.21 Brokerage and Transaction Bonuses..................................- 34 -
5.22 Bank Accounts......................................................- 34 -
5.23 Names and Locations................................................- 34 -
5.24 Affiliate Transactions.............................................- 34 -
5.25 Service Warranties.................................................- 34 -
5.26 Customers and Suppliers............................................- 35 -
5.27 Disclosure.........................................................- 35 -
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER........................................- 35 -
6.1 Organization and Power.............................................- 36 -
6.2 Capitalization.....................................................- 36 -
6.3 Authorization......................................................- 36 -
6.4 No Violation.......................................................- 36 -
6.5 Governmental Authorities and Consents..............................- 36 -
6.6 Litigation.........................................................- 36 -
6.7 Brokerage..........................................................- 37 -
ARTICLE VII
[INTENTIONALLY OMITTED.........................................................- 37 -
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ARTICLE VIII
ADDITIONAL AGREEMENTS; COVENANTS AFTER CLOSING.................................- 37 -
8.1 Survival of Representations and Warranties.........................- 37 -
8.2 Indemnification....................................................- 38 -
8.3 Mutual Assistance..................................................- 42 -
8.4 Non-Competition; Non-Solicitation..................................- 42 -
8.5 Press Release and Announcements....................................- 44 -
8.6 Expenses...........................................................- 44 -
8.7 Specific Performance...............................................- 44 -
8.8 Arbitration Procedure..............................................- 44 -
8.9 Further Assurances.................................................- 46 -
8.10 Confidentiality....................................................- 46 -
8.11 Tax Matters........................................................- 46 -
ARTICLE IX
MISCELLANEOUS..................................................................- 48 -
9.1 Amendment and Waiver...............................................- 48 -
9.2 Notices............................................................- 49 -
9.3 Successors and Assigns.............................................- 50 -
9.4 Severability.......................................................- 51 -
9.5 Interpretation.....................................................- 51 -
9.6 Captions...........................................................- 51 -
9.7 No Third-Party Beneficiaries.......................................- 51 -
9.8 Complete Agreement.................................................- 52 -
9.10 Delivery by Facsimile..............................................- 52 -
9.11 Governing Law......................................................- 52 -
9.12 Schedules..........................................................- 52 -
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EXHIBITS AND SCHEDULES
EXHIBITS:
Exhibit A-1 - Employment Agreements (Murrell)
Exhibit A-2 - Employment Agreement (Hamilton, George, Crouch)
Exhibit B - Executive Purchase Agreement
Exhibit C - Amended and Restated Stockholders Agreement
Exhibit D - Amended and Restated Registration Agreement
Exhibit E - Opinion of Counsel for Seller and the Company
Exhibit F - Real Property Distribution
Exhibit G - Lease Agreement
SCHEDULES
Accounting Schedule
Accounts Receivable Schedule
Affiliated Transactions Schedule
Assets Schedule
Bank Account Schedule
Brokerage Schedule
Buyer Consents Schedule
Compliance Schedule
Contracts Schedule
Customers and Suppliers Schedule
Developments Schedule
Employee Benefits Schedule
Employees Schedule
Environmental Schedule
Financial Statements Schedule
Indemnification Schedule
Insurance Schedule
Intellectual Property Schedule
Leased Realty Schedule
Liabilities Schedule
Litigation Schedule
Material Adverse Effect Schedule
Names and Locations Schedule
Officers and Directors Schedule
Permits Schedule
Permitted Liens Schedule
Restrictions Schedule
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Taxes Schedule
Transaction Bonuses Schedule
Warranty Schedule
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT") is made and
entered into as of April __, 2000, by and among George M. Construction, Inc., a
Texas corporation (the "COMPANY"), Thomas E. Murrell ("SELLER") and Linc.net,
Inc. a Delaware corporation ("BUYER").
WHEREAS, Seller owns all of the issued and outstanding capital
stock of the Company (the "SHARES"); and
WHEREAS, on the terms and subject to the conditions set forth
in this Agreement, Buyer desires to purchase from Seller, and Seller desires to
sell to Buyer, all of the Shares.
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:
"ACCOUNTING FIRM" has the meaning set forth in Section 2.3(c).
"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.
"AGGREGATE 2000 SAN ANTONIO LOSS" has the meaning set forth in
Section 2.4(b).
"AGREEMENT" has the meaning set forth in the preamble.
"APPLICABLE RATE" means the prime rate of interest reported
from time to time by the WALL STREET JOURNAL.
"BUYER" has the meaning set forth in the preamble.
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"BUYER PARTIES" has the meaning set forth in Section 8.2(a).
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.
"CLOSING" has the meaning set forth in Section 2.2(a).
"CLOSING BALANCE SHEET" has the meaning set forth in Section
2.3(c).
"CLOSING CASH AMOUNT" has the meaning set forth in Section
2.3(a).
"CLOSING DATE" has the meaning set forth in Section 2.2(a).
"CLOSING INDEBTEDNESS" has the meaning set forth in Section
2.3(a).
"CLOSING TAX LIABILITY" has the meaning set forth in Section
2.3(a).
"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.
"COMPANY" has the meaning set forth in the preamble.
"COMPANY TRANSACTION" means any (a) reorganization,
liquidation, dissolution or recapitalization of the Company, (b) merger or
consolidation involving the Company, (c) purchase or sale of any assets or
capital stock (or any rights to acquire, or securities convertible into or
exchangeable for, any such capital stock) of the Company (other than the
purchase and sale of inventory and capital equipment in the ordinary course of
business consistent with past custom and practice), or (d) similar transaction
or business combination involving the Company or its business or assets.
"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 its
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,
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innovations, improvements, developments, methods, designs, analyses, drawings,
reports and all similar or related information (whether or not patentable); and
(v) other Intellectual Property Rights.
"DISPUTES" has the meaning set forth in Section 8.8(a).
"DISPUTING PERSON" has the meaning set forth in Section
8.8(b).
"EARNOUT PAYMENT" has the meaning set forth in Section 2.4(c).
"EBITDA" means, for any period, the Company's net income for
such period, PLUS, to the extent (but only to the extent) deducted in
determining such net income (A) income tax expense, (B) interest expense for
indebtedness for borrowed money, (C) depreciation expense and (D) amortization
expense, MINUS to the extent (but only to the extent) added in determining such
consolidated net income (Y) interest income and (Z) extraordinary or
nonrecurring items of income or gain. For purposes of this Agreement, EBITDA
shall not take into account revenues, costs or expenses of the Company relating
to or arising out of jobs involving road or highway construction. Except as
otherwise specifically set forth on the ACCOUNTING SCHEDULE, net income and
corresponding EBITDA shall be determined in accordance with GAAP.
"EMPLOYMENT AGREEMENTS" has the meaning set forth in Section
3.1(i).
"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 chemicals, petroleum products or byproducts, asbestos,
polychlorinated biphenyls, noise, radiation or radon), each as amended and as
now or hereafter in effect.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ESTIMATED PURCHASE PRICE" has the meaning set forth in
Section 2.3(b).
"EXCESS COMPENSATION" has the meaning set forth in Section
2.3(a).
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"EXCLUDED WRITE-OFF" has the meaning set forth in Section
2.3(a).
"EXECUTIVE PURCHASE AGREEMENT" has the meaning set forth in
Section 3.1(j).
"EXECUTIVE SECURITIES" means the shares of Buyer's Series A
Preferred Stock and Common Stock issued to the Seller pursuant to the Executive
Purchase Agreement between Seller and Buyer.
"FINAL DETERMINATION" has the meaning set forth in Section
8.8(d).
"FINAL PURCHASE PRICE" has the meaning set forth in Section
2.3(d).
"GAAP" means United States generally accepted accounting
principles, as in effect from time to time.
"GOVERNMENTAL APPROVALS" has the meaning set forth in Section
3.1(b).
"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.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"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, but only to the extent that
payment is actually required under the Guaranties or if such Guaranties are not
terminated by Seller as of the Closing, (viii) all capital lease obligations,
(ix) all deferred rent, (x) 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 incurred in the
ordinary course of business which are not past due more than 60 days), (xi) all
other liabilities classified as non-current liabilities in accordance with GAAP
as of the Closing Date, except deferred federal income taxes, and (xii) all
accrued interest, prepayment premiums or penalties related to any of the
foregoing.
"INDEMNITEE" has the meaning set forth in Section 8.2(d).
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"INDEMNITOR" has the meaning set forth in Section 8.2(d).
"INSURANCE RECOVERY AMOUNT" has the meaning set forth in
Section 8.2(b)(v).
"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 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" with respect to any matter means that which any of
Thomas E. Murrell, Thomas Hamilton, Thomas Coale and John George knows or should
know after reasonable investigation (including inquiry of the Company's legal
and accounting advisors' actual knowledge); provided, that "knowledge" regarding
the union plans referenced on the EMPLOYEE BENEFITS SCHEDULE means only the
actual knowledge of any of Thomas E. Murrell, Thomas Hamilton, Thomas Coale and
John George.
"LATEST BALANCE SHEET" has the meaning set forth in Section
5.5(b).
"LEASE AGREEMENT" has the meaning set forth in Section 3.1(p).
"LEASED REAL PROPERTY" and "LEASED REALTY" have the respective
meanings set forth in Section 5.11(b).
"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
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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).
"LOSSES" has the meaning set forth in Section 8.2(a).
"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 or employee,
customer or supplier relations of the Company.
"MONTHLY SAN ANTONIO LOSS" has the meaning set forth in
Section 2.4(b).
"NET CURRENT ASSETS" means as of any date of determination,
the excess of the Company's total current assets (excluding cash) as of such
date over the Company's total current liabilities as of such date determined in
accordance with GAAP except as otherwise specifically provided herein. 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.
"1999 SAN ANTONIO LOSS" means the San Antonio EBITDA for the
twelve months ended December 31, 1999.
"NOTICE OF ARBITRATION" has the meaning set forth in Section
8.8(b).
"NOTICE OF DISAGREEMENT" has the meaning set forth in Section
2.3(c).
"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).
"PLAN" has the meaning set forth in Section 5.18(a).
"POSITIVE MONTHS" has the meaning set forth in Section 2.4(c).
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"PRE-CLOSING TAXES" has the meaning set forth in Section
8.11(b).
"PRICE ADJUSTMENT COMPONENTS" has the meaning set forth in
Section 2.3(a).
"PURCHASE PRICE" has the meaning set forth in Section 2.3(a).
"REALTY LEASES" has the meaning set forth in Section 5.11(b).
"REGISTRATION AGREEMENT" has the meaning set forth in Section
3.1(l).
"RESTRICTED TERRITORIES" has the meaning set forth in Section
8.4(a).
"RESTRICTIVE COVENANTS" has the meaning set forth in Section
8.4(c).
"REVIEWING ACCOUNTING FIRM" has the meaning set forth in
Section 2.4(c).
"SAN ANTONIO EBITDA" means for any period, the Company's
EBITDA for its San Antonio operations; provided that such EBITDA shall exclude
any overhead or general or administrative expenses associated with the Company's
headquarters in Houston and any of Buyer's overhead or general and
administrative expenses.
"SAN ANTONIO REPORTS" has the meaning set forth in Section
2.4(a).
"SECURITIES ACT" means the Securities Act of 1933, as amended,
or any similar federal law then in force.
"SELLER" has the meaning set forth in the preamble.
"SHARES" has the meaning set forth in the preamble.
"STOCKHOLDERS AGREEMENT" has the meaning set forth in Section
3.1(k).
"STRADDLE TAX RETURNS" has the meaning set forth in Section
8.11(b).
"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
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company, association or other business entity, 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.
"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 REDUCTION AMOUNT" has the meaning set forth in Section
8.2(b)(v).
"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.
"THIRD-PARTY APPROVALS" has the meaning set forth in Section
3.1(a).
"UNBILLED WIP" has the meaning set forth in Section 2.3(a).
ARTICLE II
PURCHASE AND SALE OF THE SHARES
2.1 BASIC TRANSACTION. On the terms and subject to the conditions set
forth in this Agreement, at the Closing, Buyer shall purchase from Seller, and
Seller shall sell, convey, assign, transfer and deliver to Buyer, all of the
Shares, free and clear of all Encumbrances.
2.2 CLOSING TRANSACTIONS.
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(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 April ___, 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 Seller cash in an amount
equal to the Estimated Purchase Price, by wire transfer of immediately available
funds to an account designated by Seller;
(ii) Seller shall deliver to Buyer the
certificate or certificates representing the Shares, duly endorsed in blank or
accompanied by duly executed stock powers, with appropriate transfer stamps (if
any) affixed thereto;
(iii) the Company, Seller 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
(iv) Seller shall deliver to Buyer all corporate
books and records and other property of the Company in his possession.
2.3 PURCHASE PRICE.
(a) The aggregate purchase price to be paid for the Shares
(the "PURCHASE PRICE") shall be an amount equal to (i)(A) 4.5 MULTIPLIED BY
(B)(1) the EBITDA of the Company for the twelve months ended December 31, 1999,
PLUS (2) the $591,006 of accounts receivable that were written off in the first
calendar quarter of 1999 because they represented either duplicate or incorrect
billings (the "EXCLUDED WRITE-OFF"), PLUS (3) the amount of compensation paid by
the Company to Seller in excess of $200,000 for services performed by Seller for
the Company with respect to the twelve months ended December 31, 1999 (the
"EXCESS COMPENSATION"), PLUS (4) the amount of the Company's unbilled work in
process as of December 31, 1999 (the "UNBILLED WIP") if not otherwise already
included in calculating EBITDA, MINUS (ii) an amount equal to the aggregate
amount of all Indebtedness (if any) of the Company existing as of the end of
business on the day immediately preceding the Closing Date (the "CLOSING
INDEBTEDNESS"), MINUS (iii) an amount equal to the aggregate amount of all
foreign, federal, state and local 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 end of business on the day immediately preceding the Closing Date
to the extent not already included in Closing Indebtedness (the "CLOSING TAX
LIABILITY"), MINUS (iv) the amount (if any) by which the cash of the Company as
of the end of business on the day immediately preceding the Closing Date as
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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 CASH AMOUNT")
is less than $1,700,000. The parties recognize and agree that the San Antonio
Loss was included in calculating the Company's EBITDA for the twelve months
ended December 31, 1999, and shall be subject to adjustment following the
Closing pursuant to Section 2.3(c) below. The EBITDA of the Company for the
twelve months ended December 31, 1999, the Excluded Write-Off, the Excess
Compensation, the Unbilled WIP, the Closing Indebtedness, the Closing Tax
Liability, the Closing Cash Amount and the 1999 San Antonio Loss shall
hereinafter collectively be referred to as the "PRICE ADJUSTMENT COMPONENTS."
(b) At the Closing, Buyer shall pay to Seller in the manner
described in clause (i) of Section 2.2(b) above an amount equal to the Purchase
Price, including the Price Adjustment Components, as estimated in good faith by
Buyer and Seller in a writing completed 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 Seller a balance sheet of the Company as of the end of the business
day on the day immediately preceding the Closing Date (in its final and binding
form, the "CLOSING BALANCE SHEET"), including Buyer's calculation of each of the
Price Adjustment Components (as of the dates contained in the definitions
thereof provided under Section 2.3(a) above) 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, except as otherwise provided in
Section 2.5 below. Seller shall cooperate as reasonably requested in connection
with the preparation of the Closing Balance Sheet. During the 20-day period
immediately following Seller's receipt of the Closing Balance Sheet, Seller
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, the Price
Adjustment Components and the resulting Purchase Price shall become final and
binding upon the parties 20 days following Seller's receipt thereof, unless
Seller shall give written notice of its 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) Seller
reasonably and in good faith determines that the Closing Balance Sheet, the
Price Adjustment Components 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, the Price
Adjustment Components and the resulting Purchase Price (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 20 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
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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 Seller's and its representatives' working papers relating to the Notice
of Disagreement. At the end of the 20-day period referred to above, the parties
shall submit to a mutually satisfactory independent "big-five" accounting firm
other than Ernst & Young LLP 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 and Seller shall select by lot a "big-five" accounting
firm other than Ernst & Young LLP. 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 Closing Balance Sheet,
the Price Adjustment 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 Seller, on the other hand, or less than the smallest
value for such item assigned by Buyer, on the one hand, or Seller, on the other
hand. The Parties shall also instruct the Accounting Firm to make its
determination based solely on presentations by Buyer and Seller 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 Adjustment Components and the resulting Purchase
Price calculated with reference thereto shall become final and binding on the
Parties on the 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
and Seller.
(d) Promptly after the Closing Balance Sheet and the
determination of the Price Adjustment 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 Adjustment
Components (as recalculated, the "FINAL PURCHASE PRICE"). If the Estimated
Purchase Price is greater than the Final Purchase Price, Seller 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, the Price
Adjustment Components and the resulting Purchase Price become final and binding
on the parties, make payment by wire transfer to Buyer or Seller, 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.
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2.4 EARNOUT PAYMENTS.
(a) Following Closing, the Company shall cause to be prepared
monthly reports (the "SAN ANTONIO REPORTS") setting forth in reasonable detail
the San Antonio EBITDA for the previous calendar month. Each San Antonio Report
shall be prepared in accordance with GAAP (except as otherwise specifically
provided herein) and shall be completed no later than 45 days following the last
day of the month with respect to which such San Antonio Report is prepared;
PROVIDED THAT the San Antonio EBITDA for January, February and March 2000 may be
included in the San Antonio Report for April 2000. A copy of each San Antonio
Report shall be promptly delivered to Seller upon its completion.
(b) In the event that a San Antonio Report indicates that the
Company realized negative San Antonio EBITDA for the month with respect to which
such San Antonio Report was issued (a "MONTHLY SAN ANTONIO LOSS"), such Monthly
San Antonio Loss shall be aggregated with all prior 2000 Monthly San Antonio
Losses (if any)(such sum hereinafter referred to as the "AGGREGATE 2000 SAN
ANTONIO LOSS") for purposes of calculating the amount of the Earnout Payment
pursuant to Section 2.4(c) below.
(c) In the event that the San Antonio Reports indicate that
the Company has realized positive monthly San Antonio EBITDA for at least two
consecutive months (the "POSITIVE MONTHS") or in the event that Seller provides
written notice (a "TERMINATION NOTICE") to the Company of his desire that the
Company's San Antonio Operations be discontinued, Buyer shall deliver by wire
transfer of immediately available funds, to an account designated by Seller, at
such time as the amounts in clauses (i) and (ii) below are finally determined,
an amount equal to 4.5 MULTIPLIED BY the excess, if any, of (i) the absolute
value of the amount of the 1999 San Antonio Loss as settled on the final Closing
Balance Sheet over (ii) the absolute value of the Aggregate 2000 San Antonio
Loss, if any, for the period beginning January 1, 2000 and ending the last day
of the second of the Positive Months or the date of delivery of the Termination
Notice, whichever is applicable (the "EARNOUT PAYMENT").
(d) Each San Antonio Report shall be final and binding upon
Buyer and Seller for all purposes unless, within 20 days after the delivery of
such San Antonio Report, Seller requests in writing that a nationally recognized
"Big Five" accounting firm (other than Ernst & Young LLP) (the "REVIEWING
ACCOUNTING FIRM"), mutually agreed upon by Buyer and Seller, review such San
Antonio Report and determine the San Antonio EBITDA identified therein. The
adjustment (if any) of San Antonio EBITDA contemplated in the disputed San
Antonio Report by the Reviewing Accounting Firm shall be final, conclusive and
binding on Buyer and Seller, and all fees, expenses and disbursements of the
Reviewing Accounting Firm shall be borne by (i) Buyer (in the case that the
absolute value of the San Antonio EBITDA as determined by the Reviewing
Accounting Firm is more than 10% greater than the absolute value of the San
Antonio EBITDA as set forth on the disputed San Antonio Report) or (ii) Seller
(in the case that the absolute value of the San Antonio EBITDA as
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determined by the Reviewing Accounting Firm is less than or equal to 10% greater
than the absolute value of the San Antonio EBITDA as set forth on the disputed
San Antonio Report).
2.5 CERTAIN ADJUSTMENTS PROHIBITED. Notwithstanding any contrary terms
or provisions of this Agreement, the Closing Balance Sheet shall be prepared,
adjustments (if any) to the Price Adjustment Components shall be made, and the
Final Purchase Price shall be calculated in accordance with the provisions set
forth on the ACCOUNTING SCHEDULE.
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, and
each of Seller and the Company shall have performed in all material respects all
of the covenants and agree ments required to be performed by Seller and the
Company hereunder prior to the Closing;
(b) Seller 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;
(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 Shares and to operate the businesses of and
control the Company following the Closing (including any required approvals from
the State of Texas), 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
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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 Shares or
operate the businesses of or control the Company or (iv) affect adversely the
right of the Company to own its assets or control its businesses, 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, in the aggregate taking into account all changes, or development
in the business, financial condition, value, operating results, assets,
operations, business prospects, cash flow 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
reasonable 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
Seller) 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) Seller 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
letter of consent and estoppel certificate and landlord lien waiver from each
lessor of the Leased Realty in form and substance reasonably satisfactory to
Buyer and Buyer's lender and their special counsel and such other endorsements
and affidavits and related items as Buyer or Buyer's lenders may reasonably
request;
(j) The Company shall have terminated all employment
agreements between the Company and its employees, and each of Seller, Thomas
Hamilton, Johnny George and Glen Crouch shall have entered into an agreement for
employment with the Company in forms substantially the same as those attached
hereto as EXHIBIT A-1 (in the case of Seller) and EXHIBIT A-2 (in the case of
Messrs. Hamilton, George and Crouch), respectively (the "EMPLOYMENT
AGREEMENTS"), and all of such agreements shall be in full force and effect at
the Closing;
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(k) Seller shall have entered into an executive stock purchase
agreement with Buyer providing for the purchase of capital stock of Buyer, in
form substantially the same as that attached hereto as EXHIBIT B (the "EXECUTIVE
PURCHASE AGREEMENT"), and such agreement shall be in full force and effect at
the Closing;
(l) Seller shall have entered into an Amended and Restated
Stockholders Agreement among Buyer and the stockholders of Buyer dated December
21, 1999 and attached hereto as EXHIBIT C (the "STOCKHOLDERS AGREEMENT"), and
such agreement shall be in full force and effect at the Closing;
(m) Seller shall have entered into an Amended and Restated
Registration Agreement among Buyer and the stockholders of Buyer dated December
21, 1999 and attached hereto as EXHIBIT D (the "REGISTRATION AGREEMENT"), and
such agreement shall be in full force and effect at the Closing;
(n) Buyer shall have received from Baker & Hostetler LLP,
counsel for Seller and the Company, an opinion with respect to the matters set
forth in EXHIBIT E 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;
(o) Buyer shall have received evidence (in form and substance
satisfactory to Buyer) that the Company's and Seller's legal counsel, investment
bankers, brokers, and other agents and representatives have been paid in full
and that the Company has no liability to any of the Company's or Seller's legal
counsel, investment bankers, brokers, agents or representatives;
(p) 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);
(q) Seller or an Affiliate of Seller shall have entered into
an agreement in the form substantially the same as that attached hereto as
EXHIBIT G (the "LEASE AGREEMENT") for the lease to Buyer of the real property
identified therein, providing for a five year initial term and an additional
five year renewal term, and the Lease Agreement shall be in full force and
effect at the Closing;
(r) Seller and the Company shall have obtained and delivered
to Buyer a letter of consent and an estoppel certificate and landlord lien
waiver agreement from each lessor of Leased Realty in form and substance
reasonably satisfactory to Buyer and Buyer's lender and their special counsel
and such other related items as Buyer and Buyer's lenders may reasonably
request;
(s) Seller and the Company shall have delivered to Buyer
copies of the Company's interim monthly and year-to-date financial statements
pursuant to Section 4.11 below;
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(t) On the day immediately preceding the Closing Date, the
Company shall have distributed the real property identified in EXHIBIT F
attached hereto as a dividend or a redemption with respect to Seller's common
stock in the Company;
(u) At the Closing, Seller shall have delivered to Buyer (i) a
certificate, dated the Closing Date, stating that the conditions specified in
subsections (a) through (t) above (other than subsections (f), (g) and (n)
above) have been satisfied as of the Closing; (ii) a certificate from Seller and
the Company indicating their good faith and best estimates of the Price
Adjustment Components and the resulting Purchase Price; (iii) copies of all
Third-Party Approvals and Governmental Approvals; (iv) certified copies of the
resolutions of the Company'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;
(v) the resignations, effective as of the Closing, of each director of the
Company; (vi) good standing certificates for the Company from its jurisdiction
of incorporation and each jurisdiction in which the Company is quali fied to do
business as a foreign corporation, in each case dated as of a recent date prior
to the Closing Date; and (vii) such other documents or instruments as are
required to be delivered by Seller or the Company at the Closing pursuant to the
terms hereof or that Buyer reasonably requests prior to the Closing Date to
effect the transactions contemplated hereby.
All proceedings to be taken by Seller 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 its 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 SELLER'S OBLIGATIONS. The obligation of Seller 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, 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;
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(c) Buyer shall have executed and delivered the Stockholders
Agreement, and the Stockholders Agreement shall be in full force and effect as
of the Closing;
(d) Buyer shall have executed and delivered the Registration
Agreement, and the Registration Agreement shall be in full force and effect as
of the Closing;
(e) Buyer shall have executed and delivered each of the
Executive Purchase Agreements, and each of the Executive Purchase Agreements
shall be in full force and effect as of the Closing; and
(f) At the Closing, Buyer shall have delivered to Seller (i) a
certificate, dated the date of the Closing, stating that the conditions
specified in subsection (b) 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 Seller reasonably
requests prior to the Closing Date to effect the transactions contemplated
hereby.
All proceedings to be taken by Buyer in connection with the
consummation of the trans actions contemplated hereby and all documents required
to be delivered by Buyer to effect the trans actions contemplated hereby
reasonably requested by Seller shall be reasonably satisfactory in form and
substance to Seller. Any condition specified in this Section 3.2 may be waived
if such waiver is set forth in a writing duly executed by Seller.
ARTICLE IV
[INTENTIONALLY OMITTED.]
ARTICLE V
REPRESENTATIONS AND WARRANTIES CONCERNING
THE COMPANY AND SELLER
As a material inducement to Buyer to enter into this Agreement and
consummate the transactions contemplated hereby, each of Seller and the Company
hereby jointly and severally represents and warrants to Buyer that:
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5.1 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 Texas and is qualified to do business in every jurisdiction in
which its ownership of property or conduct of business requires it to qualify.
The Company possesses all requisite corporate power and authority and all
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 articles of incorporation and by-laws
which have been furnished to Buyer's special counsel reflect all amendments made
thereto at any time prior to the date of this Agreement and are correct and
complete. The minute books (containing the records of meetings of the Company's
stockholders and board of directors), the stock certificate books and the stock
record books 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 its
articles of incorporation or by-laws. 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; TITLE TO SHARES. The entire
authorized capital stock of the Company consists of 500,000 shares of common
stock, $0.10 par value per share, of which 10,000 shares are issued and
outstanding. Seller is the record owner of, and has good and marketable title
to, all of the outstanding shares of common stock of the Company, free and clear
of all Encumbrances. At the Closing, Seller shall sell to Buyer good and
marketable title to the Shares, free and clear of all Encumbrances. 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 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 plan. The
Company is not subject to any option or 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. The Company has
not violated any federal or state securities laws in connection with the offer,
sale or issuance of its capital stock. All of the outstanding shares of the
Company's capital stock have been validly issued and are fully paid and
nonassessable. There are no agreements between the Company's stockholders with
respect to the voting or transfer of the Company's capital stock or with respect
to any other aspect of the Company's affairs.
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 or the Seller is a party have been duly
authorized by the Company and the Seller, as applicable, and no other corporate
act or other proceeding on the part of the Company, its board of directors or
the Seller 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 each of Company and Seller and constitutes a valid and
binding obligation of each of the Company and Seller, enforceable in accordance
with its terms, and each of the other agreements and instruments
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contemplated hereby to which the Company or Seller is a party, when executed and
delivered by the Company or Seller, 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 and except for any filing, notice or
authorization required pursuant to the HSR Act, the execution and delivery by
the Company and Seller of this Agreement and all of the other agreements and
instruments contemplated hereby to which the Company or Seller is a party and
the fulfillment of and compliance with the respective terms hereof and thereof
by the Company and Seller 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, Seller's or the
Company's charter documents, bylaws or other constituent documents (including
trust instruments), or any law, statute, rule or regulation to which the Company
or Seller is subject, or any agreement, instrument, license, permit, order,
judgment or decree to which the Company or Seller is subject. Neither the
Company nor 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 has no and never has had any Subsidiaries
or Investments.
5.5 FINANCIAL STATEMENTS. Attached hereto as the FINANCIAL STATEMENTS
SCHEDULE are the following financial statements:
(a) the balance sheet of the Company as of March 31, 1999
(reviewed), March 31, 1998 (compiled) and March 31, 1997 (audited), and the
related statements of income and cash flows (or the equivalent) for the fiscal
years ended March 31, 1999 and March 31, 1998; and
(b) the unaudited consolidated balance sheet of the Company as
of December 31, 1999 (the "LATEST BALANCE SHEET"), and the related statements of
income and cash flows (or the equivalent) for the nine-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 as expressly noted on the FINANCIAL STATEMENTS
SCHEDULE, subject in the case of the unaudited financial statements to the
absence of footnote disclosures (none of which footnote disclosures would,
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alone or in the aggregate, be materially adverse to the business, operations,
assets, liabilities, financial condition, operating results, value or cash flow
of the Company).
5.6 ACCOUNTS RECEIVABLE. Except as set forth on the attached ACCOUNTS
RECEIVABLE SCHEDULE, all accounts and notes receivable 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, to the Company's knowledge, 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). No Person has any Lien on such receivables or any part
thereof, and the receivables shown on the Latest Balance Sheet and Closing
Balance Sheet are net of any agreement for deduction, free goods, discount or
other deferred price or quantity adjustment.
5.7 INVENTORY. All of the Company's inventory to the extent shown on
the Closing Balance Sheet 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 does not have knowledge of any
obligation or liability (whether accrued, absolute, contingent, unliquidated or
otherwise, 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 (of which the Company has knowledge and which has not been cured as of
the date hereof), 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 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. Except as provided on the attached
MATERIAL ADVERSE EFFECT SCHEDULE, since March 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 March 31, 1999, each
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of 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 March 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 current liabilities incurred in the ordinary course
of business consistent with past practice or liabilities for equipment purchases
paid prior to Closing;
(c) discharged or satisfied any material Lien or paid any
material obligation or liability, other than current liabilities paid in the
ordinary course of business or equipment liens paid off prior to Closing;
(d) declared, set aside or made any payment or distribution of
cash (including so-called "tax distributions") or other property, other than the
real property contemplated in the Lease Agreement with respect to the Company's
stockholder'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 or unless removed prior
to Closing;
(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;
(h) made or granted any bonus or any wage or salary increase
to any management employee except as described on the EMPLOYEE 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 except for the health
-21-
insurance plan described on the EMPLOYEE BENEFIT SCHEDULE or entered into,
amended or terminated any collective bargaining agreement or other employment
agreement except for the collective bargaining agreement described on the
CONTRACTS SCHEDULE;
(i) implemented any plant closing or other layoff of employees
that could implicate the Worker Adjustment and Retraining Notification Act, as
amended, or any similar foreign, state or local law, regulation or ordinance;
(j) 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 $10,000 in the aggregate;
(k) made capital expenditures or commitments therefor that
amount in the aggregate to more than $10,000, except for equipment purchases and
leasehold improvements as described in the ASSETS SCHEDULE;
(l) 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;
(m) 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 or subcontractors in the ordinary course of business consistent with
past practice);
(n) made any charitable contributions or pledges exceeding in
the aggregate $5,000 or made any political contributions;
(o) suffered any damage, destruction or casualty loss
exceeding in the aggregate $10,000, whether or not covered by insurance;
(p) 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);
(q) made any Investment in or taken any steps to incorporate
any Subsidiary;
(r) amended its articles of incorporation, by-laws or other
organizational documents;
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(s) 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;
(t) 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;
(u) entered into, amended or terminated any contract other
than in the ordinary course of business consistent with past practice, entered
into any other material transaction contemplating consideration in an amount or
having a value in excess of $250,000 (other than transactions with customers and
suppliers), whether or not in the ordinary course of business or consistent with
past practice, or materially changed any business practice; or
(v) 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, all of 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) currently used in the Company's
business 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 March 31, 1999 and the eleven months ended February 29,
2000.
(b) The Company does not own any real property or possess any
right to acquire any real property. 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 only to Permitted Liens. The Company has previously delivered
to Buyer's special
-23-
counsel complete and accurate copies of each of the leases for the Leased Realty
(the "REALTY LEASES"). With respect to each Realty Lease: (i) the 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, 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) The lessor of the Leased Real Property demised by the
Lease Agreement owns such property in fee simple absolute, free and clear of all
Liens except Permitted Liens, and does not lease or sublease such property to
any Person other than the Company and does not allow any Person other than the
Company to use such property.
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;
(iii) contract under which the Company has
advanced or loaned any other Person amounts in the aggregate exceeding $10,000;
(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;
-24-
(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 $10,000;
(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 $10,000, 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 $10,000 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
(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 prior to Closing and is not in default under or in breach of nor
in receipt of any claim of default or breach under
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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 does not have 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) the Company has no knowledge of any breach or
anticipated breach by the other parties to any contract, lease, agreement,
instrument or commitment to which they are parties. Except as disclosed on the
MATERIAL ADVERSE EFFECT SCHEDULE, 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's counsel has been supplied with 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 the 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 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 has 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 the Seller's
knowledge, reasonably foreseeable.
-26-
(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 the Seller's
knowledge, there is no basis for any such claim, (ii) neither the Company nor
the 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 businesses 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 the 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,
none of the material 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 unresolved (or resolved, in which the amount paid in
settlement exceeded $20,000) (and, during the three 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 the Seller's knowledge, threatened against or affecting the Company
(or to the Company's or the 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, 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 the 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 businesses 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, except to the extent noted thereon. The Company is not subject to any
judgment, order or decree of any court
-27-
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 the Seller's knowledge, threatened
against or affecting the Company or 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 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 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 in all material respects with and
is in compliance in all material respects with all Environmental and Safety
Requirements. The Company has not received any oral or written notice, report or
information regarding any actual or alleged violation of Environmental and
Safety Requirements or any liabilities or potential liabilities 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).
-28-
(c) None of the following exists at any property or facility
currently or previously 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.
(i) The Company has not 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.
(ii) 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.
(iii) The Company has provided to Buyer all
environmental audits, reports and other material environmental documents
relating to the Company and any of its facilities, which audits, reports and
documents 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 union employees
receiving more than $100,000 in annual compensation and non-union employees
receiving more than $75,000 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 has 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 or decertification 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 the Seller's knowledge,
any of their respective employees are subject to any noncompete, nondisclosure,
confidentiality, employment, consulting or 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 their 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 1999 and for
the fiscal year ended March 31, 1999.
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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) Except for union plans as referenced on the attached
EMPLOYEE BENEFITS SCHEDULE, the Company does not have any obligation to
contribute to (or any other liability, including current or potential withdrawal
liability, with respect to) any "multiemployer plan" (as defined in Section
3(37) of ERISA) or any union-sponsored benefit plan or any employee benefit plan
which is a "defined benefit plan" (as defined in Section 3(35) of ERISA),
whether or not terminated.
(c) Except for union plans as referenced on the attached
EMPLOYEE BENEFITS SCHEDULE, 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 for union plans as referenced 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) With respect to the Plans, to the Company's knowledge 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. Except for union plans as referenced on the EMPLOYEE BENEFITS
SCHEDULE, none of the Plans has any unfunded liabilities which are not reflected
on the Latest Balance Sheet.
(f) To the Company's knowledge, 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. To the
Company's knowledge, neither the Company nor 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
-30-
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. To the
Company's knowledge, 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 the 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. To the
Company's knowledge, no liability to the Pension Benefit Guaranty Corporation or
otherwise under Title IV of ERISA has been or could be incurred by the Company.
(g) To the Company's knowledge, 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.
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 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. The
charges, accruals and reserves for Taxes with respect to the Company for any Tax
period (or portion thereof) ending on or before the Closing Date (excluding any
provision for deferred income taxes) to be reflected on the Closing Balance
Sheet will be adequate to cover such Taxes.
(b) Except as set forth on the attached TAXES SCHEDULE:
(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;
-31-
(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) 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;
(iv) there is no action, suit, taxing authority
proceeding or audit now in progress, pending or, to the Company's or the
Seller's knowledge, threatened against or with respect to the Company;
(v) the Company does not reasonably expect any
taxing authority to claim or assess any amount of additional Taxes against the
Company;
(vi) 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;
(vii) 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);
(viii) there are no Liens for Taxes (other than for
current Taxes not yet due and payable) upon the assets of the Company.
(ix) 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;
(x) 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
the Company is not and has never been part of an Affiliated Group for tax
purposes; and
-32-
(xi) 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.
(xii) The Company made a valid election under Code
Section 1362, effective April 1, 1999, to be an S Corporation for all taxable
years since such election through and including the current year and has made
all corresponding valid elections, where required, in the states in which it
does business and such elections have not been terminated.
(xiii) The Company, after consulting with its legal
and accounting advisors, has no knowledge of any transfer, documentary, sales,
use, stamp, registration or other Tax or fee (including any corporate level
capital gains tax) that will be incurred by the Company in connection with the
sale of the Company's stock contemplated hereunder.
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 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. Seller 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 for 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, the Company has not 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 the 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 Seller pursuant to
Section 8.6 below.
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5.25 SERVICE WARRANTIES. To the Company's 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 the Company does not have knowledge of any liability (and, to the Company's
knowledge, there is no reasonable basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim or demand against
it giving rise to any such liability) for curing or providing services related
to any specific claims already made or other damages in connection therewith. To
the Company's 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 references to those contracts containing such standard terms and
conditions of sale for the Company (containing applicable guaranty, warranty and
indemnity provisions). The Company has not been notified of any claims for (and
the Company has no 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 top twenty 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 twelve months ended December 31, 1999
and, with respect to such customers, the committed volume of purchases by such
customers for the twelve months ended December 31, 1999 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 Seller 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 stockholders, officers,
directors or executive employees is aware which has had or would reasonably be
expected to have a Material Adverse Effect.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Seller and the Company to enter into this Agreement
and consummate the transactions contemplated hereby, Buyer hereby represents and
warrants to Seller 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 and 150,000 shares of Series Preferred Stock,
of which 665,761.467 shares of Common Stock, 52,696.032 shares of Series A
Redeemable Preferred Stock and 4,860.000 shares of Series B Preferred Stock are
issued and outstanding. 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 the Company other than under the Stockholders Agreement. The Company is
not subject to any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any shares of its capital stock other than under the
Stockholders Agreement.
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
articles 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 CONSENTS 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.
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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. 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
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The indemnities and
actions expressly provided for or expressly referenced in this Article VIII are
the exclusive remedies of the parties and their successors or assigns for any
breach of this Agreement (with it being understood, however, that nothing in
this Agreement (including this Section 8.1) 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). 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 5.20 (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) and Section 5.21 (Brokerage and
Transaction Bonuses) shall not terminate;
(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 one year anniversary of the Closing Date; PROVIDED THAT any representation
or warranty in respect of which indemnity may be sought under Section 8.2 below,
and
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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. The parties acknowledge that indemnification
hereunder with respect to the breach of any covenant or agreement contained
herein, including any breach of any covenant or agreement contained in this
Article VIII, shall not be subject to any time or other limitations, except as
otherwise set forth in this Agreement.
8.2 INDEMNIFICATION.
(a) INDEMNIFICATION BY SELLER. Seller agrees to and shall
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
Seller of any representation or warranty made by the Company or 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 pursuant
to this Agreement; (ii) any nonfulfillment or breach of any covenant, agreement
or other provision by the Company, Seller under this Agreement or any of the
Schedules and Exhibits attached hereto; (iii) any action, demand, proceeding,
investigation or claim by any Person against or affecting the Company or any
Buyer Party which, if successful, would give rise to or evidence the existence
of or relate to a breach of any of the representations, warranties, covenants or
agreements of the Company or the Seller under this Agreement; (iv) any Taxes of
the Company with respect to any Tax year or portion thereof ending on or before
the Closing Date as determined in accordance with Section 8.11 hereof; or (v)
any of the matters set forth on the INDEMNIFICATION SCHEDULE attached hereto;
PROVIDED THAT Seller shall not have any liability under clauses (i) and (iii)
above (other than with respect to the representations and warranties contained
in Section 5.2 (Capital Stock and Related Matters; Title to Shares), Section
5.20 (Tax Matters) and Section 5.21(Brokerage and Transaction Bonuses)) unless
the aggregate of all Losses relating thereto for which Seller would, but for
this proviso, be liable exceeds on a cumulative basis an amount equal to
$100,000 (and then Seller shall be liable for all such Losses including the
$100,000 threshold amount); and PROVIDED FURTHER that Seller's aggregate
liability under clause (i) above (other than with
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respect to the representations and warranties contained in Section 5.2 (Capital
Stock and Related Matters; Title to Shares), Section 5.20 (Tax Matters) and
Section 5.21 (Brokerage and Transaction Bonuses)), shall in no event exceed an
amount equal to one-half of the Purchase Price (with it being understood,
however, that nothing in this Agreement (including this Section 8.2(a)) 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) FURTHER LIMITATIONS ON INDEMNIFICATION.
(i) Each addition to the asset portion of the
Company's balance sheet that corresponds to a liability, obligation, cost or
expense to be indemnified by Seller hereunder shall be taken into account as an
offset to such corresponding liability, obligation, cost or expense for purposes
of determining Seller's indemnification liability with respect to such
liability, obligation, cost and expense, to the extent such asset addition did
not appear on the Latest Balance Sheet or Closing Balance Sheet (i.e., if a
liability under a capital lease is to be indemnified by Seller hereunder, the
corresponding asset under such capital lease shall also be taken into account
for purposes of determining Seller's indemnification liability, but only to the
extent of such liability).
(ii) No breach of Seller's and the Company's
representations and warranties and no claim for adjustment of the Purchase Price
shall be asserted by Buyer based upon any change in the accounting methods set
forth on the Accounting Schedule.
(iii) No breach of the representations and
warranties and no claim for adjustment of the Purchase Price shall be asserted
that results from the creation of any new or additional reserve fund(s) with
respect to accrual of liabilities for future or contingent claims or otherwise
unless the Company had knowledge of a specific claim.
(iv) Notwithstanding any provision herein to the
contrary, any Loss for which an Indemnitor claims indemnification under this
Section 8.2 shall take into account (A) the proceeds of any insurance actually
received by the Indemnitee with respect to such Loss less any increase in
premiums to such Person as a result of such claim for insurance proceeds (the
"INSURANCE RECOVERY AMOUNT"), (B) the amount of any reduction in Tax that (1) is
actually realized by a reduction of Taxes actually paid or by a refund actually
received by the Indemnitee, and (2) is attributable to any deduction, loss,
credit or other Tax benefit arising from or arising out of such Loss (the "TAX
REDUCTION AMOUNT"). Any indemnification payment under this Section 8.2 shall
initially be made without regard to clauses (A) and (B) of this Section
8.2(b)(v) and the Indemnitee shall remit to the Indemnitor the Tax Reduction
Amount or the Insurance Recovery Amount, as the case may be, when the Indemnitee
actually realizes the Tax Reduction Amount or actually receives the Insurance
Recovery Amount, as the case may be.
(c) INDEMNIFICATION BY BUYER. Buyer agrees to and shall
indemnify Seller and hold it harmless against any Losses which Seller may
suffer, sustain or become subject to, as the result of,
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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, including without limitation the representation and warranty by
Buyer contained in Section 6.8 above.
(d) MANNER OF PAYMENT. Except as otherwise provided herein,
any indemnification of the Buyer Parties or Seller pursuant to this Section 8.2
shall be effected by wire transfer of immediately available funds from Seller or
Buyer, as the case may be, to an account designated by the applicable Buyer
Party or Seller, 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 Seller pursuant to this Section 8.2 shall be
made directly by Seller in accordance with the terms of this Section 8.2(d). All
indemnification payments under this Section 8.2 shall be deemed adjustments to
the Purchase Price set forth in Section 2.3(a) above.
(e) 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 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 prior to the Indemnitor
assuming control of such defense it shall first (A) verify to the Indemnitee in
writing that such Indemnitor shall be fully responsible (with no reservation of
any rights) for all liabilities and obligations relating to such claim for
indemnification (without regard to any dollar limitations otherwise set forth
herein) and that it shall provide full indemnification (whether or not otherwise
required hereunder) to the Indemnitee with respect to such action, lawsuit,
proceeding, investigation or other claim giving rise to such claim for
indemnification hereunder and (B) enter into an agreement with the Indemnitee in
form and substance satisfactory to the Indemnitee which agreement
unconditionally guarantees the payment and performance of any liability or
obligation which may arise with respect to such action, lawsuit, proceeding,
investigation or facts giving rise to such claim for indemnification hereunder;
and PROVIDED FURTHER, 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
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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, and except that the Indemnitor shall pay all of the
fees and expenses of such separate counsel if the Indemnitee has been advised by
counsel that a reasonable likelihood exists of a conflict of interest between
the Indemnitor and the Indemnitee);
(ii) the Indemnitor shall not be entitled to
assume control of such defense (unless otherwise agreed to in writing by the
Indemnitee) and 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 detrimental
to or injure 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) the claim
involves environmental matters in which case the Indemnitee shall have sole
control and management authority over the resolution of such claim (including
hiring legal counsel and environmental consultants, conducting environmental
investigations and cleanups, negotiating with governmental agencies and third
parties and defending or settling claims and actions); PROVIDED THAT the
Indemnitee shall keep the Indemnitor apprised of any major developments relating
to any environmental claim; or (6) upon petition by the Indemnitee, the
appropriate court rules that the Indemnitor failed or is failing to vigorously
prosecute or defend such claim; and
(iii) if the Indemnitor shall control the defense
of any such claim, the Indemnitor shall obtain the prior written consent of the
Indemnitee before entering into any settlement of a claim or ceasing to defend
such claim if, pursuant to or as a result of such settlement or cessation,
injunctive or other equitable relief will be imposed against the Indemnitee or
if such settlement does not expressly and unconditionally release the Indemnitee
from all liabilities and obligations with respect to such claim, without
prejudice.
(f) CERTAIN WAIVERS; ETC. Seller hereby agrees that he shall
not make any claim for indemnification against Buyer, the Company or any of
their respective Affiliates by reason of the fact that Seller is or was a
stockholder, 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 Seller pursuant to this
Agreement or applicable law or otherwise, and Seller hereby acknowledges and
agrees that he 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 pursuant to this Agreement or otherwise. Effective upon the Closing, Seller
hereby irrevocably waives, releases and discharges the Company
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and its Affiliates from any and all liabilities and obligations to it or him of
any kind or nature whatsoever, whether in his capacity as a stockholder, 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 Seller agrees that he 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 Seller for any breaches of the
representations, warranties, agreements or covenants of the Company hereunder,
and Seller shall not in any event seek contribution from the Company or any of
its Affiliates in respect of any payments required to be made by Seller pursuant
to this Agreement.
8.3 MUTUAL ASSISTANCE. Buyer, the Company and Seller 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) Seller hereby acknowledges that he is familiar with the
Company's trade secrets and with other Confidential Information. Seller (who is
the sole shareholder and the founder, president and a director of the Company)
acknowledges and agrees that the Company would be irreparably damaged if he 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 Seller would result in a significant loss of goodwill by the Company. Seller
further acknowledges and agrees that the covenants and agreements set forth in
this 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 Seller breached
the provisions of this Section 8.4. Therefore, in further consideration of the
amounts to be paid hereunder for the Shares and the goodwill of the Company sold
by Seller, Seller agrees that until the fifth anniversary of the Closing, Seller
shall not (and Seller 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,
construction, maintenance or repair of electric transmission lines or the
installation, construction, maintenance or repair of telephonic or communication
transmission lines and all related services; PROVIDED THAT nothing herein shall
prohibit Seller or his Affiliates 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. For purposes of this Agreement, "RESTRICTED
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TERRITORIES" shall mean the United States of America. 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 Seller pursuant to this
Agreement.
(b) Seller shall not (and 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 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. 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 restrictions and are necessary to protect the goodwill of the
Company's business and the substantial investment in the Company made by Buyer
hereunder. Seller further acknowledges and agrees that the Restrictive Covenants
are being entered into by him in connection with the sale by Seller of the
Shares and the goodwill of the Company's business pursuant to this Agreement and
not directly or indirectly in connection with Seller's employment or other
relationship with the Company.
(d) If Seller or any of his Affiliates 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
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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 Seller 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
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. Unless required by law (in which
case each of Buyer and the Company agree to use reasonable efforts to consult
with the other party prior to any such disclosure as to the form and content of
such disclosure), after the date hereof and through and including the Closing
Date, no press releases, announcements to the employees, customers or suppliers
of the Company or other releases of information related to this Agreement or the
transactions contem plated hereby will be issued or released without the consent
of each of Buyer and the Company. After the Closing, Buyer and the Company may
issue any such releases of information without the consent of any other party
hereto.
8.6 EXPENSES. Seller 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.
8.7 SPECIFIC PERFORMANCE. Each of the Company, Seller 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, the Company,
Seller 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 Buyer and Seller 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,
the arbitration procedures and any Final Determination hereunder shall
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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. Buyer and Seller shall mutually agree upon
one arbitrator to resolve any Dispute pursuant to the procedures set forth in
this Section 8.8; PROVIDED, if Buyer and Seller cannot agree on an arbitrator
within ten business days, then they shall request the American Arbitration
Association to appoint an arbitrator experienced in the area of dispute who does
not have an ongoing business relationship with any of the parties to the
dispute. The Arbitrator shall permit and facilitate such discovery as the party
initiating such claim shall reasonably request.
(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
submits a claim for $1,000 and if Seller contests 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 / 500) to Seller and 40% (i.e., 200
/ 500) to Buyer.
(d) The arbitration shall be conducted in Miami, Florida. 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 Seller 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.
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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. Seller acknowledges and agrees 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. Seller shall not in any manner take any
action which is designed, intended or might be reasonably anticipated to have
the effect of discouraging customers, suppliers, lessors, licensors and other
business associates from maintaining the same business relationships with the
Company and its Affiliates at any time after the date of this Agreement as were
maintained with the Company and its Affiliates prior to the date of this
Agreement.
8.10 CONFIDENTIALITY. Seller agrees not to disclose or use at any time
(and 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 Seller's duties to the
Company as an officer or employee. 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 Seller or any of his Affiliates
is required by law to disclose any Confidential Information, Seller shall
promptly notify Buyer in writing, which notification shall include the nature of
the legal requirement and the extent of the required disclosure, and Seller
shall cooperate with Buyer and the Company to preserve the confidentiality of
such information consistent with applicable law.
8.11 TAX MATTERS.
(a) TAX PERIODS ENDING ON OR BEFORE THE CLOSING DATE. Seller
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.
Seller shall permit Buyer to review and comment on each such Tax Return prior to
filing. Seller shall reimburse Buyer for Taxes of Seller and the Company with
respect to such periods within fifteen (15) 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. Seller shall not be liable for and shall not pay or
reimburse Buyer or Company for any Taxes incurred as a result of any election
under Section 338 of the Code.
(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
Seller 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
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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." Seller 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 Final 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.
(c) CERTAIN TAXES. All transfer, documentary, sales, use,
stamp, registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with the transfer by the Company to Seller of
the real property demised by the Lease Agreement), shall be paid by Seller when
due and Seller will at his own expense file all necessary Tax Returns and other
documentation with respect to all such transfer, documentary, sales, use, stamp,
registration and other Taxes and fees, and if required by applicable law, Buyer
will, and will cause the Company to, join in the execution of any such Tax
Returns and documentation.
(d) COOPERATION ON TAX MATTERS.
(i) Seller, 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
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. Seller agrees 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 Seller 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 Seller shall not settle or
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compromise any such proceeding without Buyer's prior written consent (which
shall not be unreasonably withheld); PROVIDED HOWEVER, Buyer hereby agrees to
consent if Seller fully indemnifies Buyer for any increase in Buyer's or the
Company's Tax liability.
(iii) Buyer and Seller 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 Seller 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. Seller 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.
(e) NO SECTION 338(h)(10) ELECTION. None of Seller, Buyer or
the Company shall make or be required to consent to any election under Section
338(h)(10) of the Code.
ARTICLE IX
MISCELLANEOUS
9.1 AMENDMENT AND WAIVER. This Agreement may be amended, and any
provision of this Agreement may be waived; PROVIDED THAT any such amendment or
waiver will be binding upon the Company, prior to the Closing, and Seller only
if such amendment or waiver is set forth in a writing executed by Seller, and
any such amendment or waiver will be binding upon the Company, after the
Closing, and Buyer only if such amendment or waiver is set forth in a writing
executed by Buyer or the Company, as the case may be. 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.
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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 Seller, the Company and Buyer shall be sent to the addresses
indicated below:
NOTICES TO SELLER:
Mr. Thomas E. Murrell
George M. Construction, Inc.
31479 SM 249 Road
Pinehurst, Texas 77362
Telecopy:
WITH A COPY TO (WHICH SHALL NOT CONSTITUTE
NOTICE TO THE COMPANY OR SELLER):
Richard Yount, Esq.
Baker & Hostetler LLP
1000 Louisiana, Suite 2000
Houston, TX 77002-5008
Telecopy: (713) 276-1626
NOTICES TO THE COMPANY AND BUYER:
Linc.net, Inc.
6303 Blue Lagoon Drive, Suite 305
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
16th Floor
Chicago, IL 60670
Attn: Burton E. McGillivray
Telecopy: (312) 732-7483
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Kirkland & Ellis
200 East Randolph
Chicago, IL 60601
Attn: Ted H. Zook
E. Paul Quinn
Telecopy: (312) 861-2200
Saunders, Karp & Megrue
262 Harbor Drive, 4th Floor
Stamford, CT 06902
Attn: John F. Megrue
Timothy B. Armstrong
Telecopy: (203) 708-6677
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 the Seller prior to or after the Closing, or assigned
or delegated by the Company prior to the Closing, 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 in whole
or in part, in connection with any disposition or transfer of all or any portion
of the Company or its businesses in any form of transaction without the consent
of any of the other parties hereto. 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.
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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 intent dated
June 10, 1999, between First Chicago Equity Capital 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
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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 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 cross-referenced in such other
applicable section or schedule.
* * * * *
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IN WITNESS WHEREOF, the parties hereto have executed this
Stock Purchase Agreement on the date first written above.
LINC.NET, INC.
By:________________________________
Name:
Title:
GEORGE M. CONSTRUCTION, INC.
By:________________________________
Name:
Title:
___________________________________
Thomas E. Murrell
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ACCOUNTING SCHEDULE
1. The Allowance for Bad Debt as provided on the Latest Balance Sheet
and Closing Balance Sheet may or may not be equal to actual bad debt but shall
be deemed to be a final and conclusive estimate of uncollectible accounts
receivable as of those dates and no adjustment of the Final Balance Sheet,
Closing Balance Sheet, Price Adjustment Components, Purchase Price or Final
Purchase Price shall be made for actual uncollectible accounts receivable except
to the extent (1) it is shown any accounts receivable are based upon work not
done or material not delivered, and (2) the Company has knowledge of the
uncollectability of any account(s) receivable.
2. The Company has made no allowance or accrual of liability for future
warranty work and no adjustment on the Latest Balance Sheet, Closing Balance
Sheet, Price Adjustment Components, Purchase Price or the Final Purchase Price
shall be made based upon accruals for warranty work relating to finished jobs or
jobs in progress unless the Company has knowledge of a service warranty
liability as of the Closing.
3. No adjustment of the Latest Balance Sheet, Closing Balance Sheet,
Price Adjustment Components, Purchase Price or the Final Purchase Price shall be
asserted based upon any change in the methods of calculating the value of
unbilled work in progress used for purposes of preparing the Latest Balance
Sheet even if the methodology used is not in accordance with GAAP or even if
other GAAP methods of accounting are permissible. Nothing contained herein shall
prohibit adjustments based on work not done or material not delivered.
4. No claim for adjustment of the Latest Balance Sheet, Closing Balance
Sheet, Price Adjustment Components, the Purchase Price or the Final Purchase
Price shall be asserted based upon the creation of any new or additional reserve
funds with respect to accrual of liabilities for future or contingent tort
claims unless the Company has knowledge of specific facts giving rise to such
future or contingent tort claims.
5. The Company is required to contribute to certain union-sponsored
employee benefit plans pursuant to its union contracts. No adjustment to the
Latest Balance Sheet, Closing Balance Sheet, Purchase Price, Price Adjustment
Components or Final Purchase Price shall be asserted based upon liability to or
for any such union-sponsored employee benefit plan, unless the Company has
knowledge of specific facts giving rise to such liability.
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INDEMNIFICATION SCHEDULE
1. All Losses arising out of or relating to third party or governmental
claims with respect to the Company's ownership and operation of real property
prior to the date hereof, other than the real property contemplated under the
Lease Agreement (except as otherwise specifically provided herein).
2. All Losses incurred but not paid by the Company during or with
respect to the period beginning on the date of the Latest Balance Sheet and
ending on the date hereof that are not otherwise reflected on the Closing
Balance Sheet arising out of or relating to an action, claim or lawsuit based on
breach of contract, breach of warranty (except for routine warranty work of the
type normally performed by the Company in the ordinary course of business),
tort, infringement, violation of law, claim or lawsuit.
3. All Losses arising out of or relating to the claim(s) by Hanron
Group, Inc. d/b/a ABA American Business Acquisition for amounts owed to it by
the Company and/or Seller in connection with the proposed sale of the Company,
including without limitation for brokerage commissions payable by the Company.
4. All Losses arising out of or relating to the use and operation of
the water supply well and water supply system at the property contemplated under
the Lease Agreement (the "WATER SUPPLY SYSTEM") prior to the Closing Date,
including without limitation (a) any fines or penalties resulting from the
failure of the Water Supply System to comply with any applicable local, state or
federal law, rule, order or regulation and (b) any liabilities resulting from
any Person's use of the Water Supply System and any health effects resulting
therefrom.
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