EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
Dated as of February 2, 1999
among
LARRY KENDALL, DAYTON KENDALL, LINDA KENDALL
and
MIDWEST COMPUTER CABLE, INC.
and
AMERILINK CORPORATION
and
MCC ACQUISITION CORP., a wholly-owned subsidiary of
AMERILINK CORPORATION.
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
THE MERGER
2.1 The Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2 Merger Consideration. . . . . . . . . . . . . . . . . . . . . . . . . 5
2.3 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.4 Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . . . 5
2.5 Articles of Incorporation and Bylaws. . . . . . . . . . . . . . . . . 5
2.6 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.7 Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.8 Conversion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.9 Tax Consequences. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE III
ADDITIONAL CONSIDERATION
3.1 Employment Agreement and Options. . . . . . . . . . . . . . . . . . . 6
3.2 Right of First Offer to Purchase Quiktron . . . . . . . . . . . . . . 7
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
4.1 Company Corporate Existence and Power . . . . . . . . . . . . . . . . 8
4.2 Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.3 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.4 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . 8
4.5 Absence of Certain Changes. . . . . . . . . . . . . . . . . . . . . . 9
4.6 Properties; Assets. . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.7 No Undisclosed Material Liabilities . . . . . . . . . . . . . . . . . 11
4.8 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.9 Business Activities . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.10 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.11 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.12 Material Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.13 Licenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.14 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.15 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . . . 17
4.16 Patents, Trademarks, etc. . . . . . . . . . . . . . . . . . . . . . . 17
4.17 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . 18
4.18 Employment and Labor Matters. . . . . . . . . . . . . . . . . . . . . 19
4.19 Banking Information . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.20 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.21 Accounting Matters. . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.22 Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.23 Customers, Product Vendors and Suppliers. . . . . . . . . . . . . . . 20
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4.24 Year 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.25 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.26 Shareholders' Capacity. . . . . . . . . . . . . . . . . . . . . . . . 21
4.27 Shareholders' Governmental Authorization, Conflicts . . . . . . . . . 21
4.28 Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.29 Binding Effect. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.30 Title to Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.31 Entire Business . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.32 Certain Interests . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.33 Finders' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.34 Absence of Certain Changes. . . . . . . . . . . . . . . . . . . . . . 22
4.35 Investment Intent . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF AMERILINK
5.1 Corporate Existence and Power . . . . . . . . . . . . . . . . . . . . 22
5.2 Consents and Approvals; No Violation. . . . . . . . . . . . . . . . . 22
5.3 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.4 Charter Documents . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.5 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.6 SEC Filings.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.7 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.8 No Rights To Register Stock . . . . . . . . . . . . . . . . . . . . . 23
5.9 AmeriLink Common Stock. . . . . . . . . . . . . . . . . . . . . . . . 23
5.10 Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE VI
COVENANTS OF SHAREHOLDERS
6.1 Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.2 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.3 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE VII
COVENANTS OF AMERILINK
7.1 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.2 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE VIII
COVENANTS OF SHAREHOLDERS AND AMERILINK
8.1 Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.2 Certain Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.3 Public Announcements. . . . . . . . . . . . . . . . . . . . . . . . . 29
8.4 Agreement to Take Necessary and Desirable Actions . . . . . . . . . . 29
ARTICLE IX
TERMINATION OF AGREEMENT
ARTICLE X
THE CLOSING
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10.1 Deliveries to AmeriLink . . . . . . . . . . . . . . . . . . . . . . . 29
10.2 Deliveries to Shareholders. . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE XI
SURVIVAL AND REMEDY; INDEMNIFICATION
11.1 Survival; Remedy for Breach . . . . . . . . . . . . . . . . . . . . . 31
11.2 Indemnification by Shareholders . . . . . . . . . . . . . . . . . . . 31
11.3 Indemnification by AmeriLink. . . . . . . . . . . . . . . . . . . . . 32
11.4 Procedures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE XII
MISCELLANEOUS
12.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
12.2 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
12.3 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . . 34
12.4 Entire Agreement; Amendment . . . . . . . . . . . . . . . . . . . . . 34
12.5 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
12.6 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
12.7 Captions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
12.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
12.9 Limitation on Damages . . . . . . . . . . . . . . . . . . . . . . . . 35
Schedule 4.1 Company Corporate Existence and Power
Schedule 4.2 Non-Contravention
Schedule 4.3 Capitalization
Schedule 4.5 Absence of Certain Changes
Schedule 4.6 Properties; Assets
Schedule 4.7 No Undisclosed Material Liabilities.
Schedule 4.8 Litigation
Schedule 4.9 Business Activities
Schedule 4.10 Tax Matters
Schedule 4.11 Employee Benefits
Schedule 4.12 Material Contracts
Schedule 4.14 Insurance
Schedule 4.16 Patents, Trademarks, etc.
Schedule 4.17 Environmental Matters
Schedule 4.18 Labor Matters
Schedule 4.19 Banking Information
Schedule 4.20 Accounts Receivable
Schedule 4.22 Warranties
Schedule 4.23 Customers, Product Vendors and Suppliers
Schedule 4.24 Year 2000
Schedule 4.31 Entire Business
Schedule 4.32 Certain Interests
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of the 2nd day of
February, 1999, is made by and among AmeriLink Corporation, an Ohio
corporation ("AmeriLink"); MCC Acquisition Corp., an Ohio corporation and
wholly owned subsidiary of AmeriLink ("MAC"); Midwest Computer Cable, Inc.,
an Iowa corporation (the "Company"); and each of Larry Kendall, Dayton
Kendall, and Linda Kendall (said individuals being hereinafter collectively
called the "Principal Shareholders" and, individually, a "Principal
Shareholder").
W I T N E S S E T H :
WHEREAS, the Principal Shareholders, together with Jeffrey Van Polen,
Richard Pearson and Michael Maddison (collectively, the "Shareholders"), are
the owners of all of the issued and outstanding shares of common stock of the
Company (the "Company Shares"); and
WHEREAS, the Company is engaged in the design and installation of
cabling systems for the transmission of video, voice and data for commercial
use; and
WHEREAS, AmeriLink, MAC, the Company and the Shareholders desire to
merge the Company with and into MAC upon the terms and subject to the
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of and in reliance upon the
covenants, conditions, representations and warranties herein contained, the
parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. The following terms, as used herein, have the
following meanings:
"Acquisition Agreement" has the meaning set forth in Section 3.2.
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by or under common control
with such Person. After the Closing, AmeriLink's Affiliates shall include
the Surviving Corporation.
"AmeriLink" has the meaning set forth in the recitals.
"AmeriLink Common Shares" means the common shares, without par value,
of AmeriLink Corporation.
"AICPA" has the meaning set forth in Section 4.4.
"Asserted Tax Liability" has the meaning set forth in Section 8.2
"Audited Financial Statements" has the meaning set forth in Section 4.4.
"Business" means the business of designing and installing cabling
systems for the transmission of video, voice and data for commercial use as
historically conducted by the Company.
"Cash Portion of the Merger Consideration" has the meaning set forth in
Section 2.2.
"Certificates of Merger" has the meaning set forth in Section 2.1.
"Claims" has the meaning set forth in Section 11.2(a).
"Closing" has the meaning set forth in Section 2.1.
"Closing Date" has the meaning set forth in Section 2.1.
"COBRA" means the requirements of Part 6 of Subtitle B of Title I of
ERISA and Code Section 4980B.
"Code" means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder.
"Company" has the meaning set forth in the recitals.
"Company's Accountants" means (a) with respect to the Reviewed
Financial Statements Messrs. Mosebach, Griffith and Company, P.C.,
independent certified public accountants; and (b) with respect to the Audited
Statements and for all other purposes of this Agreement, Messrs. McGladrey &
Pullen, Des Moines, Iowa, independent certified public accountants for the
Company.
"Company's 1998 EBITDA" means the EBITDA of the Company for the twelve
month period ended December 31, 1998 adjusted as follows: (i) Larry
Kendall's compensation (together with any compensation to his parents) shall
be adjusted to $140,000 for the twelve-month period ended December 31, 1998;
(ii) the compensation of Gervaise Kendall, the wife of Larry Kendall, shall
be adjusted to $25,000 for the twelve-month period ended December 31, 1998;
(iii) all employee benefits (including 401(k) contributions), bonuses,
incentive compensation and other normal year-end adjustments which relate to
the determination of EBITDA during the twelve month period ended December 31,
1998 (whether or not paid hereafter) shall be fully accrued for such period;
and (iv) non-cash bonus compensation relating to the award of Company Shares
to Messrs. Van Polen, Pearson and Maddison and any payroll and Medicare taxes
payable with respect thereto shall be in each case added back to the extent
taken into account in the determination of net income.
"Company Financial Statements" has the meaning set forth in Section 4.4.
"Company Shares" has the meaning set forth in the recitals.
"Disposition" has the meaning set forth in Section 3.2.
"EBITDA" means, with respect to any Person for any period, (a) net income
(or net loss), excluding any unusual and extraordinary gains or losses, PLUS (b)
to the extent taken into account in the calculation of net income (or net loss)
for such period (i) interest expense, (ii) income tax expense, and (iii) the
amount of all depreciation and amortization expense, in each case determined in
accordance with GAAP.
"Effective Time" has the meaning set forth in Section 2.1.
"Employee Benefit Plan" means any (a) deferred compensation or
retirement bonus, stock option or similar plan or arrangement, (b) defined
contribution retirement plan or arrangement which is an Employee Pension
Benefit Plan, (c) defined benefit retirement plan or arrangement which is an
Employee Pension Benefit Plan, (d) Multiemployer Plan, or (e) Employee
Welfare Benefit Plan.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 3(2), but excludes a Multiemployer Plan.
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3(1).
"Environmental Claims" has the meaning set forth in Section 4.17.
"Environmental Laws" has the meaning set forth in Section 4.17.
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"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means each entity which is treated as a single
employer with a Shareholder for purposes of Code Section 414 (including
without limitation the Company).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles in the United
States of America, as set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board of the American Institute of Certified Public Accountants or
in such other statements by such other entity as have been approved by a
significant segment of the accounting profession, which are in effect on the
date hereof or at any other time stated herein.
"Intellectual Property" means (a) trademarks, service marks, trade
dress, logos, trade names and corporate names, including all common law
rights, registrations and applications for registration thereof, and all
rights therein provided by multinational treaties or conventions, (b)
copyrights (registered or otherwise) and registrations and applications for
registration thereof, and all rights therein provided by multinational
treaties or conventions, (c) computer software, including, without
limitation, source code, operating systems and specifications, data, data
bases, files, documentation and other materials related thereto, data and
documentation, (d) trade secrets and confidential, technical or business
information (including manufacturing processes, and all ideas, formulas,
compositions, inventions and conceptions of inventions, whether patentable or
unpatentable and whether or not reduced to practice), (e) whether or not
confidential, technology (including know-how and show-how), manufacturing and
production processes and techniques, research and development information,
drawings, specifications, designs, plans, proposals, technical data,
copyrightable works, financial, marketing and business data, pricing and cost
information, business and marketing plans and customer and supplier lists and
information, (f) copies and tangible embodiments of all the foregoing, in
whatever form or medium, (g) issued patents and patent applications, (h) all
rights to obtain and rights to apply for patents, and to register trademarks
and copyrights, (i) licenses or sublicenses in connection with any of the
foregoing, and (j) all rights to sue and recover and retain damages and costs
and attorneys' fees for past, present and future infringement or breach of
any of the Intellectual Property rights herein above set forth.
"Intellectual Property Rights" has the meaning set forth in Section 4.16.
"IRS" means the Internal Revenue Service.
"Last Reported Sale Price" means the last reported sale price of the
AmeriLink Common Stock as quoted on the National Market System of the
National Association of Securities Dealers Automated Quotation System.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
"MAC" has the meaning set forth in the Recitals.
"Material Adverse Effect" means any circumstance, change in, or effect
on the business of the Company (other than changes in market or general
economic conditions) that, individually or in the aggregate with any other
circumstances, changes in, or effects on the business of the Company (a) is,
or could be, materially adverse to the business, operations, assets or
liabilities, employee relationships, customer or supplier relationships,
results of operations or financial condition of the Company or (b) could
materially adversely affect the ability of the Company to operate or conduct
its business in the manner in which it is currently operated or conducted.
"Material Contracts" has the meaning set forth in Section 4.12.
"Materials of Environmental Concern" has the meaning set forth in Section
4.17.
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"Merger" has the meaning set forth in Section 2.1.
"Merger Consideration" has the meaning set forth in Section 2.2.
"Merger Laws" has the meaning set forth in Section 2.1.
"Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).
"Notice" has the meaning set forth in Section 3.2
"Notice Response" has the meaning set forth in Section 3.2
"Option Shares" has the meaning set forth in Section 3.1.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, a corporation, a partnership, an
association, a joint stock company, a trust, a limited liability company, a
joint venture, an unincorporated organization or any other entity or
organization, including without limitation a governmental entity or political
subdivision or an agency or instrumentality thereof.
"Principal Shareholders" has the meaning set forth in the recitals.
"Quiktron" means Quiktron Incorporated, an Iowa corporation.
"Quiktron Stock" has the meaning set forth in Section 3.2.
"Response Period" has the meaning set forth in Section 3.2.
"Returns" has the meaning set forth in Section 4.10.
"Reviewed Financial Statements" has the meaning set forth in Section 4.4.
"SEC" means the Securities and Exchange Commission.
"SEC Documents" has the meaning set forth in Section 5.6.
"Securities Act" means the Securities Act of 1933, as amended
"Shareholders" has the meaning set forth in the recitals.
"Stock Portion of the Merger Consideration" has the meaning set forth in
Section 2.2.
"Subsidiary" means any entity of which securities or other ownership
interests having ordinary voting power, either alone or through or together with
any other Subsidiary, to elect a majority of the board of directors or other
Persons performing similar functions are directly or indirectly owned by the
Company.
"Surviving Corporation" has the meaning set forth in Section 2.1.
"Tax" or "Taxes" has the meaning set forth in Section 4.10.
"Tax Claim Notice" has the meaning set forth in Section 8.2.
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ARTICLE II
THE MERGER
2.1 THE MERGER. Upon the terms and subject to the conditions
hereof, and in accordance with the Merger Laws, on and as of the date hereof,
certificates of merger (the "CERTIFICATES OF MERGER") providing for the
merger of the Company with and into MAC (the "MERGER") have been duly
prepared and executed, and shall be filed by the parties with the Secretaries
of State of the States of Ohio and Iowa, in such form as is required by, and
executed in accordance with, the relevant provisions of the General
Corporation Law of the State of Ohio (Chapter 1701 of the Ohio Revised Code)
and the Iowa Business Corporation Act (Section 490.101 et seq.) (together,
the "MERGER LAWS") and the parties hereto have taken, and hereby agree to
take, any other actions required by law to make the Merger effective. As a
result of the Merger, the separate corporate existence of the Company shall
cease and MAC, with all its purposes, objects, rights, privileges, powers and
franchises, shall continue as the surviving corporation of the Merger (herein
sometimes, the "SURVIVING CORPORATION"). Immediately after the filing of the
Certificates of Merger, AmeriLink shall cause the Articles of Incorporation
of MAC to be amended to change its name to "Midwest Computer Cable, Inc."
The time the Merger becomes effective is referred to herein as the
"EFFECTIVE TIME" and the date on which the Effective Time occurs is referred
to as the "CLOSING DATE." Prior to the filing of the Certificates of Merger,
a closing has taken place at the offices of Squire, Sanders & Dempsey L.L.P.,
41 South High Street, Columbus, Ohio 43215, at 10:00 A.M., local time, on
February 2, 1999, at which the conditions set forth in Article X have been
satisfied or waived (the "CLOSING").
2.2 MERGER CONSIDERATION. In full consideration and exchange for
the Merger, AmeriLink and/or MAC, as appropriate, has delivered the Merger
Consideration (defined below) to the Shareholders and such Shareholders have
tendered their Company Shares to MAC at the Closing. The aggregate
consideration for the Merger (the "MERGER CONSIDERATION") is (a)(i) the sum
of $4,400,000 (the "CASH PORTION OF THE MERGER CONSIDERATION") and (b)
500,000 AmeriLink Common Shares (the "STOCK PORTION OF THE MERGER
CONSIDERATION").
2.3 CLOSING. All transactions consummated at the Closing are
deemed to have taken place simultaneously and are deemed to be effective as
of the opening of business of the Company on the Closing Date. At the Closing:
(a) AmeriLink and/or MAC, as appropriate, has delivered the
Merger Consideration to the Shareholders. The Merger Consideration is
allocated among each of the Shareholders in proportion to the number of
Company Shares held by each of them as of the Closing Date.
(b) Each Shareholder has delivered certificates for the Company
Shares registered in the name of that Shareholder, in each case endorsed
in blank or with executed blank stock powers attached. Each certificate
so delivered does not bear any legend restricting the transferability of
the Company Shares except as may be required under the United States
federal securities laws and all transfer, documentary, stamp or other
similar taxes or duties (including, without limitation, any real property
transfer taxes imposed by any taxing authority) payable on or in respect
of the transfer thereof shall have been paid by that Shareholder.
(c) Each Shareholder and AmeriLink and MAC has delivered or
caused to be delivered the agreements, opinions, certificates and other
documents required by Sections 10.1 and 10.2, respectively.
2.4 EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in the Merger Laws. As of the Effective Time, the Surviving
Corporation shall be a wholly owned subsidiary of AmeriLink.
2.5 ARTICLES OF INCORPORATION AND BYLAWS. The Articles of
Incorporation of MAC immediately prior to the Effective Time shall be the
Articles of Incorporation of the Surviving Corporation, except as provided in
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Section 2.6. The Code of Regulations of MAC immediately prior to the
Effective Time shall be the Code of Regulations of the Surviving Corporation.
2.6 NAME. As of the Effective Time, the name of the Surviving
Corporation shall be changed to Midwest Computer Cable, Inc.
2.7 DIRECTORS. The directors and officers of MAC immediately prior
to the Effective Time shall be the initial directors and officers of the
Surviving Corporation until their successors shall have been duly elected or
appointed and shall have qualified or until their earlier death, resignation
or removal in accordance with the Articles of Incorporation and Code of
Regulations of the Surviving Corporation.
2.8 CONVERSION. At the Effective Time, by virtue of the Merger and
without any action on the part of AmeriLink, MAC, the Company or the holder
of any of the following securities:
(a) Each Company Share shall be converted into the right to
receive an allocable share of the Merger Consideration as described in
Section 2.3(a).
(b) Each Company Share which is held in the treasury of the
Company shall be canceled and retired and cease to exist.
(c) Each issued and outstanding share of the capital stock of
MAC shall be converted into and become one fully paid and nonassessable
share of common stock of the Surviving Corporation.
2.9 TAX CONSEQUENCES. It is intended that the Merger shall
constitute a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), and that this
Agreement shall constitute a "plan of reorganization" for the purposes of
Section 368 of the Code.
ARTICLE III
ADDITIONAL CONSIDERATION
3.1 EMPLOYMENT AGREEMENTS AND OPTION. Subject to the terms and
conditions set forth in this Agreement and in reliance upon the
representations, warranties, covenants and conditions herein contained, on
the Closing Date:
(a) MAC and each of Larry Kendall, Jeffrey Van Polen, Richard
Pearson and Michael Maddison have executed, and AmeriLink has guaranteed,
separate employment agreements dated as of the Closing Date (the
"EMPLOYMENT AGREEMENTS").
(b) AmeriLink has granted to the following individuals stock
options for that number of shares of AmeriLink Common Stock ("Option
Shares") set forth opposite each such individual's name:
NAME NUMBER OF OPTION SHARES
---- -----------------------
Larry Kendall 25,000
Jeffrey Van Polen 5,000
Richard Pearson 5,000
Michael Maddison 5,000
The exercise price for all Option Shares subject to the stock options
granted hereunder is the Last Reported Sales Price prior to the date of
the grant. All such stock options have been granted pursuant to the
AmeriLink's 1994 Stock Incentive Plan, as amended, and shall expire ten
years from the date of the grant. The stock options will not be
"incentive stock options" pursuant to Section 422 of the Code. All such
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options will become exercisable as to 20% of the Option Shares upon
completion of first full year of employment and will become exercisable
as to an additional 20% of the Option Shares upon completion of each
additional full year of employment thereafter. Each of the foregoing
grants of stock options have been evidenced by a stock option award
agreement dated as of the Closing Date containing provisions customarily
set forth in similar agreements between the AmeriLink and employees of
its subsidiaries (the "STOCK OPTION AGREEMENTS").
3.2 RIGHT OF FIRST OFFER TO PURCHASE QUIKTRON. The Principal
Shareholders hereby represent and warrant to AmeriLink that they are and,
subject to the provisions below, shall continue to be, the sole owners of all
of the capital stock and equity securities of Quiktron, now or hereafter
issued or agreed to be issued (the "Quiktron Stock"), and agree as follows:
(a) If, during the 10 year period following the Closing Date,
the Principal Shareholders desire to enter into an arrangement with a
third party for the Disposition (as defined below) of either (i) any or
all of the Quiktron Stock or (ii) all or substantially all of the assets
of Quiktron, then the Principal Shareholders shall notify AmeriLink of
this fact in writing (the "NOTICE"), which Notice shall set forth the
price or other consideration for which the notifying party would agree to
a Disposition of the Quiktron Stock or the Quiktron assets, as the case
may be. As used herein, the term "DISPOSITION" means the sale, pledge,
encumbrance, or other transfer, or agreement to do any of the foregoing,
directly or indirectly, of the Quiktron Stock or the assets of Quiktron.
(b) If AmeriLink notifies the Principal Shareholders in writing
(the "NOTICE RESPONSE") within 30 days of the date on which a copy of the
Notice was received by AmeriLink (the "RESPONSE PERIOD") that AmeriLink
desires to acquire the Quiktron Stock or the Quiktron assets, as the case
may be, for the consideration set forth in the Notice, then, within 30
days after delivery of the Notice Response to the Principal Shareholders,
or such other notifying party, AmeriLink shall provide such notifying
party, with an agreement ("Acquisition Agreement") containing
substantially the same terms and conditions as set forth in the Notice,
including without limitation, consideration payable thereunder consistent
with the consideration provided for in the Notice, and such other terms
and conditions as are customary for the transaction identified in the
Notice. Such notifying party and AmeriLink shall negotiate in good faith
to execute the Acquisition Agreement within 30 days after such notifying
party's receipt of the Acquisition Agreement from AmeriLink.
(c) If a copy of the Notice is delivered to AmeriLink as
provided in Section 3.2(b) and either (i) AmeriLink fails to deliver a
Notice Response within the Response Period; or (ii) after delivery of a
Notice Response, AmeriLink fails to deliver or execute an Acquisition
Agreement within the time periods provided therefor in Section 3.2(b),
the notifying party may, for a period of 180 days thereafter, enter into
a contractual arrangement with any third party for the Disposition of
Quiktron Stock or Quiktron assets set forth in the Notice for
consideration equal to or greater than that set forth in the Notice, and
upon the other material terms and conditions set forth in the Notice. If
Principal Shareholders do not so enter into a contractual arrangement
with a third party within said 180-day period, then the Principal
Shareholders or such other notifying party must again comply with all of
the provisions of this Section 3.2 before entering into any contractual
arrangement with any third party for the Disposition of Quiktron Stock or
Quiktron assets, and the failure of the Principal Shareholders or such
other notifying party to do so will constitute a breach under this
Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
The Company and the Principal Shareholders, jointly and severally,
represent and warrant to AmeriLink and MAC that:
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4.1 COMPANY CORPORATE EXISTENCE AND POWER; NO SUBSIDIARIES. The
Company is a corporation duly organized, validly existing and in good
standing under the laws of Iowa, and has all corporate powers and all
material governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted. The Company is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where the character of the property owned or leased by it
or the nature of its activities makes such qualification necessary, except in
those jurisdictions where the failure to be so qualified would not,
individually or in the aggregate, have a Material Adverse Effect. SCHEDULE
4.1 lists each jurisdiction in which the Company is qualified to do business
as a foreign corporation. The Company has heretofore delivered to AmeriLink
true and complete copies of the Company's charter and bylaws and made
available for AmeriLink's inspection the Company's minute books, which minute
books contain a true and complete record of all meetings, and consents in
lieu of a meeting, of the Company's board of directors (and any committee
thereof) and of the Company's stockholders held or executed since the
Company's incorporation, and such records accurately reflect all transactions
referred to therein. The Company does not have any Subsidiaries or any
equity interests in any corporation, partnership, limited liability company,
joint venture arrangement or other business entity.
4.2 NON-CONTRAVENTION. Except as set forth on SCHEDULE 4.2, the
execution, delivery and performance by Shareholders of this Agreement and the
consummation of the Merger do not and will not contravene or constitute a
default under or give rise to a right of termination, cancellation or
acceleration of any right or obligation of the Company or to a loss of any
benefit to which the Company is entitled under any provision of applicable
law or regulation or of the charter, bylaws or operating agreement of the
Company or of any agreement, judgment, injunction, order, decree,
administrative interpretation, award or other instrument binding upon the
Company or result in the creation or imposition of any Lien on any asset of
the Company.
4.3 CAPITALIZATION. The authorized capital stock of the Company,
including, if applicable, each class thereof, and the number of shares
thereof issued and outstanding, whether or not fully paid for and
non-assessable, and, if applicable, any such shares authorized and reserved
for issuance for any particular purpose, is as set forth on SCHEDULE 4.3.
All outstanding shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid and non-assessable, except
as set forth in this Section and on SCHEDULE 4.3, there are outstanding (a)
no shares of capital stock or other voting securities of the Company or
capital appreciation rights, stock options, warrants, stock appreciation
rights or other phantom equity interests based on the value of the Company's
capital stock or other voting securities, (b) no securities of the Company
convertible into or exchangeable for shares of capital stock or voting
securities of the Company, (c) no options or other rights to acquire from the
Company, and no obligation of the Company to issue, any capital stock, voting
securities or securities convertible into or exchangeable for capital stock
or voting securities of the Company; and (d) no obligations of the Company to
repurchase, redeem or otherwise acquire any of the foregoing.
4.4 FINANCIAL STATEMENTS. The Company has delivered to AmeriLink
(a) its reviewed balance sheets for the fiscal years ended June 30, 1996 and
June 30, 1997, together with the related statements of income, cash flows and
changes in stockholders' equity for the years ended on such dates, together,
in each case, with all related notes and schedules thereto, accompanied by
the review reports thereon of the Company's Accountants (collectively, the
"REVIEWED FINANCIAL STATEMENTS") and (b) the audited balance sheet of the
Company dated December 31, 1998, and the related audited statements of
income, cash flows and changes in stockholders' equity of the Company for the
twelve month period ended December 31, 1998, in each case, with all related
notes and schedules thereto, accompanied by the audit report thereon of the
Company's Accountants (collectively referred to herein as the "AUDITED
FINANCIAL STATEMENTS" and together with the Reviewed Financial Statements,
the "COMPANY FINANCIAL STATEMENTS"). The Reviewed Financial Statements were
reviewed by the Company Accountants in accordance with standards established
by the American Institute of Certified Public Accountants ("AICPA") and the
review report with respect thereto stated that the Company Accountants were
not aware of any material modifications that should have been made to the
respective accompanying financial statements and information further to be in
conformity with GAAP, other than lack of year-end adjustments and footnote
disclosures. The Audited Financial Statements, including any footnotes
thereto, have been prepared in accordance with GAAP consistently applied, and
in all material respects fairly present the financial position, results of
operations, cash flows and changes in stockholders' equity of the Company as
of December 31, 1998 and for the twelve-month period then ended. The assets
and liabilities and items of income and expense on the Audited Financial
Statements
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are bona fide and were not acquired, earned or incurred pursuant to any
contract or other arrangement which was entered into, amended or terminated
in anticipation of any of the transactions contemplated by this Agreement.
The books and records of the Company are in all material respects
complete and correct, have been maintained in accordance with good business
practices, and accurately reflect the basis for the financial condition of
the Company as set forth in the aforementioned Company Financial Statements.
4.5 ABSENCE OF CERTAIN CHANGES. Except as set forth in the
SCHEDULE 4.5, since December 31, 1998, the Company has conducted its business
in the ordinary course and there has not been:
(a) any event or any change in the business or condition
(financial or otherwise) of the Company that has had or may have,
individually or in the aggregate, a Material Adverse Effect;
(b) any amendment or alteration in any material term of
articles of incorporation, by-laws or other charter documents of the
Company;
(c) any amendment or alteration in any material term of any
outstanding security, option, warrant or phantom equity interest of the
Company;
(d) any (i) incurrence, assumption or guarantee by the Company
of any debt for borrowed money other than in the ordinary course of
business, (ii) issuance or sale of any securities of the Company
convertible into or exchangeable for debt securities of the Company, or
(iii) issuance or sale of options or other rights to acquire from the
Company debt securities of the Company or any securities convertible into
or exchangeable for any such debt securities;
(e) any creation, assumption or incurrence by the Company of
any Lien on any material asset, other than in the ordinary course of
business;
(f) any assumption, guarantee, endorsement or other action by
the Company to become liable for the obligations of any Person except
endorsements of negotiable instruments and chattel paper subject to
recourse in the ordinary course of business;
(g) any making of any loan, advance or capital contribution to
or investment in any Person other than loans, advances or capital
contributions or investments made in the ordinary course of business, any
issue or sale of Company Shares, or redemption, repurchase or other
acquisition of shares of capital stock or other equity interests in or
other securities of the Company, or any dividend or other distribution
with respect thereto;
(h) any damage, destruction or other casualty loss (whether or
not covered by insurance) affecting the business or assets of the Company
which, individually or in the aggregate, has had or may have,
individually or in the aggregate, a Material Adverse Effect;
(i) any transaction or commitment made, or any contract or
agreement entered into, by the Company relating to its assets or business
(including the acquisition or disposition of any substantial assets) or
any relinquishment by the Company of any contract or other right, in
either case, material to the Company, other than transactions and
commitments in the ordinary course of business or contemplated by this
Agreement;
(j) any grant of any severance or termination pay to any
officer, consultant or employee of the Company, any entering into of any
employment or consulting agreement with any officer, consultant or
employee of the Company or any increase in compensation or benefits
payable under any existing severance or termination pay policies or
employment agreements other than grants, agreements, merit increases or
cost-of-living increases in the ordinary course of business consistent
with past practice; or
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(k) any agreement or arrangement made by the Company to take
any action which if taken prior to the date hereof would have made any
representation or warranty in this section untrue or incorrect.
(l) any transaction or commitment made, or any contract or
agreement entered into, by the Company with any director, officer,
employee or shareholder (or with any relative, beneficiary, spouse or
affiliate thereof).
(m) any tax election made by the Company or any settlement or
compromise of any material federal, state, local or foreign income tax
liability of the Company.
(n) any payment, discharge or satisfaction of any claim,
liability or obligation (absolute, accrued, asserted or unasserted,
contingent or otherwise) of or against the Company, other than the
payment, discharge or satisfaction, in the ordinary course of business
and consistent with past practice, of liabilities reflected or reserved
against in the Company Financial Statements or subsequently incurred in
the ordinary course of business and consistent with past practice.
4.6 PROPERTIES; ASSETS.
(a) SCHEDULE 4.6 contains a list of:
(i) all personal property, machinery and equipment of the
Company as of December 31, 1998 with a value of over
$1,000;
(ii) all inventory of the Company as of December 31, 1998; and
(iii) all real property leased by the Company (together with a
street address of the leased premises). The Company owns
no real property or interests in real property except its
leasehold interests listed in SCHEDULE 4.6.
(b) The Company has, or prior to the Closing will have, good
title or valid and subsisting leasehold interests in, all properties and
assets listed in SCHEDULE 4.6. None of such properties or assets is
subject to any Liens except:
(i) Liens disclosed in SCHEDULE 4.6;
(ii) Liens for taxes not yet due or being contested in good
faith (and for which adequate reserves have been
established on the Interim Financial Statements); or
(iii) Liens which do not materially detract from the value of
such property or assets as now used or materially interfere
with any present or intended use of such property or
assets.
(c) There is no violation of any law regulation or ordinance
(including without limitation laws, regulations or ordinances relating to
zoning, environmental, city planning or similar matters) relating to the
properties and assets of the Company except for such violations as would
not in the aggregate have, individually or in the aggregate, a Material
Adverse Effect.
(d) There are no pending or, to the knowledge of any Principal
Shareholder after due inquiry threatened, condemnation proceedings,
lawsuits, or administrative actions relating to the property or other
matters affecting materially and adversely the current use, occupancy, or
value thereof.
(e) The buildings, machinery (including but not limited to
motor vehicles), equipment, and other tangible assets that the Company
owns and leases and which are used in its business as presently conducted
are free from patent (and to the knowledge of Principal Shareholders,
latent) material defects,
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have been consistently maintained in accordance with normal industry
practice , and are in good operating condition and repair (subject to
normal wear and tear) and, during the twelve-month period ended
December 31, 1998, the Company has not deferred any maintenance of the
foregoing items or the accrual of any expenses associated with such
maintenance.
(f) SCHEDULE 4.6 sets forth the address of the principal
executive office of the Company and the location of all property owned or
leased by the Company and the functions thereof, as well as the locations
of all inventory of the Company.
(g) All inventory of the Company identified on SCHEDULE 4.6 or
subsequently acquired was acquired, and has been maintained, in the
ordinary course of the Business, and consists substantially of a quality,
quantity and condition usable and saleable in the ordinary course of the
Business, without write-down or write-off, as would be required by GAAP.
None of the inventory in the possession of the Company is held on
consignment, and none of the inventory of the Company is consigned to
third parties. The Company is not under any liability or obligation with
respect to the return of inventory in the possession of any third
parties. In the 24 month period prior to the Closing Date, the Company
has not accumulated or maintained inventory in excess of that reasonably
necessary to meet current commitments to its customer demands and has
consistently replenished inventory on an as-needed basis, but not in
excess of amounts sufficient to meet reasonably foreseeable customer
demands.
4.7 NO UNDISCLOSED MATERIAL LIABILITIES. There are no liabilities of
the Company of any kind whatsoever, whether accrued, contingent, absolute or
conditional, and whether or not the amount thereof is determinable, that are,
individually or in the aggregate, required to be disclosed in accordance with
GAAP, and there is no existing condition, situation or set of circumstances
which could reasonably be expected to result in such a liability, other than:
(a) liabilities disclosed or provided for in the Company
Financial Statements;
(b) liabilities listed in SCHEDULE 4.7; and
(c) liabilities incurred in the ordinary course of business
since December 31, 1998.
4.8 LITIGATION.
(a) Except as set forth in SCHEDULE 4.8(A), there is no
action, suit, investigation or proceeding pending against, or, to any
Principal Shareholder's knowledge after due inquiry, threatened
against or affecting, the Company or any of the Company's properties
before any court or arbitrator or any governmental body, agency or
official which, if determined or resolved adversely to the Company,
may have, individually or in the aggregate, a Material Adverse Effect
or which in any manner challenges or seeks to prevent, enjoin, alter
or materially delay the transfer of the Company Shares and there is no
unsatisfied judgment, order, stipulation, injunction, decree or award
to which the Company or any of its properties is subject.
(b) Except as set forth on SCHEDULE 4.8(B), the Company has not
received notice or information of any claim or allegation of personal
death or material personal injury, property or economic damage, any claim
for punitive or exemplary damages, any material claim for contribution or
indemnification, or any claim for injunctive relief in connection with
any product sold or distributed or any service provided by it.
(c) Except as set forth on Schedule 4.8(c), the Company has not
received notice or information of any warranty claim relating to the use
of any inventory or other materials purchased from Quiktron in connection
with any product sold or distributed or any service provided by the
Company.
4.9 BUSINESS ACTIVITIES.
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(a) Except as set forth in SCHEDULE 4.9, there is no
agreement, judgment, injunction, order, decree or other instrument
binding upon the Company which has or could reasonably be expected to
have the effect of prohibiting any business practice of the Company,
any acquisition of property by the Company or the conduct of business
by the Company either before or after the Closing Date.
(b) None of the Company's suppliers have canceled or otherwise
terminated its relationship with the Company, or made any written or oral
threat to cancel or terminate its relationship with the Company, for any
reason, including the consummation of the transactions contemplated
hereby.
(c) The Company is not bound by any commitments for the
performance of services or delivery of products in excess of its ability
to provide such services or deliver such products during the time
available to satisfy such commitments, and all outstanding commitments
for the performance of services or delivery of products were made on a
basis calculated to produce a profit under the circumstances prevailing
when such commitments were made.
(d) Except as set forth on SCHEDULE 4.9, now or at any time
since December 31, 1998, the Company has not received notice of, nor has
any Person asserted against it, any material product liability or
warranty claim relating to the products or services offered or sold by
the Company.
4.10 TAX MATTERS.
(a) Except as disclosed on SCHEDULE 4.10:
(i) the Company (and any predecessor of the Company)
has been a validly electing S corporation within
the meaning of sections 1361 and 1362 of the Code
at all times since July 1, 1998 and the Company
will be an S corporation up to and including the
Closing Date;
(ii) the Company has never been liable for any tax
under section 1371, 1374 or 1375 of the Code;
(iii) all Returns for any Tax period ending on or prior
to the Closing Date required to be filed by the
Company on or prior to the Closing Date have been
or will be filed when due in timely fashion and
are complete and accurate in all material
respects, except where the failure to file such
Returns or any incompleteness or inaccuracy
therein has not had, and could not have,
individually or in the aggregate, a Material
Adverse Effect;
(iv) all Taxes with respect to the Company or its
Business and any Subsidiary that are due (or
claimed to be due) on or before the Closing Date
by any Taxing jurisdiction have been paid in full
on a timely basis or an adequate reserve has been
set up for the amount of such Taxes and is
reflected in the Audited Financial Statements;
with respect to any transactions occurring on or
before the Closing Date, all Taxes required to be
collected from others or deducted or withheld from
any amounts paid to employees or others have been
duly collected or withheld, and timely paid over
to the appropriate Taxing jurisdiction; all sales
Tax exemption certificates for sales where Tax was
not charged have been properly completed and filed
with respect to all sales occurring on or before
the Closing Date; except in all cases for those
Taxes that are being contested in good faith (and
for which an adequate reserve has been set up on
the Audited Financial Statements);
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(v) no material deficiencies for Taxes relating to the
income, properties, operations, or businesses of
the Company have been claimed, proposed, or
assessed by any governmental authority prior to
the Closing; there is no pending or (to the
knowledge of any Principal Shareholder after due
inquiry or the Company and its counsel and tax
advisers) threatened action, suit, proceeding,
investigation, audit, or claim for or relating to
any liability in respect of such Taxes, and there
are no matters under discussion with any
governmental authorities with respect to Taxes
that could result in a material additional amount
of such Taxes; audits of federal, state, and local
Returns for such Taxes have been completed by the
relevant governmental authorities for each period
set forth in SCHEDULE 4.10; and, except as set
forth in SCHEDULE 4.10, the Company has not been
notified that (i) any governmental authority
intends to audit any Return for any other period,
or (ii) any governmental authority in a
jurisdiction where it does not file returns claims
or intend to claim that the Company is or may be
subject to Tax in or by that jurisdiction;
(vi) the Company has not waived any statute of
limitations in respect of Taxes or agreed to any
extension of time with respect to a Tax assessment
or deficiency;
(vii) Neither the Company nor any Subsidiary (A) has
been a party to any Tax allocation or sharing
agreement, (B) has been a member of an affiliated
group (other than an affiliated group of which the
Company is the parent) filing a consolidated
federal income tax Return, nor taken any other
action that could result in tax liability for
Taxes of an affiliated group under Treas. Reg.
Section 1.1502-6 (or any similar provision of
state, local, or foreign law), including as a
transferee or successor, by contract, or
otherwise, or (C) is currently the beneficiary of
any extensions of time within which to file any
Return;
(viii) The earliest taxable period of the Company (and
each Subsidiary) for which the statute of
limitations is still open is the fiscal year ended
June 30, 1995. Schedule 4.10 lists all federal,
state, local, and foreign income tax Returns filed
with respect to the Company and any Subsidiary for
all taxable periods for which the statute of
limitations is still open, and indicates those
income tax Returns that have been audited and
those that are currently the subject of an audit.
The Company and each Subsidiary has delivered to
AmeriLink correct and complete copies of all
state, federal, and foreign income tax Returns
with respect to all taxable periods for which the
statute of limitations is still open, and copies
of all examination reports and statements of
deficiencies that have been assessed against or
agreed to by the Company or any Subsidiary and
that may have any material effect on the tax
liability of the Company or any Subsidiary for any
present or future taxable period or for any past
taxable period for which the statute of
limitations is still open;
(ix) All material Tax elections that have been made by
the Company and each Subsidiary are shown on
Schedule 4.10. Neither the Company nor any
Subsidiary has any net operating losses or other
Tax attributes that are subject to limitation
under Code Sections 382, 383, or 384, or the
federal consolidated return regulations;
(x) Neither the Company nor any Subsidiary has been a
United States real property holding corporation
within the meaning of Code Section 897(c)(2)
during the applicable period specified in Code
Section 897(c)(1)(A)(ii);
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(xi) Neither the Company nor any Subsidiary (A) has
agreed or consented at any time under
Section 341(f) of the Code to have the provisions
of Section 341(f)(2) of the Code apply to any
disposition of any assets, (B) has agreed, or is
required, to make any adjustment under
Section 481(a) of the Code by reason of a change
in accounting method or otherwise, (C) has made an
election, or is required, to treat any asset as
owned by another person pursuant to the provisions
of Section 168(f) of the Code or as Tax-exempt
bond financed property or Tax-exempt use property
within the meaning of section 168 of the Code,
(D) has made any of the foregoing elections or is
required to apply any of the foregoing rules under
any comparable state or local Tax provision, or
(E) owns any material assets that directly or
indirectly secure debt the interest on which is
Tax-exempt under section 103(a) of the Code;
(xii) The transaction contemplated herein, either by
itself or in conjunction with any other
transaction that either the Company or any
Subsidiary may have entered into or agreed to,
will not give rise to any federal income tax
liability under section 355(e) of the Code for
which the Company or any Subsidiary may in any way
be held liable;
(xiii) Neither the Company nor any Subsidiary is a party
to any "Gain Recognition Agreements" as such term
is used in the Treasury Regulations promulgated
under Section 367 of the Code;
(xiv) Neither the Company nor any Subsidiary has made or
become obligated to make, nor will either the
Company or any Subsidiary, as a result of any
event connected with any transaction contemplated
herein and/or any termination of employment
related to such transaction, make or become
obligated to make, any "excess parachute payment,"
as defined in Section 280G of the Code (without
regard to subsection (b)(4) thereof);
(xv) There are no liens for Taxes (other than for
current Taxes that are not yet due and payable or
are being contested in good faith) upon the assets
of either the Company nor any Subsidiary;
(xvi) There are no joint ventures, partnerships, limited
liability companies or other arrangements or
contracts to which either the Company or any
Subsidiary is a party that could be treated as a
partnership for federal income Tax purposes;
(xvii) Neither the Company nor any Subsidiary has or has
had a "permanent establishment" in any foreign
country, as such term is defined in any applicable
Tax treaty or convention between the United States
and such foreign country or has otherwise taken
steps that have exposed, or will expose, it to the
taxing jurisdiction of a foreign country;
(xviii) The aggregate unpaid Taxes of the Company and all
Subsidiaries (A) did not, as of the most recent
fiscal month end prior to the date hereof, exceed
the reserve for Tax liability (not including any
reserve for deferred Taxes established to reflect
timing differences between book and Tax income)
set forth on the face of the most recent balance
sheet of the Audited Financial Statements that
have been made available to AmeriLink and (B) will
not, as of the Closing Date, exceed such reserve;
and
(xix) The Company has taken no action (including but not
limited to any distribution or disposition prior
to the Closing of assets of the Company
constituting 10
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percent or more of the value of the Company's net
assets or 30 percent or more of the value of the
Company's gross assets prior to such distribution
or disposition) that would adversely affect the
status of the transaction contemplated by this
Agreement from constituting a "reorganization"
within the meaning of Section 368(a) of the Code.
(b) "TAX" or "TAXES" means any federal, state, local or foreign
income, gross receipts, gross income, profits, franchise, transfer,
sales, use, payroll, occupation, property (real or personal), excise,
alternative, minimum, estimated, environmental and similar taxes,
assessments, and governmental charges (including interest, penalties or
additions to such taxes). "RETURNS" means all returns, reports,
estimates, information returns and statements of any nature with respect
to Taxes, including any schedule or attachment thereto and any amendment
thereof.
(c) (i) The only material audit adjustments for the Company's
Taxable years ended June 30, 1995 and June 30, 1996 described on SCHEDULE
4.10 attached hereto related to failure of the Company to use the accrual
method of accounting for the reporting of income on such Returns, (ii)
all Taxes relating to such audit adjustments have been paid in full and
(iii) all income of the Company for all Taxable periods subsequent to the
audit years ended June 30, 1996 has been recorded and calculated on the
Company's Returns using the accrual method of accounting as required by
the Code.
4.11 EMPLOYEE BENEFITS.
(a) SCHEDULE 4.11 lists each Employee Benefit Plan that any
Shareholder, any ERISA Affiliate or the Company maintains,
participates in or contributes to for the benefit of employees or
former employees of the Company.
(i) Each such Employee Benefit Plan (and each related
trust, insurance contract or fund) at all times
has been maintained and administered in compliance
with its terms and has complied in form and in
operation in all respects with the applicable
requirements of all laws, regulations and rulings,
including but not limited to ERISA and the Code.
(ii) All contributions (including all employer
contributions and employee salary reduction
contributions) which are due have been timely paid
to each such Employee Benefit Plan which is an
Employee Pension Benefit Plan.
(iii) The Company has delivered or caused to be
delivered to AmeriLink true and complete copies of
the plan documents and summary plan descriptions,
the most recent determination letter received from
the IRS, the most recent five (5) Form 5500 Annual
Reports, all related trust agreements, insurance
contracts and other funding agreements which
implement each such Employee Benefit Plan, and all
information dated within the prior two years
regarding any plan funding waiver requests, IRS
letter rulings and requests therefor, requests for
technical advice, or other outstanding issue
involving such Employee Benefit Plan with the IRS,
the Department of Labor, or the PBGC.
(iv) No Reportable Event, "prohibited transaction" (as
such term is used in Section 406 of ERISA or
Section 4975 of the Code) or "accumulated funding
deficiency" (as such term is used in Section 412
or Section 4971 of the Code) has heretofore
occurred with respect to any Employee Benefit Plan
which is an Employee Pension Benefit Plan that
could give rise to liability to the Company.
(v) Except as disclosed on SCHEDULE 4.11, (i) none of
Shareholders, any ERISA Affiliate, or the Company
is providing or has an obligation to provide post-
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retirement medical or life benefits to any
employees or former employees of the Company,
exclusive of any obligations imposed by COBRA, and
(ii) there are no restrictions on the rights of
Shareholders, any ERISA Affiliate or the Company
to amend or terminate any post-retirement medical
or life benefits without incurring any liability
therefor and no communications have been made to
participants with respect to guaranteeing any such
benefits.
(vi) Except as disclosed on SCHEDULE 4.11 consummation
of the transactions contemplated by this Agreement
will not directly or indirectly result in an
increase in the amount of compensation or benefits
or accelerate the vesting or timing of payment of
any benefits or compensation payable to or in
respect of any current or former employee of the
Company under the terms of existing agreements
and/or arrangements of the Company.
(b) With respect to each Employee Benefit Plan that the Company
or any ERISA Affiliate maintains or has maintained during the prior six
(6) years or to which any of them contributes, or has been required to
contribute during the prior six (6) years:
(i) No action, claim, suit, proceeding, hearing,
governmental audit or investigation with respect
to any such Employee Benefit Plan or their assets
(other than routine claims for benefits) is
pending or threatened.
(ii) The Company has not incurred any liability, and no
event has occurred or is expected to occur which
could give rise to liability to the Company, to
the PBGC (other than PBGC premium payments) or
otherwise under Title IV of ERISA (including any
withdrawal liability) with respect to any
Multiemployer Plan or any Employee Benefit Plan
which is an Employee Pension Benefit Plan.
4.12 MATERIAL CONTRACTS.
(a) SCHEDULE 4.12(a) lists each of the following contracts and
agreements of the Company (collectively, the "MATERIAL CONTRACTS"):
(i) each instrument or arrangement creating a Lien on
any real or personal property;
(ii) each indenture, trust agreement, credit agreement
or other instrument relating to any issue of
bonds, debentures, notes or other evidences of
indebtedness;
(iii) each lease or other agreement relating to real or
personal property or any interest therein that
either does not terminate or is not terminable
within six months from the date hereof;
(iv) each letter of credit, bank account or safe
deposit box arrangement;
(v) each contract or agreement between the Company and
any Affiliate; and
(vi) each contract or agreement that obligates the
Company to perform, provide or purchase goods,
supplies or services which have an individual
value of more than $10,000 or that is not
terminable upon thirty days or less written notice
without penalty or premium.
(b) Except as disclosed in SCHEDULE 4.12(b), each Material
Contract: (i) is valid and binding on the Company; and (ii) is in full
force and effect.
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(c) The Company is not in breach of, or default under, any
Material Contract. To the knowledge of the Company, no other party to
any Material Contract is in breach thereof or default thereunder.
(d) SCHEDULE 4.12(d) lists each contract and agreement between
the Company and Quiktron and, except as disclosed in Schedule 4.12(d)
each such contract is terminable by the Company, without penalty, within
thirty days after the Company delivers notice of termination to Quiktron.
4.13 LICENSES. No license, franchise, permit or other similar
authorization held by the Company will be terminated or impaired as a result of
the transactions contemplated by this Agreement, except such terminations or
impairments as would not have, individually or in the aggregate, a Material
Adverse Effect.
4.14 INSURANCE. SCHEDULE 4.14 lists, and the Company has furnished to
AmeriLink true and complete copies of, all insurance policies and fidelity bonds
covering the assets, business, equipment, properties, operations, employees,
officers and directors of the Company (including without limitation workers
compensation policies). There is no claim by the Company pending under any of
such policies or bonds as to which coverage has been questioned, denied or
disputed by the underwriters of such policies or bonds. All premiums payable
under all such policies and bonds are current and the Company is otherwise in
compliance in all material respects with the terms and conditions of all such
policies and bonds. Such policies of insurance and bonds (or other policies and
bonds providing substantially similar insurance coverage) are in full force and
effect. The Principal Shareholders do not know of any threatened termination of
or premium increase with respect to any of such policies or bonds.
4.15 COMPLIANCE WITH LAWS. Except for tax laws and Environmental Laws
(which are addressed in Sections 4.10 and 4.17, respectively) and except for
violations which do not have and will not have, individually or in the
aggregate, a Material Adverse Effect, the Company is not in violation of any
applicable provisions of any laws, statutes, ordinances or regulations.
4.16 PATENTS, TRADEMARKS, ETC.
(a) SCHEDULE 4.16 lists all Intellectual Property which is
owned and is used or held for use by the Company (the "INTELLECTUAL
PROPERTY RIGHTS") and which is material to the Company or the Business
specifying as to each as applicable: (i) the nature of such Intellectual
Property Right; (ii) the owner of such Intellectual Property Right; (iii)
the jurisdictions by or in which such Intellectual Property Right has
been issued or registered or in which an application for such issuance or
registration has been filed, including the respective registration or
application numbers; and (iv) material licenses, sublicenses and other
agreements as to which the Company or any of its Affiliates is a party
and pursuant to which any Person is authorized to use such Intellectual
Property Right including the identity of all parties thereto, a
description of the nature and subject matter thereof, the royalty
provided and the term thereof. Except as set forth in SCHEDULE 4.16, the
Company is the sole and exclusive owner of, with all right, title and
interest in and to, free and clear of any Lien, the Intellectual Property
Rights described therein and has sole and exclusive right (without being
contractually obligated to pay in the future compensation to any third
party in respect thereof) to the use thereof or the material covered
thereby in connection with the services or products in respect of which
they are being used. The Intellectual Property Rights constitute all of
the Intellectual Property used by the Company in the conduct of the
Business and there are no other items of Intellectual Property that are
material to the Company or the Business.
(b) Except as set forth in SCHEDULE 4.16, the Company has no
writings for which a claim for copyright has been recorded or is pending.
(c) Except as set forth in SCHEDULE 4.16, the Company (i) has
not been sued or charged in writing with or been a defendant in any
claim, suit, action or proceeding relating to the Company not finally
terminated prior to the date hereof involving a claim of infringement of
any patents, trademarks, service marks or copyrights, (ii) has no
knowledge of any such charge or claim, or (iii) has no knowledge
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of any infringement since such date by any other person on any of the
Intellectual Property Rights. No Intellectual Property Right is
subject to any outstanding order, judgment, decree, stipulation or
agreement restricting the use thereof by the Company or restricting
the licensing thereof by the Company to any Person. The Company has
not entered into any agreement to indemnify any other person against
any charge of infringement of any patent, trademark, service mark or
copyright.
(d) The consummation of the transactions contemplated by this
Agreement will not contravene or constitute a default under, require the
consent of any person pursuant to or otherwise result in the termination
or impairment of (or permit any Person to terminate or otherwise impair)
any Intellectual Property Right.
4.17 ENVIRONMENTAL MATTERS.
(a) Except as set forth in SCHEDULE 4.17(a), to the Principal
Shareholders' knowledge, the Company has been since its incorporation in
compliance with all applicable federal, state and local laws and
regulations relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata), including, without
limitation, laws, standards and regulations relating to emissions,
discharges, releases or threatened releases of chemicals, pollutants,
contaminants, wastes, toxic substances hazardous substances, or
conditions, petroleum and petroleum products ("MATERIALS OF ENVIRONMENTAL
CONCERN"), or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern (collectively, "ENVIRONMENTAL LAWS"),
which compliance includes, but is not limited to, the possession by the
Company of all permits and other governmental authorizations required
under applicable Environmental Laws, and compliance with the terms and
conditions thereof. Except as set forth in SCHEDULE 4.17(a), the Company
has not received any communication (written or oral), whether from a
governmental authority, citizens group, employee or otherwise, that
alleges that the Company is not in such full compliance, and, to any
Principal Shareholder's knowledge after due inquiry, there are no
circumstances that may prevent or interfere with such full compliance in
the future. All permits and other governmental authorizations currently
held by the Company pursuant to the Environmental Laws are identified in
SCHEDULE 4.17(a).
(b) Except as set forth in SCHEDULE 4.17(b), there is no claim,
action, cause of action, investigation or notice (written or oral) by any
person or entity alleging potential liability (including, without
limitation, potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resource damages, property damages,
personal injuries, or penalties) arising out of, based on or resulting
from (a) the presence, or release into the environment by the Company, of
any Material of Environmental Concern at any location owned, leased or
operated by the Company or (b) circumstances forming the basis of any
violation, or alleged violation, of any Environmental Law (collectively,
"ENVIRONMENTAL CLAIMS"), pending or threatened against the Company or, to
any Principal Shareholder's knowledge after due inquiry, against any
person or entity whose liability for any Environmental Claim the Company
has retained or assumed either contractually or by operation of law.
(c) Except as set forth in SCHEDULE 4.17(c), to the Principal
Shareholder's knowledge there are no past or present actions, activities,
circumstances, conditions, events or incidents, including, without
limitation, the release, emission, discharge, presence or disposal of any
Material of Environmental Concern, that could form the basis of any
Environmental Claim against the Company or, to any Principal
Shareholder's knowledge after due inquiry, against any person or entity
whose liability for any Environmental Claim the Company has retained or
assumed either contractually or by operation of law.
(d) Without in any way limiting the generality of the
foregoing, (i) all on-site and off-site locations where the Company has
released, disposed or arranged for the disposal of Materials of
Environmental Concern are identified in SCHEDULE 4.17(d), (ii) all
underground storage tanks, and the capacity and contents of such tanks,
owned, leased or controlled by the Company are identified in SCHEDULE
4.17(d), (iii) except as set forth in SCHEDULE 4.17(d), the Company has
not installed asbestos
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containing materials in any building, premises or space leased or
occupied by the Company, and (iv) except as set forth in SCHEDULE
4.17(d), no polychlorinated biphenyls (PCB's) or PCB-containing items
are used or stored by the Company at any property leased or occupied
by the Company.
4.18 EMPLOYMENT AND LABOR MATTERS.
(a) SCHEDULE 4.18(a) sets forth the names, current annual rates
of salary, bonus, profit-sharing, incentive compensation, employee
benefits, accrued vacation time and sick pay, and other compensation of
all present officers, directors, employees, agents and independent
contractors of the Company. SCHEDULE 4.18(a) also sets forth all loans
and advances (other than routine travel advances to be repaid or formally
accounted for within thirty days and reflected on the books of the
Company) made by the Company since December 31, 1998.
(b) The Company is not a party to any collective bargaining
agreement and there is no election or proceeding pending to recognize a
union for any employees of the Company, in each case as of the date
hereof. There are no unfair labor practice or other administrative or
court proceedings pending, or to the knowledge of the Principal
Shareholders, threatened between the Company and its employees and there
has not occurred within the past two years any material work stoppage or
strike or any significant labor troubles at any facility of the Company.
(c) The Company has paid in full to all its employees or
adequately accrued for, in accordance with GAAP, all wages, salaries,
commissions, bonuses, benefits and other compensation due to or on behalf
of such employees and no present or former employee of the Company has a
pending claim against the Company (whether under federal or state law)
under any employment agreement, or otherwise, on account of or for (i)
overtime pay, other than overtime pay for the current payroll period,
(ii) wages or salary for any period other than the current payroll
period, (iii) vacation or time off (or pay in lieu thereof), other than
that earned in respect of the previous twelve months, or (iv) any
violation of any statute, ordinance or regulation relating to minimum
wages or maximum hours of work.
(d) Except as set forth in SCHEDULE 4.18(d), as of the date
hereof, no person has a pending claim against the Company arising out of
any material breach or violation of any law, statute, ordinance or
regulation relating to discrimination in employment or employment
practices or occupational safety and health standards (including without
limitation the Occupational Safety and Health Act, the Fair Labor
Standards Act, Title VII of the Civil Rights Act of 1964, or the Age
Discrimination in Employment Act of 1967).
4.19 BANKING INFORMATION. SCHEDULE 4.19 contains a list of all bank
accounts and credit facilities and authorized signatories on bank accounts and
credit facilities of the Company. No other persons other than as listed on the
SCHEDULE 4.19 are authorized to withdraw any funds on the bank account or to
draw down on such credit facilities.
4.20 ACCOUNTS RECEIVABLE. All of the accounts receivable of the Company
reflected on the Company Financial Statements and all of the accounts receivable
arising or existing since December 31, 1998 represent amounts receivable for
goods actually delivered or services actually provided (or, in the case of
non-trade accounts represent amounts receivable in respect of other bona fide
business transactions), have arisen in the ordinary course of business, are not
subject to any counterclaims or offsets and have been billed and are generally
due within thirty days after such billing. All such receivables are fully
collectible in the normal and ordinary course of business, except to the extent
of a reserve in an amount not in excess of the reserve for doubtful accounts
reflected on the Interim Financial Statements. SCHEDULE 4.20 sets forth (a) the
total amount of accounts receivable of the Company outstanding as of December
31, 1998 and (b) the agings of such receivables based on the following schedule:
0-30 days, 31-60 days, 61-90 days and over 90 days, from the date of the invoice
therefor. Since December 31, 1998, (a) there has been no significant increase
or reduction in the accounts receivable and other receivables of the Company nor
has there occurred any material change in the aging thereof and (b) there has
been
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no payment made to the Company in respect of any account receivable prior to
the date on which such receivable is due and payable.
4.21 ACCOUNTING MATTERS. The Company has recognized on its books of
account all revenues and income reflected in the Company Financial Statements as
and when earned during the respective periods covered thereby under the
percentage-of-completion method in accordance with ARB-45, "Long-Term
Construction-Type Contracts" and AICPA Statement of Position 81-1, "Accounting
for Performance of Construction -Type and Certain Production-Type Contracts"
and, since December 31,1998, has continued to so recognize on its books all such
revenues and income as and when earned in the same manner. The Company has
recorded in its books of account, and the Company Financial Statements reflect,
all losses expected to be realized on contracts in progress in the period in
which such losses have become evident or known in accordance with the provisions
of AICPA Statement of Position 81-1, and, since December 31,1998, has continued
so to record all such losses in the respective periods in which they have become
evident or known in the same manner.
4.22 WARRANTIES. Except as disclosed in SCHEDULE 4.22, the Company has
not given or made any express warranties to third parties with respect to any
goods sold or services performed by the Company. None of the Company or
Principal Shareholders have any knowledge of any state of facts or the
occurrence of any event forming the basis of, or that may form the basis of, any
present or potential claim against the Company for liability due to any express
or implied warranty.
4.23 CUSTOMERS, PRODUCT VENDORS AND SUPPLIERS.
(a) SCHEDULE 4.23(a) contains a listing of: (i) the twenty
largest customers (in dollar volume) of the Company; (ii) the twenty
largest product vendors (in dollar volume) of the Company; and (iii) the
twenty largest suppliers (in dollar volume) of the Company, in each case
for the calendar year 1997.
(b) SCHEDULE 4.23(b) contains a listing of: (i) the twenty
largest customers (in dollar volume) of the Company; (ii) the twenty
largest product vendors (in dollar volume) of the Company; and (iii) the
twenty largest suppliers (in dollar volume) of the Company, in each case
for the ten month period ended December 31, 1998. Except as described in
SCHEDULE 4.23(b), the Principal Shareholders are not aware of any
existing or anticipated changes in the policies or conditions, financial
or otherwise, of such customers, product vendors or suppliers that will
materially and adversely affect the business of the Company.
(c) Except as disclosed on SCHEDULE 4.23(c), neither any such
customer, product vendor or supplier of the Company listed in SCHEDULE
4.23(b) has reduced, canceled or otherwise terminated its relationship
with the Company, or made any written or oral threat to reduce, cancel or
terminate its relationship with the Company for any reason, including the
consummation of the transactions contemplated hereby. To the knowledge
of Principal Shareholders, neither any such customer, product vendor or
supplier listed in SCHEDULE 4.23(b) intends to cancel or otherwise
terminate its relationship with the Company or to materially decrease its
services or supplies to the Company or its usage of the services or
products of the Company, other than changes in such usage that occur in
the ordinary course of business.
4.24 YEAR 2000. Except as disclosed on SCHEDULE 4.24 hereto, all
computer hardware and software used by the Company in the conduct of its
business is capable of accurately processing, calculating, manipulating,
storing and exchanging date/time data from, into and between the twentieth
and twenty-first centuries, including, without limitation, the years 1999 and
2000 and any leap year calculations.
4.25 DISCLOSURE. The Principal Shareholders and the Company have
disclosed to AmeriLink any and all facts which could have, individually or in
the aggregate, a Material Adverse Effect.
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Each Principal Shareholder represents and warrants to MAC and AmeriLink,
solely as to such Principal Shareholder, as follows:
4.26 SHAREHOLDERS' CAPACITY. The execution, delivery and performance
by Principal Shareholder of this Agreement and the consummation by Principal
Shareholder of the transactions contemplated hereby are within any Principal
Shareholder's capacity and no approval or consent of any other person is
required in connection therewith.
4.27 SHAREHOLDERS' GOVERNMENTAL AUTHORIZATION, CONFLICTS.
(a) The execution, delivery and performance by Principal
Shareholder of this Agreement and the consummation of Merger require no
action by or in respect of, or filing with, any governmental body,
agency, official or authority except as has been accomplished or will be
accomplished prior to the Closing Date.
(b) No consent, approval, waiver or other action by any Person
under any material contract, agreement, indenture, lease, instrument or
other document to which the Company is a party or by which it is bound is
required or necessary for the execution, delivery and performance of this
Agreement by such Principal Shareholder or the consummation of the
transactions contemplated hereby.
4.28 NON-CONTRAVENTION. The execution, delivery and performance by
such Principal Shareholder of this Agreement and the consummation of the Merger
do not and will not contravene or constitute a default under or give rise to a
right of termination, cancellation or acceleration of any right or obligation of
Principal Shareholder or to a loss of any benefit to which Principal Shareholder
is entitled under any provision of applicable law or regulation or of any
agreement, judgment, injunction, order, decree, administrative interpretation,
award or other instrument binding upon Principal Shareholder or result in the
creation or imposition of any Lien on any asset of Principal Shareholder.
4.29 BINDING EFFECT. This Agreement constitutes a valid and binding
agreement of such Principal Shareholder, enforceable in accordance with its
terms except as limited by bankruptcy, insolvency or other similar laws
affecting the rights of creditors generally and the application of equitable
principles.
4.30 TITLE TO SHARES. Principal Shareholder is the record and
beneficial owner of the Company Shares such Principal Shareholder has agreed to
deliver hereunder and upon delivery of the certificates for the Company Shares
by Principal Shareholder or a lost share certificate affidavit pursuant to this
Agreement, MAC will acquire good, valid and marketable title to the Company
Shares, free and clear of any Lien.
4.31 ENTIRE BUSINESS. Except as set forth in SCHEDULE 4.31, the
Company Shares constitute all of such Principal Shareholder's investment, direct
or indirect, in the Business.
4.32 CERTAIN INTERESTS. Except as set forth in SCHEDULE 4.32, neither
Principal Shareholder nor any of that Principal Shareholder's relatives or
Affiliates (other than the Company) (i) is a party to or has an interest in any
material contracts or other arrangements relating to the Business of the Company
to which the Company is a party or to which the Company or any assets used by
the Company may be subject or (ii) has any interest in any material property,
real or personal, tangible or intangible, including Intellectual Property Rights
used in or pertaining to the Company except, in each case, for the normal rights
of that Principal Shareholder as a holder of the Company Shares owned by that
Principal Shareholder. SCHEDULE 4.32 sets forth a list or description of each
material arrangement through which the Company acquires from, or provides to,
that Principal Shareholder's relatives or Affiliates any goods, properties or
services.
4.33 FINDERS' FEES. Neither the Company nor any Principal Shareholder
has employed any investment banker, broker, finder or other intermediary who
might be entitled to any fee or commission in connection with the transactions
contemplated by this Agreement.
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4.34 ABSENCE OF CERTAIN CHANGES. Principal Shareholder has not issued
or sold any securities convertible or exchangeable for other securities of the
Company or issued or sold any options or other rights to acquire from Principal
Shareholder debt securities of the Company or securities convertible into or
exchangeable for any debt securities.
4.35 INVESTMENT INTENT. Principal Shareholder is acquiring the shares
of AmeriLink Common Stock it receives from AmeriLink hereunder for investment
and not with a view to a sale or distribution thereof within the meaning of the
Securities Act. Principal Shareholder has had an opportunity to ask questions
of the principal officers and representatives of AmeriLink and to obtain any
additional information necessary to permit an evaluation of the benefits and
risks associated with the investment made hereby. Principal Shareholder has had
sufficient experience in business, financial and investment matters to evaluate
the merits and risks involved in the investment made hereby and is able to bear
the economic risk of such investment for an indefinite period of time.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF AMERILINK AND MAC
AmeriLink and MAC each represents and warrants that:
5.1 CORPORATE EXISTENCE AND POWER. It is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Ohio, has
all requisite corporate power and authority to conduct its business and own its
properties as now conducted and owned, and is qualified to do business as a
foreign corporation in each jurisdiction where the failure to be so qualified
would, in the aggregate, have a material adverse effect on its business or
financial condition. It has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by its
board of directors and no other corporate proceedings are necessary to authorize
this Agreement or to consummate the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by it and constitutes
a valid and binding agreement, enforceable against it in accordance with its
terms.
5.2 CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution and
delivery of this Agreement by it nor the consummation of the transactions
contemplated hereby will (i) conflict with or result in a breach of any
provision of its Certificate of Incorporation or Bylaws, (ii) require any
consent or approval of, or filing and expiration of a waiting period or a period
for disapproval by, any governmental authority (except for filing of an
additional listing notification with The Nasdaq Stock Market, Inc.),
(iii) result in a default (or an event that might, with the passage of time or
the giving of notice or both, constitute a default) or give rise to any right to
terminate, cancel or accelerate or to any loss of benefit under any of the
terms, conditions, or provisions of any lease, indenture, mortgage, loan or
credit agreement, or other agreement or instrument to which it is a party or by
which it or any of its assets may be bound, other than as previously disclosed
in writing to the Company, or (iv) violate any applicable law, rule or
regulation to which AmeriLink or any of its assets are bound.
5.3 LITIGATION. Except as disclosed in the SEC Documents (as defined
below), there are no actions, suits, causes of action, claims, litigation,
arbitration, administrative hearings or other form of proceedings or disputes
pending or threatened against it of a type or nature which would be required to
be disclosed by AmeriLink in any filing pursuant to Section 13 of the Exchange
Act or the rules and regulations promulgated thereunder, in any court, at law or
in equity, or before any arbitration board or any governmental department,
commission, board, bureau, agency, or instrumentality which in the aggregate
would have a material adverse effect on its business or financial condition; nor
has it been, nor is it, subject to any orders, awards, fines, judgments,
decrees, or injunctions the effect of which in the aggregate would have a
material adverse effect on its business or financial condition.
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5.4 CHARTER DOCUMENTS. It has heretofore delivered to the Company (i)
a copy of its articles of incorporation, as amended to date, certified by the
appropriate governmental authority, and (ii) a copy of its code of regulations,
as amended to date, as certified by its secretary or assistant secretary.
5.5 BROKERS. Except for JPS Capital Corporation, no broker, finder,
or investment banker is entitled to any brokerage, finder's, or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of or AmeriLink.
5.6 SEC FILINGS. AmeriLink has filed all required reports, forms
and other documents with the Securities and Exchange Commission (the "SEC
DOCUMENTS"). As of their respective dates (giving effect to any amendment
contained in a subsequently-filed SEC Document intended to supplement or replace
information given at any such date), the SEC Documents complied in all material
respects with the requirements of the Securities Act and the rules and
regulations of the Securities and Exchange Commission promulgated thereunder
applicable to such SEC Documents. The financial statements of AmeriLink
included in the SEC Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the Securities and Exchange Commission with respect thereto, have been prepared
(other than the pro forma financial statements included therein) in accordance
with GAAP (except as may be indicated in the notes thereto or, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC) and fairly present
the financial position of AmeriLink and its consolidated subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments). The pro forma combined financial statements
of the Company included in the SEC Documents, together with the related notes
thereto, present fairly the information contained therein, have been prepared in
accordance with the Securities and Exchange Commission's rules and guidelines
with respect to pro forma financial statements and have been properly presented
on the pro forma bases described therein, and the assumptions used in the
preparation thereof are reasonable and the adjustments used therein are
appropriate to give effect to the transactions and circumstances referred to
therein. Except as set forth in the SEC Documents filed and publicly available
prior to the date of this Agreement, and except for liabilities and obligations
incurred in the ordinary course of business since the date of the most recent
pro forma combined balance sheet included in the SEC Documents filed and
publicly available prior to the date of this Agreement and liabilities and
obligations which would not, individually or in the aggregate, have a material
adverse effect on AmeriLink, neither AmeriLink nor any of its subsidiaries has
any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) required by GAAP to be set forth on a consolidated
balance sheet of AmeriLink and its consolidated subsidiaries or in the notes
thereto.
5.7 CAPITALIZATION. AmeriLink's capitalization as of February 1, 1999
consisted of (i) 10,000,000 authorized AmeriLink Common Shares, of which
4,031,174 such shares (exclusive of any such shares delivered pursuant to this
Agreement) are issued and outstanding, (ii) 500,000 authorized Class A Voting
Preferred Shares, none of which are issued and outstanding, (iii) 500,000
authorized Class B Nonvoting Preferred Shares, none of which are issued and
outstanding, and (iv) outstanding options and warrants to purchase an aggregate
of 773,403 AmeriLink Common Shares (exclusive of any such options granted
pursuant to the transactions contemplated by this Agreement). AmeriLink has no
other authorized classes of capital stock.
5.8 NO RIGHTS TO REGISTER STOCK. Except as described in the SEC
Documents, AmeriLink has no obligation to register any shares of AmeriLink
Common Stock under the Securities Act.
5.9 AMERILINK COMMON STOCK. The AmeriLink Common Stock to be issued
pursuant to this Agreement has been duly authorized by all necessary corporate
action and, when issued and delivered by AmeriLink pursuant to this Agreement,
will be validly issued, fully paid and non-assessable.
5.10 MATERIAL ADVERSE CHANGE. There has been no material adverse
change in the financial condition, properties, business or prospects of
AmeriLink since the date of AmeriLink's most recent Form 10-Q filed with the SEC
on November 11, 1998, except to the extent disclosed in AmeriLink's filings with
the SEC prior to the date hereof.
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ARTICLE VI
COVENANTS OF SHAREHOLDERS
Principal Shareholders covenant and agree that:
6.1 COMPETITION.
(a) Each Principal Shareholder agrees that, for a period of
three years beginning on the Closing Date, such Principal Shareholder
will not engage or participate in any capacity in any business other than
that of the AmeriLink or one of its Affiliates which is substantially
similar to any part of the business of the Company as of the Closing
Date; provided that this Section shall not prohibit any Principal
Shareholder from owning not more than 1% of the issued and outstanding
stock of any corporation whose shares are publicly traded on a recognized
national exchange or listed in the Nasdaq national market system. The
foregoing restriction shall extend to each state in the United States.
(b) Any breach of this Section 6.5 may cause irreparable injury
to the Company or AmeriLink for which a remedy at law may be inadequate.
Therefore, AmeriLink and the Company shall be entitled to temporary and
permanent injunctive or other equitable relief in any court of competent
jurisdiction without the necessity of proving actual damages, in addition
to any other remedy, including money damages, available therefor pursuant
to this Agreement, at law or in equity.
6.2 BOOKS AND RECORDS. For purposes of this Section 6.4, the word
"AmeriLink" shall include AmeriLink, its counsel, accountants, engineers,
appraisers, employees, lenders, lenders' counsel and other representatives.
After the Closing Date, each Principal Shareholder will give, or cause to be
given, to AmeriLink, during normal business hours, such reasonable access to the
personnel, properties, titles, contracts, books, records, files, documents and
affairs of the Company and that Principal Shareholder, and copies of titles,
contracts, books, records, files and documents as is necessary, in AmeriLink's
reasonable judgment, to allow AmeriLink to obtain information in connection with
the preparation of and any pending or post-closing claims, demands, appraisals,
investigations, audits, suits, actions or administrative or other proceedings by
or against AmeriLink or the Company. To satisfy legal obligations imposed on
AmeriLink, AmeriLink shall have the right to remove original documents from the
records of each Principal Shareholder relating to the Company, provided
AmeriLink furnishes that Principal Shareholder with complete and accurate copies
of such original documents. If original documents are not needed, AmeriLink
shall have the right to copy at its own expense any records and to reimburse
that Principal Shareholder for its costs in making any such copies for
AmeriLink. Any inspection and copying of records by AmeriLink will be in such
work areas as Principal Shareholder may designate.
6.3 CONFIDENTIALITY.
(a) Principal Shareholders will hold, and will cause the
Company's employees, consultants, advisors and agents to hold, in
confidence, unless compelled to disclose by judicial or administrative
process or by other requirements of law, all confidential documents and
information concerning the Company, except to the extent that such
information can be shown to have been (i) previously known on a
non-confidential basis by the recipient, (ii) in the public domain
through no fault of any Shareholder or (iii) later lawfully acquired by
such recipient or from sources other than any of the Shareholders, the
Company or AmeriLink.
(b) Principal Shareholders will hold, and will cause the
Company's employees, consultants, advisors and agents to hold, in
confidence, unless compelled to disclose by judicial or administrative
process or by other requirements of law, all confidential documents
and information concerning AmeriLink and its subsidiaries, except to
the extent that such information can be shown to have been (i)
previously known on a non-confidential basis by the recipient, (ii) in
the public domain through no fault of any Shareholder or (iii) later
lawfully acquired by a Shareholder from sources other
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than any of Shareholders or AmeriLink. If this Agreement is
terminated, such confidence shall be maintained and Principal
Shareholders will, and will cause the Company's employees,
consultants, advisors, lenders and agents to, destroy or deliver to
AmeriLink, upon request, all documents and other materials, and all
copies thereof, obtained by Principal Shareholders or on behalf of
Principal Shareholders from AmeriLink in connection with this
Agreement that are subject to such confidence. If this Agreement is
terminated, such confidence shall be maintained and Principal
Shareholders will, and will cause officers, directors, employees,
consultants, advisors, lenders and agents of Principal Shareholders
and the Company to, destroy or deliver to AmeriLink, upon request, all
documents and other materials, and all copies thereof, obtained by any
Principal Shareholder or on such Principal Shareholder's behalf from
AmeriLink in connection with this Agreement that are subject to such
confidence.
ARTICLE VII
COVENANTS OF AMERILINK
AmeriLink covenants and agrees that:
7.1 CONFIDENTIALITY. AmeriLink will hold, and will cause its
officers, directors, employees, consultants, advisors and agents to hold, in
confidence, unless compelled to disclose by judicial or administrative process
or by other requirements of law, all confidential documents and information
concerning the Company furnished to AmeriLink in connection with the
transactions contemplated by this Agreement, except to the extent that such
information can be shown to have been (i) previously known on a nonconfidential
basis by AmeriLink, (ii) in the public domain through no fault of AmeriLink or
(iii) later lawfully acquired by AmeriLink from sources other than the Company
or Shareholders; PROVIDED that AmeriLink may disclose such information to its
officers, directors, agents, lenders and other investors in connection with the
transactions contemplated by this Agreement so long as such persons are informed
by AmeriLink of the confidential nature of such information and are directed by
AmeriLink to treat such information confidentially. AmeriLink's obligations to
hold any such information in confidence shall be satisfied if they exercise the
same care with respect to such information as it would take to preserve the
confidentiality of its own similar information. If this Agreement is
terminated, such confidence shall be maintained and AmeriLink will, and will
cause its officers, directors, employees, consultants, advisors, lenders and
agents to, destroy or deliver to a Principal Shareholder, upon request, all
documents and other materials, and all copies thereof, obtained by AmeriLink or
on its behalf from that Principal Shareholder in connection with this Agreement
that are subject to such confidence. The provisions of this Section 7.1 shall
expire as of the Closing Date.
7.2 BOOKS AND RECORDS.
(a) For purposes of this Section 7.2(a), the word "Principal
Shareholder" shall include a Principal Shareholder, its counsel,
accountants, engineers, appraisers, employees and other representatives.
After the Closing Date, AmeriLink will give, or cause to be given, to
each Principal Shareholder, during normal business hours, such reasonable
access to the personnel, properties, titles, contracts, books, records,
files, documents and affairs of the Company and copies of titles,
contracts, books, records, files and documents as is necessary, in that
Principal Shareholder's reasonable judgment, to allow that Principal
Shareholder to obtain information in connection with any pending or
post-closing claims, demands, appraisals, investigations, other audits,
suits, actions or administrative or other proceedings by or against that
Principal Shareholder. After the Closing Date, AmeriLink will provide or
cause to be provided to that Principal Shareholder all financial
statements, exhibits and supporting schedules and access to books,
records and files as required, as in the past, for closings of that
Principal Shareholder's financial statements. To satisfy legal
obligations imposed on a Principal Shareholder, that Principal
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Shareholder shall have the right to remove original documents from the
records of AmeriLink relating to the Company, provided that Principal
Shareholder furnishes AmeriLink with complete and accurate copies of such
original documents. If original documents are not needed, that Principal
Shareholder shall have the right to copy at its own expense any records
and to reimburse AmeriLink for its costs in making any such copies for
that Principal Shareholder. Any inspection and copying of records by
that Principal Shareholder will be in such work areas as AmeriLink may
designate. The covenants of this Section 7.2(a) shall survive any sale
or other disposition by AmeriLink of the Company Shares and any
disposition of the assets of the Company.
(b) AmeriLink agrees that it shall preserve and keep the
records of the Company delivered to it hereunder for a period of seven
(7) years from the Closing Date.
ARTICLE VIII
COVENANTS OF SHAREHOLDERS AND AMERILINK
The parties hereto agree that:
8.1 BEST EFFORTS. Subject to the terms and conditions of this
Agreement each party will use its best efforts to take or cause to be taken all
action and to do or cause to be done all things necessary, proper or advisable
under applicable laws and regulations to consummate the transactions
contemplated by this Agreement.
8.2 CERTAIN FILINGS; TAX MATTERS.
(a) The Principal Shareholders and AmeriLink shall cooperate
with one another (i) in connection with the preparation of any press
release or Exchange Act filing describing this Agreement or the
transactions contemplated thereby, (ii) in determining whether any other
action by or in respect of or filing with a governmental body, agency or
official, or authority or any actions, consents, approvals or waivers are
required to be obtained from parties to any material contracts in
connection with the consummation of the transactions contemplated by this
Agreement and (iii) in seeking any such actions, consents, approvals or
waivers or making any such filings, furnishing information required in
connection therewith and seeking timely to obtain any such actions,
consents, approvals or waivers.
(b) For tax purposes, the income of the Company shall be
apportioned to the period up to and including the Closing Date and the
period after the Closing Date as between Principal Shareholders and
AmeriLink by closing the books of the Company as of the end of the day
before the Closing Date. The Principal Shareholders shall make the
Election pursuant to Section 1362(e)(3) of the Code respecting the
closing of the Company's final tax year as of the Closing Date.
AmeriLink shall cooperate with Principal Shareholders and shall consent
to such Election.
(c) (i) The Principal Shareholders shall prepare and file
the following Returns with respect to the Company: (A) all income tax
Returns and franchise tax Returns for any taxable period ending on or
before the Closing Date (including, without limitation, with respect to
the Company's final Tax year as provided in subsection (b) above); and
(B) all Returns required to be filed (taking into account extensions)
prior to the Closing Date with respect to Taxes other than income Taxes
and franchise Taxes. AmeriLink shall have the right to review and
comment on all Tax Returns described in clause (A) and no such Returns
shall be filed without the prior written consent of AmeriLink, which
consent may be withheld or granted in its reasonable discretion. To the
extent permitted by applicable law, the Principal Shareholders shall
include any income, gain, loss, deduction or other tax items for such
periods on their Returns in a manner consistent with the Schedule K-1's
prepared by Principal Shareholders for such periods.
(ii) AmeriLink shall file, and shall cause the
Surviving Corporation to file, all Returns with respect to the
Surviving Corporation other than the Returns that Principal
Shareholders are required to file pursuant to subparagraph (i)
above of this Section 8.2(c).
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(iii) Neither AmeriLink nor Principal Shareholders shall
(nor shall AmeriLink cause or permit the Surviving Corporation to)
amend, refile or otherwise modify (or grant an extension of any
statute of limitations with respect to) any Return required to be
filed by the other party pursuant to this Section 8.2(c) without
the prior written consent of the other parties, which consent may
be withheld in the sole discretion of such other parties.
(iv) Principal Shareholders shall pay the Taxes as
shown on the Returns that Principal Shareholders are required to
file pursuant to this Section 8.2(c). AmeriLink shall be liable
for and shall pay all taxes due with respect to the Returns
AmeriLink is required to file pursuant to this Section 8.2(c)
except to the extent such Taxes exceed the amount reflected as an
accrual for such tax on the Company Financial Statements (such
excess being the responsibility of Sellers).
(v) AmeriLink and Principal Shareholders agree to
report all transactions not in the ordinary course of business
occurring on the Closing Date after the Closing on AmeriLink's
consolidated income tax Return to the extent permitted by Reg.
Section 1.1502-76(b)(1)(B).
(vi) AmeriLink and MAC shall not take any action on or
after the Closing Date that would adversely affect the status of
the transaction contemplated by this Agreement from constituting a
"reorganization" within the meaning of Section 368(a) of the Code
(d) COOPERATION ON TAX MATTERS.
(i) Principal Shareholders and AmeriLink shall
cooperate fully, and shall cause the Company and the
Subsidiaries to cooperate fully, as and to the extent
reasonably requested by the other party, in connection with the
preparation and filing of Returns pursuant to this Article
VIII. Such cooperation shall include the retention and (upon
the other party's request) the provision of records and
information which are reasonably relevant to such returns, and
making employees available on a mutually convenient basis to
provide additional information and explanation of any material
provided hereunder reasonably relevant to such returns.
Principal Shareholders shall, and AmeriLink shall cause the
Surviving Corporation to, (A) retain all books and records with
respect to tax matters pertinent to the Surviving Corporation
relating to any taxable period beginning before the Closing
Date until the expiration of the statute of limitations (and,
to the extent notified by AmeriLink or Principal Shareholders,
any extensions thereof) of the respective taxable periods, and
to abide by all record retention agreements entered into with
any taxing authority; and (B) give the other parties reasonable
written notice prior to transferring, destroying or discarding
any such books and records and, if AmeriLink or the Principal
Shareholders so request, Principal Shareholders or the
Surviving Corporation, as the case may be, shall allow the
other party to take possession of such books and records.
(ii) Promptly after receipt by AmeriLink of a written
notice of any demand, claim or circumstance which, after the
lapse of time, would or might give rise to a claim or the
commencement (or threatened commencement) of any action
proceeding or investigation with respect to which indemnity may
be sought hereunder with respect of any matter concerning
Taxes, but not including receipt of a request for information
("ASSERTED TAX LIABILITY"), AmeriLink shall give written notice
thereof to the Principal Shareholders (the "TAX CLAIM NOTICE").
(A) A Tax Claim Notice shall contain factual
information (to the extent reasonable and available to
AmeriLink) generally describing the Asserted Tax
Liability in question and shall include copies of any
notice or other document received from any taxing
authority in respect of such Asserted Tax Liability.
Failure by AmeriLink to give Principal Shareholders
prompt notice of an Asserted Tax Liability shall not
reduce or otherwise affect AmeriLink's right to seek
indemnification hereunder; provided, however, that if
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such failure to give prompt notice results in a material
detriment to any Principal Shareholder, then any amount
which AmeriLink may otherwise be entitled to as
indemnification hereunder from such Principal
Shareholder with respect to such Asserted Tax Liability
shall be reduced by the amount which is solely and
directly attributable to such failure to give prompt
notice to such Principal Shareholder.
(B) AmeriLink shall have the sole right to control
and make all decisions regarding the Surviving
Corporation's and each Subsidiary's interests in any Tax
audit or administrative or court proceeding relating to
Taxes, including selection of counsel and selection of a
forum for such contest, provided, however, that in the
event such audit or proceeding relates to Taxes for
which Principal Shareholders are responsible and/or have
agreed to indemnify AmeriLink, (1) AmeriLink and
Principal Shareholders shall cooperate in the conduct of
any audit or proceeding relating to such period, (2)
Principal Shareholders shall have the right to
participate in such audit or proceeding at Principal
Shareholders' expense, (3) AmeriLink shall not enter
into any agreement with the relevant taxing authority
pertaining to such Taxes without the written consent of
Principal Shareholders, which consent shall not
unreasonably be withheld, and (4) AmeriLink may, without
the written consent of Principal Shareholders, enter
into such an agreement provided that AmeriLink shall
have agreed in writing to (I) accept responsibility and
liability for the payment of such Taxes and any
consequential Taxes resulting from such Taxes and (II)
forego any indemnification under this Agreement with
respect to such Taxes and any consequential Taxes
resulting from such Taxes. In the event of any conflict
between the provisions of this Section 8.2 and Section
11.4 (relating to third party claims), the provisions of
this Section 8.2 shall control.
(iii) AmeriLink and Principal Shareholders further agree,
upon request, to use their best efforts to obtain any certificate
or other document from any governmental authority or other person
or entity as may be necessary to mitigate, reduce or eliminate any
tax that could be imposed (including without limitation with
respect to the transactions contemplated by this Agreement).
(iv) At AmeriLink's expense, AmeriLink shall, and shall cause
the Surviving Corporation and Subsidiaries to furnish Tax
information to Principal Shareholders for the period which
includes the Closing Date in accordance with the Company's past
custom and practice.
(v) Notwithstanding the foregoing, no Principal Shareholder
shall enter into a settlement agreement with respect to or
otherwise resolve any Asserted Tax Liability, or any Tax audit or
administrative or court proceedings relating to the Returns
required to be filed by such Principal Shareholder, in a manner
which for periods after the Closing Date would have a material
adverse effect on the tax position of the Surviving Corporation
and its Subsidiaries after the Closing Date, unless such
settlement or resolution would be reasonable in the case of a
person that owned the Company and the Subsidiaries both before and
after the Closing Date.
(vi) In the event that any governmental entity challenges the
position of the Principal Shareholders that the transactions
contemplated by this constitute a "reorganization" within the
meaning of Section 368(a) of the Code, each of AmeriLink, MAC and
the Company agree to cooperate with the Principal Shareholders at
the Principal Shareholder's expense in defending such challenge
and each of AmeriLink, MAC and the Company agree to the extent
permitted by law and consistent with the provisions of this
Agreement to take actions and maintain a position consistent with
the Principal Shareholders' defense of such challenge.
(e) REFUNDS AND TAX BENEFITS. Any federal, state, county or
local tax refunds that are received by AmeriLink or the Surviving
Corporation, and any amounts credited against tax to which AmeriLink or
the Surviving Corporation become entitled, that relate to tax periods or
portions thereof ending on or
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before the Closing Date shall be for the account of Principal
Shareholders, and AmeriLink shall pay over to Principal Shareholders
any such refund or the amount of such credit within fifteen (15) days
after receipt or entitlement thereto, subject to offset by the amount
of any Claims arising under Section 11.2 without regard to the
limitation set forth in Section 11.2(d).
(f) CERTAIN TAXES. All transfer, documentary, sales, use, stamp,
registration or other such taxes and fees (including any penalties and
interest) incurred in connection with this Agreement shall be paid by
Principal Shareholders when due, and each Principal Shareholder shall, at
its expense, file all necessary 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, AmeriLink shall, and shall cause its affiliates to, join in the
execution of any such Returns and other documentation
8.3 PUBLIC ANNOUNCEMENTS. Principal Shareholders may not issue any
press release or make any public statement with respect to this Agreement and
the transactions contemplated hereby without the prior consent of AmeriLink,
such consent not to be unreasonably withheld. AmeriLink is authorized, to
the extent required by applicable law or to facilitate the consummation of
the transactions contemplated by this Agreement, to issue any such press
release or make any such public disclosure after providing Principal
Shareholders with notice prior to issuing any such press release or making
any such public disclosure.
8.4 AGREEMENT TO TAKE NECESSARY AND DESIRABLE ACTIONS. Principal
Shareholders (prior to the Closing) and AmeriLink (after the Closing) agree, and
agree to cause the Company (prior to the Closing) or the Surviving Corporation
(after the Closing), to execute and deliver such other documents, certificates,
agreements and other writings and to take such other actions as may be necessary
or desirable in order to consummate or implement expeditiously the transactions
contemplated by this Agreement.
ARTICLE IX
[Reserved]
ARTICLE X
THE CLOSING
10.1 DELIVERIES TO AMERILINK. At the Closing, the Company and/or the
Principal Shareholders, as appropriate, has delivered to AmeriLink the following
items:
(a) COMPANY SHARES. Stock certificates representing all of the
Company Shares issued and outstanding as of the Closing Date, duly
endorsed in blank for transfer or accompanied by appropriate stock powers
duly executed in blank, with all taxes, direct or indirect, attributable
to the transfer of such Company Shares paid or provided for.
(b) REPRESENTATIONS AND WARRANTIES. A certificate signed by
the Principal Shareholders and dated as of the Closing Date stating that
each of the representations and warranties of the Principal Shareholders
contained herein and in any certificate or other writing delivered by
Principal Shareholders pursuant hereto or in connection herewith shall be
true on and as of the Closing Date with the same effect as though made on
and as of such date.
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(c) CHARTER DOCUMENTS. A copy of the Articles of Incorporation
of the Company (certified by the Secretary of State of the State of Iowa)
and by-laws of the Company (certified by the secretary of the Company)
and the corporate minute books, stock books and corporate seal (if any)
of the Company.
(d) SECRETARY'S CERTIFICATE. A certificate, dated the Closing
Date, of the secretary of the Company certifying (A) that complete and
accurate copies of the resolutions of the board of directors and
shareholders of the Company approving the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby are attached thereto, (B) that such resolutions are
in full force and effect and have not been amended or repealed and (C)
the names and titles of the officers of the Company who have executed the
documents, certificates and instruments delivered at the Closing and
their signatures.
(e) GOOD STANDING. A certificate of the Secretary of the State
of Iowa dated within 15 days before the Closing Date certifying that the
Company is a corporation in good standing under the laws of such state.
(f) OPINION OF PRINCIPAL SHAREHOLDERS' COUNSEL. An opinion of
Belin Lamson McCormick Zumbach Flynn dated the Closing Date.
(g) INVESTMENT LETTERS. Executed investment letters of each
Shareholder.
(h) RESIGNATIONS. Resignation letters, effective as of the
Closing Date, from each director and officer of the Company requested by
AmeriLink at least two days' prior to the Closing Date in form and
substance satisfactory to the AmeriLink.
(i) EMPLOYMENT AGREEMENTS. The counterparts of employment
agreements with MAC dated as of the date hereof executed by MAC and,
respectively, Larry Kendall, Jeffrey Van Polen, Richard Pearson and
Michael Maddison, and in each case bearing a guaranty executed by
AmeriLink.
(j) SHORT-FORM MERGER AGREEMENT. The counterparts of a
short-form merger agreement dated as of the date hereof among and
executed by each of MAC, AmeriLink, Larry Kendall, Jeffrey Van Polen,
Richard Pearson and Michael Maddison.
(k) SCHEDULED ITEMS. All items identified in the Schedules to
this Agreement.
10.2 DELIVERIES TO SHAREHOLDERS. At the Closing, AmeriLink and/or MAC,
as appropriate, has delivered to the Shareholders the following items:
(a) MERGER CONSIDERATION. The Cash Portion of the Merger
Consideration shall be payable by wire transfer in immediately
available funds to bank accounts in the United States of America
designated in writing by the Shareholders not less than three days
before the Closing Date. The Stock Portion of the Merger
Consideration shall be delivered in the form of stock certificates
evidencing ownership by the Shareholders of a total of 500,000 shares
of AmeriLink Common Stock.
(b) REPRESENTATIONS AND WARRANTIES. A certificate signed by an
authorized representative of AmeriLink stating that each of the
representations and warranties of AmeriLink contained in this Agreement
and in any certificate or other writing delivered pursuant hereto or in
connection with the transactions contemplated hereby shall be true on and
as of the Closing Date with the same effect as though made on and as of
such date.
(c) OPINION OF SPECIAL COUNSEL TO AMERILINK. An opinion of
Squire, Sanders & Dempsey L.L.P., counsel to AmeriLink.
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(d) EMPLOYMENT AGREEMENTS. The counterparts of employment
agreements with Larry Kendall, Jeffrey Van Polen, Richard Pearson and
Michael Maddison executed by an authorized representative of MAC.
(e) SHORT-FORM MERGER AGREEMENT. The counterparts of a
short-form merger agreement with Larry Kendall, Jeffrey Van Polen,
Richard Pearson and Michael Maddison executed by an authorized
representative of each of MAC and AmeriLink.
(f) STOCK OPTIONS. Stock option grants to Larry Kendall,
Jeffrey Van Polen, Richard Pearson and Michael Maddison as described
in Section 3.1.
(g) SEC DOCUMENTS. Copies of AmeriLink's Report on Form10-K
filed June 25, 1998, its Report on Form 10-Q filed August 10, 1998,
its Report on Form 10-Q filed November 10, 1998, and its Proxy
Statement to Shareholders dated July 7, 1998.
ARTICLE XI
SURVIVAL AND REMEDY; INDEMNIFICATION
11.1 SURVIVAL; REMEDY FOR BREACH. The representations and warranties
of the Principal Shareholders contained in Sections 4.1 through 4.35 of Article
IV or in any certificate or other writing delivered pursuant hereto or in
connection herewith shall survive the Closing (even if the AmeriLink knew or had
reason to know of any misrepresentation or breach of warranty at the time of the
Closing) and continue in full force and effect for a period of two years
thereafter. Notwithstanding the foregoing and without limiting any of the
provisions of the previous sentence, the representations and warranties of the
Principal Shareholders contained in Section 4.10, Section 4.17 shall survive
until the expiration of all statutes of limitation applicable to the subject
matter contained in those sections and the representations and warranties of the
Principal Shareholders contained in Sections 4.26 through 4.35 shall survive
without limitation. All covenants and other agreements included in this
Agreement shall survive the Closing except as indicated therein.
11.2 INDEMNIFICATION BY SHAREHOLDERS.
(a) The Principal Shareholders hereby indemnify each AmeriLink
Indemnitee (as hereinafter defined), jointly and severally, against and
agrees to hold each AmeriLink Indemnitee harmless from any and all
damage, loss, liability, penalty, assessment, settlement, judgment and
expense (including, without limitation, reasonable expenses of
investigation and attorneys' fees and expenses) (collectively, "CLAIMS")
incurred or suffered by any such AmeriLink Indemnitee arising out of (i)
the inaccuracy of any of the representations or breach of any of the
warranties made by the Company and the Principal Shareholders in Section
4.1 through 4.25 of Article IV, or in any certificate or other writing
delivered pursuant to this Agreement or in connection herewith, or the
breach of any covenant or agreement of any Principal Shareholder
hereunder (even if the AmeriLink Indemnitees or any of them knew or had
reason to know of any inaccuracy in any representation or breach of any
warranty at the time of the Closing) and (ii) the events, circumstances,
and conditions described in Schedule 4.8 and Schedule 4.17, respectively,
if and to the extent that such Claims exceed the amounts reserved for
such matters on the Company Financial Statements. The Principal
Shareholders' obligation to provide indemnification pursuant to clause
(i) of this Section 11.2(a) with respect to the representations and
warranties set forth in Sections 4.1 through 4.25 above shall expire on
the second anniversary of the Closing Date except to the extent that a
legal action is commenced with respect to any Claim thereunder on or
before such date, and except that the foregoing limitation shall not
apply to the Principal Shareholders' obligation to indemnify with respect
to Claims relating to the representations and warranties provided in
Sections 4.10 and 4.17, above, as to which such obligation to indemnify
shall continue without limitation.
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(b) The obligations of Principal Shareholders to indemnify each
AmeriLink Indemnitee shall extend to (i) all Taxes with respect to
transactions or periods ending on or prior to the Closing Date and (ii)
all Taxes with respect to periods ending after the Closing Date to the
extent attributable to the portion of any such period occurring on or
prior to the Closing Date, provided that such obligations shall be
limited to the extent the Taxes described in the foregoing clauses (i)
and (ii) are in excess of the accruals or reserves for Tax liabilities as
stated in the Audited Financial Statements. Such obligations shall be
without regard to whether there was a breach of any representation or
warranty under Section 4.10 with respect to such Tax or any disclosure
that may have been made on Schedule 4.10 or otherwise. For purposes of
applying this section to taxable periods that begin before and end after
the Closing Date, the portion of such Taxes that are attributable to the
period ending on or before the Closing Date (and for which Principal
Shareholders are responsible) shall (A) in the case of any Taxes other
than Taxes based upon or related to income or receipts, be deemed to be
the amount of such Tax for the entire Taxable period multiplied by a
fraction the numerator of which is the number of days in the Taxable
period ending on the Closing Date and the denominator of which is the
number of days in the entire Taxable period and (B) in the case of any
Tax based upon or related to income or receipts be deemed equal to the
amount which would be payable if the relevant Taxable period ended on the
Closing Date. All determinations necessary to give effect to the
foregoing allocations shall be made in a manner consistent with prior
practice of the Company and any Subsidiary.
(c) Each Principal Shareholder hereby indemnifies and holds
harmless each AmeriLink Indemnitee, severally but not jointly, from and
against any Claims incurred by such AmeriLink Indemnitee in connection
with the inaccuracy of any of the representations made by that Principal
Shareholder in Sections 4.26 through 4.36 of Article IV.
(d) Principal Shareholders shall have no liability for Claims
with respect to matters described in Section 11.2(a) (other than matters
described in Section 11.2(b) and (c)) until the total of all Claims with
respect to such matters described in Sections 11.2 (a) (other than
matters described in Section 11.2(b) and (c)) exceeds an aggregate
threshold of $87,500 (at which point Principal Shareholders will jointly
and severally be obligated to indemnify each AmeriLink Indemnitee from
and against all such Claims relating back to the first dollar).
Principal Shareholders will be liable with respect to the matters
described in Sections 11.2(a) (other than matters described in Section
11.2(b) and (c)) only up to an amount equal to the aggregate of the
Merger Consideration.
(e) Notwithstanding the provisions of Section 11.2(d) and
without limiting the provisions thereof, in the event of any inaccuracy
in the representations and warranties contained in Article IV (whenever
discovered) which, if correctly reflected in the Audited Financial
Statements would cause the Company's 1998 EBITDA to be an amount less
than $1,750,000, then the Principal Shareholders will jointly and
severally be obligated to pay to AmeriLink (in addition to any amounts
required to be paid to AmeriLink pursuant to Section 11.2(a) through (d))
an amount equal to the product of (i) the sum of $1,750,000 minus the
corrected amount of the Company's 1998 EBITDA, multiplied by (ii) 5.144.
11.3 INDEMNIFICATION BY AMERILINK. AmeriLink hereby indemnifies each
Principal Shareholder against and agrees to hold each Principal Shareholder
harmless from any and all Claims incurred or suffered by any such Principal
Shareholder arising out of the inaccuracy of any of the representations or
warranties made by AmeriLink in Article V, or in any certificate or other
writing delivered pursuant hereto or in connection herewith, or the breach of
any covenant or agreement of AmeriLink hereunder (even if the Principal
Shareholders or any of them knew or had reason to know of any inaccuracy in any
representation or breach of any warranty at the time of the Closing).
AmeriLink's obligation to provide the indemnity pursuant to this Section 11.3
shall expire on the second anniversary of the Closing Date except to the extent
that a legal action is commenced with respect to any Claim hereunder on or
before such date.
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11.4 PROCEDURES.
(a) For purposes of this Article XI, the term "AMERILINK
INDEMNITEE" shall include AmeriLink and any of its Affiliates (including,
without limitation, MAC) and, effective at the Closing, the Surviving
Corporation. For purposes of this Section 11.4, the term "INDEMNIFYING
PARTY" shall mean AmeriLink or Principal Shareholders, as appropriate,
and "INDEMNIFIED PARTY" shall mean an AmeriLink Indemnitee or a Principal
Shareholder, as appropriate.
(b) Each Indemnified Party shall give prompt notice to the
Indemnifying Party of the assertion of any claim, or the commencement of
any suit, action or proceeding in respect of which indemnity may be
sought hereunder and of any damage, loss, liability or expense which the
Indemnified Party deems to be within the ambit of this Section 11.4,
specifying with reasonable particularity the basis therefor and will give
the Indemnifying Party such information with respect thereto as the
Indemnifying Party may reasonably request. The Indemnifying Party may,
at its own expense, (i) participate in and, (ii) upon notice to the
Indemnified Party, assume the defense of any such suit, action or
proceeding; PROVIDED that (i) the Indemnifying Party's counsel is
reasonably satisfactory to the Indemnified Party, (ii) the Indemnifying
Party shall thereafter consult with the Indemnified Party upon the
Indemnified Party's reasonable request for such consultation from time to
time with respect to such suit, action or proceeding and (iii) the
Indemnifying Party shall not, without the Indemnified Party's consent,
agree to any settlement with respect to any Tax if the effect of such
settlement would be an increase in the liability of the Indemnified Party
with respect to any Tax for any period beginning after the Closing. If
the Indemnifying Party assumes such defense, the Indemnified Party shall
have the right (but not the duty) to participate in the defense thereof
and to employ counsel, at its own expense, separate from the counsel
employed by the Indemnifying Party. The Indemnifying Party shall be
liable for the fees and expenses of counsel employed by the Indemnified
Party for any period during which the Indemnifying Party has not assumed
the defense thereof. Whether or not the Indemnifying Party chooses to
defend or prosecute any claim, all of the parties hereto shall cooperate
in the defense or prosecution thereof.
(c) No Indemnifying Party shall be liable under this Section
11.4 for any settlement, effected without its consent or resulting from a
proceeding in which such Indemnifying Party was not permitted an
opportunity to participate, of any claim, litigation or proceeding in
respect of which indemnity may be sought hereunder. No investigation by
any Indemnified Party at or prior to the Closing shall relieve any
Indemnifying Party of any liability under this Article XI.
(d) Any claim of any AmeriLink Indemnitee (other than
AmeriLink) under this Section 11.4 may be made and enforced by AmeriLink
on behalf of any such AmeriLink Indemnitee.
ARTICLE XII
MISCELLANEOUS
12.1 NOTICES. Any notices or other communications required or
permitted hereunder shall be sufficiently given if sent by telecopier or by
registered or certified airmail, postage prepaid, addressed as follows:
To AmeriLink:
AmeriLink Corporation
1900 E. Dublin-Granville Road
Suite 100A
Columbus, Ohio 43229
Attention: Larry Linhart
Telecopy: (614) 895-8942
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with copies to:
Richard W. Rubenstein, Esq.
Squire, Sanders & Dempsey L.L.P.
1300 Huntington Center
41 South High Street
Columbus, Ohio 43215
Telecopy: (614) 365-2499
To Principal Shareholders:
Midwest Computer Cable, Inc.
1901 NW 92nd Ct.
Des Moines, Iowa 50325
Attention: Larry Kendall
Telecopy: (515) 223-9332
with copies to:
Steven E. Zumbach, Esq.
Belin Lamson McCormick Zumbach Flynn
666 Walnut Street
2000 Financial Center
Des Moines, Iowa 50309
Telecopy: (515) 244-7818
or such other addresses as shall be furnished by like notice by such party. Any
such notice or communication given by mail shall be deemed to have been given
four days after the date so mailed, and any such notice or communication given
by telecopy shall be deemed to have been given when transmitted.
12.2 EXPENSES. Except as otherwise provided herein, all legal and
other costs and expenses incurred in connection with this Agreement and the
transactions contemplated thereby shall be paid by the party incurring such
expenses, except that any such expenses incurred by or on behalf of the Company
in connection with legal fees and expenses and the approximately $22,000 of
accounting fees and expenses paid prior to the Closing Date shall be the
responsibility of the Principal Shareholders.
12.3 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the parties and their respective successors and
assigns, PROVIDED, HOWEVER, that neither this Agreement nor any right hereunder
may be assigned by any party without the consent of the other parties hereto.
12.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement, including the
Schedules and Exhibits hereto, and the other instruments and agreements referred
to herein embody the entire agreement of the parties hereto with respect to the
subject matter hereof and supersede all prior agreements with respect thereto.
This Agreement may be amended but only in a writing signed by AmeriLink and
Principal Shareholders. Any provision hereof may be waived but only in a
writing signed by AmeriLink if such waiver is sought to be enforced against
AmeriLink and only in a writing signed by Principal Shareholders if such waiver
is sought to be enforced against Principal Shareholders.
12.5 COUNTERPARTS. This Agreement may be executed in any number of
counterparts as may be convenient or necessary, and it shall not be necessary
that the signatures of all parties hereto or thereto be contained on any one
counterpart hereof or thereof. Additionally, the parties hereto agree that for
purposes of facilitating the execution of this Agreement, (a) the signature
pages taken from the separate individually executed counterparts of this
Agreement may be combined to form multiple fully executed counterparts and (b) a
facsimile
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transmission shall be deemed to be an original signature for all purposes.
All executed counterparts of this Agreement shall be deemed to be originals,
but all such counterparts taken together or collectively, as the case may be,
shall constitute one and the same agreement.
12.6 SEVERABILITY. If any term, provision, covenant or restriction of
this Agreement or the application thereof to any person or circumstance should
be held by an administrative agency or court of competent jurisdiction to be
invalid, void, or unenforceable, then the remainder of this Agreement and the
application of such term, provision, covenant, or restriction to other persons
or circumstances shall not be affected thereby, but rather shall be enforced to
the greatest extent permitted by law. Further, it is the intent of the parties
that if any term, provision, covenant, or restriction of the Agreement should be
held to be invalid, void, or unenforceable as applied to any person or
circumstance, then such term, provision, covenant, or restriction shall be
modified to the extent necessary in order to render the same enforceable,
consistent with the expressed objectives of the parties hereto for entering into
this Agreement.
12.7 CAPTIONS. The captions herein are inserted for convenience of
reference only and shall be ignored in the construction or interpretation
hereof.
12.8 GOVERNING LAW; VENUE. This Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio (without regard to
conflict of law principles). The parties to this Agreement hereby irrevocably
and unconditionally submit, for themselves and their property, to the exclusive
jurisdiction of any Iowa court sitting in the County of Polk or any Federal
court of the United States of America sitting in the Southern District of Iowa,
and any appellate court from any such court, in any suit, action or proceeding
arising out of or relating to this Agreement, or for recognition or enforcement
of any judgment arising out of or relating to this Agreement, and each of the
parties hereby irrevocably and unconditionally agrees that all claims in respect
of any such suit, action or proceeding or judgment shall be heard and determined
in such Iowa court or, to the extent permitted by law, by removal or otherwise,
in such Federal court, and if each of such Iowa court and such Federal court
refuses to accept jurisdiction with respect thereto, such suit, action or
proceeding may be brought in any other court with jurisdiction. The parties
agree that no party to this Agreement may move to (i) transfer any such suit,
action or proceeding from such Iowa court or Federal court to another
jurisdiction; (ii) consolidate any such suit, action or proceeding brought in
such Iowa court or Federal court with a suit, action or proceeding brought in
such Iowa court or Federal court with a suit, action or proceeding in another
jurisdiction; or (iii) dismiss any such suit, action or proceeding brought in
such Iowa court or Federal court for the purpose of bringing the same in another
jurisdiction. Each party agrees that a final judgment in any such suit, action
or proceeding shall be conclusive and may be enforced in any other jurisdiction
by suit on the judgment or in any other manner provided by law.
Each party hereby irrevocably and unconditionally waives, to the fullest
extent it may legally and effectively do so, any objection which it may now or
hereafter have to the laying of venue of any suit, action or proceeding arising
out of or relating to this Agreement in any Iowa court sitting in the County of
Polk or any Federal court sitting in the Southern District of Iowa. Each party
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such suit, action or proceeding
in any such court and further waives the right to object, with respect to such
suit, action or proceeding, that such court does not have jurisdiction over such
party.
Service of process relating to actions arising out of this Agreement may
be served upon any party anywhere in the world.
12.9 LIMITATION ON DAMAGES. The Principal Shareholders shall not be
liable for damages to AmeriLink and MAC in excess of the value of the Merger
Consideration. AmeriLink and MAC shall not be liable for damages to the
Principal Shareholders in excess of the value of the Merger Consideration.
[The Remainder of This Page Left Blank Intentionally]
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IN WITNESS WHEREOF, this Agreement (including the Schedules referenced
below and attached hereto and forming a part hereof) has been executed on behalf
of each of the parties hereto as of the day and year first above written.
/s/ Larry Kendall AMERILINK CORPORATION
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LARRY KENDALL
/s/ Dayton Kendall By: /s/ Larry R, Linhart, President
- -------------------------------- -------------------------------
DAYTON KENDALL Larry R. Linhart, President
/s/ Linda Kendall
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LINDA KENDALL MCC ACQUISITION CORP.
MIDWEST COMPUTER CABLE, INC By: /s/ Larry R. Linhart, President
-------------------------------
Larry R. Linhart, President
By: /s/ Larry Kendall, President
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Larry Kendall, President
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